Jason Industries, Inc. (Form: 10-K, Received: 03/01/2018 17:58:53)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2017

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

Commission File Number: 001-36051

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)

(414) 277-9300

(Registrant’s telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.0001 par value per share		The NASDAQ Stock Market LLC
Warrants to purchase Common Stock		The NASDAQ Stock Market LLC
(Title of class)		(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

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. (Check one):



Large accelerated filer ¨		Accelerated filer ¨
Non-accelerated filer ý		Smaller reporting company ¨
(Do not check if a smaller reporting company)		Emerging growth company ý

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant, as of June 30, 2017 , the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $27.4 million (based upon the closing price of $1.29 per share on The NASDAQ Stock Market as of such date). Solely for the purposes of this disclosure, shares of common stock held by executive officers and directors of the registrant as of such date have been excluded because such persons may be deemed to be affiliates. This determination of executive officers and directors as affiliates is not necessarily a conclusive determination for any other purposes.

There were 27,374,458 shares of common stock issued and outstanding as of February 22, 2018 .

Documents Incorporated by Reference

Portions of the registrant’s definitive proxy statement relating to its 2018 Annual Meeting of Shareholders (the “ 2018 Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K. The 2018 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

JASON INDUSTRIES, INC.

TABLE OF CONTENTS



PART I.
Item 1.	Business	2
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	28
Item 2.	Properties	28
Item 3.	Legal Proceedings	28
Item 4.	Mine Safety Disclosures	28

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
Item 6.	Selected Financial Data	32
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	62
Item 8.	Financial Statements and Supplementary Data	64
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	104
Item 9A.	Controls and Procedures	104
Item 9B.	Other Information	105

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	106
Item 11.	Executive Compensation	106
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	106
Item 13.	Certain Relationships and Related Transactions, and Director Independence	106
Item 14.	Principal Accounting Fees and Services	106

PART IV
Item 15.	Exhibits and Financial Statements Schedules	107
Item 16.	Form 10-K Summary	107
Schedule II	Consolidated Valuation and Qualifying Accounts	108

SIGNATURES		112

Cautionary Note Regarding Forward-Looking Statements

Unless otherwise indicated, references to “Jason Industries,” the “Company,” “we,” “our” and “us” in this Annual Report on Form 10-K refer to Jason Industries, Inc. and its consolidated subsidiaries.

This report contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Specifically, forward-looking statements may include statements relating to the Company’s future financial performance, changes in the markets for the Company’s products, the Company’s expansion plans and opportunities, and other statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.

These forward-looking statements are based on information available to the Company as of the date of this report and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date, and the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, the Company’s actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include the following:


•	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 impact of the U.S. Tax Cuts and Jobs Act;


•	the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; and


•	other risks and uncertainties indicated in this report, including those discussed under “Risk Factors” in Item 1A of Part I of this report, as such may be amended or supplemented in Part II, Item 1A, “Risk Factors”, of the Company’s subsequently filed Quarterly Reports on Form 10-Q.

PART I

ITEM 1. BUSINESS

Corporate History

Jason Industries, a Delaware corporation, was originally formed in May 2013 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 and Jason Partners Holdings Inc. (“Jason” or “Seller”) completed a transaction in which JPHI Holdings Inc. (“JPHI”), a majority owned subsidiary of the Company, acquired all of the capital stock of Jason from its then current owners, Saw Mill Capital, LLC, Falcon Investment Advisors, LLC and other investors (the “Business Combination”) pursuant to a stock purchase agreement, dated as of March 16, 2014 (the “Purchase Agreement”). In connection with the Business Combination, the Company entered into new senior secured credit facilities with a syndicate of lenders led by Deutsche Bank AG New York Branch, as administrative agent, in the aggregate amount of approximately $460.0 million, which was primarily used to refinance existing indebtedness, pay transaction fees and expenses and pay a portion of the purchase price under the Purchase Agreement. The purchase price under the Purchase Agreement was also funded with cash held in our initial public offering trust account, the contribution of Jason common stock to JPHI by certain members of Seller and certain directors and management of Jason Incorporated (collectively, the “Rollover Participants”) in exchange for JPHI stock, and the proceeds from the sale of our 8% Series A Convertible Perpetual Preferred Stock (the “Series A Preferred Stock”) in a private placement that closed simultaneously with the Business Combination.

Following the Business Combination and through October 2016, Jason Incorporated was an indirect majority-owned operating subsidiary of the Company and our only significant asset, with the Rollover Participants indirectly owning 16.9% of Jason Incorporated and the Company indirectly owning 83.1% of Jason Incorporated. In the fourth quarter of 2016 and the first quarter of 2017, all Rollover Participants exchanged their JPHI stock for Company common stock, which decreased the

Rollover Participant’s ownership percentage in JPHI to 0% and resulted in the Company owning 100% of Jason Incorporated as of February 23, 2017.

As of December 31, 2017 , the Company has outstanding Common Stock and Warrants listed on The NASDAQ Stock Market (“Nasdaq”) under the symbols “JASN” and JASNW”, respectively, and Series A Preferred Stock, which is traded over the counter under the symbol “JSSNP.”

Presentation of Financial and Operating Data

The Business Combination was accounted for using the acquisition method of accounting under the provisions of Accounting Standards Codification Topic 805, “Business Combinations.” Accordingly, we are treated as the legal and accounting acquirer and Jason is treated as the legal and accounting acquiree. However, Jason is considered to be our accounting predecessor, and therefore unless otherwise indicated, the financial information and operating data presented in this Annual Report on Form 10-K is that of Jason Partners Holdings Inc.

Our Business

Jason Industries is a global industrial manufacturing company with significant market share positions in each of its four businesses: finishing, components, seating and acoustics. Our businesses provide critical components and manufacturing solutions to customers across a wide range of end markets, industries and geographies through a global network of 31 manufacturing facilities and 15 sales offices, warehouses and joint venture facilities throughout the United States and 13 foreign countries. The Company has embedded relationships with long standing customers, superior scale and resources and specialized capabilities to design and manufacture specialized products on which our customers rely.

The Company focuses on markets with sustainable growth characteristics and where it is, or has the opportunity to become, the industry leader. The 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. The components segment is a diversified manufacturer of expanded and perforated metal components and subassemblies for smart utility meters. The seating segment supplies seating solutions to equipment manufacturers in the motorcycle, lawn and turf care, industrial, agricultural, construction and power sports end markets. The acoustics segment manufactures engineered non-woven, fiber-based acoustical products primarily for the automotive industry.

Jason Incorporated History

The formation of Jason Incorporated’s platform began in 1985 when it completed the buyout of three businesses, collectively generating approximately $70 million of revenue, from AMCA International, a manufacturing conglomerate that served a variety of industries. The acquired businesses consisted of (i) Osborn Manufacturing, the largest manufacturer of industrial brushes in the United States; (ii) Janesville Products, the largest manufacturer of automotive acoustical fiber insulation in the United States; and (iii) Jackson Buff, the largest manufacturer of industrial buffs in the United States, each of which has a history spanning decades.

Description of Business Segments

Jason Industries’ global industrial platform encompasses a diverse group of industries, geographies and end markets. Through our four business segments, we deliver an array of industrial consumables and critical manufactured components to a number of industries, including industrial equipment, motorcycles, lawn and turf care, rail and automotive. The highly fragmented nature of the Company’s end markets creates growth opportunities given our established global footprint and leading share positions.

Net sales are distributed amongst the four segments as follows:



	Year ended December 31,
	2017		2016		2015
Net sales
Finishing	30.9	%	27.9	%	27.0	%
Components	12.7	%	13.8	%	17.2	%
Seating	24.5	%	22.8	%	25.0	%
Acoustics	31.9	%	35.5	%	30.8	%
	100.0	%	100.0	%	100.0	%

See more information regarding our segments and sales by geography within Part II, Item 8, Note 16 to the Consolidated Financial Statements.

Finishing

Market/Industry Overview

The Company’s product lines are comprised of industrial brushes, polishing buffs and compounds, and abrasives used primarily in the metalworking, welding and construction industries. The market for finishing products is highly fragmented with most participants having single or limited product lines and serving specific geographic markets. While the finishing business competes with numerous domestic and international companies across a variety of product lines, we do not believe that any one competitor directly competes with us on all of our product lines. We believe we are the only market participant that reaches all regions of the world. End users of finishing products are broadly diversified across many sectors of the economy. In the long-term, the finishing market is closely tied to overall growth in industrial production, which we believe has fundamental long-term growth potential.

The finishing market is also characterized by the need for sophisticated manufacturing equipment, the ability to produce a broad number of niche products and the flexibility in manufacturing operations to adapt to ever-changing customer demands and schedules. We believe entry into markets by competitors with lower labor costs, including foreign competitors, will be limited because labor is a relatively small portion of total manufacturing costs. The cost of labor, manufacturing, shipping and logistics is dramatically rising in countries such as China and customers continue to have increasing demand for shorter lead times and lower inventory and carrying costs.

Key Products

Through the finishing business, which represented 30.9% of the Company’s 2017 revenue, Jason Industries produces and supplies industrial brushes, polishing buffs and compounds, and abrasives. We established the finishing business in 1985 by acquiring the business of Osborn Manufacturing, which has been in operation since 1887. Our products are used in a variety of applications with no single customer or industry accounting for a significant portion of business revenue. The Company has strategic facilities located globally, including production sites in low-cost locations such as China, India, Portugal, Romania and Mexico.

The finishing business is a one-stop provider of standard and customized brush, polishing, and abrasives products used across multiple industries, including aerospace, automotive, construction, engineering, plastic, steel, hardware, welding and shipbuilding, among others. Our broad product suite is composed of brush types used for a variety of applications, including power, maintenance, strip, punch, and roller brushes. These products are marketed under leading brand names that include Osborn ^® and Sealeze ^® . Our buff products are sold under the JacksonLea ^® and Lippert Unipol ^® brands and are comprised of industrial buffs and abrasives used primarily to finish parts requiring a high degree of luster and/or a satin or textured surface. In addition to manufacturing buffs, the Company also produces the industry’s broadest product line of buffing compounds available in liquid or bar form that are customized to specific end use requirements. Our abrasive products are marketed under the DRONCO ^® and Osborn ^® brands and include bonded abrasives such as cutting and grinding wheels and flap discs, as well as diamond cutting wheels and tools. We also service customers with products complementing our brush, polishing, and abrasives lines, including heavy-duty idler rollers for high-capacity precision load handling sold under the Load Runners ^® brand.

The Company has representatives who reach more than 30,000 customers in approximately 130 countries worldwide. During 2017 , the finishing segment derived approximately 38% of its sales from North America and the majority of the remaining revenue from Europe. We service our diverse customer base through U.S. facilities in Indiana and Ohio and 12 foreign countries, including joint ventures in China and Taiwan. Our manufacturing and service locations allow us to work on a regional and local basis with customers to develop custom products and provide significant technical support, resulting in strong relationships with our top customers that average 25 years. In addition, the Company has invested in state-of-the-art laboratories in Richmond, Indiana and Burgwald, Germany to provide further technical design and support capabilities for our customers.

Components

Market/Industry Overview

The market for component products is highly fragmented with most participants having single or limited product lines, serving specific geographic markets or providing niche capabilities applicable to a limited customer base. While we compete with certain domestic and international competitors across a portion of our product lines, we believe that no one competitor directly competes with us across all of our product lines. End users of component products are diversified across various sectors of the economy.

Demand in the components market is influenced by the broader industrial manufacturing market, as well as trends in the perforated and expanded metal, rail and commercial equipment industries. The best gauge of domestic industrial production

is the U.S. Industrial Production Index, which measures the monthly level of output arising from the manufacturing, mining and gas sectors.

Key Products

Through the components business, which represented 12.7% of the Company’s 2017 revenue, we manufacture a broad range of expanded and perforated metal components and subassemblies. The Company is a provider of components that are used in a broad array of products, including railcars, air and liquid filtration, hardware, off-road equipment, security fencing and smart meters. The components business was originally acquired in 1993 through the purchase of the Koller Group, a producer of metal formed components such as stampings, subassemblies, wire forms and expanded metal products. Today, the components business operates through the Metalex and Morton brands, as we made the strategic decision to discontinue certain product lines under the Assembled Products brand in 2016.

Within each of the components business product categories, our strategy is to have engineers work alongside customers to create value-added components and solutions for various end products. Our engineering resources, manufacturing capabilities and low cost production availability through our operations in Mexico provide opportunities to deliver value to customers. These characteristics drive long-standing relationships with our top customers that average over 20 years.

Seating

Market/Industry Overview

The seating business product line includes motorcycle seats; operator seats for construction, agriculture, lawn and turf care and other industrial equipment markets; and seating for the power sports market. The market for seating products is dominated by several large domestic and international participants, who are often awarded contracts as the sole supplier for a particular motorcycle, riding lawn mower or other construction, agriculture or material handling platform. We believe that competitive differentiation is based mostly on innovative styling, ergonomic comfort, manufacturing flexibility, quality, price and delivery.

Motorcycle production has experienced a decline in the past year and we believe future demand will mirror global motorcycle market trends. The construction market is closely tied to overall growth in industrial production, which we believe has long-term growth potential. Demand for lawn and turf care equipment is primarily dependent on weather and trends in personal consumption expenditures, recreational and leisure activities, and residential and commercial real estate construction and sales. The market for lawn and turf care equipment has remained relatively flat in the past year and we expect it to mirror general economic conditions.

Key Products

Through the seating business, which represented 24.5% of the Company’s 2017 revenue, the Company provides seating solutions for a variety of applications, including motorcycle, agricultural, construction, industrial, lawn and turf care, and power sports. The seating business was established in 1995 through the acquisition of Milsco Manufacturing Company, which has provided high-quality seats since 1934. The seating business operates under the Milsco brand, which was originally established as a harness maker in 1924 and, early in its history, gained notice as the first company to put padded seating on tractors and farm equipment.

The seating business offers a distinct vertically integrated operating model, which includes a full range of functions, such as research and development, design and engineering, manufacturing of components and final assembly. Through our broad manufacturing capabilities and high quality products, we have established longstanding relationships with our top customers, which average over 30 years.

Acoustics

Market/Industry Overview

The market for automotive acoustical products is dominated by several large domestic and international participants. These participants are often awarded contracts as the sole supplier for a particular automotive platform. Competition includes manufacturers of mechanically bonded non-woven products, resin-bonded products, injection molded and thermoformed plastic and urethane foam. Competition is based on innovative styling, price, acoustical performance, durability and weight. Engineering, design and innovation are key distinguishing factors because acoustical products represent a small percentage of the total cost to manufacture an automobile.

Growth in the automotive acoustics market is driven by increasing demand for enhanced acoustics, lighter weight and improved noise, vibration and harshness characteristics within the automotive market. As overall vehicle quality has improved, consumers have increasingly equated quality with the acoustic performance of a vehicle. As a result, car manufacturers have expended significant capital for sophisticated acoustical testing systems and laboratories. In addition, an increasing regulatory focus on reducing vehicle mass, increasing fuel-efficiency and stringent end of vehicle life recycling standards have driven the

penetration of non-woven materials that are lighter than other acoustical products and that utilize recycled post-industrial textile fibers and recycled PET containers. The replacement of interior and exterior products previously served by plastic-based materials has created a trend in new vehicle designs to substitute structured non-woven acoustical products with vehicle manufacturers, which has helped to expand non-woven acoustical content per vehicle.

Key Products

Through the acoustics business, which represented 31.9% of the Company’s 2017 revenue, we manufacture engineered non-woven, fiber-based acoustical and structural products primarily for the automotive industry. The acoustics business was established in 1985 through the acquisition of Janesville Products, which has developed extensive design and manufacturing expertise over its 140 year history that allows it to provide custom acoustical solutions for each vehicle platform it serves. We market our products as being lighter, improving acoustical performance, enhancing aesthetics, and being easier to install than other acoustical products manufactured by our competitors. As a result, our products are used in a large share of light vehicles manufactured in North America today, including 10 of 2017’s top 20 models.

We believe the acoustics business offers a broad product line of value-added, higher margin components used in a wide range of vehicles, including automobiles, sport utility vehicles and light trucks, as well as in the industrial and transportation markets. The Company has focused on developing premier lightweight fiber-based solutions that provide competitive or superior acoustical properties. Our production of non-woven fiber-based products is organized by the form in which it is supplied: (i) die cut, (ii) molded, (iii) rolls and blanks, and (iv) other non-woven products.

The acoustics business operates principally as an automotive Original Equipment Manufacturer (“OEM”) and Tier-1 supplier. The Company has focused on increasing sales directly to automotive OEMs, which allows us to integrate our technology and value-added capabilities within OEM organizations. These efforts have shifted sales to what we believe is a more desirable balance between OEMs and Tier-1 suppliers while also broadening the number of vehicle platforms that utilize the Company’s products. Substantially all automotive products are sole sourced by customers for a particular vehicle and are used for the life of the platform.

Competitive Strengths

The Company believes the following key characteristics provide a competitive advantage and position us for future growth:

Established Industry Leader Across Our Four Businesses

The Company’s businesses have developed leading positions across various niche markets that enhance end user’s comfort, safety and productivity. For example, in our turf care seats and polishing product lines, we believe we are more than twice the size of the next largest direct competitor. The Company’s market share positions have created a stable platform upon which to grow. Our products’ significant brand recognition helps to sustain our market share positions. The Company’s products are often viewed as a brand of choice for quality, dependability, value and continuous innovation. We have served many of our customers for over 25 years. Despite leading positions in many of our markets, we face competitive challenges in others. In the Company’s finishing and components segments, we believe certain of our competitors are small and family-owned, operate with lower operating expenses, have lower profit expectations and/or supply lower cost commodity products, which allows such competitors to provide lower cost products and compete with us on pricing. In our seating segment, specifically with respect to highly technical seats for the agricultural and construction vehicle markets, the cost to customers of switching from a current supplier’s products to ours is high, and we believe certain of our competitors have established long-term and entrenched relationships with such customers. These costs and relationships make it challenging to convince such customers to purchase products from us instead of from their existing supplier.

Superior Design & Manufacturing Solutions

The Company has a track record of providing customers with innovative, customized solutions through production flexibility and collaboration with their design and manufacturing teams. We have consistently refined manufacturing processes to incorporate design technologies that improve design capabilities, breadth of product offering, product quality and manufacturing efficiency.

Across our businesses, we maintain teams of designers and a diverse product selection in numerous geographic regions, which allows us to respond quickly to real-time customer needs. Our versatile design and manufacturing capabilities enable us to deliver differentiated and highly-customized solutions for customers by leveraging experienced engineering staff and technologically advanced manufacturing equipment. We believe our diverse product offerings and customized design and manufacturing capabilities have made us a preferred choice within many industries and an entrenched key solutions provider to customers. Some of the Company’s competitors focus on commodity products and lower-value-added products that appeal to certain end users and markets.

We believe we have become a partner at each stage in product development, which has deepened our relationships with an already entrenched customer base and driven revenue growth from existing accounts and new customers.

Scalable Business Philosophy

We use a consistent strategy and focus and deploy capital and resources across our businesses to projects with the highest returns on invested capital. Through corporate strategic planning initiatives, we annually assess our three-year outlook and goals, by using a policy deployment matrix disseminated throughout the organization. The Company’s management utilizes the strategic plan and resulting policy deployment matrix to develop an annual budget and profit plan and monitors progress towards long-term strategic goals.

Across the Company’s businesses, our management team is focused on enhancing product innovation, efficiency, global accessibility and competitiveness. Shared best practices serve to continually improve the processes and products that our customers depend on by delivering customized, value-added solutions across the platform. This global reach offers customers a consistent and fully integrated manufacturing partner capable of serving their needs on a global, regional and local basis.

Diverse, Global Footprint with Growing Presence in Emerging Markets

The Company maintains 31 global manufacturing locations, consisting of 13 in the United States and 18 in foreign countries, giving each business a strong international presence. Approximately 32% of the Company’s 2017 revenue was generated from products manufactured outside of the United States. In addition, our global presence enables us to take advantage of low-cost manufacturing at our facilities in China, India, Portugal, Romania, and Mexico and to meet the needs of local customers with operations in those regions. The Company continues to build upon its established presence in low-cost production locations through the expansion of owned operations and the development of joint ventures and sourcing relationships in Asia, Eastern Europe and Mexico. Our management believes that this global footprint also provides channels of organic growth through the introduction of products into new markets. Our management frequently evaluates our manufacturing, warehouse, distribution and sales locations to identify revenue enhancement opportunities, optimize production costs and ensure proximity to key customers.

Growth Strategies

The Company is focused on delivering sustained profitable growth through a number of avenues. Our growth initiatives are developed based on strategic plans conducted on an annual basis within each business. These plans are regularly reviewed and updated by our leadership team. As a result, we have a uniform strategy that focuses all of our resources on the following key initiatives:

Margin Growth

We are focused on continuous improvement in our profit margins through the development of higher-margin products, continued operational improvements and active product portfolio management. We anticipate our strategy of shifting toward innovative higher-value engineered products will continue to improve our pricing power and profitability. Among other initiatives, the Company is focused on redesigning products to reduce materials costs, continuing to reduce labor-intensive manufacturing processes and reducing logistics costs, which have traditionally been a significant component of overall costs and an important consideration when choosing its strategic manufacturing locations.

The Company is focused on creating operational effectiveness at each of its business segments through deployment of lean principles and implementation of continuous operational improvement initiatives. While many of these activities have focused on implementing shop floor improvements, we have also targeted our selling and administrative functions in order to reduce the cost of serving our customers. The Company is also focused on improving profitability through an active evaluation of customer pricing and a reduction in the number of parts and product variations that are produced. While these initiatives may result in lower overall sales, they are focused on creating shareholder value through higher margins and profitability, diversification, as well as lower inventory levels and working capital requirements.

The Company continuously evaluates its manufacturing footprint and utilization of manufacturing capacity. In recent years, the Company has completed or announced the consolidation of manufacturing facilities across its businesses. Reduction of fixed costs through optimization of manufacturing footprint and capacity will continue to be a driver of margin expansion and improving profitability.

Market Share Gains

While our businesses pursue growth within new and existing markets through customized strategies targeted for the markets we serve, all businesses are tasked with identifying and pursuing key growth opportunities through new products, geographies, sales channels and diversifying end markets served. Management believes we have the potential to increase market share due to the highly fragmented nature of our end markets. Each business has identified specific opportunities to expand market share, with associated incremental revenue targets.

Product Innovation

Management believes that the Company’s strategy of developing innovative products will position us for continued growth. Working in collaboration with key customers, the design and manufacture of customized products that deliver value will support this growth. We believe that developing new products will allow us to deepen our value-added relationships with customers, open new opportunities for revenue generation, improve pricing power and enhance profitability. The Company has a focused and dedicated strategy for continuous innovation, which is supported by sophisticated manufacturing capabilities and engineering expertise. Such research and development costs incurred in the development of new products or significant improvements to existing products were $3.6 million in the year ended December 31, 2017 , $4.2 million in the year ended December 31, 2016 and $5.0 million in the year ended December 31, 2015 . This continued focus on innovation has driven successful new product introductions, which we believe will enable continued growth.

Acquisitions

The Company uses acquisitions to increase revenues with existing customers and to expand revenues to both new markets and customers. The Company intends to only pursue an acquisition if it is accretive to EBITDA (earnings before interest, income taxes, depreciation and amortization) margins post-synergies, has a strategic focus that aligns with our core strategy and generates the appropriate estimated return on investment as part of our capital resource and allocation process.

Customers

The Company has an entrenched base of blue chip customers that are leaders in their respective markets. Our customer relationships often span decades in each business. Additionally, our customer base is diversified. In our finishing segment, no customers were at or above 10% of the revenue of such segment. In our seating and components segments, three customers were at or above 10% of the revenues of such segments. In our acoustics segment, two customers were at or above 10% of the revenues of such segment. Across all of Jason Industries, no customers were at or above 10% of 2017 , 2016 or 2015 revenues. In 2017 , our five largest customers represent a combined 28% of 2017 revenues.

Suppliers and Raw Materials

Polyurethane foam, vinyl, plastics, steel, polyester fiber, bicomponent fiber and machined fiber are the primary raw materials that we use to manufacture our products. There are a limited number of domestic and foreign suppliers of these raw materials. The Company generally orders supplies on a purchase order basis. Although our contracts and long term arrangements with our customers generally do not expressly allow us to pass through increases in our raw materials, energy costs and other inputs to our customers, we endeavor to discuss price adjustments with our customers on a case by case basis where it makes business sense. For the year ended December 31, 2017 , the spend with our top three material suppliers accounted for less than 10% of total material spend and our largest supplier accounts for approximately 3% of total spend. The Company makes an ongoing effort to reduce and contain raw material costs. We do not engage in raw material commodity hedging contracts. The Company attempts to reflect raw material price changes in the sale price of our products.

Seasonality

We experience seasonality of demand for our products in the seating business. Due to our experience in this market, we have adapted our business operations to manage this seasonality. The business also depends upon general economic conditions and other market factors beyond our control, and the Company serves customers in cyclical industries. See “Seasonality and Working Capital” in the accompanying “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained herein for further discussion.

Employees

As of December 31, 2017 , the Company had approximately 4,300 employees and manufactured products in 31 locations around the world. Approximately 53% of the seating segment’s hourly employees and 51% of the components segment’s hourly employees are unionized. Contracts are negotiated on a local basis, significantly mitigating the risk of a company-wide or segment level work stoppage. Additionally, approximately 1,100 of the Company’s employees reside in Europe, where trade union membership is common. We believe we have a strong relationship with our employees, including those represented by labor unions.

Environmental Matters

The Company’s operations and facilities are subject to extensive federal, state, local and foreign laws and regulations related to pollution and the protection of the environment, health, safety and natural resources, including those governing, among other things, emissions to air, discharges to water, the use, generation, handling, storage, treatment and disposal of hazardous substances and wastes and other materials and the remediation of contaminated sites. The operation of manufacturing plants entails risks in these areas, and a failure by the Company to comply with applicable environmental laws and regulations, or to obtain and comply with the permits required for its operations, could result in civil or criminal fines,

penalties, enforcement actions, third party claims for property damage and personal injury, requirements to clean up property or to pay for the capital or operating costs of cleanup, or regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, including the installation of pollution control equipment or remedial actions. Moreover, if applicable environmental, health and safety laws and regulations, or the interpretation or enforcement thereof, become more stringent in the future, the Company could incur capital or operating costs beyond those currently anticipated.

Compliance with environmental laws has not historically had a material adverse effect on the Company’s capital expenditures, earnings or competitive position, and we anticipate that such compliance will not have a material effect on its business or financial condition in the future.

Available Information

The Company’s internet website address is www.jasoninc.com . The Company makes available free of charge (other than an investor’s own Internet access charges) through its internet website its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, on the same day they are electronically filed with, or furnished to, the U.S. Securities and Exchange Commission (the “SEC”). The Company is not including the information contained on or available through its website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K.

Executive Officers of the Registrant

The following table sets forth information concerning our executive officers as of February 27, 2018:



Name	Age	Position
Brian K. Kobylinski	51	President and Chief Executive Officer
Chad M. Paris	36	Senior Vice President and Chief Financial Officer
John J. Hengel	59	Vice President—Finance, Treasurer and Assistant Secretary
Srivas Prasad	49	Senior Vice President and General Manager—Acoustics
Keith A.Walz	50	Senior Vice President and General Manager—Finishing

Brian K. Kobylinski has served as President and Chief Executive Officer since December 2016. Prior to being named Chief Executive Officer, Mr. Kobylinski served as President & Chief Operating Officer since April 8, 2016. Prior to joining Jason Industries, Mr. Kobylinski served as Executive Vice President, Energy Segment and China for Actuant Corporation based in Milwaukee, Wisconsin. During his 23 years with Actuant Corporation, Mr. Kobylinski progressed through a number of management roles, including Vice President - Industrial and Energy Segments, Vice President – Business Development and Global Business Leader – Hydratight. Mr. Kobylinski received his masters of business administration from the University of Wisconsin - Madison and his bachelors of art from St. Norbert College.

Chad M. Paris has served as Senior Vice President and Chief Financial Officer since February 2018. Mr. Paris joined Jason Industries in June 2014 and worked in several financial management roles at the Company, including Vice President and Chief Financial Officer, Vice President - Finance Finishing Americas, Vice President of Investor Relations, Financial Planning and Analysis, and Director of External Reporting. Prior to joining Jason Industries, Mr. Paris was a senior manager in the audit practice at Deloitte & Touche LLP. Mr. Paris is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants. Mr. Paris earned a Bachelor of Business Administration degree in finance and real estate and a Master of Science degree in management, with an accounting concentration, both from the University of Wisconsin-Milwaukee.

John J. Hengel has served as our Vice President—Finance, Treasurer and Assistant Secretary since June 30, 2014 and previously served as Vice President of Finance of Jason Incorporated since 1999. Prior to joining Jason Incorporated, Mr. Hengel was a director in the audit and business advisory services practice at PricewaterhouseCoopers LLP from 1992 to 1999. Mr. Hengel is a Certified Public Accountant and a member of both the American and Wisconsin Institutes of Certified Public Accountants. He holds a Bachelor of Science in accounting from Carroll University.

Srivas Prasad has served as our Senior Vice President and General Manager—Acoustics since December 2016. Prior to that, Mr. Prasad served as Senior Vice President and General Manager - Seating and Acoustics and as President of our Seating segment. Prior to serving as the President of the Seating segment, he served as Vice President—Business Development at Jason Incorporated from 2011 to 2014 and held key leadership positions in Jason Incorporated’s Acoustics segment from 2006 to 2010. Mr. Prasad holds a Bachelor’s degree in engineering from Bangalore University and a Masters in engineering from Lamar University.

Keith A. Walz has served as our Senior Vice President and General Manager— Finishing since February 2018. Mr. Walz previously served as the Vice President and General Manager— Finishing and Vice President of Corporate Development and Strategy, joining Jason Industries in March 2015. Prior to joining Jason Industries, Mr. Walz served as the Vice President of Corporate Development at Brady Corporation based in Milwaukee, Wisconsin. Prior to joining Brady Corporation, Mr. Walz was a founding Partner of Kinsale Capital, a private investment firm focused on control equity investments in the middle market from 2006 to 2010. Prior to forming Kinsale Capital, Mr. Walz served as Managing Director at ABN ARMO Capital. Mr. Walz holds his bachelor’s degree in finance from the University of Arkansas and a Master of Business Administration from DePaul University.

ITEM 1A. RISK FACTORS

An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below and all of the other information contained in this report before deciding to invest in our securities. If any of the events or developments described below occur, our business, financial condition and/or results of operations could be negatively affected. In that case, the trading price of our securities could decline, and you could lose all or part of your investment.

Risk Factors Relating to Our Business

We are affected by developments in the industries in which our customers operate.

We derive our revenues largely from customers in the following industry sectors: agricultural, automotive, motorcycles, construction, rail and industrial manufacturing. Factors affecting any of these industries in general, or any of our customers in particular, could adversely affect us because our revenue growth largely depends on the continued growth of our customers’ businesses in their respective industries. These factors include:


•	seasonality of demand for our customers’ products which may cause our manufacturing capacity to be underutilized for periods of time;


•	our customers’ failure to successfully market their products, to gain or retain widespread commercial acceptance of their products or to compete effectively in their industries;


•	loss of market share for our customers’ products, which may lead our customers to reduce or discontinue purchasing our products and to reduce prices, thereby exerting pricing pressure on us;


•	economic conditions in the markets in which our customers operate, in particular, the United States and Europe, including recessionary periods such as the 2008/2009 global economic downturn; and


•	product design changes or manufacturing process changes that may reduce or eliminate demand for the components we supply.

We expect that future sales will continue to depend on the success of our customers. If economic conditions and demand for our customers’ products deteriorate, we may experience a material adverse effect on our business, operating results and financial condition.

Some of our business segments are cyclical. A downturn or weakness in overall economic activity can have a material negative impact on us.

Historically, sales of products that we manufacture have been subject to cyclical variations caused by changes in general economic conditions. During recessionary periods, we have been adversely affected by reduced demand for our products. In addition, the strength of the economy generally may affect the rates of expansion, consolidation, renovation and equipment replacement in the industries we serve.

Volatility in the prices of raw materials and energy prices and our ability to pass along increased costs to our customers could adversely affect our results of operations.

The prices of raw materials critical to our business and performance, such as steel, are based on global supply and demand conditions. Certain raw materials used by us, including polyurethane foam, vinyl, plastics, steel, polyester fiber, bicomponent fiber and machined fiber are only available from a limited number of suppliers, and it may be difficult to find alternative suppliers at the same or similar costs. Our material costs may also be adversely impacted by tariffs or other trade duties on imports. Although our contracts and long term arrangements with our customers generally do not expressly allow us to pass through increases in our raw materials, energy costs and other inputs to our customers, we endeavor to discuss price adjustments with our customers on a case by case basis where it makes business sense. While we strive to pass through the price of raw materials to our customers (other than increases in order amounts which are subject to negotiation), we may not be able to do so in the future, and volatility in the prices of raw materials may affect customer demand for certain products. In addition, we, along with our suppliers and customers, rely on various energy sources for a number of activities connected with our business, such as the transportation of raw materials and finished products. Energy and utility prices, including electricity and water prices, and in particular prices for petroleum-based energy sources, are volatile. Increased supplier and customer operating costs arising from volatility in the prices of energy sources, such as increased energy and utility costs and transportation costs, could be passed through to us and we may not be able to increase our product prices sufficiently or at all to offset such increased costs. The impact of any volatility in the prices of energy or the raw materials on which we rely, including the reduction in demand for certain products caused by such price volatility, could result in a loss of revenue and profitability and adversely affect our results of operations.

We compete with numerous other manufacturers in each of our segments and competition from these providers may affect the profitability of our business.

The industries we serve are highly competitive. We compete with numerous companies that manufacture finishing, components, seating and automotive acoustics products. Many of our competitors have international operations and significant financial resources and some have substantially greater manufacturing, research and design and marketing resources than us. These competitors may, among others:


•	respond more quickly to new or emerging technologies;


•	have greater name recognition, critical mass or geographic market presence;


•	be better able to take advantage of acquisition opportunities;


•	adapt more quickly to changes in customer requirements;


•	devote greater resources to the development, promotion and sale of their products;


•	be better positioned to compete on price for their products, due to any combination of low-cost labor, raw materials, components, facilities or other operating items, or willingness to make sales at lower margins than us;


•	consolidate with other competitors in the industry which may create increased pricing and competitive pressures on our business; and


•	be better able to utilize excess capacity which may reduce the cost of their products or services.

Competitors with lower cost structures may have a competitive advantage when bidding for business with our customers. We also expect our competitors to continue to improve the performance of their current products or services, to reduce prices of their existing products or services and to introduce new products or services that may offer greater performance and improved pricing. Additionally, we may face competition from new entrants to the industry in which we operate. Any of these developments could cause a decline in sales and average selling prices, loss of market share of our products or profit margin compression.

In addition, our level of indebtedness and financial condition may make it difficult for us to continue to negotiate acceptable payment terms with our vendors and customers or may result in one or more of our suppliers making demand for adequate assurance, which could include a demand for payment in advance. If we are unable to negotiate acceptable payment terms with our customers, or if any of our material suppliers were to successfully demand payment in advance, and we were unable to internally generate or externally raise cash in sufficient amounts to cover our resulting reduced liquidity, it could have a material adverse effect on our liquidity and our competitive position, and it may also make it more difficult for us to obtain future financing.

We face risks related to sales through distributors and other third parties.

We sell a portion of our products through third parties such as distributors, agents and channel partners (collectively referred to as distributors). Using third parties for distribution exposes us to many risks, including competitive pressure, concentration, credit risk, and compliance risks. Distributors may sell products that compete with our products, and we may need to provide financial and other incentives to focus distributors on the sale of our products. We may rely on one or more key distributors for a product, and the loss of these distributors could reduce our revenue. Distributors may face financial difficulties, including bankruptcy, which could harm our collection of accounts receivable and financial results. Violations of the Foreign Corrupt Practices Act or similar laws by distributors or other third-party intermediaries could have a material impact on our business. Failing to manage risks related to our use of distributors may reduce sales, increase expenses, and weaken our competitive position.

We may not be able to maintain our engineering, technological and manufacturing expertise.

The markets for our products are characterized by changing technology and evolving process development. The continued success of our business will depend upon our ability to:


•	hire, retain and expand our pool of qualified engineering and technical personnel;


•	maintain technological leadership in our industry;


•	successfully anticipate or respond to changes in manufacturing processes in a cost-effective and timely manner; and


•	successfully anticipate or respond to changes in cost to serve in a cost-effective and timely manner.

We cannot be certain that we will develop the capabilities required by our customers in the future. The emergence of new technologies, industry standards or customer requirements may render our equipment, inventory or processes obsolete or uncompetitive. We may have to acquire new technologies and equipment to remain competitive. The acquisition and

implementation of new technologies and equipment may require us to incur significant expense and capital investment, which could reduce our margins and affect our operating results. When we establish or acquire new facilities, we may not be able to maintain or develop our engineering, technological and manufacturing expertise due to a lack of trained personnel, effective training of new staff or technical difficulties with machinery. Failure to anticipate and adapt to customers’ changing technological needs and requirements or to hire and retain a sufficient number of engineers and maintain engineering, technological and manufacturing expertise may have a material adverse effect on our business.

We may be unable to realize the expected benefits of capital expenditures, which could adversely affect our profitability and operations.

We expect to continue to invest in our business through capital expenditures to support our facilities and purchases of production equipment and acquisitions. There can be no assurance that these investments will generate any specific return on investment.

Our goodwill and other intangible assets represent a substantial amount of our total assets. A decline in future operating performance at one or more of our reporting units could result in the further impairment of goodwill or other intangible assets, which could have a material adverse effect on our financial condition and results of operations.

At December 31, 2017 , goodwill and other intangible assets totaled $176.6 million , or approximately 32% of our total assets. The goodwill results from our acquisitions, representing the excess of cost over the fair value of the net tangible and other identifiable intangible assets we have acquired. We assess annually whether there has been impairment in the value of our goodwill. If future operating performance at one or more of our reporting units were to fall below current or planned levels, we could be required to recognize a non-cash charge to operating earnings for goodwill (at our finishing reporting unit) or record an impairment charge related to other intangible assets. In the fourth quarter of 2016, the Company recorded charges of $63.3 million for the impairment of goodwill. Given the continued significance of the Company’s goodwill and intangible assets, any additional significant goodwill or intangible asset impairment could reduce earnings in such period and have a material adverse effect on our financial condition and results of operations.

Divestitures and discontinued operations could negatively impact our business, and contingent liabilities from businesses that we sell could adversely affect our financial results.

As part of our portfolio management process, we review our operations for businesses which may no longer be aligned with our strategic initiatives and long-term objectives. Divestitures pose risks and challenges that could negatively impact our business. For example, when we decide to sell a business, we may be unable to do so on satisfactory terms and within our anticipated time-frame, and even after reaching a definitive agreement to sell a business, the sale may be subject to satisfaction of pre-closing conditions, which may not be satisfied, as well as regulatory and governmental approvals, which may prevent us from completing a transaction on acceptable terms. In addition, the impact of the divestiture on our revenue and net earnings may be larger than projected, which could distract management, and disputes may arise with buyers. Dispositions may also involve continued financial involvement, as we may be required to retain responsibility for, or agree to indemnify buyers against contingent liabilities related to businesses sold, such as lawsuits, tax liabilities, product liability claims or environmental matters. Under these types of arrangements, performance by the divested businesses or other conditions outside our control could affect our future financial results.

If we fail to develop new and innovative products or if customers in our markets do not accept them, our results could be negatively affected.

Our products must be kept current to meet our customers’ needs. To remain competitive, we therefore must develop new and innovative products on an ongoing basis. If we fail to make innovations or the market does not accept our new products, our sales and results would likely suffer. We invest significantly in the research and development of new products. These expenditures do not always result in products that will be accepted by the market. To the extent they do not, whether as a function of the product or the business cycle, we will have increased expenses without significant sales to benefit us. Failure to develop successful new products may also cause potential customers to purchase competitors’ products, rather than invest in products manufactured by us.

The potential impact of failing to deliver products on time could increase the cost of the products.

In most instances, we guarantee that we will deliver a product by a scheduled date. If we subsequently fail to deliver the product as scheduled, we may be held responsible for cost impacts and/or other damages resulting from any delay. To the extent that these failures to deliver may occur, the total damages for which we could be liable could significantly increase the cost of the products; as such, we could experience reduced profits or, in some cases, a loss for that contract. Additionally, failure to deliver products on time could result in damage to customer relationships, the potential loss of customers, and reputational damage which could impair our ability to attract new customers.

Increasing costs of doing business in many countries in which we operate may adversely affect our business and financial results.

Increasing costs such as labor and overhead costs in the countries in which we operate may erode our profit margins and compromise our price competitiveness. Historically, the low cost of labor in certain of the countries in which we operate has been a competitive advantage but labor costs in these countries, such as China, have been increasing. Our profitability also depends on our ability to manage and contain our other operating expenses such as the cost of utilities, factory supplies, factory space costs, equipment rental, repairs and maintenance and freight and packaging expenses. In the event we are unable to manage any increase in our labor and other operating expenses in an environment where revenue does not increase proportionately, our financial results would be adversely affected.

Our international scope will require us to obtain financing in various jurisdictions.

We operate manufacturing facilities in the United States and 13 foreign countries, which creates financing challenges for us. These challenges include navigating local legal and regulatory requirements associated with obtaining financing in the respective foreign jurisdictions in which we operate. In the event that we are not able to obtain financing on satisfactory terms in any of these jurisdictions, it could significantly impair our ability to run our foreign operations on a cost effective basis or to grow such operations. Failure to manage such challenges may adversely affect our business and results of operations.

We have operations in many countries and such operations may be subject to a number of risks specific to these countries.

Our international operations across many different jurisdictions may be subject to a number of risks specific to these countries, including:


•	less flexible employee relationships which can be difficult and expensive to terminate;


•	labor unrest;


•	political and economic instability (including war and acts of terrorism);


•	inadequate infrastructure for our operations (i.e., lack of adequate power, water, transportation and raw materials);


•	health concerns and related government actions;


•	risk of governmental expropriation of our property;


•	less favorable, or relatively undefined, intellectual property laws;


•	unexpected changes in regulatory requirements and laws;


•	longer customer payment cycles and difficulty in collecting trade accounts receivable;


•	export duties, tariffs, import controls and trade barriers (including quotas);


•	adverse trade policies or adverse changes to any of the policies of either the United States or any of the foreign jurisdictions in which we operate;


•	adverse changes in tax rates or regulations;


•	legal or political constraints on our ability to maintain or increase prices;


•	burdens of complying with a wide variety of labor practices and foreign laws, including those relating to export and import duties, environmental policies and privacy issues;


•	inability to utilize net operating losses incurred by our foreign operations against future income in the same jurisdiction; and


•	economies that are emerging or developing, that may be subject to greater currency volatility, negative growth, high inflation, limited availability of foreign exchange and other risks.

These factors may harm our results of operations, and any measures that we may implement to reduce the effect of volatile currencies and other risks of our international operations may not be effective. In our experience, entry into new international markets requires considerable management time as well as start-up expenses for market development, hiring and establishing office facilities before any significant revenue is generated. As a result, initial operations in a new market may operate at low margins or may be unprofitable.

Our international sales and operations are subject to applicable laws relating to trade, export controls and foreign corrupt practices, the violation of which could adversely affect our operations.

We are subject to applicable international trade, customs, export controls and economic sanctions laws and regulations of the United States and other countries and the Foreign Corrupt Practices Act and other anti-bribery laws that generally bar bribes or unreasonable gifts to foreign governments or officials. Changes in such laws may restrict our business practices, including cessation of business activities in sanctioned countries or with sanctioned entities, and may result in modifications to compliance programs. Violation of these laws or regulations could result in sanctions or fines and could have a material adverse effect on our financial condition, results of operations and cash flows. In addition, changes or modifications to existing trade agreements between the United States and other countries could also have a material adverse effect on our financial condition, results of operations and cash flows.

We are subject to risks of currency fluctuations and related hedging operations, and the devaluation of the currencies of countries in which we conduct our manufacturing operations, particularly the Euro, that may negatively affect the profitability of our business.

We report our financial results in U.S. dollars. Approximately 32% of our net sales in 2017 were in currencies other than the U.S. dollar. Changes in exchange rates among other currencies, especially the Euro to the U.S. dollar, may negatively affect our net sales, cost of sales, gross profit and net income where our expenses and revenues are denominated in different currencies. We cannot predict the effect of future exchange rate fluctuations. We may from time to time use financial instruments, primarily short-term forward contracts, to hedge Euro and other currency commitments arising from foreign currency obligations. Where possible, we endeavor to match our non-functional currency exchange requirements to our receipts. If our hedging activities are not successful or if we change or reduce these hedging activities in the future, we may experience significant unexpected expenses from fluctuations in exchange rates.

We depend on our key executive officers, managers and skilled personnel and may have difficulty retaining and recruiting qualified employees and managing the cost of labor.

Our success depends to a large extent upon the continued services of our executive officers, senior management personnel, managers and other skilled personnel and our ability to recruit and retain skilled personnel to maintain and expand our operations. We could be affected by the loss of any of our executive officers who are responsible for formulating and implementing our business plan and strategy. In addition, we need to recruit and retain additional management personnel and other skilled employees. However, competition is high for skilled technical personnel among companies that rely on engineering and technology, and the loss of qualified employees or an inability to attract, retain and motivate additional skilled employees required for the operation and expansion of our business could hinder our ability to conduct design, engineering and manufacturing activities successfully and develop marketable products. We may not be able to attract the skilled personnel we require or retain those whom we have trained at our own cost. If we are not able to do so, our business and our ability to continue to grow could be negatively affected and we could face additional competition from those who leave and work for our competitors.

We continue to be dependent on our production personnel to manufacture our products in a cost-effective and efficient

manner. We believe there is significant competition for production personnel with the skills and technical knowledge that we require. Our ability to continue efficient operations, reduce production costs, and consolidate operations will depend, in large part, on our success in recruiting, training, integrating and retaining sufficient numbers of production personnel to support our production, cost savings and consolidation targets. New hires require significant training and it may take significant time before they achieve full productivity. As a result, we may incur significant costs to attract, train and retain employees, including significant expenditures related to salaries and benefits. If we are unable to hire and train sufficient numbers of effective production personnel, our business would be adversely affected.

Many of our customers do not commit to long-term production schedules, which makes it difficult for us to schedule production accurately and achieve maximum efficiency of our manufacturing capacity.

Generally, our customers do not commit to long-term contracts. Many of our customers do not commit to firm production schedules and we continue to experience reduced lead-times in customer orders. Additionally, customers may change production quantities or delay production with little lead-time or advance notice. Therefore, we rely on and plan our production and inventory levels based on our customers’ advance orders, commitments or forecasts, as well as our internal assessments and forecasts of customer demand. The volume and timing of sales to our customers may vary due to, among other factors:


•	variation in demand for or discontinuation of our customers’ products;


•	our customers’ attempts to manage their inventory;


•	design changes;


•	changes in our customers’ manufacturing strategies; and


•	acquisitions of or consolidation among customers.

The variations in volume and timing of sales make it difficult to schedule production and optimize manufacturing capacity. This uncertainty may require us to increase staffing and incur other expenses in order to meet an unexpected increase in customer demand, potentially placing a significant burden on our resources. Additionally, an inability to respond to such increases may cause customer dissatisfaction, which may negatively affect our customers’ relationships.

Further, in order to secure sufficient production scale, we may make capital investments in advance of anticipated customer demand. Such investments may lead to low utilization levels if customer demand forecasts change and we are unable to utilize the additional capacity. Because fixed costs make up a large proportion of our total production costs, a reduction in customer demand can have a significant adverse impact on our gross profits and operating results. Additionally, we order materials and components based on customer forecasts and orders and suppliers may require us to purchase materials and components in minimum quantities that exceed customer requirements, which may have an adverse impact on our gross profits and operating results. In the past, anticipated orders from some of our customers have failed to materialize and delivery schedules have been deferred as a result of changes in our customers’ business needs. We have also allowed long-term customers to delay orders to absorb excess inventory. Such order fluctuations and deferrals may have an adverse effect on our business, operating results and/or financial conditions.

We may incur additional expenses and delays due to technical problems or other interruptions at our manufacturing facilities or those of our suppliers.

Disruptions in operations due to technical problems or other interruptions such as floods or fire would adversely affect the manufacturing capacity of our facilities or those of our suppliers. Such interruptions could cause delays in production and cause us to incur additional expenses such as charges for expedited deliveries for products that are delayed. Additionally, our customers have the ability to cancel purchase orders in the event of any delays in production and may decrease future orders if delays are persistent. Additionally, to the extent that such disruptions do not result from damage to our physical property, these may not be covered by our business interruption insurance. Any such disruptions may adversely affect our business, operations, and financial results.

We may be unable to realize the expected benefits of our restructuring actions, which could adversely affect our profitability and operations.

In order to align our resources with our growth strategies, operate more efficiently and control costs, we have periodically announced restructuring plans, which include workforce reductions, plant closures and consolidations, asset impairments and other cost reduction initiatives. 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. This program 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 during 2017 and are expected to be completed in 2018. We may undertake additional restructuring actions and workforce reductions in the future. As these plans and actions are complex, unforeseen factors could result in expected savings and benefits to be delayed or not realized to the full extent planned, and our operations and business may be disrupted.

The operations of our manufacturing facilities may be disrupted by union activities and other labor-related problems.

We have labor unions at certain of our facilities. As of December 31, 2017 , we had approximately 500 unionized personnel in the United States. For such employees, we have entered into collective bargaining agreements with the respective labor unions. In the future, such agreements may limit our ability to contain increases in our labor costs as our ability to control future labor costs depends partly on the outcome of wage negotiations with our employees. Any future collective bargaining agreements may lead to further increases in our labor costs. Although our employees in certain other facilities are currently not unionized, there can be no assurance that they will continue to remain as such.

Union activities and other labor-related problems not linked to union activities may disrupt our operations and adversely affect our business and results of operations. We cannot provide any assurance that we will not be affected by any such labor unrest, or increase in labor cost, or interruptions to the operations of our existing manufacturing plants or new manufacturing plants that we may set up in the future. Any disruptions to our manufacturing facilities as a result of labor-related disturbances could affect our ability to meet delivery and efficiency targets resulting in an adverse effect on our customer relationships and our financial results. Such disruptions may not be covered by our business interruption insurance.

Any disruption in our information systems could disrupt our operations and would be adverse to our business and financial operations.

We depend on various information systems to support our customers’ requirements and to successfully manage our business, including managing orders, supplies, accounting controls and payroll. Any inability to successfully manage the

procurement, development, implementation or execution of our information systems and back-up systems, including matters related to system security, reliability, performance and access, as well as any inability of these systems to fulfill their intended purpose within our business, could have an adverse effect on our business and financial performance. Such disruptions may not be covered by our business interruption insurance.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of business, we collect and store sensitive data, including our proprietary business information and that of our customers, suppliers and business partners, as well as personally identifiable information of our customers and employees, in our data centers and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures, our information technology, infrastructure and business processes may be vulnerable to malicious attacks or breached due to employee error, malfeasance or other disruptions, including as a result of rollouts of new systems. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings and/or regulatory penalties, disruption of our operations, damage of our reputation, financial loss through unauthorized payments and/or cause a loss of confidence in our products and services, which could adversely affect our business.

Natural disasters, epidemics and other events outside our control, and the ineffective management of such events, may harm our business.

Some of our facilities are located in areas that may be affected by natural disasters such as hurricanes, earthquakes, water shortages, tsunamis and floods. All facilities are subject to other natural or man-made disasters such as fires, acts of terrorism, failures of utilities and epidemics. If such an event were to occur, our business could be harmed due to the event or our inability to effectively manage the effects of the particular event. Potential harms include the loss of business continuity, the loss of business data and damage to infrastructure.

Our production could be severely affected if our employees or the regions in which our facilities are located are affected by a significant outbreak of any disease or epidemic. For example, a facility could be closed by government authorities for a sustained period of time, some or all of our workforce could be unavailable due to quarantine, fear of catching the disease or other factors, and local, national or international transportation or other infrastructure could be affected, leading to delays or loss of production. In addition, our suppliers and customers are subject to similar risks, which could lead to a shortage of components or a reduction in our customers’ demand for our services.

We rely on a variety of common carriers to transport our materials from our suppliers, and to transport products from us to our customers. Problems suffered by any of these common carriers, whether due to a natural disaster, labor problem, act of terrorism, increased energy prices or some other issue, could result in shipping delays, increased costs or some other supply chain disruption and could therefore have a material adverse effect on our operations.

In addition, some of our facilities possess certifications, machinery, equipment or tooling necessary to work on specialized products that our other locations lack. If work is disrupted at one of these facilities, it may not be practicable or feasible to transfer such specialized work to another facility without significant costs and delays. Thus, any disruption in operations at a facility possessing specialized certifications, machinery, equipment or tooling could adversely affect our ability to provide products to our customers and thus negatively affect our relationships and financial results.

Political and economic developments could adversely affect our business.

Increased international political instability and social unrest, evidenced by the threat or occurrence of terrorist attacks, enhanced national security measures and the related decline in consumer confidence may hinder our ability to do business. Any escalation in these events or similar future events may disrupt our operations or those of our customers and suppliers and could affect the availability of raw materials and components needed to manufacture our products or the means to transport those materials to manufacturing facilities and finished products to customers. These events may have an adverse effect on the world economy and consumer confidence and spending, which could adversely affect our revenue and operating results. The effect of these events on the volatility of the world financial markets could in the future lead to volatility of the market price of our securities and may limit the capital resources available to us, our customers and suppliers.

Sales of our products may result in exposure to product liability, intellectual property infringement and other claims.

Our manufactured products can expose us to potential liabilities. For instance, our manufacturing businesses expose us to potential product liability claims resulting from injuries caused by defects in products we design or manufacture, as well as potential claims that products we design or processes we use infringe on third-party intellectual property rights. Such claims could subject us to significant liability for damages, subject the infringing portion of our business to injunction and, regardless of their merits, could be time-consuming and expensive to resolve. We may also have greater potential exposure from warranty

claims and product recalls due to problems caused by product design. Although we have product liability insurance coverage, it may not be sufficient to cover the full extent of our product liability, if at all, and may also be subject to the satisfaction of a deductible. A successful product liability claim in excess or outside of our insurance coverage or any material claim for which insurance coverage was denied or limited and for which indemnification was not available could have a material adverse effect on our business, results of operations and/or financial condition.

If our manufacturing processes and products do not comply with applicable statutory and regulatory requirements, or if we manufacture products containing design or manufacturing defects, demand for our products may decline and we may be subject to liability claims.

Our designs, manufacturing processes and facilities need to comply with applicable statutory and regulatory requirements. We may also have the responsibility to ensure that products we design satisfy safety and regulatory standards including those applicable to our customers and to obtain any necessary certifications. In addition, our customers’ products and the manufacturing processes that we use to produce them are often highly complex. As a result, products that we manufacture may at times contain manufacturing or design defects, and our manufacturing processes may be subject to errors or not be in compliance with applicable statutory and regulatory requirements or demands of our customers. Defects in the products we manufacture or design, whether caused by a design, manufacturing or component failure or error, or deficiencies in our manufacturing processes, may result in delayed shipments to customers, replacement costs or reduced or canceled customer orders. If these defects or deficiencies are significant, our business reputation may also be damaged. The failure of the products that we manufacture or our manufacturing processes and facilities to comply with applicable statutory and regulatory requirements may subject us to legal fines or penalties and, in some cases, require us to shut down or incur considerable expense to correct a manufacturing process or facility. In addition, these defects may result in liability claims against us or expose us to liability to pay for the recall of a product or to indemnify our customers for the costs of any such claims or recalls which they face as a result of using items manufactured by us in their products. Even if our customers are responsible for the defects, they may not assume, or may not have resources to assume, responsibility for any costs or liabilities arising from these defects, which could expose us to additional liability claims.

Compliance or the failure to comply with regulations and governmental policies could cause us to incur significant expense.

We are subject to a variety of local and foreign laws and regulations including those relating to labor and health and safety concerns and import/export duties and customs. Such laws may require us to pay mandated compensation in the event of workplace accidents and penalties in the event of incorrect payments of duties or customs. Additionally, we may need to obtain and maintain licenses and permits to conduct business in various jurisdictions. If we or the businesses or companies we acquire have failed or fail in the future to comply with such laws and regulations, then we could incur liabilities and fines and our operations could be suspended. Such laws and regulations could also restrict our ability to modify or expand our facilities, could require us to acquire costly equipment, or could impose other significant expenditures.

If our products are subject to warranty claims, our business reputation may be damaged and we may incur significant costs.

We generally provide warranties to our customers for defects in materials and workmanship and where our products do not conform to specifications. A successful claim for damages arising as a result of such defects or deficiencies may affect our business reputation. In addition, a successful claim for which we are not insured, where the damages exceed insurance coverage, where we cannot recover from our vendors to the extent their materials or workmanship were defective, or any material claim for which insurance coverage is denied or limited and for which indemnification is not available, could have a material adverse effect on our business, operating results and financial condition. In addition, as we pursue new end-markets, warranty requirements will vary and we may be less effective in pricing our products to appropriately capture the warranty costs.

We are or may be required to obtain and maintain quality or product certifications for certain markets.

In some countries, our customers require or prefer that we obtain certain certifications for our products and testing facilities with regard to specifications/quality standards. For example, we are required to obtain American Railroad Association approval for certain of our products. Consequently, we need to obtain and maintain the relevant certifications so that our customers are able to sell their products, which are manufactured by us, in these countries. If we are unable to meet and maintain the requirements needed to secure or renew such certifications, we may not be able to sell our products to certain customers and our financial results may be adversely affected.

Our income tax returns are subject to current tax legislation and review by taxing authorities, and the final determination of our tax liability with respect to changes in tax legislation, tax audits and any related litigation could adversely affect our financial results.

Although we believe that our tax estimates are reasonable and that we prepare our tax filings in accordance with all applicable current tax laws, the final determination with respect to any tax audits and changes in tax legislation, and any related litigation, could be materially different from our estimates or from our historical income tax provisions and accruals. The

results of an audit, tax reform or litigation could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments. We are undergoing tax audits in various jurisdictions and we regularly assess the likelihood of an adverse outcome resulting from such examinations to determine the adequacy of our tax reserves.

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”) which will impact our provision for income taxes. The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system, limiting the deductibility of interest payments and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Company is still evaluating the impact that the Tax Reform Act will have on its tax position. The impact of the Tax Reform Act, including future guidance and interpretations, could result in an increase to our U.S. tax liability and a resulting negative impact on our future operating results.

Failure of our customers to pay the amounts owed to us in a timely manner may adversely affect our financial condition and operating results.

We generally provide payment terms ranging from 30 to 50 days. As a result, we generate significant accounts receivable from sales to our customers, representing 33.6% and 37.0% of current assets as of December 31, 2017 and December 31, 2016 , respectively. Accounts receivable from sales to customers were $68.6 million and $77.8 million as of December 31, 2017 and December 31, 2016 , respectively. As of December 31, 2017 , the largest amount owed by a single customer was approximately 13% of total accounts receivable. As of December 31, 2017 , our allowance for doubtful accounts was approximately $3.0 million . If any of our significant customers have insufficient liquidity, we could encounter significant delays or defaults in payments owed to us by such customers, and we may need to extend our payment terms or restructure the receivables owed to us, which could have a significant adverse effect on our financial condition. Any deterioration in the financial condition of our customers will increase the risk of uncollectible receivables. Global economic uncertainty could also affect our customers’ ability to pay our receivables in a timely manner or at all or result in customers going into bankruptcy or reorganization proceedings, which could also affect our ability to collect our receivables.

Regulations related to conflict minerals may force us to incur additional expenses and affect the manufacturing and sale of our products.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), signed into law on July 21, 2010, includes Section 1502, pursuant to which the SEC adopted additional disclosure requirements related to certain minerals sourced from the Democratic Republic of Congo and surrounding countries, or “conflict minerals,” for which such conflict minerals are necessary to the functionality of a product manufactured, or contracted to be manufactured, by an SEC reporting company. The metals covered by the final rules are commonly referred to as “3TG” and include tin, tantalum, tungsten and gold. Compliance with the disclosure requirements could affect the sourcing and availability of some of the minerals used in the manufacture of our products. Our supply chain is complex, and if we are not able to conclusively verify the origins for all conflict minerals used in our products or that our products are “conflict free,” we may face reputational challenges with our customers or investors. Furthermore, we may also encounter challenges to satisfy customers who require that our products be certified as “conflict free,” which could place us at a competitive disadvantage if we are unable to do so. Additionally, as there may be only a limited number of suppliers offering “conflict free” metals, we cannot be sure that we will be able to obtain necessary metals from such suppliers in sufficient quantities or at competitive prices. We could incur significant costs related to the compliance process, including potential difficulty or added costs in satisfying the disclosure requirements. Other laws or regulations impacting our supply chain may have similar consequences.

Our failure to comply with environmental laws could adversely affect our business and financial condition.

We are subject to various federal, state, local and foreign environmental laws and regulations, including regulations governing the use, storage, discharge and disposal of hazardous substances used in our manufacturing processes.

We are also subject to laws and regulations governing the recyclability of products, the materials that may be included in products, and our obligations to dispose of these products after end-users have finished with them. Additionally, we may be exposed to liability to our customers relating to the materials that may be included in the components that we procure for our customers’ products. Any violation or alleged violation by us of environmental laws could subject us to significant costs, fines or other penalties.

We are also required to comply with an increasing number of product environmental compliance regulations focused on the restriction of certain hazardous substances. Non-compliance could result in significant costs and penalties.

In addition, increasing governmental focus on climate change may result in new environmental regulations that may negatively affect us, our suppliers and our customers by requiring us to incur additional direct costs to comply with new environmental regulations, as well as additional indirect costs as a result of our customers or suppliers passing on additional compliance costs. These costs may adversely affect our operations and financial condition.

Environmental liabilities that may arise in the future could be material to us.

Our operations, facilities and properties are subject to extensive and evolving laws and regulations pertaining to air emissions, wastewater discharges, the handling and disposal of solid and hazardous materials and wastes, the remediation of contamination, and otherwise relating to health, safety and the protection of the environment. As a result, we are involved from time to time in administrative or legal proceedings relating to environmental and health and safety matters, and have in the past and will continue to incur capital costs and other expenditures relating to such matters. We also cannot be certain that identification of presently unidentified environmental conditions, more vigorous enforcement by regulatory authorities or other unanticipated events will not arise in the future and give rise to additional environmental liabilities, compliance costs and/or penalties that could be material. Further, environmental laws and regulations are constantly evolving and it is impossible to predict accurately the effect they may have upon our financial condition, results of operations or cash flows.

Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, investments and results of operations.

We are subject to laws and regulations enacted by national, regional and local governments, including non-U.S. governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations.

Pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act for so long as we are an “emerging growth company.”

Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, and generally requires in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. We are required to provide management’s attestation on internal controls, however, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an “emerging growth company”. We will be an “emerging growth company” until the earlier of (1) the last day of the fiscal year (a) following August 14, 2018, the fifth anniversary of our initial public offering, (b) in which we have total annual gross revenue of at least $1.0 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We may encounter difficulties in completing or integrating acquisitions, which could adversely affect our operating results.

We expect to expand our presence in new end markets, expand our capabilities and acquire new customers, some of which may occur through acquisitions. These transactions may involve acquisitions of entire companies, portions of companies, the entry into joint ventures and acquisitions of businesses or selected assets. Potential challenges related to our acquisitions and joint ventures include:


•	paying an excessive price for acquisitions and incurring higher than expected acquisition costs;


•	difficulty in integrating acquired operations, systems, assets and businesses;


•	difficulty in implementing financial and management controls, reporting systems and procedures;


•	difficulty in maintaining customer, supplier, employee or other favorable business relationships of acquired operations and restructuring or terminating unfavorable relationships;


•	ensuring sufficient due diligence prior to an acquisition and addressing unforeseen liabilities of acquired businesses;


•	making acquisitions in new end markets, geographies or technologies where our knowledge or experience is limited;


•	failing to realize the benefits from goodwill and intangible assets resulting from acquisitions which may result in write-downs;


•	failing to achieve anticipated business volumes; and


•	making acquisitions which force us to divest other businesses.

Any of these factors could prevent us from realizing the anticipated benefits of an acquisition, including additional revenue, operational synergies and economies of scale. Our failure to realize the anticipated benefits of acquisitions could adversely affect our business and operating results.

Acquisitions, expansions or infrastructure investments may require us to increase our level of indebtedness or issue additional equity.

Should we desire to undertake significant additional expansion activities, make substantial investments in our infrastructure or consummate significant additional acquisition opportunities, our capital needs would increase and we may need to increase available borrowings under our credit facilities or access public or private debt and equity markets. There can be no assurance, however, that we will be successful in raising additional debt or equity on terms that we would consider acceptable.

An increase in the level of indebtedness could, among other things:


•	make it difficult for us to obtain financing in the future for working capital, capital expenditures, debt service requirements, acquisitions or other purposes;


•	limit our flexibility in planning for or reacting to changes in our business;


•	affect our ability to pay dividends;


•	make us more vulnerable in the event of a downturn in our business; and


•	affect certain financial covenants with which we must comply in connection with our credit facilities.

Additionally, a further equity issuance could dilute the ownership interest of existing stockholders.

Risk Factors Relating to Our Indebtedness

We have a substantial amount of indebtedness, which may limit our operating flexibility and could adversely affect our results of operations and financial condition.

We have approximately $410.7 million of indebtedness as of December 31, 2017 , consisting of $388.0 million in term loans, $21.8 million in borrowings under existing non-U.S. debt agreements, and $0.8 million of capital leases.

Our indebtedness could have important consequences to our investors, including, but not limited to:


•	increasing our vulnerability to, and reducing our flexibility to respond to, general adverse economic and industry conditions;


•	requiring the dedication of a substantial portion of our cash flow from operations to the payment of principal, and interest on our indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, acquisitions, joint ventures or other general corporate purposes;


•	limiting our flexibility in planning for, or reacting to, changes in our business, the competitive environment and the industry in which we operate;


•	placing us at a competitive disadvantage as compared to our competitors that are not as highly leveraged; and


•	limiting our ability to borrow additional funds and increasing the cost of any such borrowing.

A breach of a covenant or restriction contained in our U.S. credit facility (the “Senior Secured Credit Facilities”) could result in a default that could in turn permit the affected lenders to accelerate the repayment of principal and accrued interest on our outstanding loans and terminate their commitments to lend additional funds. If the lenders under such indebtedness accelerate the repayment of our borrowings, we cannot assure that we will have sufficient assets to repay those borrowings as well as other indebtedness.

To the extent that our access to credit is restricted because of our own performance or conditions in the capital markets generally, our financial condition would be materially adversely affected. Our level of indebtedness may make it difficult to service our debt and may adversely affect our ability to obtain additional financing, use operating cash flow in other areas of our business or otherwise adversely affect our operations.

Our Senior Secured Credit Facilities contain restrictive covenants that may impair our ability to conduct business.

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 (as defined in the Senior Secured Credit Facilities) to: incur additional indebtedness (including guaranty 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. In addition, under the revolving loan portion of our Senior Secured Credit Facilities, if the aggregate outstanding amount of all revolving loans, swingline loans and certain letter of credit obligations exceeds 25% of the revolving credit commitments at the end of any fiscal quarter, Jason Incorporated and its Restricted Subsidiaries will be required to not exceed a specified consolidated first lien leverage ratio. As a result of these covenants and restrictions, we are limited in how we conduct our business and we may be unable to raise additional debt or other financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. Failure to comply with such restrictive covenants may lead to default and acceleration under our Senior Secured Credit Facilities and may impair our ability to conduct business. We may not be able to maintain compliance with these covenants in the future and, if we fail to do so, we may not be able to obtain waivers from the lenders and/or amend the covenants, which may adversely affect our financial condition.

Upon the occurrence of an event of default under our Senior Secured Credit Facilities, the lenders could elect to accelerate payments due and terminate all commitments to extend further credit. Consequently, we may not have sufficient assets to repay the Senior Secured Credit Facilities, as well as other secured and unsecured indebtedness.

Upon the occurrence of an event of default under our Senior Secured Credit Facilities, the lenders thereunder could elect to declare all amounts outstanding under the Senior Secured Credit Facilities to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders under the Senior Secured Credit Facilities could proceed against the collateral granted to them to secure that indebtedness. The Company has pledged a significant portion of our assets as collateral under the Senior Secured Credit Facilities. If the lenders under our Senior Secured Credit Facilities accelerate the repayment of borrowings, we cannot assure that we will have sufficient assets to repay the Senior Secured Credit Facilities, as well as other secured and unsecured indebtedness.

An adverse change in the interest rates for our borrowings could adversely affect our financial condition.

We pay interest on outstanding borrowings under our Senior Secured Credit Facilities at interest rates that fluctuate based upon changes in certain short term prevailing interest rates. An adverse change in these rates could have a material adverse effect on our financial position, results of operations and cash flows and our ability to borrow money in the future. At times, we will enter into interest rate swaps to hedge some of this risk. If the duration of interest rate swaps exceeds one month, we will have to mark-to-market the value of such swaps which could cause us to recognize losses.

Risk Factors Relating to Our Securities and Capital Structure

General Securities and Capital Structure Risk Factors

The market price of our securities may decline.

Fluctuations in the price of our securities could contribute to the loss of all or part of your investment. Trading in our common stock and warrants has been limited. There is also currently no market for our Series A Preferred Stock and it is unlikely one will develop. If an active market for our securities develops and continues, the trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.

Factors affecting the trading price of our securities may include:


•	actual or anticipated fluctuations in our financial results or the financial results of companies perceived to be similar to us;


•	changes in the market’s expectations about our operating results;


•	success of competitors;


•	our operating results failing to meet the expectation of securities analysts or investors in a particular period;


•	changes in financial estimates and recommendations by securities analysts concerning the Company or its markets in general;


•	operating and stock price performance of other companies that investors deem comparable to the Company;


•	our ability to market new and enhanced products on a timely basis;


•	changes in laws and regulations affecting our business;


•	commencement of, or involvement in, litigation involving the Company;


•	changes in the Company’s capital structure, such as future issuances of securities or the incurrence of additional debt;


•	the volume of securities available for public sale;


•	any major change in our board or management;


•	sales of substantial amounts of our securities by our directors, executive officers or significant shareholders or the perception that such sales could occur; and


•	general economic and political conditions such as recession; interest rate, fuel price, and international currency fluctuations; and acts of war or terrorism.

As of December 31, 2017 , there were 25,966,381 shares of our common stock issued and outstanding. While our common shares trade on Nasdaq, our stock is thinly traded (approximately 0.4% , or 104,000 shares, of our stock traded on an average daily basis during the year ended December 31, 2017 ), and you may have difficulty in selling your shares quickly.

In addition, the market price of our common stock could also be affected by possible sales of our common stock by investors who view the Series A Preferred Stock as a more attractive means of equity participation in us and by hedging or arbitrage trading activity involving our common stock. The hedging or arbitrage could, in turn, affect the trading price of the Series A Preferred Stock or any common stock that holders receive upon conversion of the Series A Preferred Stock.

Many of the factors listed above are beyond our control. In addition, broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general, and Nasdaq, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our common stock and warrants which trade on Nasdaq, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to the Company could depress the price of our securities regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

Our inability to comply with the continued listing requirements of the Nasdaq Capital Market could result in our common stock and/or warrants being delisted, which could adversely affect the market price and liquidity of our securities and could have other adverse effects.

To remain in compliance with the continued listing requirements on The Nasdaq Capital Market, among other things, (1) the market value of listed securities must remain equal to or greater than $35 million, the Company must have stockholders’ equity of $2.5 million or more, or the Company must have net income from continuing operations of $500,000 in the most recently completed fiscal year and (2) the Company’s common stock must have a bid price of at least $1.00 per share.

If the Company does not remain in compliance with the continuing listing requirements, Nasdaq could provide written notice that the Company’s common stock and/or warrants are subject to delisting from The Nasdaq Capital Market. In that event, Nasdaq rules permit the Company to appeal such determination to a Nasdaq hearings panel. If our common stock and/or warrants are delisted, it could be more difficult to buy or sell our securities and to obtain accurate quotations, and the price of our common stock and/or warrants could suffer a material decline. In addition, a delisting could impair the Company’s ability to raise capital through the public markets, could deter broker-dealers from making a market in or otherwise seeking or generating interest in our securities and might deter certain institutions and persons from investing in our securities at all.

Our business and/or reputation could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading value of our securities.

Certain of our shareholders have made, and may in the future make strategic proposals, suggestions, or requests for changes concerning the operation of our business, our business strategy, corporate governance considerations, or other matters that may not be fully aligned with our own. Responding to actions by activist shareholders can be costly and time-consuming, disrupt our operations and divert the attention of management and our employees. Perceived uncertainties as to our future direction may result in the loss of potential business opportunities, damage to our reputation, and may make it more difficult to attract and retain qualified directors, personnel and business partners. These actions could also cause our stock price to experience periods of volatility.

One of our largest shareholders has significant influence over our management and affairs and could exercise this influence against other shareholders’ best interests.

At February 22, 2018 , Mr. Jeffry N. Quinn, our Chairman and one of our largest shareholders, beneficially owned approximately 16.7% of our outstanding shares of common stock, and our other executive officers and directors collectively beneficially owned an additional 2.6% of our outstanding shares of common stock. As a result, pursuant to our bylaws and applicable laws and regulations, Mr. Quinn and our other executive officers and directors are able to exercise significant

influence over our company, including, but not limited to, any shareholder approvals for the election of our directors and, indirectly, the selection of our senior management, the amount of dividend payments, if any, our annual budget, increases or decreases in our share capital, new securities issuance, mergers and acquisitions and any amendments to our bylaws. Furthermore, this concentration of ownership may delay or prevent a change of control or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which could decrease the market price of our shares.

A significant number of additional shares of our common stock may be issued upon the exercise or conversion of existing securities, which issuances would substantially dilute existing shareholders and may depress the market price of our common stock.

As of February 22, 2018 , there were 27,374,458 shares of our common stock outstanding. In addition, (i) 13,993,773 shares of common stock can be issued upon the exercise of outstanding warrants, (ii) 4,438,327 shares of common stock can be issued upon conversion of our Series A Preferred Stock, which includes 1,391,723 shares of common stock potentially issuable upon conversion of additional shares of Series A Preferred Stock received as dividends over the next five years and assumes that the conversion ratio is not adjusted, and (iii) 2,703,114 shares of common stock are available for future issuance under our 2014 Omnibus Incentive Plan. From time to time, the Company may seek to obtain Board of Directors approval for additional omnibus incentive plans that would allow for additional future issuances of common stock. The issuance of shares of common stock would substantially dilute the proportionate ownership and voting power of existing security holders, and their issuance, or the possibility of their issuance, may depress the market price of our common stock.

Anti-takeover provisions contained in our certificate of incorporation and bylaws, our Shareholder Rights Agreement, the increased conversion rate triggered by a “fundamental change”, as well as provisions of Delaware law, could impair a takeover attempt.

The Company’s second amended and restated certificate of incorporation (the “certificate of incorporation”) and bylaws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our Board of Directors. These provisions include:


•	no cumulative voting in the election of directors, which limits the ability of minority shareholders to elect director candidates;


•	the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death, or removal of a director, which prevents shareholders from being able to fill vacancies on our Board of Directors;


•	the ability of our Board of Directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without shareholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;


•	a prohibition on shareholder action by written consent, which forces shareholder action to be taken at an annual or special meeting of our shareholders;


•	the requirement that an annual meeting of shareholders may be called only by the chairman of the Board of Directors, the chief executive officer, or the Board of Directors, which may delay the ability of our shareholders to force consideration of a proposal or to take action, including the removal of directors;


•	limiting the liability of, and providing indemnification to, our directors and officers;


•	controlling the procedures for the conduct and scheduling of shareholder meetings;


•	providing that directors may be removed prior to the expiration of their terms by shareholders only for cause; and


•	advance notice procedures that shareholders must comply with in order to nominate candidates to our Board of Directors or to propose matters to be acted upon at a shareholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.

These provisions, alone or together, could delay hostile takeovers and changes in control of the Company or changes in our Board of Directors and management.

The Company’s Board of Directors adopted a Shareholder Rights Agreement on September 12, 2016 that, in general terms, 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. The existence of this Shareholder Rights Agreement could discourage a potential acquirer, including potential acquirers that otherwise seek a transaction with us that would be attractive. In addition, the increased conversion rate of the Series A Preferred Stock into shares of our common

stock that would be triggered by a “fundamental change” (as defined in the Certificate of Designations, Preferences, Rights and Limitations of the Series A Preferred Stock (the “Certificate of Designations”)) could also discourage a potential acquirer.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents some shareholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock.

Any provision of our certificate of incorporation, bylaws, Certificate of Designations or Delaware law, as well as our Shareholder Rights Agreement, that has the effect of delaying or deterring a change in control could limit the opportunity for our security holders to receive a premium for their securities and could also affect the price that some investors are willing to pay for our securities.

Our only significant asset is our indirect ownership of Jason Incorporated and such ownership may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or preferred stock or satisfy our other financial obligations.

As of February 22, 2018 , we have no direct operations and no significant assets other than the indirect ownership of Jason Incorporated. We will depend on Jason Incorporated for distributions, loans and other payments to generate the funds necessary to meet our financial obligations, including our expenses as a publicly traded company, and to pay any dividends with respect to our preferred stock and common stock. Legal and contractual restrictions in agreements governing our senior secured credit facilities and future indebtedness of Jason Incorporated, as well as the financial condition and operating requirements of Jason Incorporated, and the fact that we may be required to obtain the consent from the other shareholders of Jason Incorporated, may limit our ability to obtain cash from Jason Incorporated. The earnings from, or other available assets of, Jason Incorporated may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or satisfy its other financial obligations. In addition, the terms of our Series A Preferred Stock may from time to time prevent us from paying cash dividends on our common stock.

Series A Preferred Stock Risk Factors

We are not obligated to pay dividends on the Series A Preferred Stock if prohibited by law; the terms of our financing agreements may limit our ability to pay such dividends; and we will not be able to pay cash dividends if we have insufficient cash to do so.

Under Delaware law, dividends on capital stock may only be paid from “surplus” or, if there is no “surplus,” from the corporation’s net profits for the then-current or the preceding fiscal year. Unless we operate profitably, our ability to pay dividends on the Series A Preferred Stock would require the availability of adequate “surplus,” which is defined as the excess, if any, of our net assets (total assets less total liabilities) over our capital.

Financing agreements, whether ours or those of our subsidiaries and whether in place now or in the future, may contain restrictions on our ability to pay cash dividends on our capital stock, including the Series A Preferred Stock. These limitations may cause us to be unable to pay dividends on the Series A Preferred Stock unless we can refinance amounts outstanding under those agreements. Since we are not obligated to declare or pay cash dividends, we do not intend to do so to the extent we are restricted by any of our financing agreements.

The dividends payable by us on the Series A Preferred Stock may exceed our current and accumulated earnings and profits, as calculated for U.S. federal income tax purposes. If that occurs, it will result in the amount of the dividends that exceed such earnings and profits being treated for U.S. federal income tax purposes first as a return of capital to the extent of the beneficial owner’s adjusted tax basis in the Series A Preferred Stock, and the excess, if any, over such adjusted tax basis as capital gain. Such treatment will generally be unfavorable for corporate beneficial owners and may also be unfavorable to certain other beneficial owners.

Further, even if adequate surplus is available to pay dividends on the Series A Preferred Stock, we may not have sufficient cash to pay cash dividends on the Series A Preferred Stock. Even if we do have sufficient cash to pay dividends, our capital allocation strategy may result in the Company electing to pay dividends in additional shares of Series A Preferred Stock. We have in the past, and may elect in the future, to pay dividends on the Series A Preferred Stock in shares of additional Series A Preferred Stock; however, our ability to pay dividends in shares of our Series A Preferred Stock may be limited by the number of shares of Series A Preferred Stock we are authorized to issue under our certificate of incorporation. As of January 1, 2018 we had issued 49,665 shares of our Series A Preferred Stock out of 100,000 authorized shares.

The Series A Preferred Stock does not have an established trading market, which may negatively affect its market value and the ability to transfer or sell such shares.

The shares of Series A Preferred Stock do not have an established trading market, but trade in the over the counter market. Since the Series A Preferred Stock has no stated maturity date, investors seeking liquidity will be limited to selling their shares in the secondary market or converting their shares to common shares and selling in the secondary market. We do not intend to list the Series A Preferred Stock on any securities exchange. We cannot assure you that an active trading market in the Series A Preferred Stock will develop or, even if it develops, we cannot assure you that it will last. In either case, the trading price of the Series A Preferred Stock could be adversely affected and the ability of a holder of Series A Preferred Stock to transfer shares of Series A Preferred Stock will be limited. We are not aware of any entity making a market in the shares of our Series A Preferred Stock which we anticipate may further limit liquidity.

The conversion rate of the Series A Preferred Stock may not be adjusted for all dilutive events.

The number of shares of our common stock that a holder of Series A Preferred Stock is entitled to receive upon conversion of the Series A Preferred Stock is subject to adjustment for certain specified events, including, but not limited to, the issuance of certain stock dividends on our common stock, the issuance of certain rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness, or assets, cash dividends and certain issuer tender or exchange offers, as set forth in the Certificate of Designations. However, the conversion rate may not be adjusted for other events, such as the exercise of stock options or other equity awards held by our employees or offerings of our common stock or securities convertible into common stock (other than those set forth in the Certificate of Designations) for cash or in connection with acquisitions, which may adversely affect the market price of our common stock. Further, if any of these other events adversely affects the market price of our common stock, we expect it to also adversely affect the market price of our Series A Preferred Stock. In addition, the terms of our Series A Preferred Stock do not restrict our ability to offer common stock or securities convertible into common stock in the future or to engage in other transactions that could dilute our common stock. We have no obligation to consider the interests of the holders of our Series A Preferred Stock in engaging in any such offering or transaction. If we issue additional shares of common stock, those issuances may materially and adversely affect the market price of our common stock and, in turn, those issuances may adversely affect the trading price of the Series A Preferred Stock.

Series A Preferred Stock holders may be adversely affected if a “fundamental change” occurs

If a “fundamental change” (as defined in the Certificate of Designations) occurs, we will under certain circumstances increase the conversion rate by a number of additional shares of our common stock for shares of Series A Preferred Stock converted in connection with such fundamental change as described in the Certificate of Designations. While this feature is designed to, among other things, compensate holders of Series A Preferred Stock for lost option time value of their shares of Series A Preferred Stock as a result of the fundamental change, it may not adequately compensate holders of Series A Preferred Stock for their loss as a result of such transaction. In addition, the conversion rate as adjusted will not exceed the $1,000 liquidation preference, divided by 66 ² / ₃ % of $10.49 , the closing sale price of our common stock on June 30, 2014. However, if the adjustment is based on an amount per share that is less than the floor of 66 ² / ₃ % of $10.49 , holders will likely receive a number of shares of common stock worth less than the $1,000 liquidation preference per share of Series A Preferred Stock, plus any accumulated and unpaid dividends thereon. Holders of our Series A Preferred Stock will have no claim against the Company for the difference between the value of the consideration received upon a conversion in connection with a fundamental change and the $1,000 liquidation preference per share of Series A Preferred Stock, plus any accumulated and unpaid dividends thereon.

These provisions will not afford protection to holders of Series A Preferred Stock in the event of other transactions that could adversely affect the value of the Series A Preferred Stock. For example, transactions such as leveraged recapitalizations, refinancings, restructurings, or acquisitions initiated by us may not constitute a fundamental change. In the event of any such transaction, holders would not have the protection afforded by the provisions applicable to a fundamental change even though each of these transactions could increase the amount of our indebtedness, or otherwise adversely affect our capital structure or any credit ratings, thereby adversely affecting the holders of Series A Preferred Stock.

In addition, holders of Series A Preferred Stock will have no additional rights upon a fundamental change, and will have no right not to convert the Series A Preferred Stock into shares of our common stock.

Our obligation to satisfy the additional shares requirement could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness and equitable remedies.

We have reserved a number of shares of our common stock for issuance upon the conversion of the Series A Preferred Stock equal to the aggregate conversion rate, which, under limited circumstances, is less than the maximum number of shares of common stock that we might be required to issue upon such conversion.

On issuance of the Series A Preferred Stock, we reserved, and are obligated under the terms of the Series A Preferred Stock to keep reserved at all times, a number of shares of our common stock equal to the aggregate liquidation preference

divided by the closing sale price of our common stock on the date of the closing of our issuance of the Series A Preferred Stock. This is less than the maximum number of shares of our common stock issuable upon conversion of the Series A Preferred Stock in connection with a fundamental change where we could, depending on the stock price at the time, be required to issue upon conversion of the Series A Preferred Stock, shares of common stock representing the $1,000 liquidation preference per share divided by 66 ² / ₃ % of $10.49 , the closing sale price of our common stock on June 30, 2014. In that circumstance, we would not have reserved the full amount of shares of our common stock issuable upon conversion of the Series A Preferred Stock. While we may satisfy our obligation to issue shares upon conversion of the Series A Preferred Stock by utilizing authorized, unreserved and unissued shares of common stock, if any, or by redesignating reserved shares or purchasing shares in the open market, there can be no assurance that we would be able to do so at that time.

We may issue additional series of preferred stock that rank equally to the Series A Preferred Stock as to dividend payments and liquidation preference and these future issuances may adversely affect the market price for our common stock.

Neither our Certificate of Incorporation nor the Certificate of Designations prohibits us from issuing additional series of preferred stock that would rank equally to the Series A Preferred Stock as to dividend payments and liquidation preference. Our certificate of incorporation provides that we have the authority to issue up to 5,000,000 shares of preferred stock, including up to 100,000 shares of Series A Preferred Stock. The issuances of other series of preferred stock could have the effect of reducing the amounts available to the Series A Preferred Stock in the event of our liquidation, winding-up or dissolution. It may also reduce cash dividend payments on the Series A Preferred Stock if we do not have sufficient funds to pay dividends on all Series A Preferred Stock outstanding and outstanding parity preferred stock.

Additional issuances and sales of preferred stock, or the perception that such issuances and sales could occur, may cause prevailing market prices for our common stock to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to us.

Holders of our Series A Preferred Stock have no voting rights except under limited circumstances.

Except with respect to certain material and adverse changes to the Series A Preferred Stock as described in the Certificate of Designations, holders of Series A Preferred Stock do not have voting rights and will have no right to vote for any members of our Board of Directors, except as may be required by Delaware law.

Holders of our Series A Preferred Stock may be subject to tax if we make or fail to make certain adjustments to the conversion rate of the Series A Preferred Stock even though the holders of Series A Preferred Stock do not receive a corresponding cash distribution.

The conversion rate of the Series A Preferred Stock is subject to adjustment in certain circumstances, including the payment of cash dividends. If the conversion rate is adjusted as a result of a distribution that is taxable to our common shareholders, such as a cash dividend, holders of Series A Preferred Stock may be deemed to have received a dividend subject to U.S. federal income tax without the receipt of any cash. In addition, a failure to adjust (or to adjust adequately) the conversion rate after an event that increases a holder of Series A Preferred Stock’s proportionate interest in us could be treated as a deemed taxable dividend to the holder of Series A Preferred Stock. If a “fundamental change” (as defined in the Certificate of Designations) occurs, under some circumstances, we will increase the conversion rate for shares of Series A Preferred Stock converted in connection with such fundamental change. Such increase may also be treated as a distribution subject to U.S. federal income tax as a dividend. If a holder of Series A Preferred Stock is a non-U.S. holder, any deemed dividend may be subject to U.S. federal withholding tax at a 30% rate, or such lower rate as may be specified by an applicable treaty, which may be set off against subsequent payments on the Series A Preferred Stock.

Warrants Risk Factors

There is no guarantee that the warrants will ever be in the money, and they may expire worthless and the terms of our warrants may be amended.

The exercise price for our warrants is $12.00 per share. There is no guarantee that the warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

In addition, the warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding warrants originally issued as part of units in our initial public offering (the “Public Warrants”) to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding Public Warrants approve of such amendment. Although our ability to amend the terms of the warrants with the consent of at least 65% of the then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares of our common stock purchasable upon exercise of a warrant.

We may redeem the Public Warrants prior to their exercise at a time that is disadvantageous to warrantholders, thereby making their warrants worthless.

We have the ability to redeem the outstanding Public Warrants at any time after they become exercisable and prior to their expiration at a price of $0.01 per warrant, provided that (i) the last reported sale price of our common stock equals or exceeds $18.00 per share for any 20 trading days within the 30 trading-day period ending on the third business day before we send the notice of such redemption and (ii) on the date we give notice of redemption and during the entire period thereafter until the time the warrants are redeemed, there is an effective registration statement under the Securities Act of 1933 covering the shares of our common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available. Redemption of the outstanding Public Warrants could force holders of Public Warrants:


•	to exercise their warrants and pay the exercise price therefore at a time when it may be disadvantageous for them to do so;


•	to sell their warrants at the then-current market price when they might otherwise wish to hold their warrants; or


•	to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of their warrants.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our corporate headquarters is located at 833 E. Michigan Street, Suite 900, Milwaukee, Wisconsin with approximately 19,000 square feet of office space that we lease, the term of which expires on May 1, 2027. Our executive offices are located at this facility, along with our treasury, finance, insurance, legal, information technology, human resources, tax, business development and administration of employee benefits functions.

As of December 31, 2017 , Jason Industries owned or leased the following additional facilities:



	Number of Locations				Square Footage
	Manufacturing	Warehouse	Sales / Distribution / Admin	Total	Owned	Leased	Total
Finishing	15	—	4	19	480,000	536,000	1,016,000
Components	3	1	—	4	—	445,000	445,000
Seating	6	3	2	11	200,000	581,000	781,000
Acoustics	7	3	2	12	65,000	1,013,000	1,078,000
	31	7	8	46	745,000	2,575,000	3,320,000

We consider our facilities suitable and adequate for the purposes for which they are used and do not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities. Our largest facilities are located in the United States, Mexico and Germany. We also maintain a presence in China, France, India, Portugal, Romania, Singapore, Spain, Taiwan, Sweden and the United Kingdom. See Note 10 “ Leases ” in the notes to the consolidated financial statements for information regarding our lease commitments.

ITEM 3. LEGAL PROCEEDINGS

On September 14, 2017, the New York Supreme Court dismissed, with prejudice, all claims asserted by JMB Capital Partners Master Fund, L.P.’s December 22, 2016 complaint, captioned JMB Capital Partners Master Fund, L.P. v. Jason Industries, Inc., et al., Index No. 656692/2016. As of December 31, 2017 , the appeal period has expired without an appeal being filed.

In addition to the case noted above, from time to time, the Company is subject to litigation incidental to its business, as well as other litigation of a non-material nature in the ordinary course of business.

See Note 17 , “Commitments and Contingencies” under the heading “Litigation Matters” in the notes to the consolidated financial statements for further information.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock and warrants are currently quoted on Nasdaq under the symbols “JASN” and “JASNW,” respectively. There is no established trading market for the Series A Preferred Stock, but the shares trade in the over the counter market under the symbol “JSSNP.”

Common Stock and Warrants Prices

The following table sets forth for the periods indicated, the reported high and low sales prices for our common stock and warrants.



	Common Stock				Warrants
	High		Low		High		Low
2017:
First Quarter	$	1.87	$	1.15	$	0.07	$	0.04
Second Quarter	$	1.65	$	1.14	$	0.19	$	0.04
Third Quarter	$	1.64	$	0.77	$	0.10	$	0.04
Fourth Quarter	$	2.64	$	1.44	$	0.05	$	0.01

2016:
First Quarter	$	4.23	$	2.77	$	0.20	$	0.04
Second Quarter	$	4.20	$	3.52	$	0.35	$	0.11
Third Quarter	$	3.90	$	1.87	$	0.29	$	0.06
Fourth Quarter	$	2.37	$	1.41	$	0.10	$	0.04

Holders

As of December 31, 2017 , there were 25,966,381 shares of common stock outstanding, held of record by 75 holders, and 48,697 shares of Series A Preferred Stock outstanding, held of record by 12 holders. On January 1, 2018, an additional 968 shares of Series A Preferred Stock were issued to the 12 holders of record. In addition, 13,993,773 shares of common stock are issuable upon exercise of 13,993,773 warrants, held of record by 7 holders. The number of record holders of our common stock, Series A Preferred Stock and warrants does not include DTC participants or beneficial owners holding shares through nominee names. See Note 18 “ Subsequent Events ” of the accompanying consolidated financial statements for further information on the exchange of certain shares of Series A Preferred Stock for common stock of Jason Industries, Inc., which occurred subsequent to December 31, 2017 .

Dividends

The Company paid the following dividends on the Series A Preferred Stock during the year ended December 31, 2017 :



(in thousands, except share and per share amounts)
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

On November 28, 2017 , the Company announced a $20.00 per share dividend on its Series A Preferred Stock to be paid in additional shares of Series A Preferred Stock on January 1, 2018 to holders of record on November 15, 2017 . As of December 31, 2017 , the Company has recorded the 968 additional Series A Preferred Stock shares declared from the dividend for $1.0 million within preferred stock in the consolidated balance sheets.

The Company has not paid any dividends on its common stock to date. It is the present intention of the Company to retain any earnings for use in its business operations and, accordingly, the Company does not anticipate the Board of Directors declaring any dividends in the foreseeable future on our common stock. In addition, certain of our loan agreements restrict the payment of dividends and the terms of our Series A Preferred Stock may from time to time prevent us from paying cash dividends on our common stock.

Recent Issuer Purchases of Equity Securities

The following table contains detail related to the repurchase of common stock based on the date of trade during the three months ended December 31, 2017 :



2017 Fiscal Month	Total Number of Shares Purchased ^(a)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Plans or Programs Announced ^(b)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
September 30 to Novembe r 3	—	—	—	N/A
November 4 to December 1	—	—	—	N/A
December 2 to December 31	—	—	—	N/A
Total	—	—	—

^(a) Represents shares of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock unit awards. The 2014 Omnibus Incentive Plan and the award agreements permit participants to satisfy all or a portion of the statutory federal, state and local withholding tax obligations arising in connection with plan awards by electing to (1) have the Company reduce the number of shares otherwise deliverable or (2) deliver shares already owned, in each case having a value equal to the amount to be withheld. During the year ended December 31, 2017 , the Company withheld 25,532 shares that employees presented to the Company to satisfy withholding taxes in connection with the vesting of restricted stock unit awards.

^(b) The Company is not currently participating in a share repurchase program.

Comparative Share Performance Graph

The following information in this Item 5 is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates it by reference into such a filing.

The following graph shows a comparison of cumulative total shareholder return, calculated on a dividend reinvested basis, for (1) the Company’s common stock, (2) the Standard & Poor’s SmallCap 600 Index, and (3) the Dow Jones U.S. Diversified Industrials Index, for the period October 18, 2013 (the first day our common shares were traded following our initial public offering) through December 31, 2017 . The graph assumes the value of the investment in our common stock and each index was $100.00 on October 18, 2013 and that all dividends were reinvested. Note that historic stock price performance is not necessarily indicative of future stock price performance.



	10/18/2013		12/31/2013		12/31/2014		12/31/2015		12/31/2016		12/31/2017
Jason Industries, Inc.	$	100.00	$	102.02	$	99.49	$	38.18	$	18.18	$	23.94
S&P SmallCap 600	$	100.00	$	109.83	$	116.15	$	113.86	$	144.10	$	163.17
Dow Jones US Diversified Industrials	$	100.00	$	116.29	$	117.51	$	132.60	$	147.12	$	137.43

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data for the years ended December 31, 2017 , 2016 and 2015 have been derived from Jason Industries’ audited consolidated financial statements, including the notes thereto, appearing elsewhere in this Annual Report on Form 10-K. The selected financial data for the period June 30, 2014 through December 31, 2014, the period January 1, 2014 through June 29, 2014 and the year ended December 31, 2013 have been derived from Jason’s historical consolidated financial statements not included herein.

Upon completion of the Business Combination on June 30, 2014 (the “Closing Date”), the Company was identified as the acquirer for accounting purposes, and Jason is the acquiree and accounting predecessor. The Company’s financial statement presentation distinguishes Jason as the “Predecessor” for periods prior to the Closing Date. The Company was subsequently re-established as Jason Industries, Inc. and is the “Successor” for periods after the Closing Date, which includes consolidation of Jason Industries, Inc. subsequent to the Business Combination on June 30, 2014. The acquisition was accounted for as a business combination using the acquisition method of accounting, and the Successor financial statements reflect a new basis of accounting that is based on the fair value of net assets acquired. As a result of the application of the acquisition method of accounting as of the effective time of the acquisition, the financial statements for the Predecessor period and for the Successor period are presented on a different basis and, therefore, are not comparable.

The historical results presented below are not necessarily indicative of the results to be expected for any future period. This information should be read in conjunction with “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the Company’s consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.



	Successor												Predecessor
	Year Ended December 31,									June 30, 2014 Through December 31, 2014			January 1, 2014 Through June 29, 2014			Year Ended December 31, 2013
(in thousands, except per share data)	2017			2016			2015			June 30, 2014 Through December 31, 2014			January 1, 2014 Through June 29, 2014			Year Ended December 31, 2013
Statement of Operations Data:
Net sales	$	648,616		$	705,519		$	708,366		$	325,335		$	377,151		$	680,845
Cost of goods sold ⁽¹⁾	517,764			574,412			561,076			270,676			294,175			527,371
Gross profit ⁽¹⁾	130,852			131,107			147,290			54,659			82,976			153,474
Selling and administrative expenses	103,855			113,797			129,371			57,183			54,974			108,889
Newcomerstown fire gain- net	—			—			—			—			—			(12,483		)
Impairment charges	—			63,285			94,126			—			—			—
(Gain) loss on disposals of property, plant and equipment - net	(759		)	880			109			57			338			22
Restructuring	4,266			7,232			3,800			1,131			2,554			2,950
Transaction-related expenses	—			—			886			2,533			27,783			1,073
Multiemployer pension plan withdrawal gain	—			—			—			—			—			(696		)
Operating income (loss) ⁽¹⁾	23,490			(54,087		)	(81,002		)	(6,245		)	(2,673		)	53,719
Interest expense	(33,089		)	(31,843		)	(31,835		)	(16,172		)	(7,301		)	(20,716		)
Gain on extinguishment of debt	2,201			—			—			—			—			—
Equity income	952			681			884			381			831			2,345
Loss on divestiture	(8,730		)	—			—			—			—			—
Gain from sale of joint ventures	—			—			—			—			3,508			—
Gain from involuntary conversion of property, plant and equipment	—			—			—			—			—			6,351
Other income - net	319			900			97			167			107			636
(Loss) income before income taxes ⁽¹⁾	(14,857		)	(84,349		)	(111,856		)	(21,869		)	(5,528		)	42,335
Tax (benefit) provision ⁽¹⁾	(10,384		)	(6,296		)	(22,255		)	(7,889		)	(573		)	18,247
Net (loss) income ⁽¹⁾	$	(4,473	)	$	(78,053	)	$	(89,601	)	$	(13,980	)	$	(4,955	)	$	24,088
Less net gain (loss) attributable to noncontrolling interests	5			(10,818		)	(15,143		)	(2,362		)	—			—
Net (loss) income attributable to Jason Industries ⁽¹⁾	$	(4,478	)	$	(67,235	)	$	(74,458	)	$	(11,618	)	$	(4,955	)	$	24,088
Accretion of preferred stock dividends and redemption premium	3,783			3,600			3,600			1,810			—			2,405
Net (loss) income available to common shareholders of Jason Industries ⁽¹⁾	$	(8,261	)	$	(70,835	)	(78,058		)	$	(13,428	)	$	(4,955	)	$	21,683
(Loss) earnings per share: Basic and diluted ⁽¹⁾	$	(0.32	)	$	(3.15	)	$	(3.53	)	$	(0.61	)	$	(4,955.00	)	$	21,683.00
Weighted-average shares outstanding:
Basic and diluted	26,082			22,507			22,145			21,991			1			1
Cash dividends paid per common share	$	—		$	—		$	—		$	—		$	—		$	43,055


⁽¹⁾	Amounts in 2016 have been revised for prior period errors as described within Note 2 , “ Revision of Previously Reported Financial Information ”.



	Successor									Predecessor
	As of December 31,									As of December 31, 2013
(in thousands)	2017		2016			2015		2014		As of December 31, 2013
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	48,887	$	40,861		$	35,944	$	62,279	$	16,318
Total assets ⁽¹⁾	546,323		583,836			697,092		788,733		420,330
Long-term debt	391,768		416,945			426,150		404,635		233,144
Total liabilities ⁽¹⁾	540,639		586,978			612,098		606,058		389,858
Total stockholders’ equity (deficit) ⁽¹⁾	5,684		(3,142		)	84,994		182,675		30,472


⁽¹⁾	Amounts in 2016 have been revised for prior period errors as described within Note 2 , “ Revision of Previously Reported Financial Information ”.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations of the Company should be read in conjunction with the consolidated financial statements for the years ended December 31, 2017 , 2016 and 2015 , including the notes thereto, included elsewhere in this Annual Report on Form 10-K. The Company’s actual results may not be indicative of future performance. This discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those discussed in “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included in Part I, Item IA or in other parts of this Annual Report on Form 10-K. Actual results may differ materially from those contained in any forward-looking statements.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains certain financial measures, in particular EBITDA and Adjusted EBITDA, which are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These non-GAAP financial measures are being presented because management believes that they provide readers with additional insight into the Company’s operational performance relative to earlier periods and relative to its competitors. EBITDA and Adjusted EBITDA are key measures used by the Company to evaluate its performance. The Company does not intend for these non-GAAP financial measures to be a substitute for any GAAP financial information. Readers of this MD&A should use these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures. Reconciliations of EBITDA and Adjusted EBITDA to net income, the most comparable GAAP measure, are provided in this MD&A.

Fiscal Year

The Company’s fiscal year ends on December 31 . Throughout the year, the Company reports its results using a fiscal calendar whereby each three month quarterly reporting period is approximately thirteen weeks in length and ends on a Friday. The exceptions are the first quarter, which begins on January 1 , and the fourth quarter, which ends on December 31 . For 2017 , the Company’s fiscal quarters were comprised of the three months ended March 31, June 30, September 29 and December 31 . In 2016 , the Company’s fiscal quarters were comprised of the three months ended April 1, July 1, September 30, and December 31 .

Overview

Jason Industries, Inc. is a global industrial manufacturing company with significant market share positions in each of its four segments: finishing, components, seating, and acoustics. The Company was founded in 1985 and today provides critical components and manufacturing solutions to customers across a wide range of end markets, industries and geographies through its global network of 31 manufacturing facilities and 15 sales offices, warehouses and joint venture facilities throughout the United States and 13 foreign countries. The Company has embedded relationships with long standing customers, superior scale and resources and specialized capabilities to design and manufacture specialized products on which our customers rely.

The Company focuses on markets with sustainable growth characteristics and where it is, or has the opportunity to become, the industry leader. The Company’s finishing segment focuses on the production of industrial brushes, polishing buffs and compounds, and abrasives that are used in a broad range of industrial and infrastructure applications. The components segment is a diversified manufacturer of expanded and perforated metal components and subassemblies for smart utility meters. The seating segment supplies seating solutions to equipment manufacturers in the motorcycle, lawn and turf care, industrial, agricultural, construction and power sports end markets. The acoustics segment manufactures engineered non-woven, fiber-based acoustical products for the automotive industry.

On May 29, 2015, the Company acquired all of the outstanding shares of DRONCO GmbH (“DRONCO”). DRONCO is a leading European manufacturer 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 DRONCO acquisition expanded the finishing segment’s product portfolio and advances its entry to adjacent abrasives markets.

During the years ended December 31, 2017 , 2016 and 2015 , approximately 32% , 30% and 28% of the Company’s sales were generated by the Company’s operations located outside of the U.S., respectively. As a diversified, global business, the Company’s operations are affected by worldwide, regional and industry-specific economic and political factors. The Company’s geographic and industry diversity, as well as the wide range of its products, help mitigate the impact of industry or economic fluctuations. Given the broad range of products manufactured and industries and geographies served, management does not use any indicators other than general economic trends to predict the overall outlook for the Company. The Company’s individual businesses monitor key competitors and customers, including, to the extent possible, their sales, to gauge relative performance and the outlook for the future.

General Market Conditions and Trends; Business Performance and Outlook

Demand for the Company’s products was mixed in 2017 when compared with 2016, with higher demand in the finishing segment, offset by lower demand in the components, seating, and acoustics segments. Demand was mixed in 2016 when compared with 2015, with higher demand in the acoustics segment, offset by lower demand in the finishing, components and seating segments.

Demand in the Company’s finishing segment is largely dependent upon overall industrial production levels in the markets it serves. Management believes that gross domestic product (“GDP”) and industrial production levels in the Company’s served markets will continue to grow modestly in the near term. However, if there is no growth, or if GDP or production levels do not increase or shrink, there could be reduced demand for the finishing segment’s products, which would have a material negative impact on the finishing segment’s net sales and/or income from continuing operations.

Sales levels for the components segment are dependent upon new railcar and smart utility production levels in the U.S., as well as general U.S. industrial production levels. Railcar production declined in 2017 and management believes this decline will persist into 2018 as part of a cyclical decline. Management believes U.S. GDP and industrial production will grow modestly. However, if the North American rail industry declines more rapidly than anticipated, customers in-source production, and/or U.S. GDP is flat or shrinks, there could be reduced demand for the components segment’s products, which would have a material negative impact on the components segment’s net sales and/or income from continuing operations.

The seating segment is principally impacted by demand from U.S.-based original equipment manufacturers serving the motorcycle, lawn and turf care, construction, agricultural and power sports market segments. In recent years, power sports production and the lawn and turf care equipment market have grown modestly, and global construction activity has improved. Management believes that, in the near term, power sports, construction and agriculture equipment industries will continue to show stability, while the lawn and turf care industry will experience normal seasonal demand, and the motorcycle industry will soften. However, if such industries weaken (or, in the case of the motorcycle industry, soften more than anticipated), there could be reduced demand for the seating segment’s products, which would have a material negative impact on the seating segment’s net sales and/or income from continuing operations.

Demand for products manufactured by the Company’s acoustics segment is primarily influenced by production levels in the North American automobile industry. Management believes that North American automotive industry production, which peaked in 2016 and decreased approximately 4% in 2017, will continue to modestly cycle down over the next several years. If such industry weakens more than anticipated, or if the mix of cars, light trucks and SUVs that are produced shifts significantly, there could be reduced demand for the acoustics segment’s products, which would have a material negative impact on the acoustics segment’s net sales and/or income from continuing operations.

The Company expects overall market conditions to remain challenging due to macro-economic uncertainties and monetary and fiscal policies of countries where we do business. While individual businesses and end markets continue to experience volatility, the Company expects to benefit as general economic conditions in North America and Western Europe are expected to experience modest growth. Regarding economic conditions, as discussed above, we expect the following in the near term:


•	modest global GDP growth;


•	increasing global industrial production;


•	slowing demand in the North American automotive industry;


•	lower demand in the motorcycle industry;


•	declining demand in the North American rail industry;


•	continued strength in the power sport and construction industries; and


•	normal seasonal demand in the lawn and turf care market.

Strategic Initiatives

The Company’s strategic initiatives support an overall capital allocation strategy that focuses on decreasing leverage through maximizing earnings and free cash flow. On March 1, 2016, the Company announced a global cost reduction and restructuring program designed to expand Adjusted EBITDA margins. To achieve this target, our strategic initiatives include:

Margin Expansion - The Company is focused on creating operational effectiveness at each of its business segments through deployment of lean principles and implementation of continuous operational improvement initiatives. While many of these activities have focused on implementing shop floor improvements, we have also targeted our selling and administrative functions in order to reduce the cost of serving our customers. The Company is also focused on improving profitability through an active evaluation of customer pricing and margins and a reduction in the number of parts and product variations that are

produced. While these initiatives may result in lower overall sales, they are focused on creating shareholder value through higher margins and profitability, as well as lower inventory levels and working capital requirements.

Continued footprint rationalization - The Company serves its customers through a global network of manufacturing facilities, sales offices, warehouses and joint venture facilities throughout the United States and 13 foreign countries. The Company’s geographic footprint has evolved over time with a focus on maximizing geographic coverage while optimizing costs. Over the past several years, the Company has closed several facilities in higher cost, mature markets and replaced them with facilities in higher growth, lower cost regions such as Mexico, India and Eastern Europe. The Company continuously evaluates its manufacturing footprint and utilization of manufacturing capacity. In recent years, the Company has completed or announced the consolidation of manufacturing facilities across its businesses. Reduction of fixed costs through optimization of manufacturing footprint and capacity will continue to be a driver of margin expansion and improving profitability.

In 2017, the Company closed the finishing segment’s Richmond, Virginia facility and consolidated two facilities in Libertyville, Illinois in the components segment. In 2016, the Company wound down operations of the finishing segment facility in Brazil, and the components facility in Buffalo Grove, Illinois. The Company believes that geographic proximity to existing and potential customers provides logistical efficiencies, as well as important strategic and cost advantages, and has also taken steps to realign its footprint within the United States. The Company anticipates that costs associated with any future rationalization activities, as well as the capital required for any new facilities, will be funded by cash generated from operating activities.

Product Innovation - During the past several years, the Company’s research and development activities have placed more focus on developing new products that are of higher value to our customers with superior performance over alternative and competitive products, thereby providing customers with a better value proposition. The Company believes that developing new and innovative products will allow it to deepen its value-added relationships with customers, open new opportunities for revenue generation, enhance pricing power and improve margins. This strategy has been particularly effective in the Company’s acoustics segment where new fiber based products have been developed to capitalize on industry trends requiring quieter automobiles and products that meet end of vehicle life recycling standards and lower weight.

Acquisitions - The Company uses acquisitions to increase revenues with existing customers and to expand revenues to both new markets and customers. The Company intends to only pursue an acquisition if it is accretive to EBITDA (earnings before interest, income taxes, depreciation and amortization) margins post-synergies, has a strategic focus that aligns with our core strategy and generates the appropriate estimated return on investment as part of our capital resource and allocation process.

Factors that Affect Operating Results

The Company’s results of operations and financial performance are influenced by a number of factors, including the timing of new product introductions, general economic conditions and customer buying behavior. The Company’s business is complex, with multiple segments serving a broad range of industries worldwide. The Company has manufacturing and sales facilities around the world, and it operates in numerous regulatory and governmental environments. Comparability of future results could be impacted by any number of unforeseen issues.

Key Events

In addition to the factors described above, the following strategic and operational events, which occurred during the years ended December 31, 2017 , 2016 and 2015 , affected the Company’s results of operations:

Divestitures . On August 30, 2017, the Company completed the divestiture of the European operations within the acoustics segment located in Germany (“Acoustics Europe”) for a net purchase price of $8.1 million , which includes 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 million pre-tax loss.

Tax Cuts and Jobs Act . On December 22, 2017, the President of the United States signed into law the Tax Reform Act. The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act also adds many new provisions including changes to bonus depreciation and the deductions for executive compensation and interest expense, among others. 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. See further discussion of the Tax Reform Act within “Consolidated Results of Operations” below.

Impairment charges. 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 the 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 connection with the evaluation of the goodwill impairment in the acoustics and components reporting units, the Company assessed tangible and intangible assets for impairment prior to performing the first step of the goodwill impairment test. As a result of this analysis, the undiscounted future cash flows of each asset group within the reporting units exceeded the recorded carrying values of the net assets within each asset group, and as such, no non-cash impairment charges resulted from such assessment.

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.

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 .

Total non-cash impairment charges of $94.1 million were recorded in the fourth quarter of 2015 as a result of these analyses. These charges are 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, the third-party valuation firm was also involved 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.

Acquisitions . During the second quarter of 2015, the Company acquired all of the outstanding shares of DRONCO. DRONCO is a European manufacturer 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.

Key Financial Definitions

Net sales . Net sales reflect the Company’s sales of its products net of allowances for returns and discounts. Several factors affect net sales in any period, including general economic conditions, weather conditions, the timing of acquisitions and divestitures and the purchasing habits of its customers.

Cost of goods sold . Cost of goods sold includes all costs of manufacturing the products the Company sells. Such costs include direct and indirect materials, direct and indirect labor costs, including fringe benefits, supplies, utilities, depreciation, facility rent, insurance, pension benefits and other manufacturing related costs. The largest component of cost of goods sold is the cost of materials, which typically represents approximately 60% of net sales. Fluctuations in cost of goods sold are caused primarily by changes in sales levels, changes in the mix of products sold, productivity of labor, and changes in the cost of raw materials. In addition, following acquisitions, cost of goods sold will be impacted by step-ups in the value of inventories required in connection with the accounting for acquired businesses.

Selling and administrative expenses . Selling and administrative expenses primarily include the cost associated with the Company’s sales and marketing, finance, human resources, and administration, engineering and technical services functions. Certain corporate level administrative expenses such as payroll and benefits, incentive compensation, travel, accounting, auditing and legal fees and certain other expenses are kept within its corporate results and not allocated to its business segments.

Impairment charges . As required by GAAP, when certain conditions or events occur, the Company recognizes impairment losses to reduce the carrying value of goodwill, other intangible assets and property, plant and equipment to their estimated fair values. During the year ended December 31, 2017 , the Company recognized no impairment charges.

Gain (loss) on disposals of fixed assets-net . In the ordinary course of business, the Company disposes of fixed assets that are no longer required in its day to day operations with the intent of generating cash from those sales.

Restructuring . In the past several years, the Company has made changes to its worldwide manufacturing footprint to reduce its fixed cost base. These actions have resulted in employee severance and other related charges, changes in its operating cost structure, movement of manufacturing operations and product lines between facilities, exit costs for consolidation and closure of plant facilities, employee relocation and lease termination costs, and impairment charges. It is likely that the Company will incur such costs in future periods as well. These operational changes and restructuring costs affect comparability between periods and segments.

Transaction-related expenses . Transaction-related expenses primarily consist of professional service fees related to the the Company’s acquisition and divestiture activities.

Interest expense . Interest expense consists of interest paid to the Company’s lenders under its worldwide credit facilities, cash paid on interest rate hedge contracts and amortization of deferred financing costs.

Gain on extinguishment of debt . Gain on extinguishment of debt primarily consists of gains recorded related to the repurchases of second lien term loan debt, net of the associated write-off of previously unamortized debt discount and deferred financing costs on the second lien term loans related to the extinguishment.

Equity income . The Company maintains non-controlling interests in Asian joint ventures that are part of its finishing segment and records a proportional share in the earnings of these joint ventures as required by GAAP. The amount of equity income recorded is dependent upon the underlying financial results of the joint ventures.

Loss on divestiture . On August 30, 2017, the Company completed the divestiture of its Acoustics Europe business. The loss on divestiture relates to the excess of the net assets of the business over the fair value less costs to sell and recognition of cumulative foreign currency translation adjustments upon closing of the divestiture.

Other income-net . Other income is principally comprised of royalty income received from non-U.S. licensees and rental income from subleasing activities.

Tax benefit . The Company’s tax benefit is impacted by a number of factors, including the amount of taxable earnings derived in foreign jurisdictions with tax rates that are different than the U.S. federal statutory rate, state tax rates in the jurisdictions where the Company does business, tax minimization planning and its ability to utilize various tax credits and net operating loss carryforwards. Income tax expense also includes the impact of provision to return adjustments, changes in valuation allowances and changes in reserve requirements for unrecognized tax benefits. In 2017, the income tax benefit was also impacted by the provisions of the Tax Reform Act.

Accretion of preferred stock dividends and redemption premium. The Company records accretion of preferred stock dividends to reflect cumulative dividends on its preferred stock. The accretion amounts are subtracted from net loss to arrive at the net loss available to common shareholders for the purposes of calculating the Company’s net loss per share available to common shareholders.

General Factors Affecting the Results of Continuing Operations

Foreign exchange . The Company has a significant portion of its operations outside of the U.S. As such, the results of the Company’s operations are based on currencies other than the U.S. dollar. Changes in foreign currency exchange rates influence its financial results, and therefore the ability to compare results between periods and segments.

Seasonality . The Company’s seating segment is subject to seasonal variation due to the markets it serves and the stocking requirements of its customers. The peak season has historically been during the period from November through May. Sales during these months are typically greater due to the shipments required to fill the inventory at retail stores and customer warehouses. There are, however, variations in the seasonal demands from year to year depending on weather, customer inventory levels, and model year changes. This seasonality and annual variations of this seasonality could impact the ability to compare results between time periods.

Consolidated Results of Operations

The following table sets forth our consolidated results of operations:



	Year Ended December 31, 2017			Year Ended December 31, 2016			Year Ended December 31, 2015
(in thousands)	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	)

Other financial data: ⁽¹⁾



(in thousands, except percentages)	Year Ended December 31, 2017			Year Ended December 31, 2016			Increase/(Decrease)
(in thousands, except percentages)	Year Ended December 31, 2017			Year Ended December 31, 2016			$			%
Consolidated
Net sales	$	648,616		$	705,519		$	(56,903	)	(8.1)%
Net loss	(4,473		)	(78,053		)	(73,580		)	(94.3	)
Net loss as a % of net sales	0.7		%	11.1		%	(1,040) bps
Adjusted EBITDA	67,752			64,160			3,592			5.6
Adjusted EBITDA as a % of net sales	10.4		%	9.1		%	130 bps



	Year Ended December 31, 2016			Year Ended December 31, 2015			Increase/(Decrease)
(in thousands, except percentages)	Year Ended December 31, 2016			Year Ended December 31, 2015			$			%
Consolidated
Net sales	$	705,519		$	708,366		$	(2,847	)	(0.4	)%
Net loss	(78,053		)	(89,601		)	(11,548		)	(12.9	)
Net loss as a % of net sales	11.1		%	12.6		%	(150) bps
Adjusted EBITDA	64,160			81,164			(17,004		)	(21.0	)
Adjusted EBITDA as a % of net sales	9.1		%	11.5		%	(240) bps


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

Year ended December 31, 2017 and the year ended December 31, 2016

Net sales . Net sales were $648.6 million for the year ended December 31, 2017 , a decrease of $56.9 million , or 8.1% , compared with $705.5 million for the year ended December 31, 2016 , reflecting decreased net sales in the acoustics segment of $43.3 million , the components segment of $15.0 million and the seating segment of $1.9 million , partially offset by increased net sales in the finishing segment of $3.4 million .

The decrease of $43.3 million in the acoustics segment was partially due to a $10.5 million decrease related to the sale of the Acoustics Europe business. The decrease of $15.0 million in the components segment was partially due to a decrease of $8.9 million as a result of the strategic decision to discontinue certain product lines selling under the Assembled Products brand in 2016. The increase of $3.4 million in the finishing segment was offset by a $4.7 million decrease associated with the wind down of a facility in Brazil.

Changes in foreign currency exchange rates compared with the U.S. dollar had a net positive impact of $1.2 million on consolidated net sales during the year ended December 31, 2017 compared with 2016 , positively impacting the finishing segment’s net sales by $1.5 million and negatively impacting the seating segment’s net sales by $0.3 million . This was due principally to the weakening of the U.S. dollar against the Euro during the year ended December 31, 2017 .

See further discussion of segment results below.

Cost of goods sold . Cost of goods sold was $517.8 million for the year ended December 31, 2017 , compared with $574.4 million for the year ended December 31, 2016 . The decrease in cost of goods sold was primarily due to lower net sales volumes in the acoustics, components and seating segments, lower labor and material usage costs in the acoustics segment as a result of operational efficiencies, reduced costs resulting from the Company’s global cost reduction and restructuring program and decreased health care and workers compensation costs due to lower claims, partially offset by higher organic net sales volumes in the finishing segment, operational inefficiencies in the components and seating segments and a $1.0 million negative impact related to foreign currency exchange rates.

The reduced costs resulting from the Company’s global cost reduction and restructuring program were due to lower manufacturing costs in the finishing segment as a result of the wind down of a facility in Brazil, lower manufacturing costs in the components segments due to the strategic decision to discontinue certain product lines selling under the Assembled Products brand in 2016 and lower manufacturing costs in the acoustics segment due to the sale of the Acoustics Europe business of $7.8 million.

Gross profit . For the reasons described above, gross profit was $130.9 million for the year ended December 31, 2017 , compared with $131.1 million for the year ended December 31, 2016 .

Selling and administrative expenses . Selling and administrative expenses were $103.9 million for the year ended December 31, 2017 , compared with $113.8 million for the year ended December 31, 2016 , a decrease of $9.9 million .

The decrease is primarily due to reduced selling and administrative expenses resulting from the Company’s global cost reduction and restructuring program of $6.1 million, which includes $3.1 million related to the closure of facilities in the components and finishing segments, as well as decreased corporate expenses of $4.1 million primarily related to professional fees associated with supply chain consulting incurred in 2016, a decrease due to the sale of the Acoustics Europe business and a reduction of bad debt expenses of $1.6 million due to improved collections. The decrease was partially offset by increased incentive compensation of $4.4 million, an increase in share-based compensation expense of $1.9 million, primarily due to a decrease in assumed vesting of Adjusted EBITDA based awards in the second quarter of 2016, which resulted in a $2.5 million reversal of previously recorded expense, and a $0.5 million negative impact related to foreign currency exchange rates. See further discussion of corporate expenses and segment results in the “Segment Financial Data” section below.

Impairment charges . There were no non-cash impairment charges for the year ended December 31, 2017 . Non-cash impairment charges for the year ended December 31, 2016 were $63.3 million , primarily relating to charges of $29.8 million and $33.2 million for the impairment of goodwill in the acoustics and components segments, respectively. See “Factors that Affect Operating Results - Key Events” in this MD&A and Note 8 “ Goodwill and Other Intangible Assets ” of the accompanying consolidated financial statements for further information.

(Gain) loss on disposals of property, plant and equipment—net . Gain on disposals of property, plant and equipment - net for the year ended December 31, 2017 was $0.8 million , compared to a loss of $0.9 million for the year ended December 31, 2016 . The gain on disposals of property, plant and equipment - net for the year ended December 31, 2017 includes a gain of $0.5 million on the sale of a building related to the closure of the finishing segment’s Richmond, Virginia facility and a gain of $0.4 million on the sale of equipment related to the closure of the components segment’s Buffalo Grove, Illinois facility. The loss on disposals of property, plant and equipment - net for the year ended December 31, 2016 includes a loss of $0.6 million on

a sale of a seating segment facility. Changes in the level of fixed asset disposals are dependent upon a number of factors, including changes in the level of asset sales, operational restructuring activities, and capital expenditure levels.

Restructuring . Restructuring costs were $4.3 million for the year ended December 31, 2017 compared to $7.2 million for the year ended December 31, 2016 . During 2017 and 2016, such costs primarily relate to actions resulting from the global cost reduction and restructuring program announced on March 1, 2016. During 2017, such costs were primarily severance and move costs related to the consolidation of two U.S. facilities in the components segment, the consolidation of two U.S. facilities in the finishing segment and the closure of a facility in Brazil in the finishing segment. During 2016, such costs primarily related to severance actions in all segments, including costs related to the closure of the components segment’s facility in Buffalo Grove, Illinois and the wind down of the finishing segment’s facility in Brazil. Included within the restructuring costs for the wind down of the Brazil facility are charges related to a loss contingency for certain employment matter claims.

Transaction-related expenses . Transaction-related expenses were insignificant for both the years ended December 31, 2017 and 2016 .

Interest expense . Interest expense was $33.1 million for the year ended December 31, 2017 compared with $31.8 million for the year ended December 31, 2016 . The increase in interest expense for the year ended December 31, 2017 primarily relates to $1.9 million recognized in 2017 related to the Company’s interest rate swaps which were effective December 30, 2016. The effective interest rate on the Company’s total outstanding indebtedness for the year ended December 31, 2017 was 7.6% as compared to 7.0% for the year ended December 31, 2016 . See “Senior Secured Credit Facilities” in the Liquidity and Capital Resources section of this MD&A for further discussion.

Gain on extinguishment of debt. Gain on extinguishment of debt was $2.2 million for the year ended December 31, 2017 . The gain on extinguishment of debt relates to the repurchase of $20.0 million of second lien term loans for $16.8 million in the second and third quarters of 2017. In connection with the repurchase, the Company wrote off $0.4 million of previously unamortized debt discount and $0.4 million of previously unamortized deferred financing costs, which were recorded as a reduction to the gain on extinguishment of debt. See “Senior Secured Credit Facilities” in the Liquidity and Capital Resources section of this MD&A for further discussion.

In the fourth quarter of 2017, the Company retired $2.4 million of foreign debt with cash received from the sale of Acoustics Europe and incurred a $0.2 million prepayment fee, which was recorded as an offset to the gain on extinguishment of debt.

Equity income . Equity income was $1.0 million for the year ended December 31, 2017 , compared with $0.7 million for the year ended December 31, 2016 .

Loss on divestiture. Loss on divestiture was $8.7 million for the year ended December 31, 2017 . On August 30, 2017, the Company completed the divestiture of its Acoustics Europe business. The divestiture resulted in an $8.7 million pre-tax loss, of which $7.9 million was recorded in the second quarter of 2017 when the business was classified as held for sale and written down to estimated fair value less costs to sell and $0.8 million was recorded in the third quarter of 2017 based on changes in the net assets of the business and additional foreign currency translation adjustments upon closing of the divestiture. See Note 4 , “ Divestiture ” in the notes to the consolidated financial statements for further information.

Other income —net . Other income was $0.3 million for the year ended December 31, 2017 , compared with $0.9 million for the year ended December 31, 2016 . During 2017 and 2016, other income-net consisted of certain rental and royalty income streams. During 2016, other income-net also included other one-time transactions within our finishing segment.

Loss before income taxes . For the reasons described above, loss before income taxes was $14.9 million for the year ended December 31, 2017 compared with $84.3 million for the year ended December 31, 2016 .

Tax benefit . The tax benefit was $10.4 million for the year ended December 31, 2017 , compared with $6.3 million for the year ended December 31, 2016 . The effective tax rate for the year ended December 31, 2017 was 69.9% , compared with 7.5% for the year ended December 31, 2016 . The Company’s tax benefit is impacted by a number of factors, including, among others, the amount of taxable income or loss at the U.S. federal statutory rate, the amount of taxable earnings derived in foreign jurisdictions that all have tax rates lower than the U.S. federal statutory rate prior to enactment of the Tax Reform Act , permanent items, state tax rates in jurisdictions where we do business and the ability to utilize various tax credits and net operating loss carry forwards to reduce income tax expense. The income tax benefit also includes the impact of provision to return adjustments, adjustments to valuation allowances and reserve requirements for unrecognized tax positions. For the year ended December 31, 2017 , the tax benefit was impacted by the enactment of the Tax Reform Act.

The 2017 effective tax rate of 69.9% differs from the U.S. federal statutory rate of 35% due primarily to the provision in the Tax Reform Act that reduces the U.S. federal income tax rate to 21% from 35% effective January 1, 2018, state tax benefits, the impact of lower foreign tax rates when compared to the 35% U.S. federal 2017 statutory tax rate (primarily in Germany and Mexico) and the reversal of the valuation allowance on the deferred tax assets at a foreign subsidiary. These items

were partially offset by the impact of the tax on the one-time deemed mandatory repatriation of undistributed foreign subsidiary earnings, change in assertion regarding permanent reinvestment of earnings in our wholly-owned foreign subsidiaries and the vesting and forfeiture of share-based compensation for which no tax benefit will be realized.

On December 22, 2017, the President of the United States signed into law comprehensive tax legislation commonly referred to as the Tax Reform Act. The legislation significantly changes 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 adds 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 will not incur any U.S. federal cash taxes resulting from the deemed mandatory repatriation.

During the fourth quarter of 2017, the Company changed its assertion regarding the permanent 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. 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.

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 provisions 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. Due 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 available accounting policy alternatives to either adopt or record the U.S. income tax effect of future GILTI inclusions in 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.

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 these amounts in its consolidated financial statements for the year ended December 31, 2017 . The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, 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 2016 effective tax rate of 7.5% differs from the U.S. federal statutory rate of 35.0% due primarily to the impact of non-deductible impairment charges recorded for the components and acoustics segments, the change in assertion regarding permanent reinvestment of earnings in our non-majority joint venture holding and increases in valuation allowances, partially offset by state tax benefits, the impact of lower foreign tax rates when compared to the U.S. federal statutory tax rate (primarily in Germany and Mexico) and a reduction in the reserve for uncertain tax positions as a result of the lapsing of the statute of limitations in one of the Company’s non U.S. tax jurisdictions. The change in assertion at the joint venture was driven by several factors. Prior to the second quarter of 2016, the Company had the ability 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 .

See Note 14 , “ Income Taxes ” in the consolidated financial statements for a complete reconciliation of the U.S. statutory tax rate to the effective tax rate and more information on tax events in 2017 and 2016 affecting each year’s respective tax rates.

Net loss . For the reasons described above, net loss was $4.5 million for the year ended December 31, 2017 compared with $78.1 million for the year ended December 31, 2016 .

Net gain (loss) attributable to noncontrolling interests . Net gain attributable to noncontrolling interests was immaterial for the year ended December 31, 2017 , compared with a net loss attributable to noncontrolling interests of $10.8 million for the year ended December 31, 2016 . Noncontrolling interests represented the Rollover Participants interest in JPHI which was reduced to 0% as of February 23, 2017. See Note 11 , “ Shareholders' Equity (Deficit) ” in the consolidated financial statements for further discussion.

Adjusted EBITDA . For the year ended December 31, 2017 , Adjusted EBITDA was $67.8 million , or 10.4% of net sales, an increase of $3.6 million , or 5.6% , compared with $64.2 million , or 9.1% of net sales, for the year ended December 31, 2016 . The increase reflects higher Adjusted EBITDA in the finishing segment of $3.5 million , the seating segment of $0.2 million , the acoustics segment of $0.1 million and lower corporate expenses of $4.1 million , partially offset by decreased Adjusted EBITDA in the components segment of $4.4 million . The change in the Adjusted EBITDA in the acoustics segment includes a $1.2 million decrease from the sale of the Acoustics Europe business. See “Segment Financial Data” within Item 7, “Management’s Discussion and Analysis,” for further discussion on Adjusted EBITDA for each segment.

Changes in foreign currency exchange rates compared with the U.S dollar had a positive impact of $0.1 million on consolidated Adjusted EBITDA for the year ended December 31, 2017 compared with the year ended December 31, 2016 .

Other Comprehensive income (loss). Other comprehensive income was $12.2 million for the year ended December 31, 2017 compared with an other comprehensive loss of $6.5 million for the year ended December 31, 2016 . The increase was driven by more favorable foreign currency translation adjustments in 2017 compared to 2016, the change in unrealized gains (losses) on cash flow hedges and employee retirement plan adjustments.

Foreign currency translation adjustments are based on fluctuations in the value of foreign currencies (primarily the Euro) against the U.S. Dollar each period.

Other comprehensive income for unrealized gains (losses) on cash flow hedges increased for the year ended December 31, 2017 as compared to the year ended December 31, 2016 due to a shift from an unrealized loss to an unrealized gain position on cash flow hedges in 2017 compared to an increase in the unrealized loss position on cash flow hedges in 2016. The net change in unrealized gains (losses) on cash flow hedges is based on the changes in current interest rates and market expectations of the timing and amount of future interest rate changes. In 2017, the hedging instruments shifted to a net gain position, based on future expectations for interest rate increases.

Employee retirement plan adjustments was a gain of $0.4 million for the year ended December 31, 2017 , compared with a loss of $0.6 million for the year ended December 31, 2016 . The employee retirement plan adjustments are based on actuarial valuations using a December 31 measurement date 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 employee retirement plan gain for the year ended December 31, 2017 primarily related to actuarial gains recognized in U.S. pension and postretirement health care benefit plans within our finishing segment due to higher actual plan asset returns compared with the expected returns on plan assets and a decrease in expected future claim costs, respectively, partially offset by actuarial losses recognized in a German pension plan within our finishing segment due to an increase in future expected compensation. The employee retirement plan loss for the year ended December 31, 2016 primarily related to actuarial losses recognized in a UK pension plan within our finishing segment related to decreasing discount rates.

Year ended December 31, 2016 and the year ended December 31, 2015

Net sales . Net sales were $705.5 million for the year ended December 31, 2016, a decrease of $2.8 million , or 0.4% , compared with $708.4 million for the year ended December 31, 2015 , reflecting decreased net sales in the components segment of $24.5 million and the seating segment of $15.7 million , partially offset by increased net sales in the acoustics segment of $31.9 million and and the finishing segment of $5.5 million . See further discussion of segment results below.

On May 29, 2015, the Company acquired DRONCO. DRONCO’S results of operations are included within the finishing segment and the Company’s consolidated results of operations since the date of acquisition. For the years ended December 31, 2016 and 2015 , $38.5 million and $24.1 million , respectively, of net sales from DRONCO were included in the Company’s consolidated statements of operations. See Note 3 , “ Acquisitions ” to the consolidated financial statements for further discussion of the DRONCO acquisition.

Changes in foreign currency exchange rates compared with the U.S. dollar had a net negative impact of $3.9 million on consolidated net sales during the year ended December 31, 2016 compared with 2015, negatively impacting the finishing, seating, and acoustics segments’ net sales by $3.1 million, $0.7 million and $0.1 million, respectively. This was due principally to the strengthening of the U.S. dollar against the Euro and Mexican Peso during the year ended December 31, 2016.

Cost of goods sold . Cost of goods sold was $574.4 million for the year ended December 31, 2016, compared with $561.1 million for the year ended December 31, 2015. The increase in cost of goods sold was due to increased net sales in the acoustics and finishing segments, higher labor and material usage costs in the acoustics segment related to new platforms and operational inefficiencies, and sales mix within the seating segment. The increase was partially offset by decreased net sales in the seating and components segments, favorable raw material costs in the acoustics and components segments, and a $2.9 million favorable impact related to foreign currency exchange rates.

Gross profit . For the reasons described above, gross profit was $131.1 million for the year ended December 31, 2016, compared with $147.3 million for the year ended December 31, 2015.

Selling and administrative expenses . Selling and administrative expenses were $113.8 million for the year ended December 31, 2016, compared with $129.4 million for the year ended December 31, 2015.

The decrease was primarily due to reduced selling and administrative expenses resulting from the Company’s global cost reduction and restructuring program announced on March 1, 2016 of $7.3 million for the year ended December 31, 2016, decreased incentive compensation of $2.2 million for the year ended December 31, 2016, cost savings of $2.1 million from other spending controls within the seating, acoustics and components segments, and $5.9 million of severance and other expenses incurred in 2015 related to the transitions of the Company’s then Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). In addition, share-based compensation expense for the year ended December 31, 2016 decreased $8.7 million compared with the year ended December 31, 2015 due to a decrease in assumed vesting of Adjusted EBITDA based awards, a decrease in restricted stock units (“RSUs”) expense from accelerated vesting in 2015 related to the transition of the Company’s then CEO and CFO, and a decrease in Stock Price based awards expense due to completion of the service periods for the awards.

The decreases are partially offset by increased corporate expenses of $5.9 million, including $2.8 million of professional fees associated with supply chain consulting for the year ended December 31, 2016 and increased compensation expenses related to investments in management resources and talent, and $2.9 million of increased expenses at DRONCO related to the timing of the acquisition in May 2015 which resulted in five incremental months of expense in 2016. See further discussion of corporate expenses and segment results in the “Segment Financial Data” section below.

Impairment charges . Non-cash impairment charges for the year ended December 31, 2016 were $63.3 million, primarily relating to charges of $29.8 million and $33.2 million for the impairment of goodwill in the acoustics and components segments, respectively. See “Factors that Affect Operating Results - Key Events” in this MD&A and Note 8 “Goodwill and Other Intangible Assets” of the accompanying consolidated financial statements for further information.

Loss on disposals of property, plant and equipment—net . For the year ended December 31, 2016, the Company recognized a net loss on disposals of property, plant and equipment-net of $0.9 million, compared with $0.1 million for the year ended December 31, 2015. The loss on disposals of property, plant and equipment-net for the year ended December 31, 2016 relates primarily to a loss of $0.6 million on the sale of a seating segment facility. Changes in the level of property, plant and equipment disposals are dependent upon a number of factors, including changes in the level of asset sales, operational restructuring activities, and capital expenditure levels.

Restructuring . Restructuring costs were $7.2 million for the year ended December 31, 2016 compared to $3.8 million for the year ended December 31, 2015. During 2016, such costs related to severance actions in all segments resulting from the global cost reduction and restructuring program announced on March 1, 2016, including costs related to the closure of the components segment’s facility in Buffalo Grove, Illinois and the wind down of the finishing segment’s facility in São Bernardo do Campo, Brazil. Included within the restructuring costs for the wind down of the Brazil facility are charges related to a loss contingency for certain employment matter claims.

During 2015, such costs related to the final closure of the acoustics segment’s Norwalk, Ohio facility, closure of the finishing segment’s Brooklyn Heights, Ohio office, closure of the components segment’s facility in China, and winding down of the finishing segment’s machine business in Sweden.

Transaction-related expenses . Transaction-related expenses were insignificant for the year ended December 31, 2016, compared with $0.9 million for the year ended December 31, 2015. During 2015, transaction-related expenses primarily consisted of professional service fees associated with the 2015 acquisition of DRONCO.

Interest expense . Interest expense was $31.8 million for both the year ended December 31, 2016 and 2015. See “Senior Secured Credit Facilities” in the Liquidity and Capital Resources section of this MD&A for further discussion.

Equity income . Equity income was $0.7 million for the year ended December 31, 2016, compared with $0.9 million for the year ended December 31, 2015.

Other income —net . Other income was $0.9 million for the year ended December 31, 2016, compared with $0.1 million for the year ended December 31, 2015. During 2016, other income-net consisted of certain rental and royalty income streams as well as other one-time transactions within our finishing segment.

Loss before income taxes . For the reasons described above, loss before income taxes was $84.3 million for the year ended December 31, 2016 compared with $111.9 million for the year ended December 31, 2015.

Tax benefit . The tax benefit was $6.3 million for the year ended December 31, 2016, compared with $22.3 million for the year ended December 31, 2015. The effective tax rate for the year ended December 31, 2016 was 7.5%, compared with 19.9% for the year ended December 31, 2015. The Company’s tax benefit is impacted by a number of factors, including, among others, the amount of taxable income or loss at the U.S. federal statutory rate, the amount of taxable earnings derived in foreign jurisdictions that all have tax rates lower than the U.S. federal statutory rate (primarily in Germany and Mexico), permanent items, state tax rates in jurisdictions where we do business and the ability to utilize various tax credits and net operating loss carry forwards to reduce income tax expense. The income tax benefit also includes the impact of provision to return adjustments, adjustments to valuation allowances and reserve requirements for unrecognized tax positions.

The 2015 effective tax rate of 19.9% differs from the U.S. federal statutory rate of 35.0% due primarily to the impact of non-deductible impairment charges recorded for the seating segment, partially offset by state tax benefits and the impact of lower foreign tax rates when compared to the U.S. federal statutory tax rate.

See Note 14 , “ Income Taxes ” in the consolidated financial statements for a complete reconciliation of the U.S. statutory tax rate to the effective tax rate and more information on tax events in 2016 and 2015 affecting each year’s respective tax rates.

Net loss . For the reasons described above, net loss was $78.1 million for the year ended December 31, 2016 compared with $89.6 million for the year ended December 31, 2015.

Net loss attributable to noncontrolling interests . Net loss attributable to noncontrolling interests was $10.8 million for the year ended December 31, 2016, compared with $15.1 million for the year ended December 31, 2015. Noncontrolling interests represent the Rollover Participants interest in JPHI. See Note 11 , “ Shareholders' Equity (Deficit) ” to the consolidated financial statements for further discussion.

Adjusted EBITDA . For the year ended December 31, 2016, Adjusted EBITDA was $64.2 million, or 9.1% of net sales, a decrease of $17.0 million, or 21.0%, compared with $81.2 million, or 11.5% of net sales, in the year ended December 31, 2015. The decrease reflects decreased Adjusted EBITDA in the components segment of $6.7 million, the seating segment of $3.6 million, the finishing segment of $1.6 million and the acoustics segment of $0.3 million, and higher corporate expenses of $4.8 million. See “Segment Financial Data” within Item 7, “Management’s Discussion and Analysis,” for further discussion on Adjusted EBITDA for each segment.

Changes in foreign currency exchange rates compared with the U.S dollar had a negative impact of $0.3 million on consolidated Adjusted EBITDA for the year ended December 31, 2016 compared with the year ended December 31, 2015, negatively impacting the finishing segment’s Adjusted EBITDA by $0.3 million.

Other Comprehensive Loss. Other comprehensive loss was $6.5 million for the year ended December 31, 2016 compared with $11.3 million for the year ended December 31, 2015. The change was driven by the impact of foreign currency translation adjustments, the net change in unrealized gains (losses) on cash flow hedges and employee retirement plan adjustments. Foreign currency translation adjustments are based on fluctuations in the value of foreign currencies (primarily the Euro and Mexican Peso) against the U.S. Dollar each period.

Employee retirement plan adjustments was a loss of $0.6 million for the year ended December 31, 2016, compared with a gain of $0.5 million for the year ended December 31, 2015. The employee retirement plan adjustments are based on actuarial valuations using a December 31 measurement date 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 employee retirement plan loss for the year ended December 31, 2016 primarily related to actuarial losses recognized in a UK pension plan within our finishing segment related to decreasing discount rates. The employee retirement plan gain for the year ended December 31, 2015 primarily related to actuarial gains recognized in a UK pension plan in our finishing segment and a US plan in our components segment related to increasing discount rates.

The net change in unrealized losses on cash flow hedges is based on the changes in current interest rates and market expectations of the timing and amount of future interest rate changes. In the fourth quarter of 2015, the Company entered into the forward starting interest rate swap agreements discussed in Note 9, “Debt and Hedging Instruments”. Subsequent to entering into these arrangements, actual interest rate increases have been lower and have occurred later than expected, thereby, resulting in losses associated with these hedging instruments.

Key Measures the Company Uses to Evaluate Its Performance

EBITDA and Adjusted EBITDA . The Company uses “Adjusted EBITDA” as the primary measure of profit or loss for the purposes of assessing the operating performance of its segments. The Company defines EBITDA as net income (loss) before interest expense, income tax provision (benefit), depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA, excluding the impact of operational restructuring charges and non-cash or non-operational losses or gains, including goodwill and long-lived asset impairment charges, gains or losses on disposal of property, plant and equipment, divestitures and extinguishment of debt, integration and other operational restructuring charges, transactional legal fees, other professional fees, purchase accounting adjustments, and non-cash share based compensation expense.

Management believes that Adjusted EBITDA provides a clear picture of the Company’s operating results by eliminating expenses and income that are not reflective of the underlying business performance. The Company uses this metric 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 and the Company uses this measure to evaluate its operating performance and segment operating performance and to determine the level of incentive compensation paid to its employees.

The Senior Secured Credit Facilities (defined in Note 9 and below) definition of EBITDA excludes income of partially owned affiliates, unless such earnings have been received in cash, among other things.

Set forth below is a reconciliation of Adjusted EBITDA to net loss (in thousands) (unaudited):



	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
Net loss	(4,473		)	$	(78,053	)	$	(89,601	)
Tax benefit	(10,384		)	(6,296		)	(22,255		)
Interest expense	33,089			31,843			31,835
Depreciation and amortization	38,934			44,041			45,248
EBITDA	57,166			(8,465		)	(34,773		)
Adjustments:
Impairment charges ⁽¹⁾	—			63,285			94,126
Restructuring ⁽²⁾	4,266			7,232			3,800
Transaction-related expenses ⁽³⁾	—			—			886
Integration and other restructuring costs ⁽⁴⁾	(569		)	1,980			9,047
Share-based compensation ⁽⁵⁾	1,119			(752		)	7,969
Gain (loss) on disposals of property, plant and equipment - net ⁽⁶⁾	(759		)	880			109
Gain on extinguishment of debt ⁽⁷⁾	(2,201		)	—			—
Loss on divestiture ⁽⁸⁾	8,730			—			—
Total adjustments	10,586			72,625			115,937
Adjusted EBITDA	$	67,752		$	64,160		$	81,164

⁽¹⁾

Charges for the year ended December 31, 2016 primarily relate to non-cash impairment of goodwill of $29.8 million and $33.2 million in the acoustics and components segments, respectively. Charges for the year ended December 31, 2015 represent non-cash impairment charges of $58.8 million, $27.7 million, $6.8 million, and $0.8 million related to impairment of goodwill, customer relationships, trademarks and patents intangible assets, respectively, in the seating segment. See “Factors that Affect Operating Results - Key Events” in this MD&A and Note 8 “ Goodwill and Other Intangible Assets ” of the accompanying consolidated financial statements for further information.

⁽²⁾

Restructuring includes costs associated with exit or disposal activities as defined by GAAP related to facility consolidation, including one-time employee termination benefits, costs to close facilities and relocate employees, and costs to terminate contracts other than capital leases. See Note 5 , “ Restructuring Costs ” of the accompanying consolidated financial statements for further information.


⁽³⁾	Transaction-related expenses primarily consist of professional service fees related to the DRONCO acquisition.

⁽⁴⁾

In 2017, integration and restructuring costs includes the reversal of a liability recorded in acquisition accounting from the Business Combination in 2014. In 2016, integration and other restructuring costs includes costs associated with the start-up of new acoustics segment facilities in Warrensburg, Missouri and Richmond, Indiana. Additionally, integration and other restructuring costs in 2016 includes a $0.6 million reversal of a reserve related to the Newcomerstown fire recorded in acquisition accounting for the Business Combination in 2014 and $0.7 million of charges recorded to reduce inventory balances to estimated net realizable value at our Brazil location within the finishing segment. In 2015, integration and other restructuring costs also includes $5.9 million of severance and expenses related to the transitions of the Company’s then CEO and CFO, partially offset by a $0.8 million gain resulting from termination of an unfavorable lease recorded in acquisition accounting for the Business Combination. Such costs are not included in restructuring for GAAP purposes.

⁽⁵⁾

Represents non-cash share based compensation expense for awards under the Company’s 2014 Omnibus Incentive Plan. During 2016, share based compensation included $2.5 million of income due to a decrease in assumed vesting levels of Adjusted EBITDA based awards. In 2015, share based compensation included $2.9 million of expense due to accelerated vesting of restricted stock units related to the transitions of the Company’s then CEO and CFO. See Note 12 , “ Share Based Compensation ” of the accompanying consolidated financial statements for further information.

(6)

Gain on disposals of property, plant and equipment - net for the year ended December 31, 2017 includes a gain of $0.5 million on the sale of a building related to the closure of the finishing segment’s Richmond, Virginia facility and a gain of $0.4 million on the sale of equipment related to the closure of the components segment’s Buffalo Grove, Illinois facility. Loss on disposals of property, plant and equipment - net for the year ended December 31, 2016 includes a loss of $0.6 million on sale of a seating segment facility.


(7)	Represents gains on extinguishment of second lien term loan debt, net of a prepayment fee to retire foreign debt in the fourth quarter of 2017. See Note 9 , “ Debt and Hedging Instruments ” of the accompanying consolidated financial statements for further information.

(8)

On August 30, 2017, the Company completed the divestiture of its Acoustics Europe business. The divestiture resulted in a $8.7 million pre-tax loss, of which $7.9 million was recorded in the second quarter of 2017 when the business was classified as held for sale and $0.8 million was recorded in the third quarter of 2017 upon closing of the divestiture. See Note 4 , “ Divestiture ” of the accompanying consolidated financial statements for further information.

Adjusted EBITDA percentage of sales . Adjusted EBITDA as a percentage of sales is an important metric that the Company uses to evaluate its operational effectiveness and business segments.

Segment Financial Data

The table below presents the Company’s net sales, Adjusted EBITDA and Adjusted EBITDA as a percentage of net sales for each of its reportable segments for the years ended December 31, 2017 and 2016 . The Company uses Adjusted EBITDA as the primary measure of profit or loss for purposes of assessing the operating performance of its segments. See “Key Measures the Company Uses to Evaluate Its Performance” above for our definition of Adjusted EBITDA and a reconciliation of the Company’s consolidated Adjusted EBITDA to net loss, which is the most comparable GAAP measure.



	Year Ended December 31, 2017			Year Ended December 31, 2016			Increase/(Decrease)
(in thousands, except percentages)	Year Ended December 31, 2017			Year Ended December 31, 2016			$			%
Finishing
Net sales	$	200,284		$	196,883		$	3,401		1.7	%
Adjusted EBITDA	27,661			24,200			3,461			14.3
Adjusted EBITDA % of net sales	13.8		%	12.3		%	150 bps
Components
Net sales	$	82,621		$	97,667		$	(15,046	)	(15.4	)%
Adjusted EBITDA	9,888			14,249			(4,361		)	(30.6	)
Adjusted EBITDA % of net sales	12.0		%	14.6		%	(260) bps
Seating
Net sales	$	159,129		$	161,050		$	(1,921	)	(1.2	)%
Adjusted EBITDA	16,348			16,122			226			1.4
Adjusted EBITDA % of net sales	10.3		%	10.0		%	30 bps
Acoustics
Net sales	$	206,582		$	249,919		$	(43,337	)	(17.3	)%
Adjusted EBITDA	27,341			27,202			139			0.5
Adjusted EBITDA % of net sales	13.2		%	10.9		%	230 bps
Corporate
Adjusted EBITDA	$	(13,486	)	$	(17,613	)	$	4,127		23.4	%
Consolidated
Net sales	$	648,616		$	705,519		$	(56,903	)	(8.1	)%
Adjusted EBITDA	67,752			64,160			3,592			5.6
Adjusted EBITDA % of net sales	10.4		%	9.1		%	130 bps



	Year Ended December 31, 2016			Year Ended December 31, 2015			Increase/(Decrease)
(in thousands, except percentages)	Year Ended December 31, 2016			Year Ended December 31, 2015			$			%
Finishing
Net sales	$	196,883		$	191,394		$	5,489		2.9	%
Adjusted EBITDA	24,200			25,799			(1,599		)	(6.2	)
Adjusted EBITDA % of net sales	12.3		%	13.5		%	(120) bps
Components
Net sales	$	97,667		$	122,133		$	(24,466	)	(20.0	)%
Adjusted EBITDA	14,249			20,943			(6,694		)	(32.0	)
Adjusted EBITDA % of net sales	14.6		%	17.1		%	(250) bps
Seating
Net sales	$	161,050		$	176,792		$	(15,742	)	(8.9	)%
Adjusted EBITDA	16,122			19,766			(3,644		)	(18.4	)
Adjusted EBITDA % of net sales	10.0		%	11.2		%	(120) bps
Acoustics
Net sales	$	249,919		$	218,047		$	31,872		14.6	%
Adjusted EBITDA	27,202			27,515			(313		)	(1.1	)
Adjusted EBITDA % of net sales	10.9		%	12.6		%	(170) bps
Corporate
Adjusted EBITDA	$	(17,613	)	$	(12,859	)	$	(4,754	)	(37.0	)%
Consolidated
Net sales	$	705,519		$	708,366		$	(2,847	)	(0.4	)%
Adjusted EBITDA	64,160			81,164			(17,004		)	(21.0	)
Adjusted EBITDA % of net sales	9.1		%	11.5		%	(240) bps



Finishing Segment
	Year Ended December 31, 2017			Year Ended December 31, 2016			Increase/(Decrease)
(in thousands, except percentages)	Year Ended December 31, 2017			Year Ended December 31, 2016			$		%
Net sales	$	200,284		$	196,883		$	3,401	1.7	%
Adjusted EBITDA	27,661			24,200			3,461		14.3
Adjusted EBITDA % of net sales	13.8		%	12.3		%	150 bps

For the year ended December 31, 2017 , net sales were $200.3 million , an increase of $3.4 million , or 1.7% , compared with $196.9 million for the year ended December 31, 2016 . On a constant currency basis (net positive currency impact of $1.5 million for the year ended December 31, 2017 ), revenues increased by $1.9 million for the year ended December 31, 2017 . Excluding currency impact, the increase in net sales for the year ended December 31, 2017 was primarily due to increases in demand from industrial end markets in Europe and North America, partially offset by a $4.7 million decrease associated with the wind down of the finishing segment’s facility in Brazil and decreases in volume associated with strategic decisions related to exiting unprofitable customers and products.

Adjusted EBITDA for the year ended December 31, 2017 increased $3.5 million to $27.7 million ( 13.8% of net sales) from $24.2 million ( 12.3% of net sales) for the year ended December 31, 2016 . Changes in foreign currency exchange rates did not significantly impact Adjusted EBITDA. The increase in Adjusted EBITDA for the year ended December 31, 2017 primarily resulted from increases in sales volume to industrial end markets in Europe and North America, savings in selling and administrative expenses as a result of the Company’s global cost reduction and restructuring program and other spending controls, partially offset by increased incentive compensation due to increased attainment percentages.



	Year Ended December 31, 2016			Year Ended December 31, 2015			Increase/(Decrease)
(in thousands, except percentages)	Year Ended December 31, 2016			Year Ended December 31, 2015			$			%
Net sales	$	196,883		$	191,394		$	5,489		2.9	%
Adjusted EBITDA	24,200			25,799			(1,599		)	(6.2	)
Adjusted EBITDA % of net sales	12.3		%	13.5		%	(120) bps

For the year ended December 31, 2016, net sales were $196.9 million, an increase of $5.5 million or 2.9%, compared with $191.4 million for the year ended December 31, 2015. On a constant currency basis (net negative currency impact of $3.1 million for the year ended December 31, 2016), revenues increased by $8.6 million for the year ended December 31, 2016. The increase in net sales resulted from the May 2015 acquisition of DRONCO, which had net sales of $38.5 million during the year ended December 31, 2016 compared to $24.1 million during the year ended December 31, 2015, partially offset by lower volumes in industrial end markets globally.

Adjusted EBITDA decreased $1.6 million, or 6.2%, for the year ended December 31, 2016 to $24.2 million (12.3% of net sales) compared to $25.8 million (13.5% of net sales) for the year ended December 31, 2015. On a constant currency basis (net negative currency impact of $0.3 million for the year ended December 31, 2016), Adjusted EBITDA decreased by $1.3 million for the year ended December 31, 2016. The decrease in Adjusted EBITDA for the year ended December 31, 2016 primarily resulted from lower sales volumes in industrial end markets, unfavorable product mix when compared with 2015 and operational inefficiencies resulting in higher labor costs and material usage, partially offset by savings in selling and administrative expenses resulting from the Company’s global cost reduction program. The decrease in Adjusted EBITDA as a percentage of net sales for the year ended December 31, 2016 was additionally impacted by lower Adjusted EBITDA margins related to DRONCO.



Components Segment
	Year Ended December 31, 2017			Year Ended December 31, 2016			Increase/(Decrease)
(in thousands, except percentages)	Year Ended December 31, 2017			Year Ended December 31, 2016			$			%
Net sales	$	82,621		$	97,667		$	(15,046	)	(15.4	)%
Adjusted EBITDA	9,888			14,249			(4,361		)	(30.6	)
Adjusted EBITDA % of net sales	12.0		%	14.6		%	(260) bps

For the year ended December 31, 2017 , net sales were $82.6 million , a decrease of $15.0 million or 15.4% , compared with $97.7 million for the year ended December 31, 2016 . The decrease in net sales was primarily due to a decrease of $8.9 million as a result of the strategic decision to discontinue certain product lines selling under the Assembled Products brand in 2016 and lower sales volumes in the rail market.

Adjusted EBITDA decreased $4.4 million , or 30.6% , for the year ended December 31, 2017 to $9.9 million ( 12.0% of net sales) compared to $14.2 million ( 14.6% of net sales) for the year ended December 31, 2016 . The decrease in Adjusted EBITDA for the year ended December 31, 2017 primarily resulted from lower volume in the rail market and unfavorable product mix, increases in raw material prices primarily due to steel purchases, lower labor productivity on decreased volumes and increased incentive compensation due to increased attainment percentages, partially offset by decreased selling and administrative expenses from other spending controls and $0.9 million as a result of the strategic decision to discontinue certain product lines selling under the Assembled Products brand in 2016 that were not profitable.



	Year Ended December 31, 2016			Year Ended December 31, 2015			Increase/(Decrease)
(in thousands, except percentages)	Year Ended December 31, 2016			Year Ended December 31, 2015			$			%
Net sales	$	97,667		$	122,133		$	(24,466	)	(20.0	)%
Adjusted EBITDA	14,249			20,943			(6,694		)	(32.0	)
Adjusted EBITDA % of net sales	14.6		%	17.1		%	(250) bps

For the year ended December 31, 2016, net sales were $97.7 million, a decrease of $24.5 million, or 20.0%, compared with $122.1 million for the year ended December 31, 2015. The decrease was primarily due to lower sales volumes of rail, general industrial, perforated, and expanded metal products and lower pricing of metal products resulting from lower raw material costs.

For the year ended December 31, 2016, Adjusted EBITDA was $14.2 million (14.6% of net sales), compared with $20.9 million (17.1% of net sales) for the year ended December 31, 2015. The decrease in Adjusted EBITDA of $6.7 million was primarily due to lower sales volumes and lower labor productivity on the decreased sales volumes, partially offset by lower raw material pricing and savings in selling and administrative expenses resulting from the Company’s global cost reduction program and other spend controls.



Seating Segment
	Year Ended December 31, 2017			Year Ended December 31, 2016			Increase/(Decrease)
(in thousands, except percentages)	Year Ended December 31, 2017			Year Ended December 31, 2016			$			%
Net sales	$	159,129		$	161,050		$	(1,921	)	(1.2	)%
Adjusted EBITDA	16,348			16,122			226			1.4
Adjusted EBITDA % of net sales	10.3		%	10.0		%	30 bps

For the year ended December 31, 2017 , net sales were $159.1 million , a decrease of $1.9 million , or 1.2% , compared with $161.1 million for the year ended December 31, 2016 . On a constant currency basis (net negative currency impact of $0.3 million for the year ended December 31, 2017 ), revenues decreased by $1.6 million for the year ended December 31, 2017 . The decrease in net sales for the year ended December 31, 2017 was primarily due to decreases in volume in the turf care, motorcycle and power sports markets, partially offset by an increase in volume in the construction market and higher pricing.

For the year ended December 31, 2017 , Adjusted EBITDA was $16.3 million ( 10.3% of net sales), compared to $16.1 million ( 10.0% of net sales) for the year ended December 31, 2016 . Changes in foreign currency exchange rates did not significantly impact Adjusted EBITDA. The increase in Adjusted EBITDA for the year ended December 31, 2017 was primarily due to savings in cost of goods sold and selling and administrative expenses resulting from the Company’s global cost reduction program, supply chain initiatives, improved pricing, and other spending controls, partially offset by decreased sales volume and operational inefficiencies resulting in higher material usage and increased freight costs.



	Year Ended December 31, 2016			Year Ended December 31, 2015			Increase/(Decrease)
(in thousands, except percentages)	Year Ended December 31, 2016			Year Ended December 31, 2015			$			%
Net sales	$	161,050		$	176,792		$	(15,742	)	(8.9	)%
Adjusted EBITDA	16,122			19,766			(3,644		)	(18.4	)
Adjusted EBITDA % of net sales	10.0		%	11.2		%	(120) bps

For the year ended December 31, 2016, net sales were $161.1 million, a decrease of $15.7 million, or 8.9%, compared with $176.8 million for the year ended December 31, 2015. On a constant currency basis (net negative currency impact of $0.7 million for the year ended December 31, 2016), revenues decreased by $15.0 million for the year ended December 31, 2016. The decrease in net sales was primarily due to decreases in volume in the motorcycle, turf care and construction markets as well as lower pricing, partially offset by a volume increase in the power sports market.

For the year ended December 31, 2016, Adjusted EBITDA was $16.1 million (10.0% of net sales), a decrease of $3.6 million, or 18.4%, compared to $19.8 million (11.2% of net sales) for the year ended December 31, 2015. Changes in foreign currency exchange rates did not significantly impact Adjusted EBITDA. The decrease in Adjusted EBITDA was primarily due to lower sales volumes, lower pricing, unfavorable sales mix with lower margin generating products and operational inefficiencies resulting in higher material usage and lower labor productivity. The decrease was partially offset by savings in selling and administrative expenses resulting from the Company’s global cost reduction program and other spend controls.



Acoustics Segment
	Year Ended December 31, 2017			Year Ended December 31, 2016			Increase/(Decrease)
(in thousands, except percentages)	Year Ended December 31, 2017			Year Ended December 31, 2016			$			%
Net sales	$	206,582		$	249,919		$	(43,337	)	(17.3	)%
Adjusted EBITDA	27,341			27,202			139			0.5
Adjusted EBITDA % of net sales	13.2		%	10.9		%	230 bps

For the year ended December 31, 2017 , net sales were $206.6 million , a decrease of $43.3 million , or 17.3% , compared with $249.9 million for the year ended December 31, 2016 . Changes in foreign currency exchange rates did not significantly impact net sales. The decrease was primarily due to lower overall North American vehicle demand and a significant decrease in demand for car platforms due to a shift from cars to light trucks and sport utility vehicles. The decrease was also due to $10.5 million of lower sales as a result of the sale of the Acoustics Europe business which was sold on August 30, 2017, lower sales volumes as a result of a net decrease in vehicle platforms, and nonrecurring 2016 sales volumes related to a competitor bankruptcy.

For the year ended December 31, 2017 , Adjusted EBITDA was $27.3 million ( 13.2% of net sales), compared with $27.2 million ( 10.9% of net sales) for the year ended December 31, 2016 . Changes in foreign currency exchange rates did not significantly impact Adjusted EBITDA. The increase in Adjusted EBITDA for the year ended December 31, 2017 was primarily due to savings in cost of goods sold from lower labor costs and lower material usage costs from improved production efficiencies and supply chain initiatives and savings in selling and administrative expenses resulting from the Company’s global cost reduction programs and other spending controls. The increase in Adjusted EBITDA was partially offset by lower sales

volumes, increased incentive compensation and $1.2 million due to the sale of the Acoustics Europe business which was sold on August 30, 2017.



	Year Ended December 31, 2016			Year Ended December 31, 2015			Increase/(Decrease)
(in thousands, except percentages)	Year Ended December 31, 2016			Year Ended December 31, 2015			$			%
Net sales	$	249,919		$	218,047		$	31,872		14.6	%
Adjusted EBITDA	27,202			27,515			(313		)	(1.1	)
Adjusted EBITDA % of net sales	10.9		%	12.6		%	(170) bps

For the year ended December 31, 2016, net sales were $249.9 million, an increase of $31.9 million, or 14.6%, compared with $218.0 million for the year ended December 31, 2015. On a constant currency basis (net negative currency impact of $0.1 million for the year ended December 31, 2016), revenues increased by $32.0 million for the year ended December 31, 2016. The increase in net sales for the year ended December 31, 2016 was due to higher volumes resulting from new platform awards with higher content per vehicle in North America and additional sales volume resulting from a competitor bankruptcy, partially offset by lower pricing on existing platforms.

For the year ended December 31, 2016, Adjusted EBITDA was $27.2 million (10.9% of net sales), compared to $27.5 million (12.6% of net sales) for the year ended December 31, 2015. Changes in foreign currency exchange rates did not significantly impact Adjusted EBITDA. The decrease in Adjusted EBITDA for the year ended December 31, 2016 was primarily due to operational inefficiencies resulting in higher labor costs and material usage and lower pricing on existing platforms, partially offset by higher volumes on new platforms, lower raw material costs and savings in selling and administrative expenses resulting from the Company’s global cost reduction program, lower incentive compensation expense due to increased attainment percentages and other spend controls.



Corporate
	Year Ended December 31, 2017			Year Ended December 31, 2016			Increase/(Decrease)
(in thousands, except percentages)	Year Ended December 31, 2017			Year Ended December 31, 2016			$		%
Adjusted EBITDA	$	(13,486	)	$	(17,613	)	$	4,127	23.4	%

Corporate expense is principally comprised of the costs of corporate operations, including the compensation and benefits of the Company’s executive team and personnel responsible for treasury, finance, insurance, legal, information technology, human resources, tax compliance and planning and the administration of employee benefits. Corporate expense also includes third party legal, audit, tax and other professional fees and expenses, board of directors compensation and expenses, and the operating costs of the corporate office.

The decrease of $4.1 million in corporate expense for the year ended December 31, 2017 compared to the prior year primarily resulted from $2.8 million of non-recurring third-party professional fees associated with investments in manufacturing and supply chain improvement initiatives incurred during the year ended December 31, 2016 , the transition of the Company’s Chief Executive Officer and Chief Operating Officer and other spending controls, partially offset by increased incentive compensation due to increased attainment percentages.



	Year Ended December 31, 2016			Year Ended December 31, 2015			Increase/(Decrease)
(in thousands, except percentages)	Year Ended December 31, 2016			Year Ended December 31, 2015			$			%
Adjusted EBITDA	$	(17,613	)	$	(12,859	)	$	(4,754	)	(37.0	)%

The increase of $4.8 million in corporate expense for the year ended December 31, 2016 primarily resulted from $2.8 million of increased third-party professional fees associated with investments in manufacturing and supply chain improvement initiatives, as well as increased compensation expenses related to investments in management resources and talent, offset by reduced incentive compensation expense.

Liquidity and Capital Resources

Background

The Company’s primary sources of liquidity are cash generated from its operations, available cash and borrowings under its U.S. and foreign credit facilities. As of December 31, 2017 , the Company had $48.9 million of available cash, $33.9 million of additional borrowings available under the revolving credit facility portion of its U.S. credit agreement, and $12.7 million available under short-term revolving loan facilities that the Company maintains outside the U.S. As of December 31, 2017 , available borrowings under its U.S. revolving credit facility were reduced by outstanding letters of credit of $6.1 million . Included in the Company’s consolidated cash balance of $48.9 million at December 31, 2017 is cash of $24.3 million held at the Company’s non-U.S. operations. These funds, with some restrictions and tax implications, are available for repatriation as deemed necessary or advisable by the Company. The Company’s U.S. credit agreement and foreign revolving loan facilities are available for working capital requirements, capital expenditures and other general corporate purposes. We believe our existing cash on hand, expected future cash flows from operating activities, and additional borrowings available under our U.S. and foreign credit facilities will provide sufficient resources to fund ongoing operating requirements as well as future capital expenditures, debt service requirements, and investments in future growth to create value for our shareholders.

As of December 31, 2016 , the Company had $40.9 million of available cash, $35.0 million of additional borrowings available under the revolving credit facility portion of its U.S. credit agreement, and $13.4 million available under short-term revolving loan facilities that the Company maintains outside the U.S. As of December 31, 2016 , available borrowings under its U.S. revolving credit facility were reduced by outstanding letters of credit of $5.0 million . Included in the Company’s consolidated cash balance of $40.9 million at December 31, 2016 was $19.0 million of cash held at Jason’s non-U.S. operations.

Indebtedness

As of December 31, 2017 , the Company’s total outstanding indebtedness of $401.5 million was comprised of aggregate term loans outstanding under its Senior Secured Credit Facilities of $378.8 million (net of a debt discount of $3.6 million and deferred financing costs of $5.6 million ), various foreign bank term loans and revolving loan facilities of $21.8 million and capital lease obligations of $0.8 million . No amounts were outstanding under the revolving credit facility portion of the Senior Secured Credit Facilities as of December 31, 2017 .

As of December 31, 2016 , the Company’s total outstanding indebtedness of $425.1 million was comprised of aggregate term loans outstanding under its Senior Secured Credit Facilities of $400.5 million (net of a debt discount of $5.0 million and deferred financing costs of $7.5 million ), various foreign bank term loans and revolving loan facilities of $23.3 million and capital lease obligations of $1.3 million . No amounts were outstanding under the revolving credit facility portion of the Senior Secured Credit Facilities as of December 31, 2016 .

The Company maintains various bank term loan and revolving loan facilities outside the U.S. for local operating and investing needs. Borrowings under these facilities totaled $21.8 million as of December 31, 2017 , including borrowings of $18.0 million incurred by the Company’s subsidiaries in Germany, and borrowings totaled $23.3 million as of December 31, 2016 , including borrowings of $21.5 million incurred by the Company’s subsidiaries in Germany. The foreign debt obligations in Germany primarily relate to term loans within our finishing segment of $18.0 million at December 31, 2017 and $19.3 million at December 31, 2016 . The German borrowings bear interest at fixed and variable rates ranging from 2.1% to 4.7% and are subject to repayment in varying amounts through 2025.

Senior Secured Credit Facilities

General . On June 30, 2014 and as subsequently amended, Jason Incorporated, as the borrower, entered into (i) the First Lien Credit Agreement, dated as of June 30, 2014, with Jason Partners Holdings Inc., Jason Holdings, Inc. I, a wholly-owned subsidiary of Jason Partners Holdings Inc. (“Intermediate Holdings”), Deutsche Bank AG New York Branch, as administrative agent (the “First Lien Administrative Agent”), the subsidiary guarantors party thereto and the several banks and other financial institutions or entities from time to time party thereto (the “First Lien Credit Agreement”) and (ii) the Second Lien Credit Agreement, dated as of June 30, 2014, with Jason Partners Holdings Inc., Intermediate Holdings, Deutsche Bank AG New York Branch, as administrative agent (the “Second Lien Administrative Agent”), the subsidiary guarantors party thereto and the several banks and other financial institutions or entities from time to time party thereto (the “Second Lien Credit Agreement” and, together with the First Lien Credit Agreement, the “Credit Agreements”).

The First Lien Credit Agreement provides for (i) term loans in an aggregate principal amount of $310.0 million (the “First Lien Term Facility” and the loans thereunder the “First Lien Term Loans”), of which $298.0 million is outstanding as of December 31, 2017 , and (ii) a revolving loan of up to $40.0 million (including revolving loans, a $10.0 million swingline loan sublimit, and a $12.5 million letter of credit sublimit) (the “Revolving Credit Facility”), in each case under the new first lien senior secured loan facilities (the “First Lien Credit Facilities”). The Second Lien Credit Agreement provides for term loans in

an aggregate principal amount of $110.0 million , of which $90.0 million is outstanding as of December 31, 2017 , under the new second lien senior secured term loan facility (the “Second Lien Term Facility” and the loans thereunder the “Second Lien Term Loans” and, the Second Lien Term Facility together with the First Lien Credit Facilities, the “Senior Secured Credit Facilities”).

The First Lien Term Loans mature in 2021, the Revolving Credit Facility matures in 2019, and the Second Lien Term Loans mature in 2022. The principal amount of the First Lien Term Loans amortizes in quarterly installments of $0.8 million , with the balance payable at maturity. Neither the Revolving Credit Facility nor the Second Lien Term Loans amortize, however each is repayable in full at maturity.

Security Interests . In connection with the Senior Secured Credit Facilities, Jason Partners Holdings Inc., Intermediate Holdings, Jason Incorporated and certain of Jason Incorporated’s subsidiaries (the “Subsidiary Guarantors”), entered into a (i) First Lien Security Agreement (the “First Lien Security Agreement”), dated as of June 30, 2014, in favor of the First Lien Administrative Agent and (ii) a Second Lien Security Agreement (the “Second Lien Security Agreement”, together with the First Lien Security Agreement, the “Security Agreements”), dated as of June 30, 2014, in favor of the Second Lien Administrative Agent. Pursuant to the Security Agreements, amounts borrowed under the Senior Secured Credit Facilities and any swap agreements and cash management arrangements provided by any lender party to the Senior Secured Credit Facilities or any of its affiliates are secured (i) with respect to the First Lien Credit Facilities, on a first priority basis and (ii) with respect to the Second Lien Term Facility, on a second priority basis, by a perfected security interest in substantially all of Jason Incorporated’s, Jason Partners Holdings Inc.’s, Intermediate Holdings’ and each Subsidiary Guarantor’s tangible and intangible assets (subject to certain exceptions), including U.S. registered intellectual property and all of the capital stock of each of Jason Incorporated’s direct and indirect wholly-owned material Restricted Subsidiaries (as defined in the Credit Agreements) (limited, in the case of foreign subsidiaries, to 65% of the capital stock of first tier foreign subsidiaries). In addition, pursuant to the Credit Agreements, Jason Partners Holdings Inc., Intermediate Holdings and the Subsidiary Guarantors guaranteed amounts borrowed under the Senior Secured Credit Facilities.

Interest Rate and Fees . At our election, the interest rate per annum applicable to the loans under the Senior Secured Credit Facilities is based on a fluctuating rate of interest determined by reference to either (i) a base rate determined by reference to the higher of (a) the “prime rate” of Deutsche Bank AG New York Branch, (b) the federal funds effective rate plus 0.50% and (c) the Eurocurrency rate applicable for an interest period of one month plus 1.00% , plus an applicable margin equal to (x) 3.50% in the case of the First Lien Term Loans, (y) 2.25% in the case of the Revolving Credit Facility or (z) 7.00% in the case of the Second Lien Term Loans or (ii) a Eurocurrency rate determined by reference to the London Interbank Offered Rate (“LIBOR”), adjusted for statutory reserve requirements, plus an applicable margin equal to (x) 4.50% in the case of the First Lien Term Loans, (y) 3.25% in the case of the Revolving Credit Facility or (z) 8.00% in the case of the Second Lien Term Loans. Borrowings under the First Lien Term Facility and Second Lien Term Facility are subject to a floor of 1.00% in the case of Eurocurrency loans. The applicable margin for loans under the Revolving Credit Facility may be subject to adjustment based upon Jason Incorporated’s consolidated first lien net leverage ratio.

Interest Rate Hedge Contracts. To manage exposure to fluctuations in interest rates, the Company entered into forward interest rate swap agreements (“Swaps”) in 2015 with notional values totaling $210.0 million at December 31, 2017 and December 31, 2016 . The Swaps have been designated by the Company as cash flow hedges, and effectively fix the variable portion of interest rates on variable rate term loan borrowings at a rate of approximately 2.08% prior to financing spreads and related fees. The Swaps had a forward start date of December 30, 2016 and have an expiration date of June 30, 2020. As such, the Company began recognizing interest expense related to the interest rate hedge contracts in the first quarter of 2017. For the year ended December 31, 2017 , the Company recognized $1.9 million of interest expense related to the Swaps. There was no interest expense recognized in 2016 and 2015. Based on current interest rates, the Company expects to recognize interest expense of $0.8 million related to the Swaps in 2018.

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 asset of $0.1 million at December 31, 2017 and a net liability of $2.0 million at December 31, 2016 , respectively. See the amounts recorded on the consolidated balance sheets within the table below:



	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	)

Mandatory Prepayment . Subject to certain exceptions, the Senior Secured Credit Facilities are subject to mandatory prepayments in amounts equal to: (1) a percentage of the net cash proceeds from any non-ordinary course sale or other disposition of assets (including as a result of casualty or condemnation) by Jason Incorporated or any of its Restricted Subsidiaries (as defined in the Credit Agreements) in excess of a certain amount and subject to customary reinvestment provisions and certain other exceptions; (2) 100% of the net cash proceeds from the issuance or incurrence of debt by Jason Incorporated or any of its Restricted Subsidiaries (other than indebtedness permitted by the Senior Secured Credit Facilities); and (3) 75% (with step-downs to 50%, 25% and 0% based upon achievement of specified consolidated first lien net leverage ratios under the First Lien Credit Facilities and specified consolidated total net leverage ratios under the Second Lien Term Facility) of annual excess cash flow, as defined, of Jason Incorporated and its Restricted Subsidiaries. Other than the payment of customary “breakage” costs, Jason Incorporated may voluntarily prepay outstanding loans at any time. Based on the provisions above, at December 31, 2017 and December 31, 2016 , a mandatory excess cash flow prepayment of $2.5 million and $1.9 million , respectively, was included within the current portion of long-term debt in the consolidated balance sheets.

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 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 consolidated statements of operations.

In the fourth quarter of 2017, the Company utilized $2.4 million of cash received during the third quarter from the sale of Acoustics Europe to retire foreign debt in Germany and incurred a $0.2 million prepayment fee, which was recorded as an offset to the gain on extinguishment of debt.

Covenants . 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.

In addition, under the Revolving Credit Facility, if the aggregate outstanding amount of all revolving loans, swingline loans and certain letter of credit obligations exceed 25 percent , or $10.0 million , of the revolving credit commitments at the end of any fiscal quarter, Jason Incorporated and its Restricted Subsidiaries will be required to not exceed a consolidated first lien net leverage ratio of 4.50 to 1.00 . If such outstanding amounts do not exceed 25 percent of the revolving credit commitments at the end of any fiscal quarter, no financial covenants are applicable. As of December 31, 2017 the consolidated first lien net leverage ratio was 3.93 to 1.00 on a pro forma trailing twelve-month basis calculated in accordance with the respective provisions of the Credit Agreements which exclude the Second Lien Term Loans from the calculation of net debt (numerator) and allow the inclusion of certain pro forma adjustments and exclusion of certain specified or nonrecurring costs and expenses in calculating Adjusted EBITDA (denominator). The aggregate outstanding amount of all revolving loans, swingline loans and certain letters of credit was less than 25 percent of revolving credit commitments at December 31, 2017 . As of December 31, 2017 , the Company was in compliance with the financial covenants contained in the Credit Agreements.

Events of Default . The Senior Secured Credit Facilities contain customary events of default, including nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty when made; violation of a covenant; cross-default to material indebtedness; bankruptcy events; inability to pay debts or attachment; material unsatisfied judgments; actual or asserted invalidity of any security document; and a change of control. Failure to comply with these provisions of the Senior Secured Credit Facilities (subject to certain grace periods) could, absent a waiver or an amendment from the lenders under such agreement, restrict the availability of the Revolving Credit Facility and permit the acceleration of all outstanding borrowings under the Credit Agreements.

Series A Preferred Stock

Holders of the 49,665 shares of Series A Preferred Stock outstanding as of January 1, 2018 are entitled to receive, when, as and if declared by the Company’s Board of Directors, cumulative dividends at the rate of 8.0% per annum (the dividend rate) on the $1,000 liquidation preference per share of the Series A Preferred Stock, payable quarterly in arrears on each dividend payment date. Dividends shall be paid in cash or, at the Company’s option, in additional shares of Series A Preferred Stock or a combination thereof, and are payable on January 1, April 1, July 1, and October 1 of each year, commencing on the first such date after the date of the first issuance of the Series A Preferred Stock.

The Company paid the following dividends on the Series A Preferred Stock in additional shares of Series A Preferred Stock during the year ended December 31, 2017 :



(in thousands, except share and per share amounts)
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

On November 28, 2017 , the Company announced a $20.00 per share dividend on its Series A Preferred Stock to be paid in additional shares of Series A Preferred Stock on January 1, 2018 to holders of record on November 15, 2017 . As of December 31, 2017 , the Company has recorded the 968 additional Series A Preferred Stock shares declared for the dividend of $1.0 million within preferred stock in the consolidated balance sheets.

Seasonality and Working Capital

The Company uses net operating working capital (“NOWC”), a non-GAAP measure, as a percentage of the previous twelve months of net sales as a key indicator of working capital management. The Company defines this metric as the sum of trade accounts receivable and inventories less trade accounts payable as a percentage of net sales. NOWC as a percentage of trailing twelve month net sales was 13.7% as of December 31, 2017 and 12.8% as of December 31, 2016 . The calculation of NOWC as a percentage of sales for December 31, 2017 excludes $22.9 million of trailing twelve month net sales relating to Acoustics Europe, which was sold on August 30, 2017. Set forth below is a table summarizing NOWC as of December 31, 2017 and December 31, 2016 .



(in thousands)	December 31, 2017			December 31, 2016
Accounts receivable—net	68,626			77,837
Inventories	70,819			73,601
Accounts payable	(53,668		)	(61,160		)
NOWC	$	85,777		$	90,278

In overall dollar terms, the Company’s NOWC is generally lower at the end of the calendar year due to reduced sales activity around the holiday season. NOWC generally peaks at the end of the first quarter as the Company experiences high seasonal demand from certain customers, particularly those serving the motor sports, and lawn and garden equipment markets to fill the supply chain for the spring season. There are, however, variations in the seasonal demands from year to year depending on weather, customer inventory levels, and model year changes. The Company historically generates approximately 51% - 54% of sales in the first half of the year.

Short-Term and Long-Term Liquidity Requirements

The Company’s ability to make principal and interest payments on borrowings under its U.S. and foreign credit facilities and its ability to fund planned capital expenditures will depend on its ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, regulatory (including tax) and other conditions. Based on its current level of operations, the Company believes that its existing cash balances and expected cash flows from operations will be sufficient to meet its operating requirements for at least the next 12 months from the date of filing. However, the Company may require borrowings under its credit facilities and alternative forms of financings or investments to achieve its longer-term strategic plans.

Capital expenditures during the year ended December 31, 2017 were $15.9 million , or 2.4% of annual sales, for the year ended December 31, 2017 . Capital expenditures for 2018 are expected to be approximately $17 million . The Company finances its annual capital requirements with funds generated from operations.

Warrant Repurchase

As of December 31, 2017 , the Company had 13,993,773 warrants outstanding. Each outstanding warrant entitles the registered holder to purchase one 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, our Board of Directors authorized the purchase of up to $5.0 million of our outstanding warrants. Management is authorized to effect 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 and December 31, 2016 .

Consolidated Statements of Cash Flows for the Years Ended December 31, 2017 , December 31, 2016 , and December 31, 2015



	Year Ended December 31, 2017			Year Ended December 31, 2016			Year Ended December 31, 2015
(in thousands)	Year Ended December 31, 2017			Year Ended December 31, 2016			Year Ended December 31, 2015
Cash flows provided by operating activities	$	30,091		$	35,117		$	39,034
Cash flows provided by (used in) investing activities	715			(16,453		)	(67,564		)
Cash flows (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
Depreciation and amortization	$	38,934		$	44,041		$	45,248
Capital expenditures	$	15,873		$	19,780		$	32,786
Cash paid during the year for interest	$	30,242		$	28,717		$	28,969
Cash paid during the year for income taxes, net of refunds	$	6,843		$	7,163		$	4,349

Year Ended December 31, 2017 and Year Ended December 31, 2016

Cash Flows Provided by Operating Activities

For the year ended December 31, 2017 , cash flows provided by operating activities were $30.1 million compared to $35.1 million for the year ended December 31, 2016 , a decrease of $5.0 million . Changes in net operating working capital decreased operating cash flow by $8.8 million during the year ended December 31, 2017 , as compared to the year ended December 31, 2016 , driven primarily by a higher level of cash generated from a reduction in working capital in 2016 as compared to 2017, partially offset by higher income exclusive of non cash items, in 2017. Higher working capital reductions in 2016 resulted from the billing and collection of prepaid customer tooling on new acoustics segment platforms along with higher inventory decreases and accounts payable increases, partially offset by higher accounts receivable reductions and accrued compensation increases in 2017.

Cash Flows Provided by (Used in) Investing Activities

Cash flows provided by investing activities was $0.7 million for the year ended December 31, 2017 compared to cash flows used in investing activities of $16.5 million for the year ended December 31, 2016 . The change in cash flows provided by (used in) investing activities was primarily the result of proceeds on divestitures in 2017 of $7.9 million, lower capital expenditures of $3.9 million and increased proceeds from the sale of property, plant and equipment of $5.4 million . The increase in proceeds from the disposal of property, plant and equipment resulted from the building sale executed in connection with the sale leaseback of our Libertyville, Illinois facility and the sale of a building related to the closure of the finishing segment’s Richmond, Virginia facility in 2017.

Cash Flows Used in Financing Activities

Cash flows used in financing activities were $24.3 million for the year ended December 31, 2017 compared with cash flows used in financing activities of $12.8 million for the year ended December 31, 2016 . The increase in cash flows used in financing activities was due to higher payments of $18.7 million on First and Second Lien term loans for the buyback of Second Lien debt during 2017 and $1.6 million lower proceeds from other long-term debt borrowings. This was offset by lower preferred stock dividend payments of $3.6 million due to all dividends in 2017 being paid in additional shares of Series A Preferred Stock and $5.3 million lower payments of other long-term debt.

Depreciation and Amortization

Depreciation and amortization totaled $38.9 million for the year ended December 31, 2017 , compared with $44.0 million for the year ended December 31, 2016 . Depreciation and amortization for the year ended December 31, 2017 is lower than incurred by the Company in the prior period primarily as a result of asset disposals from certain restructuring activities such as the closure of the Buffalo Grove, Ill. facility in the components segment in 2016, the wind down of the finishing segment’s facility in Brazil and the August 2017 divestiture of Acoustics Europe, in addition to the impact of lower capital expenditures in 2017 compared to prior periods.

Capital Expenditures

Capital expenditures totaled $15.9 million for the year ended December 31, 2017 , compared with $19.8 million for the year ended December 31, 2016 . The lower capital expenditures are primarily driven by a lower level of project activity in 2017 compared with 2016.

Cash Paid for Interest

Cash paid for interest totaled $30.2 million for the year ended December 31, 2017 and $28.7 million for the year ended December 31, 2016 . The increase in cash paid for interest for the year ended December 31, 2017 primarily relates to $1.9 million paid in 2017 related to the Company’s interest rate swaps which were effective December 30, 2016.

Cash Paid for Income Taxes

Cash paid for income taxes net of refunds totaled $6.8 million for the year ended December 31, 2017 and $7.2 million for the year ended December 31, 2016 .

Year Ended December 31, 2016 and Year Ended December 31, 2015

Cash Flows Provided by Operating Activities

Cash flows provided by operating activities totaled $35.1 million for the year ended December 31, 2016 compared to $39.0 million for the year ended December 31, 2015 . The cash flows provided by operating activities were primarily the result of the net loss of $78.1 million adjusted for non-cash items of $31.1 million related to depreciation, $12.9 million related to amortization of intangible assets, $3.0 million related to amortization of deferred financing costs and debt discounts, $63.3 million of impairment charges, and $0.9 million of losses on disposal of property, plant and equipment, as well as $2.1 million of cash dividends received from joint ventures. These changes were partially offset by $0.7 million in equity income, changes in deferred taxes of $14.1 million , and $0.8 million of share-based compensation. As compared to net loss adjusted for non-cash items and the dividends received from joint ventures for the year ended December 31, 2015 , this resulted in decreased cash flows provided by operating activities of $12.1 million . Changes in working capital increased operating cash flow by $15.4 million for the year ended December 31, 2016 , compared to $7.3 million for the year ended December 31, 2015 , driven by business levels and working capital reduction actions across business segments.

Cash Flows Used in Investing Activities

Cash flows used in investing activities totaled $16.5 million for the year ended December 31, 2016 compared to $67.6 million for the year ended December 31, 2015 . The decrease in cash flows used in investing activities was primarily the result of the acquisition of DRONCO in 2015 for $34.4 million , net of cash acquired, compared with cash proceeds of $3.4 million from the sale of property, plant, and equipment (mostly due to sale of a building in the seating segment) in 2016, as well as decreased capital expenditures.

Cash Flows (Used in) Provided by Financing Activities

Cash flows used in financing activities were $12.8 million for the year ended December 31, 2016 compared to cash flows provided by financing activities of $5.2 million for the year ended December 31, 2015 . The change in cash flows was primarily due to increased payments on other long-term debt and lower proceeds from borrowings, as additional debt was acquired in 2015 with the acquisition of DRONCO.

Depreciation and Amortization

Depreciation and amortization totaled $44.0 million for the year ended December 31, 2016 , compared with $45.2 million for the year ended December 31, 2015 . Depreciation and amortization is slightly lower for the year ended December 31, 2016 as a result of lower amortization due to the impairment of certain seating segment intangible assets during the fourth quarter of 2015, partially offset by higher depreciation due to capital expenditures and the acquisition of DRONCO.

Capital Expenditures

Capital expenditures for property, plant, and equipment totaled $19.8 million for the year ended December 31, 2016 , compared with $32.8 million for the year ended December 31, 2015 . Capital expenditures were lower in 2016 compared with 2015 primarily due to an acoustics manufacturing facility in Richmond, Indiana completed in 2015.

Cash Paid for Interest

Cash paid for interest totaled $28.7 million for the year ended December 31, 2016 and $29.0 million for the year ended December 31, 2015 .

Cash Paid for Income Taxes

Cash paid for income taxes net of refunds totaled $7.2 million for the year ended December 31, 2016 and $4.3 million for the year ended December 31, 2015 .

Commitments and Contractual Obligations

The following table presents the Company’s commitments and contractual obligations as of December 31, 2017 , as well as its long-term obligations (in thousands):



			Payments Due by Period
	Total		2018		2019-2020		2021-2022		Thereafter
Long-term debt obligations under U.S. credit agreement	$	388,025	$	5,599	$	6,200	$	376,226	$	—
Other long-term debt obligations	21,795		3,846		7,175		5,860		4,914
Interest payments on long-term debt obligations ⁽¹⁾	108,343		28,872		56,523		22,787		161
Capital lease obligations ⁽²⁾	840		259		581		—		—
Operating lease obligations ⁽³⁾	60,703		10,243		17,447		15,187		17,826
Purchase obligations ⁽⁴⁾	786		653		133		—		—
Multiemployer and UK pension obligations ⁽⁵⁾	3,325		382		763		763		1,417
Total before other long-term liabilities	$	583,817	$	49,854	$	88,822	$	420,823	$	24,318
Other long-term liabilities ⁽⁶⁾	18,960
Total	$	602,777


⁽¹⁾	Amounts represent the expected cash payments of interest expense on all long-term debt obligations and were calculated using interest rates in place as of December 31, 2017 and assuming that the underlying debt obligations will be repaid in accordance with their terms.


⁽²⁾	Amounts represent the expected cash payments of capital lease obligations.


⁽³⁾	Operating leases represent the minimum rental commitments under non-cancelable operating leases.


⁽⁴⁾	The Company routinely issues purchase orders to numerous vendors for inventory and other supplies. These purchase orders are generally cancelable with reasonable notice to the vendor, and as such, are excluded from the obligations table.


⁽⁵⁾	Represents contributions required with respect to the former Morton multiemployer pension plan as a result of the withdrawal from the plan and required contributions to the pension plan in the UK.

⁽⁶⁾

Other long-term liabilities primarily consist of obligations for uncertain tax positions, pension obligations, postretirement health and other benefits, insurance accruals and other accruals. Other than payments required with respect to the former Morton multiemployer pension plan and a pension plan in the UK, the Company is unable to determine the ultimate timing of these liabilities and, therefore, no payment amounts were included in the “payments due by period” portion of the contractual obligations table.

Off-Balance Sheet Arrangements

The Company leases certain machinery, transportation equipment and office, warehouse and manufacturing facilities under various operating lease agreements. Under most arrangements, the Company pays the property taxes, insurance, maintenance and expenses related to the leased property. See Note 10 , “ Leases ”, in the notes to the consolidated financial statements and the “Contractual Obligations” table above for further information.

The Company had outstanding letters of credit totaling $6.1 million , $5.0 million , and $4.6 million as of December 31, 2017 , 2016 and 2015 , respectively, the majority of which secure self-insured workers compensation liabilities.

Critical Accounting Policies and 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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates its estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The following policies are considered by management to be the most critical in understanding the judgments that are involved in the preparation of our consolidated financial statements and the uncertainties that could impact our results of operations, financial position and cash flows. Application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Although the Company has listed a number of accounting policies below which it believes to be the most critical, the Company also believes that all of its accounting policies are important to the reader. Therefore, see Note 1 , “ Summary of Significant Accounting Policies ”, of the accompanying consolidated financial statements of the Company appearing elsewhere in this Annual Report.

Goodwill, Other Intangible Assets and Other Long-Lived Assets: The Company’s goodwill, other intangible assets and tangible fixed assets are held at historical cost, net of depreciation and amortization, less any provision for impairment. Intangible and tangible assets with determinable lives are amortized or depreciated on a straight line basis over estimated useful lives as follows:



Intangible Assets
Goodwill		No amortization
Patents		Amortized over 7 years
Customer relationships		Amortized over 10 to 15 years
Trademarks and other intangible assets		Amortized over 5 to 18 years

Tangible Assets
Land		No depreciation
Buildings and improvements		Depreciated over 2 to 40 years
Machinery and equipment		Depreciated over 2 to 10 years

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 are used in determining an estimated fair value for each reporting unit.

The Company performed its annual goodwill impairment test in the fourth quarter of 2017 and determined that the fair value of the finishing reporting unit, the only reporting unit with a recorded goodwill balance, exceeded the carrying value of the reporting unit by over 15% . 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 each reporting unit. Both approaches are generally 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.

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 may result in the carrying value of this reporting unit exceeding its fair value, and goodwill and amortizable intangible assets could be impaired. See Note 8 , “ Goodwill and Other Intangible Assets ”, of the accompanying consolidated financial statements for further discussion.

The Company also reviews other intangible assets and tangible fixed assets for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. If such indicators are present, the Company performs undiscounted cash flow analyses to determine if an impairment exists. If an impairment is determined to exist, any related impairment loss is calculated based on fair value.

A considerable amount of management judgment and assumptions is required in performing the impairment tests, principally in determining the fair value of each reporting unit and the specifically identifiable intangible and tangible assets. While the Company believes its judgments and assumptions are reasonable, different assumptions could change the estimated fair values and, therefore, additional impairment charges could be required.

Employee Benefit Plans: The Company provides a range of benefits to employees and certain former employees, including in some cases pensions and postretirement health care, although the majority of these plans are frozen to new participation. 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 approach the Company uses to determine the annual assumptions is as follows:


•	Discount Rate: The Company’s discount rate assumptions are based on the interest rate of high-quality corporate bonds, with appropriate consideration of our plans’ participants’ demographics and benefit payment terms.


•	Expected Return on Plan Assets: The Company’s expected return on plan assets assumptions are based on our expectation of the long-term average rate of return on assets in the pension funds, which is reflective of the current and projected asset mix of the funds and considers the historical returns earned on the funds.


•	Compensation Increase: The Company’s compensation increase assumptions reflect our long-term actual experience, the near-term outlook and assumed inflation.


•	Retirement and Mortality Rates: The Company’s retirement and mortality rate assumptions are based primarily on actual plan experience and mortality tables.


•	Health Care Cost Trend Rates: The Company’s health care cost trend rate assumptions are based primarily on actual plan experience and mortality inflation.

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 or amortized over future periods. Based on information provided by independent actuaries and other relevant sources, the Company believes that the assumptions used are reasonable; however, changes in these assumptions could impact our financial position, results of operations or cash flows. See Note 15 , “ Employee Benefit Plans ”, of the accompanying consolidated financial statements for further discussion.

Income Taxes: The Company is subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and recording the related deferred tax assets and liabilities. The Company assesses its income tax positions and records tax liabilities for all years subject to examination based upon management’s evaluation of the facts and circumstances and information available at the reporting dates. For those income tax positions where it is more-likely-than-not that a tax benefit will be sustained upon the conclusion of an examination, the Company has recorded the largest amount of tax benefit having a cumulatively greater than 50% likelihood of being realized upon ultimate settlement with the applicable taxing authority assuming that it has full knowledge of all relevant information. For those tax positions that do not meet the more-likely-than-not threshold regarding the ultimate realization of the related tax benefit, no tax benefit has been recorded in the financial statements. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases, net operating losses, tax credits and other carryforwards. 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 be recovered or settled. The Company regularly reviews its deferred tax assets for recoverability and establishes a valuation allowance based on historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. As a result of this review, the Company has established valuation allowances against certain of our deferred tax assets relating to foreign and state net operating loss and credit carryforwards. Future tax authority rulings and changes in tax laws, changes in projected levels of taxable income and future tax planning strategies could affect the actual effective tax rate and tax balances recorded.

On December 22, 2017, the President of the United States signed into law the Tax Reform Act. The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act also adds many new provisions including changes to bonus depreciation and the deductions for executive compensation and interest expense, among others. 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. See further discussion of the Tax Reform Act within “Consolidated Results of Operations” above and Note 14 , “ Income Taxes ”, of the accompanying consolidated financial statements for further discussion.

Use of Estimates: The Company records reserves or allowances for returns and discounts, doubtful accounts, inventory, incurred but not reported medical claims, environmental matters, warranty claims, workers compensation claims, product and non-product litigation and incentive compensation. These reserves require the use of estimates and judgment. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The Company believes that such estimates are made on a consistent basis and with appropriate assumptions and methods. However, actual results may differ from these estimates.

New Accounting Pronouncements

See Note 1 , “ Summary of Significant Accounting Policies ,” under the heading “Recently issued accounting standards,” of the accompanying consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in foreign currency exchange rates and interest rates and, to a lesser extent, commodities. To reduce such risks, the Company selectively uses financial instruments and other proactive management techniques. All hedging transactions are authorized and executed pursuant to clearly defined policies and procedures, which strictly prohibit the use of financial instruments for trading or speculative purposes.

Currency Risk: The Company has manufacturing, sales and distribution operations around the world; therefore, exchange rates impact the U.S. Dollar (“USD”) value of our reported earnings, our investments in our foreign subsidiaries and the intercompany transactions with these subsidiaries. Approximately $206.9 million , or 32% , of our sales originated in a currency other than the U.S. dollar for the year ended December 31, 2017 . As a result, fluctuations in the value of foreign currencies against the USD, particularly the Euro, may have a material impact on our reported results. Revenues and expenses denominated in foreign currencies are translated into USD using average exchange rates in effect during the period. Consequently, as the value of the USD changes relative to the currencies of our major markets, our reported results vary. For the year ended December 31, 2017 , sales denominated in Euros approximated $127 million . Therefore, with a 10% increase or decrease in the value of the Euro in relation to the USD, our translated net sales (assuming all other factors are unchanged) would increase or decrease by $12.7 million , respectively, and our net loss would increase or decrease by approximately $0.1 million , respectively. The net assets and liabilities of our non-U.S. subsidiaries, which totaled approximately $146.0 million as of December 31, 2017 , are translated into USD at the exchange rates in effect at the end of the period. The resulting translation adjustments are recorded in shareholders’ equity as cumulative translation adjustments. The cumulative translation adjustments recorded in accumulated other comprehensive loss at December 31, 2017 resulted in a decrease to shareholders’ equity of $18.6 million . Transactional foreign currency exchange exposure results primarily from the purchase of products, services or equipment from affiliates or third party suppliers where the purchase value is significant, denominated in

another currency and to be settled over an extended period, and from the repayment of intercompany loans between subsidiaries using different currencies. The Company periodically identifies areas where it does not have naturally offsetting currency positions and then may purchase hedging instruments to protect against potential currency exposures. As of December 31, 2017 , the Company did not have any significant foreign currency hedging instruments in place nor did it have any significant sales or purchase commitments in currencies outside of the functional currencies of the operations responsible for satisfying such commitments. All long-term debt is held in the functional currencies of the operations that are responsible for the repayment of such obligations. As of December 31, 2017 , long-term debt denominated in currencies other than the USD totaled $19.5 million .

Interest Rate Risk: The Company utilizes a combination of short-term and long-term debt to finance our operations and is exposed to interest rate risk on our outstanding floating rate debt instruments, which bear interest at rates that fluctuate with changes in certain short-term prevailing interest rates. Borrowings under U.S. credit facilities bear interest at rates tied to either the “prime rate” of Deutsche Bank AG New York Branch, the federal funds effective rate, the Eurocurrency rate, or a Eurocurrency rate determined by reference to LIBOR, subject to an established floor. A 25 basis point increase or decrease in the applicable interest rates on our variable rate debt would increase or decrease interest expense by approximately $1 million .

As of December 31, 2017 , the Company has entered into various interest rate swaps in order to mitigate a portion of the variable rate interest exposure. The Company is counterparty to certain interest rate swaps with a total notional amount of $210.0 million entered into in November 2015 in order to mitigate a portion of the variable rate interest exposure. These swaps are scheduled to mature in June 2020. Under the terms of the agreement, the Company swapped three month LIBOR rates for a fixed interest rate, resulting in the payment of a fixed LIBOR rate of 2.08% on a notional amount of $210.0 million .

Commodity risk: The Company sources a wide variety of materials and components from a network of global suppliers. While such materials are generally available from numerous suppliers, commodity raw materials, such as steel, aluminum, copper, fiber, foam chemicals, plastic resin, vinyl and cotton sheeting are subject to price fluctuations, which could have a negative impact on our results. The Company strives to pass along such commodity price increases to customers to avoid profit margin erosion and utilizes value analysis and value engineering (“VAVE”) initiatives to further mitigate the impact of commodity raw material price fluctuations as improved efficiencies across all locations are achieved. As of December 31, 2017 , the Company did not have any commodity hedging instruments in place.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Quarterly Results of Operations (unaudited)

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 2017 and fiscal 2016 . 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.



	1Q			2Q ⁽¹⁾			3Q			4Q		Full Year
(in thousands, except percentages)	2017			2017			2017			2017		2017
Net sales	$	175,193		$	172,477		$	155,430		$	145,516	$	648,616
Gross profit	34,609			35,644			31,973			28,626		130,852
Loss on divestiture	—			(7,888		)	(842		)	—		(8,730		)
Net (loss) income	(493		)	(4,737		)	(1,601		)	2,358		(4,473		)
Less net income attributable to noncontrolling interests	5			—			—			—		5
Net (loss) income attributable to Jason Industries	(498		)	(4,737		)	(1,601		)	2,358		(4,478		)
Accretion of preferred stock dividends and redemption premium	918			936			955			974		3,783
Net (loss) income available to common shareholders of Jason Industries	$	(1,416	)	$	(5,673	)	$	(2,556	)	$	1,384	$	(8,261	)
Net (loss) income per share available to common shareholders of Jason Industries:
Basic	$	(0.05	)	$	(0.22	)	$	(0.10	)	$	0.05	$	(0.32	)
Diluted	(0.05		)	(0.22		)	(0.10		)	0.05		(0.32		)
Weighted average number of common shares outstanding:
Basic	25,784			26,042			26,241			26,255		26,082
Diluted	25,784			26,042			26,241			26,785		26,082



	1Q			2Q			3Q			4Q			Full Year
(in thousands, except percentages)	2016			2016			2016			2016			2016
Net sales	$	190,974		$	185,687		$	170,108		$	158,750		$	705,519
Gross profit	37,791			37,039			30,847			25,430			131,107
Impairment charges	—			—			—			63,285			63,285
Net loss	(3,088		)	(2,454		)	(2,547		)	(69,964		)	(78,053		)
Less net loss attributable to noncontrolling interests	(510		)	(400		)	(415		)	(9,493		)	(10,818		)
Net loss attributable to Jason Industries	(2,578		)	(2,054		)	(2,132		)	(60,471		)	(67,235		)
Accretion of preferred stock dividends and redemption premium	900			900			900			900			3,600
Net loss available to common shareholders of Jason Industries	$	(3,478	)	$	(2,954	)	$	(3,032	)	$	(61,371	)	$	(70,835	)
Net loss per share available to common shareholders of Jason Industries:
Basic and diluted	$	(0.16	)	$	(0.13	)	$	(0.13	)	$	(2.70	)	$	(3.15	)
Weighted average number of common shares outstanding:
Basic and diluted	22,388			22,395			22,499			22,758			22,507

⁽¹⁾

The second quarter of 2017 includes revision adjustments for a $1.2 million error in the loss on divestiture related to the calculation of the write down of the Company’s Acoustics European operations and a $0.1 million error for the understatement of depreciation expense for the second quarter ended June 30, 2017. The adjustments decreased gross profit by $0.1 million, increased the loss on divestiture by $1.2 million and increased the net loss, net loss attributable to Jason Industries and net loss available to common shareholders of Jason Industries by $1.3 million. See Note 2 , “ Revision of Previously Reported Financial Information ”.



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
Report of Independent Registered Public Accounting Firm		66
Consolidated Statements of Operations		67
Consolidated Statements of Comprehensive Income (Loss)		68
Consolidated Balance Sheets		69
Consolidated Statements of Shareholders’ Equity (Deficit)		70
Consolidated Statements of Cash Flows		71
Notes to Consolidated Financial Statements		72

Index to Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts		108

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 sheets of Jason Industries, Inc. and its subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2017, 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 Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in 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”) 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 consolidated financial 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 consolidated financial 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Milwaukee, WI

March 1, 2018

We have served as the Company or its predecessors’ auditor since 1985.

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
	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

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

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
	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	)

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

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

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

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		Additional Paid-In Capital			Retained Deficit			Accumulated Other Comprehensive Loss						Noncontrolling Interests				Total Shareholders’ Equity (Deficit)
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

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

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
	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 reportable segments: finishing, components, seating and acoustics. The segments have operations within the United States and 13 foreign countries. The Company’s finishing segment focuses on the production of industrial brushes, polishing buffs and compounds, and abrasives that are used in a broad range of industrial and infrastructure applications. The components segment is a diversified manufacturer of expanded and perforated metal components, slip resistant surfaces and subassemblies for smart utility meters. The seating segment supplies seating solutions to equipment manufacturers in the motorcycle, lawn and turf care, industrial, agricultural, construction and power sports end markets. The acoustics segment manufactures engineered non-woven, fiber-based acoustical products for the automotive industry.

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 Jason by the Company (the “Business Combination”).

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 ends on a Friday. The exceptions are the first quarter, which begins on January 1 , and the fourth quarter, which ends on December 31 . For 2017 , the Company’s fiscal quarters were comprised of the three months ended March 31, June 30, September 29 , and December 31 . In 2016 , the Company’s fiscal quarters were comprised of the three months ended April 1, July 1, September 30, 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. 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 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 5 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.

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 finishing segment and are accounted for using the equity method of accounting. As of December 31, 2017 and 2016 , the Company’s investment in these joint ventures was $6.1 million and $4.8 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 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 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 million and $365.8 million as of December 31, 2017 and 2016 , 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 and Hedging 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 or 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 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 and Hedging 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 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).

Other comprehensive income (loss): Other comprehensive income (loss) includes disclosure of financial information that historically has not been recognized in the calculation of net income. The Company’s other comprehensive 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.

Jason Industries, Inc.

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

Product warranties: The Company offers warranties on the sales of certain 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 are recorded as a component of cost of goods sold.

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 million in the year ended December 31, 2017 , $4.2 million in the year ended December 31, 2016 , and $5.0 million in the year ended December 31, 2015 .

Advertising costs: Advertising costs are charged to selling and administrative expenses as incurred and were $1.8 million in the year ended December 31, 2017 , $1.9 million in the year ended December 31, 2016 , and $2.7 million in the year ended December 31, 2015 .

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 , and 2015 the Company had no individual customers at or above 10% of consolidated net sales. At December 31, 2017 , one 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.

Recently issued accounting standards

Accounting standards adopted in the current fiscal year

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11, “ Simplifying the Measurement of Inventory ” (“ASU 2015-11”). Under ASU 2015-11, inventory is measured at the “lower of cost and net realizable value” and options that formerly existed for “market value” were eliminated. ASU 2015-11 defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” No other changes were made to the current guidance on inventory measurement. The Company adopted ASU 2015-11 effective January 1, 2017 on a prospective basis. There was an insignificant impact to the reported consolidated financial statements for the year ended December 31, 2017 as a result of adoption of this standard.

In August 2016, the FASB issued ASU 2016-15, “ Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments ” (“ASU 2016-15”) , 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

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 contract for 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 standard is effective for interim and annual reporting periods beginning after December 15, 2018; however, early adoption is permitted. The Company is currently assessing the impact that this standard will have on its consolidated financial statements, as well as the planned timing of adoption.



2.	Revision of Previously Reported Financial Information

During the third quarter of 2017, 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.

While 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 throughout the consolidated financial statements and notes thereto have been adjusted to incorporate the revised amounts, where applicable.

Jason Industries, Inc.

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

The impact of the required correction to 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 impact of the required correction to the consolidated balance sheet was as follows:



	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

The above revisions did not impact total net cash provided by (used in) operating, investing or financing activities within the consolidated statements of cash flows for any previous period. Other than the adjustments to net loss for the year ended ended December 31, 2016, which impacted recorded retained deficit, shareholders' deficit attributable to Jason Industries and total shareholders' deficit, there were no other impacts to the consolidated statements of shareholders' equity (deficit). There was no impact to the Company's previously reported “segment” Adjusted EBITDA for the year ended December 31, 2016.



3.	Acquisitions

DRONCO GmbH (“DRONCO”)

On May 29, 2015, the Company acquired all of the outstanding shares of DRONCO. DRONCO is a European manufacturer 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 , the Company recognized $0.9 million of acquisition-related costs related to DRONCO and these costs are included in the consolidated statements of operations as “Transaction-related expenses”. For the years ended December 31, 2016 and 2015 , $38.5 million and $24.1 million , respectively, of net sales from DRONCO were included in the Company’s consolidated statements of operations.

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.



4.	Divestiture

On August 30, 2017, the Company completed the divestiture of its European operations within the acoustics 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 million pre-tax loss.

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 reduced the Company’s non-core revenue within the European automotive market and has allowed it to focus on margin expansion and growth in the core North American automotive market. The Company determined that the divestiture did not represent a strategic shift that will 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.



5.	Restructuring Costs

On March 1, 2016, as part of a strategic review of organizational structure and operations, the Company announced a global cost reduction and restructuring program (the “2016 program”). The 2016 program, as used herein, refers to costs related to various restructuring activities across business segments. This includes entering into severance and termination agreements with employees and footprint rationalization activities, including exit and relocation costs for the consolidation and closure of plant facilities and lease termination costs. These activities were ongoing throughout the years ended December 31, 2016 and 2017 and are expected to be completed by the end of 2018.

For the year ended December 31, 2015 , the Company incurred certain restructuring costs related to changes to its worldwide manufacturing footprint. These actions resulted in charges relating to employee severance and other related charges, such as exit costs for the consolidation and closure of plant facilities, employee relocation and lease termination costs. These costs related to decisions that preceded the 2016 program and are therefore not considered to be part of such plan. 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 material charges related to 2015 restructuring activities for the year ended December 31, 2017 , and no additional costs are expected for such restructuring activities.

The following table presents the restructuring costs recognized by the Company under the 2016 program by reportable segment. The 2016 program began in the first quarter of 2016 and as such, the cumulative restructuring charges represent the 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 facility 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.

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 both the 2016 program and previous activities:



	Severance costs			Lease termination costs			Other costs			Total
Balance - December 31, 2016	$	1,281		$	333		$	1,085		$	2,699
Current period restructuring charges	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

At December 31, 2017 and December 31, 2016 , the restructuring liabilities were classified as other current liabilities on the consolidated balance sheets. At December 31, 2017 and December 31, 2016 , 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 within the finishing segment due to the closure of a facility in Brazil.

Jason Industries, Inc.

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)



6.	Inventories

Inventories at December 31, 2017 and December 31, 2016 consisted of the following:



	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, 2017 and December 31, 2016 consisted of the following:



	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 reporting segment was as follows:



	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, 2017 and December 31, 2016 , accumulated goodwill impairment losses were $122.1 million , primarily due to $58.8 million related to the seating reporting unit, $29.8 million related to the acoustics reporting unit, and $33.2 million related to the components reporting unit.

Fiscal 2017 Impairment Assessment

The Company performed its annual goodwill impairment test in the fourth quarter of 2017 and determined that the fair value of the finishing reporting unit, the only reporting unit with a recorded goodwill balance, exceeded the carrying value of the reporting unit by over 15% . 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 are generally 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.

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 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 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)

Other amortizable intangible assets are evaluated for potential impairment whenever events or circumstances indicate that the carrying value may not be recoverable. There were no impairment charges recorded related to tangible or intangible assets during 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.

The approximate weighted average remaining useful lives of the Company’s intangible assets a t December 31, 2017 are as follows: patents - 3.1 years; customer relationships - 10.7 years; and trademarks and other intangibles - 11.6 years.

Amortization of intangible assets approximated $12.7 million , $12.9 million , and $14.1 million for the years ended December 31, 2017 , 2016 and 2015 , respectively. Excluding the impact of any future acquisitions, the Company anticipates the annual amortization for each of the next five years and thereafter to be the following:



2018	$	14,360
2019	11,800
2020	11,800
2021	11,631
2022	11,458
Thereafter	70,450
	$	131,499



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)

Future annual maturities of long-term debt outstanding at December 31, 2017 are as follows:



2018	$	9,704
2019	6,950
2020	7,006
2021	289,378
2022	92,708
Thereafter	4,914
Total future annual maturities of long term debt outstanding	410,660
Less: Debt discounts on Term Loans	(3,602		)
Less: Deferred issuance costs on Term Loans	(5,586		)
Total debt	$	401,472

Senior Secured Credit Facilities

On June 30, 2014, all indebtedness under Jason’s former 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 amended (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 in 2021, of which $298.0 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 in 2022, of which $90.0 million is outstanding as of December 31, 2017 , and (iii) a revolving loan of up to $40.0 million (“Revolving Credit Facility”) maturing in 2019. The Company capitalized debt issuance costs of $13.5 million in connection with the refinancing. The unamortized amount of debt issuance costs as of December 31, 2017 were $5.6 million related to the First Lien Term Loans and Second Lien Term Loans and $0.6 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. 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 of $0.8 million , with the balance payable at maturity. At the Company’s election, the interest rate per annum applicable to the loans under the Senior Secured Credit Facilities is based on a fluctuating rate of interest determined by reference to either (i) a base rate determined by reference to the higher of (a) the “prime rate” of Deutsche Bank AG New York Branch, (b) the federal funds effective rate plus 0.50% and (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”), 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 a consolidated first lien net leverage ratio.

At December 31, 2017 , the interest rates on the outstanding balances of the First Lien Term Loans and Second Lien Term Loans were 6.2% and 9.7% , 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, swingline loans and certain letter of credit obligations exceeds 25 percent , or $10.0 million , of the revolving credit commitments at the end of any fiscal quarter, Jason Incorporated and its restricted subsidiaries will be required to not exceed a consolidated first lien net leverage ratio of 4.50 to 1.00 . If such outstanding amounts do not exceed 25 percent of the revolving credit commitments at the end of any fiscal quarter, no financial covenants are applicable. The Company did not draw on its revolver during 2017.

Under the Senior Secured Credit Facilities, the Company is subject to mandatory prepayments if certain requirements are met. At December 31, 2017 and 2016 , mandatory prepayments of $2.5 million and $1.9 million , respectively, under the Senior Secured Credit Facilities were included within the current portion of long-term debt in the consolidated balance sheets. The mandatory prepayment is in excess of regular current installments due.

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.

Foreign debt

The Company has the following foreign debt obligations, including various overdraft facilities and term loans:



	December 31, 2017		December 31, 2016
Germany	$	18,003	$	21,469
Mexico	3,179		850
India	599		834
Other	14		150
Total foreign debt	$	21,795	$	23,303

These various foreign loans are comprised of individual outstanding obligations ranging from approximately $0.1 million to $11.2 million and $0.1 million to $12.6 million as of December 31, 2017 and December 31, 2016 , respectively. Certain of the Company’s foreign borrowings contain financial covenants requiring maintenance of a minimum equity ratio and maximum leverage ratio, among others. The Company was in compliance with these covenants as of December 31, 2017 .

The foreign debt obligations in Germany primarily relate to term loans within our finishing segment of $18.0 million at December 31, 2017 and $19.3 million at December 31, 2016 . The German borrowings bear interest at fixed and variable rates ranging from 2.1% 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 during the third quarter sale of Acoustics Europe to retire 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 of $210.0 million at both December 31, 2017 and December 31, 2016 . 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 year ended December 31, 2017 , the Company recognized $1.9 million of interest expense 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 million related to the Swaps in 2018.



	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	)

Jason Industries, Inc.

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)



10.	Leases

Lease Obligations

The Company leases machinery, transportation equipment and office, warehouse and manufacturing facilities under agreements which are accounted for as operating leases. Many of the leases include provisions that enable the Company to renew the lease, and certain leases are subject to various escalation clauses.

Future minimum lease payments required under long-term operating leases in effect at December 31, 2017 are as follows:



2018	$	10,243
2019	9,034
2020	8,413
2021	7,033
2022	8,154
Thereafter	17,826
	$	60,703

Total rental expense under operating leases was $12.2 million , $13.1 million , $9.8 million for the years end December 31, 2017 , December 31, 2016 , and December 31, 2015 , 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 th e lease as an operating lease and will pay approximately $10.1 million in minimum lease payments over the life of the lease.



11.	Shareholders' Equity (Deficit)

At December 31, 2017 , the Company has authorized for issuance 120,000,000 shares of $0.0001 par value common stock, of which 25,966,381 shares were issued and outstanding, and has authorized for issuance 5,000,000 shares of $0.0001 par value preferred stock, of which 49,665 shares were issued and outstanding, including 968 shares declared as a dividend on November 28, 2017 and issued on January 1, 2018 .

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 during the years ended December 31, 2017 , 2016 and 2015 .



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

On November 28, 2017 , the Company announced a $20.00 per share dividend on its Series A Preferred Stock to be paid in additional shares of Series A Preferred Stock on January 1, 2018 to holders of record on November 15, 2017 . As of December 31, 2017 , the Company has recorded the 968 additional Series A Preferred Stock shares declared for the dividend of $1.0 million within preferred stock in the consolidated balance sheets.

Shareholder Rights Agreement

On September 12, 2016, 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. New Rights will accompany any new shares of common stock issued after September 16, 2016. The Rights trade with and are inseparable from our common stock and will not be evidenced by separate certificates unless they become exercisable. The Rights will expire on March 12, 2018.

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 Right 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 , subject to adjustment as set forth in the Rights Agreement, once the Rights become exercisable. Per the Rights 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

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 .

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

Following the consummation of the Business Combination, Jason became an indirect majority-owned subsidiary of the Company, with the Company then owning approximately 83.1 percent of JPHI and the rollover participants then owning a

Jason Industries, Inc.

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

noncontrolling interest of approximately 16.9 percent of JPHI. The rollover participants received 3,485,623 shares of JPHI, which were exchangeable on a one -for-one basis for shares of common stock of the Company.

In November and December 2016, certain rollover participants exchanged 2,401,616 shares of JPHI stock for Company common stock, which decreased the noncontrolling interest to 6.0 percent . 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 no shares of JPHI stock remain outstanding as of December 31, 2017 . 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			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	)



12.	Share 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 units 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, 2014, the 2014 Omnibus Incentive Plan (the “2014 Plan”) was approved by shareholders to provide incentives to key employees of the Company and its subsidiaries. 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. There were 3,473,435 shares of common stock reserved and authorized for issuance under the 2014 Plan. At December 31, 2017 , there were 352,587 shares of common stock authorized and available for future grants under the 2014 Plan.

Jason Industries, Inc.

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

Share Based Compensation Expense

The Company recognized the following share based compensation expense (income):



	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
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 , $2.0 million of total unrecognized compensation expense related to share-based compensation plans is expected to be recognized over a weighted-average period of 2.2 years. The total unrecognized share-based compensation expense to be recognized in future periods as of December 31, 2017 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.

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 zero to 150% for those awards granted from 2014 through 2016 and from zero to 100% for those awards granted in 2017 , 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 twenty 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 RSU 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	554		$	5.22	401		$	8.70	762		$	10.50
Granted	745		1.32		375		3.75		216		6.39
Issued	(265	)	4.84		(211	)	7.62		(582	)	10.50
Deferred	159		3.69		62		4.24		67		10.55
Forfeited	(160	)	1.53		(73	)	9.04		(62	)	7.84
Outstanding at end of period	1,033		$	2.84	554		$	5.22	401		$	8.70

As of December 31, 2017 , there was $1.0 million of unrecognized share-based compensation expense related to 744,232 RSU awards, with a weighted-average grant date fair value of $1.84 , that are expected to vest over a weighted-average period of 2.1 years. Included within the total 1,032,686 RSU awards outstanding as of December 31, 2017 are 288,454 RSU awards for members of our Board of Directors which have vested and issuance of the shares has been deferred, with a weighted-average grant date fair value of $5.41 . The total fair values of shares vested during the years ended December 31, 2017 , 2016 and 2015 were $0.3 million , $0.7 million and $3.4 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, 2017 , 2016 and 2015 , 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).

Performance Share Units

Adjusted EBITDA Vesting Awards

The following table summarizes Adjusted EBITDA 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	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)

Adjusted EBITDA Vesting Awards - 2014 and 2015 Grant

During the period June 30, 2014 through December 31, 2014, 1,215,704 performance share unit awards were granted to certain executive officers and senior management employees. During the year ended December 31, 2015 , 142,238 performance share unit awards were granted to 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.

During the second quarter of 2016, the Company lowered its estimated vesting of the 2014 and 2015 performance share unit awards from 62.5% of target, or 301,382 shares, to an estimated vesting payout of 0% , or 0 shares, resulting in $2.4 million of share-based compensation income due to declines in profitability. As of December 31, 2017 , there was no unrecognized 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.

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 zero to 907,505 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 of the Adjusted EBITDA based performance share unit awards is currently being recognized based on an estimated payout of 100% of target, or 907,505 shares. As of December 31, 2017 , there was $1.0 million of unrecognized compensation expense related to Adjusted EBITDA based vesting performance share unit awards, which is expected to be recognized over a weighted average period of 2.2 years.

Stock Price Vesting Awards

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, 2017 and 2016 . During the year ended December 31, 2015 , 94,825 performance share unit awards were granted to certain executive officers. The awards had a three year performance period from July 1, 2014 through June 30, 2017. Distributions under these 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.

Jason Industries, Inc.

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

As of December 31, 2017 , there was no unrecognized compensation expense related to stock price based 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.

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 based vesting performance share unit awards expected to be recognized in subsequent periods.

Jason Industries, Inc.

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)



13.	Earnings per Share

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” 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, 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

⁽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 available to the Company’s common shareholders for each of the periods presented, potentially dilutive shares are excluded from the diluted net loss per share calculation because they were anti-dilutive under the treasury stock method, in accordance with Accounting Standards Codification Topic 260.

Jason Industries, Inc.

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)



14.	Income Taxes

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”). The legislation significantly changes 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 adds 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.

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
	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 taxes 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, 2017			Year Ended December 31, 2016			Year Ended December 31, 2015
Current
Federal	$	208		$	—		$	161
State	(125		)	57			104
Foreign	6,878			7,759			5,703
Total current income tax provision	6,961			7,816			5,968

Deferred
Federal	(14,864		)	(9,059		)	(24,548		)
State	(1,281		)	(1,781		)	(3,196		)
Foreign	(1,200		)	(3,272		)	(479		)
Total deferred income tax benefit	(17,345		)	(14,112		)	(28,223		)
Total income tax benefit	$	(10,384	)	$	(6,296	)	$	(22,255	)

The income tax benefit recognized in the accompanying consolidated statements of operations differs from the amounts computed by applying the Federal income tax rate to loss before income tax benefit. A reconciliation of income taxes at the Federal statutory rate to the effective tax rate is summarized as follows:



	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
Tax at Federal statutory rate of 35%	35.0	%	35.0	%	35.0	%
State taxes - net of Federal benefit	7.7		1.5		2.7
Research and development incentives	1.7		0.5		0.4
Foreign rate differential	5.2		1.3		0.8
Valuation allowances	5.0		(1.8	)	0.2
Change in foreign tax rates	(1.2	)	0.6		(1.0	)
Decrease (increase) in tax reserves	(0.4	)	1.0		(0.2	)
Stock compensation expense	(6.7	)	(0.6	)	(0.7	)
U.S. taxation of foreign earnings ⁽¹⁾	(10.2	)	(3.6	)	(0.5	)
Non-deductible meals and entertainment	(0.3	)	(0.1	)	(0.1	)
Non-deductible impairment charges ⁽²⁾	—		(25.7	)	(16.2	)
Change in U.S. tax rate ⁽³⁾	72.5		—		—
Transition tax on unremitted foreign earnings ⁽⁴⁾	(35.7	)	—		—
Other	(2.7	)	(0.6	)	(0.5	)
Effective tax rate	69.9	%	7.5	%	19.9	%

⁽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.

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
Deferred tax assets
Accrued expenses and reserves	$	2,685		$	3,832
Postretirement and postemployment benefits	1,702			2,662
Employee benefits	3,476			2,844
Inventories	1,392			2,710
Other assets	1,868			3,310
Operating loss and credit carryforwards	15,257			22,510
Gross deferred tax assets	26,380			37,868
Less valuation allowance	(4,220		)	(4,879		)
Deferred tax assets	22,160			32,989

Deferred tax liabilities
Property, plant and equipment	(15,670		)	(25,854		)
Intangible assets and other liabilities	(28,912		)	(46,376		)
Foreign investments	(1,688		)	(2,109		)
Deferred tax liabilities	(46,270		)	(74,339		)
Net deferred tax liability	$	(24,110	)	$	(41,350	)

Amounts recognized in the statement of financial position consist of:
Other assets - net	$	1,589		$	1,258
Deferred income taxes	(25,699		)	(42,608		)
Net amount recognized	$	(24,110	)	$	(41,350	)

At December 31, 2017 , the Company has U.S. federal and state net operating loss carryforwards, which expire at various dates through 2036, approximating $27.6 million and $102.9 million , respectively. In addition, the Company has U.S. state tax credit carryforwards of $1.0 million which expire between 2017 and 2031. The Company’s foreign net operating loss carryforwards total approximately $16.9 million (at December 31, 2017 exchange rates). The majority of these foreign net operating loss carryforwards are available for an indefinite period.

Valuation allowances totaling $4.2 million and $4.9 million as of December 31, 2017 and 2016 , respectively, have been established for deferred income tax assets primarily related to certain subsidiary 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, 2017 , 2016 and 2015 :



	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
Balance at beginning of period	$	1,881		$	2,928		$	2,743
Additions (reductions) based on tax positions related to current year	267			126			(28		)
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		)
Balance at end of period	$	1,916		$	1,881		$	2,928

Of the $1.9 million , $1.9 million , and $2.9 million of unrecognized tax benefits as of December 31, 2017 , 2016 and 2015 , respectively, approximately $1.9 million , $1.6 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 income tax provision. During the years ended December 31, 2017 , 2016 and 2015 , the Company had an immaterial amount of interest and penalties that were recognized as a component of the income tax provision.

At December 31, 2017 and 2016 , 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, the Company believes it is reasonably possible the total amount of unrecognized tax benefits will stay the same.

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
Brazil		2013 - 2017
France		2013 - 2017
Germany		2012 - 2017
Mexico		2012 - 2017
Sweden		2012 - 2017
United Kingdom		2016 - 2017
United States (federal)		2014 - 2017
United States (state and local)		2013 - 2017

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 permanent 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 su bsidiaries. 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.

During the second quarter of 2016, the Company changed its assertion regarding the permanent reinvestment of earnings of its non-majority owned joint venture holding. Such change in assertion was driven by several factors. Prior to the second quarter of 2016, the Company had the ability 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 .

Jason Industries, Inc.

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)



15.	Employee Benefit Plans

Defined contribution 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 million , $2.4 million and $1.7 million , for the years ended December 31, 2017 , 2016 and 2015 , respectively.

Defined benefit pension plans

The Company maintains defined benefit pension plans covering union and certain other employees. These plans are frozen to new participation.

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
	Year Ended December 31, 2017			Year Ended December 31, 2016			Year Ended December 31, 2017			Year Ended December 31, 2016
Accumulated benefit obligation	$	10,605		$	10,626		$	15,054		$	13,162

Change in projected benefit obligation
Projected benefit obligation at beginning of year	$	10,626		$	10,824		$	13,532		$	12,988
Service cost	—			—			177			155
Interest cost	393			425			312			391
Actuarial loss	292			70			388			1,842
Benefits paid	(706		)	(693		)	(502		)	(506		)
Other	—			—			8			7
Currency translation adjustment	—			—			1,553			(1,345		)
Projected benefit obligation at end of year	$	10,605		$	10,626		$	15,468		$	13,532

Change in plan assets
Fair value of plan assets at beginning of year	$	9,282		$	8,985		$	6,316		$	6,393
Actual return on plan assets	1,110			906			536			940
Employer and employee contributions	410			145			485			497
Benefits paid	(706		)	(693		)	(506		)	(510		)
Other	(41		)	(61		)	—			—
Currency translation adjustment	—			—			615			(1,004		)
Fair value of plan assets at end of year	$	10,055		$	9,282		$	7,446		$	6,316
Funded Status	$	(550	)	$	(1,344	)	$	(8,022	)	$	(7,216	)

Weighted-average assumptions
Discount rates	3.33%-3.45%			3.71%-3.90%			1.80%-2.40%			1.70%-2.60%
Rate of compensation increase	N/A			N/A			2.00%-3.70%			2.00%-3.90%
Amounts recognized in the statement of financial position consist of:
Non-current assets	$	1,935		$	1,409		$	—		$	—
Other current liabilities	—			—			(78		)	(65		)
Other long-term liabilities	(2,485		)	(2,753		)	(7,944		)	(7,151		)
Net amount recognized	$	(550	)	$	(1,344	)	$	(8,022	)	$	(7,216	)

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
	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, 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
Components of Net Periodic Benefit Cost
Service cost	$	—		$	—		$	—		$	177		$	155		$	125
Interest cost	393			425			410			312			391			384
Expected return on plan assets	(467		)	(513		)	(580		)	(226		)	(253		)	(255		)
Amortization of actuarial loss	14			27			—			41			7			—
Net periodic (benefit) cost	$	(60	)	$	(61	)	$	(170	)	$	304		$	300		$	254

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%
Rate of compensation increase	N/A			N/A			N/A			2.00%-3.90%			2.00%-3.60%			2.00%-3.70%
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%

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
	Year Ended December 31, 2017		Year Ended December 31, 2016		Year Ended December 31, 2015
Unrecognized loss	$	2,099	$	1,994	$	1,364

In the next fiscal year, $0.1 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, 2017 and 2016 are as follows:



	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, 2017 and 2016 are as follows:



	Total as of December 31, 2017		Level 1		Level 2		Level 3
Cash and cash equivalents	$	1,202	$	1,202	$	—	$	—
Accrued dividends	3		3		—		—
Global equities	9,413		9,413		—		—
Fixed income securities	6,630		—		6,630		—
Group annuity/insurance contracts	253		—		—		253
Total	$	17,501	$	10,618	$	6,630	$	253


	Total as of December 31, 2016		Level 1		Level 2		Level 3
Cash and cash equivalents	$	842	$	842	$	—	$	—
Accrued dividends	3		3		—		—
Global equities	8,066		8,066		—		—
Fixed income securities	6,461		—		6,461		—
Group annuity/insurance contracts	226		—		—		226
Total	$	15,598	$	8,911	$	6,461	$	226

The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed during 2017 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

No assets were transferred between levels of the fair value hierarchy during the years ended December 31, 2017 and December 31, 2016 .

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 2018 are estimated to be approximately $0.8 million . Estimated projected benefit payments from the plans as of December 31, 2017 are as follows:



2018	$	1,219
2019	1,218
2020	1,362
2021	1,315
2022	1,281
2023-2027	6,821

Multiemployer plan

Morton hourly union employees 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. As of December 31, 2017 , a liability of $1.5 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 , $1.7 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 care and life 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
Accumulated benefit obligation	$	1,423		$	1,972

Change in projected benefit obligation
Projected benefit obligation at beginning of year	$	1,972		$	2,094
Interest cost	68			76
Actuarial gain	(483		)	(37		)
Benefits paid	(134		)	(161		)
Projected benefit obligation at end of year	$	1,423		$	1,972

Change in plan assets
Employer contributions	$	134		$	161
Benefits paid	(134		)	(161		)
Fair value of plan assets at end of year	$	—		$	—
Funded Status	$	(1,423	)	$	(1,972	)

Weighted-average assumptions
Discount rates	3.26		%	3.64		%
Amounts recognized in the statement of financial position consist of:
Other current liabilities	$	(142	)	$	(208	)
Other long-term liabilities	(1,281		)	(1,764		)
Net amount recognized	$	(1,423	)	$	(1,972	)

The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was a blended rate of 8.40% and 5.50% at December 31, 2017 and December 31, 2016 , respectively. It was assumed that these rates will decline by 1% to 3% every 5 years for the next 15 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.

100

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, 2017			Year Ended December 31, 2016			Year Ended December 31, 2015
Components of net periodic benefit cost
Interest cost	$	68		$	76		$	92
Amortization of the net (gain) loss from earlier periods	(18		)	(13		)	1
Net periodic benefit cost	$	50		$	63		$	93

Weighted-average assumptions
Discount rates	3.64		%	3.82		%	3.82		%

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
	Year Ended December 31, 2017			Year Ended December 31, 2016			Year Ended December 31, 2015
Unrecognized gain	$	(582	)	$	(217	)	$	(214	)

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 2018 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, 2017 are as follows:



2018	$	144
2019	139
2020	132
2021	123
2022	116
2023-2027	475



16.	Business Segments, Geographic and Customer Information

The Company’s business activities are organized into 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 of industrial products and is organized into four reportable segments: finishing, components, 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. The 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. The acoustics segment manufactures engineered non-woven, fiber-based acoustical products for the automotive industry.

Net sales 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

The Company uses “Adjusted EBITDA” as the primary measure of profit or loss for the purposes of assessing the operating performance of its segments. The Company defines EBITDA as net income (loss) before interest expense, income tax

provision (benefit), depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA, excluding the impact of operational restructuring charges and non-cash or non-operational losses or gains, including goodwill and long-lived asset impairment charges, gains or losses on disposal of property, plant and equipment, divestitures and extinguishment of debt, integration and other operational restructuring charges, transactional legal fees, other professional fees, purchase accounting adjustments, and non-cash share based compensation expense.

Management believes that Adjusted EBITDA provides a clear picture of the Company’s operating results by eliminating expenses and income that are not reflective of the underlying business performance. Certain corporate-level administrative expenses such as payroll and benefits, incentive compensation, travel, accounting, auditing and legal fees and certain other expenses are kept within its corporate results and are not allocated to its business segments. Shared expenses across the Company that directly relate to the performance of our four reportable segments are allocated to the segments. Adjusted EBITDA is used to facilitate a comparison of the Company’s operating performance on a consistent basis from period to period and to analyze the factors and trends affecting its segments. The Company’s internal plans, budgets and forecasts use Adjusted EBITDA as a key metric. In addition, this measure is used to evaluate its operating performance and segment operating performance and to determine the level of incentive compensation paid to its employees.

As the Company uses Adjusted EBITDA as its primary measure of segment performance, GAAP on segment reporting requires the Company to include this measure in its discussion of segment operating results. The Company must also reconcile segment Adjusted EBITDA to operating results presented on a GAAP basis.

Adjusted EBITDA information relating to the Company’s reportable segments is presented below followed by a reconciliation of total segment Adjusted EBITDA to consolidated income before taxes:



	Year Ended
	December 31, 2017			December 31, 2016			December 31, 2015
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
	$	81,238		$	81,773		$	94,023

Interest expense	(1,370		)	(1,561		)	(1,870		)
Loss on debt extinguishment	(182		)	—			—
Depreciation and amortization	(38,577		)	(43,697		)	(44,938		)
Impairment charges	—			(63,285		)	(94,126		)
Gain (loss) on disposal of property, plant and equipment - net	759			(869		)	(109		)
Loss on divestiture	(8,730		)	—			—
Restructuring	(4,275		)	(6,634		)	(3,800		)
Transaction-related expenses	—			—			(789		)
Integration and other restructuring costs	—			(1,621		)	(2,713		)
Total segment income (loss) before income taxes	28,863			(35,894		)	(54,322		)
Corporate general and administrative expenses	(13,486		)	(17,613		)	(12,860		)
Corporate interest expense	(31,719		)	(30,282		)	(29,965		)
Corporate gain on debt extinguishment	2,383			—			—
Corporate depreciation	(357		)	(344		)	(310		)
Corporate restructuring	9			(598		)	—
Corporate transaction-related expenses	—			—			(97		)
Corporate integration and other restructuring	569			(359		)	(6,333		)
Corporate loss on disposal of property, plant and equipment	—			(11		)	—
Corporate share based compensation (expense) income	(1,119		)	752			(7,969		)
Loss before income taxes	$	(14,857	)	$	(84,349	)	$	(111,856	)

101

Jason Industries, Inc.

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

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 are 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
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



	December 31, 2017		December 31, 2016
Long-lived assets
United States	$	197,174	$	219,591
Europe	70,797		84,638
Mexico	13,484		13,734
Other	4,240		4,118
	$	285,695	$	322,081

Net sales attributed to geographic locations are based on the locations producing the external sales. Long-lived assets by geographic location consist of the net book values of property, plant and equipment and amortizable intangible assets.

102

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. The Company is actively investigating and defending such claims and has gathered additional information to assess the total potential exposure related to this matter, including the potential of additional claims. In the opinion of management, the resolution of this contingency will not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

In addition to the cases noted above, the Company is a party to various legal proceedings that have arisen in the normal course of its business. These legal proceedings typically include product liability, labor, and employment claims. The Company has recorded reserves for loss contingencies based on the specific circumstances of each case. Such reserves are recorded when it is probable that a loss has been incurred as of the balance sheet date, can be reasonably estimated and is not covered by insurance. In the opinion of management, the resolution of these contingencies will not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

Environmental Matters

At December 31, 2017 and December 31, 2016 , the Company held reserves of $1.0 million for environmental matters at one location. The ultimate cost of any remediation required will depend on the results of future investigation. Based upon available information, the Company believes that it has obtained and is in substantial compliance with those material environmental permits and approvals necessary to conduct its business. Based on the facts presently known, the Company does not expect environmental costs to have a material adverse effect on its financial condition, results of operations or cash flows.



18.	Subsequent Events

Exchange of Series A 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 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.

103

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2017 . Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that 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.

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'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 .

Material Weakness in Internal Control over Financial Reporting

In the the third quarter of 2017, our management 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 controls necessary to allow for a detailed review over non-routine transactions on a timely basis and did not have the appropriate complement 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 Europe in the three 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 statements as of and for the year ended December 31, 2016. See Note 2 to the consolidated financial statements included in Part 2, Item 8 of this report for further information regarding this revision. These control deficiencies could result in the misstatement of account balances or disclosures that would result in a material misstatement of the annual or

104

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 fourth quarter of 2017, we enhanced the design of controls around certain control activities, specifically, 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. We believe that these enhanced resources and processes will effectively remediate the material weakness, but the material weakness will not be considered remediated until the revised controls operate for a sufficient period of time and management has concluded, 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.

Changes in Internal Control over Financial Reporting

The remediation efforts related to the material weakness disclosed in Management’s Report on Internal Control over Financial Reporting are considered a change in the Company’s 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’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

105

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 Governance and Nominating Committee,” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s 2018 Proxy Statement to be filed with the SEC within 120 days after December 31, 2017 in connection with the solicitation of proxies for the Company’s 2018 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–Compensation Committee Interlocks and Insider Participation,” “Executive 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 .



	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)
Equity compensation plans approved by security holders	2,350,527	$	—	352,587	⁽²⁾

Equity compensation plans not approved by security holders	—	$	—	—
Total	2,350,527	—		352,587

⁽¹⁾ Column (a) of the table above includes 2,350,527 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” 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.

106

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, 2017 and 2016, for the years ended December 31, 2017, December 31, 2016 and December 31, 2015		Page
Report of Independent Registered Public Accounting Firm		66
Consolidated Statements of Operations		67
Consolidated Statements of Comprehensive Income (Loss)		68
Consolidated Balance Sheets		69
Consolidated Statements of Shareholders’ Equity (Deficit)		70
Consolidated Statements of Cash Flows		71
Notes to Consolidated Financial Statements		72

(2) Financial Statement schedules



Index to Financial Statement schedules
For the years ended December 31, 2017, December 31, 2016 and December 31, 2015		Page
Schedule II - Valuation and Qualifying Accounts		108

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 Signatures page of this Form 10-K.

ITEM 16. FORM 10-K SUMMARY

None.

107

SCHEDULE II. CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

(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, 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⁾ The amounts included in the “other” column primarily relate to the impact of foreign currency exchange rates.

108

EXHIBIT INDEX



Exhibit Number		Description

2.1		Stock Purchase Agreement, dated as of March 16, 2014, by and among Jason Partners Holdings Inc., Jason Partners Holdings LLC, Quinpario Acquisition Corp. and JPHI Holdings Inc. (incorporated herein by reference to Exhibit 2.1 to the Registrant’s Form 8-K, filed with the Securities and Exchange Commission (the “Commission”) on March 18, 2014 (File No. 1-36051)).*

3.1		Second Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-8, filed with the Commission on July 3, 2014 (File No. 333-197250)).

3.2		Certificate of Designations, Preferences, Rights and Limitations of 8.0% Series A Convertible Perpetual Preferred Stock (incorporated herein by reference to Exhibit A to Exhibit 10.11 to the Registrant’s Form 10-Q, filed with the Commission on May 15, 2014 (File No. 1-36051)).

3.3		Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred Stock to the Second Amended and Restated Articles of Incorporation of Jason Industries, Inc., dated as of September 12, 2016 (incorporated herein by reference to Exhibit A to Exhibit 4 to the Registrant’s Form 8-K, filed with the SEC on September 12, 2016 (File No. 1-36051)).

3.4		Bylaws of the Company (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-8, filed with the Commission on July 3, 2014 (File No. 333-197250)).

4.1		Specimen Common Stock Certificate (incorporated herein by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-1, filed with the Commission on August 1, 2013 (File No. 333-189432)).

4.2		Specimen Warrant Certificate (incorporated herein by reference to Exhibit A to Exhibit 4.4 to the Registrant’s Form 8-K, filed with the Commission on August 14, 2013 (File No. 1-36051)).

4.3		Warrant Agreement between Continental Stock Transfer & Trust Company and the Company, dated as of August 8, 2013 (incorporated herein by reference to Exhibit 4.4 to the Registrant’s Form 8-K, filed with the Commission on August 14, 2013 (File No. 1-36051)).

4.4		Registration Rights Agreement among the Company, Quinpario Partners I, LLC and the other security holders named therein, dated August 8, 2013 (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 8-K, filed with the Commission on August 14, 2013 (File No. 1-36051)).

4.5		Amendment No.1 to Registration Rights Agreement among the Company, Quinpario Partners I, LLC and the other security holders named therein, dated July 14, 2014 (incorporated herein by reference to Exhibit 4.6 to the Registrant’s Registration Statement on Form S-1, filed with the Commission on July 15, 2014, as amended (File No. 333-197412)).

4.6		Form of Registration Rights Agreement by and between the Company and the persons named therein (incorporated herein by reference to Exhibit 10.12 to the Registrant’s Form 10-Q, filed with the Commission on May 15, 2014 (File No. 1-36051)).

4.7		Rights Agreement, dated as of September 12, 2016, by and between Jason Industries, Inc. and Continental Stock Transfer & Trust Company, as the Rights Agent (incorporated herein by reference to Exhibit 4 to the Registrant’s Form 8-K, filed with the SEC on September 12, 2016 (File No. 1-36051)).

10.1		Investor Rights Agreement by and between the Company, JPHI Holdings Inc. and certain stockholders of the Company, dated as of June 30, 2014 (incorporated herein by reference to Exhibit 10.5 to the Registrant’s Form 8-K, filed with the Commission on July 7, 2014 (File No. 1-36051)).

10.2		Jason Industries, Inc. 2014 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 99.1 to the Registrant’s Registration Statement on Form S-8, filed with the Commission on July 3, 2014 (File No. 333-197250)).**

10.3		Employment Agreement between the Company and Srivas Prasad, dated as of June 30, 2014 (incorporated herein by reference to Exhibit 10.10 to the Registrant’s Form 8-K, filed with the Commission on July 7, 2014 (File No. 1-36051)).**

10.4		Amended and Restated Employment Agreement between the Company and John Hengel, dated as of June 30, 2014 (incorporated herein by reference to Exhibit 10.12 to the Registrant’s Form 8-K, filed with the Commission on July 7, 2014 (File No. 1-36051)).**

10.5		Employment Agreement between the Company and Sarah Sutton, dated as of April 6, 2015 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed with the Commission on April 7, 2015 (File No. 1-36051)).**

109



Exhibit Number		Description
10.6		Employment Agreement between the Company and Thomas Doerr, dated as of November 9, 2015 (incorporated herein by reference to Exhibit 10.12 to the Registrant’s Form 10-K, filed with the Commission on March 8, 2016 (File No. 1-36051))**

10.7		Employment Agreement between the Company and Brian K. Kobylinski, dated as of April 8, 2016 (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Form 10-Q, filed with the Commission on May 10, 2016 (File No. 1-36051)).**

10.8		Amendment to Employment Agreement between the Company and Brian K. Kobylinski, dated December 1, 2016 (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 8-K, filed with the Commission on December 2, 2016 (File No. 1-36051)).**

10.9		Employment Agreement between the Company and Chad M. Paris, effective as of August 25, 2017 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed with the Commission on August 17, 2017 (File No. 1-36051)).**

10.10		First 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, 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)).

10.11		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, 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, filed with the Commission on July 7, 2014 (File No. 1-36051)).

10.12		First Lien Security Agreement, dated as of June 30, 2014, by and among Jason Partners Holdings Inc., Jason Holdings, Inc. I, Jason Incorporated and certain of its subsidiaries in favor of Deutsche Bank AG New York Branch (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Form 8-K, filed with the Commission on July 7, 2014 (File No. 1-36051)).

10.13		Second Lien Security Agreement, dated as of June 30, 2014, by and among Jason Partners Holdings Inc., Jason Holdings, Inc. I, Jason Incorporated and certain of its subsidiaries in favor of Deutsche Bank AG New York Branch (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Form 8-K, filed with the Commission on July 7, 2014 (File No. 1-36051)).

10.14		Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.13 to the Registrant’s Form 8-K, filed with the Commission on July 7, 2014 (File No. 1-36051)).

10.15		Form of Restricted Stock Unit Agreement pursuant to the Jason Industries, Inc. 2014 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.15 to the Registrant’s Form 10-Q, filed with the Commission on November 7, 2014 (File No. 1-36051)).*

10.16		Form of Restricted Stock Unit Agreement pursuant to the Jason Industries, Inc. 2014 Omnibus Incentive Plan (ROIC-Vesting) (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed with the Commission on February 3, 2016 (File No. 1-36051)).**

10.17		Form of Non-Employee Director Restricted Stock Unit Agreement pursuant to the Jason Industries, Inc. 2014 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.16 to the Registrant’s Form 10-Q, filed with the Commission on November 7, 2014 (File No. 1-36051)).*

10.18		Form of Restricted Stock Unit Agreement pursuant to the Jason Industries, Inc. 2014 Omnibus Incentive Plan (Time-Vesting).**

10.19		Form of Restricted Stock Unit Agreement pursuant to the Jason Industries, Inc. 2014 Omnibus Incentive Plan (Cliff-Vesting) (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 10-Q, filed with the Commission on May 10, 2016 (File No. 1-36051)).**

10.20		Form of Restricted Stock Unit & Cash Bonus Award Agreement pursuant to the Jason Industries, Inc. 2014 Omnibus Incentive Plan (Time-Vesting) (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed with the Commission on July 5, 2017 (File No. 1-36051)).**

10.21		Form of Restricted Stock Unit & Cash Bonus Award Agreement pursuant to the Jason Industries, Inc. 2014 Omnibus Incentive Plan (EBITDA-Vesting) (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 8-K, filed with the Commission on July 5, 2017 (File No. 1-36051)).**

10.22		First Amendment to First Lien Credit Agreement between, dated as of February 1, 2018, by and among Jason Incorporated, Jason Partners Holdings Inc., Jason Holdings, Inc. I, Deutsche Bank AG 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.

110



Exhibit Number		Description
10.23		First Amendment to Second Lien Credit Agreement between, dated as of February 1, 2018, by and among Jason Incorporated, Jason Partners Holdings Inc., Jason Holdings, Inc. I, Deutsche Bank AG 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.

10.24		Form of Preferred Stock Exchange Agreement (incorporated by reference to Exhibit 10 to the Registrant’s 8-K, filed with the Commission on January 23, 2018 (File No. 1-36051)).

10.25		Employment Agreement between the Company and Keith A. Walz, dated as of February 27, 2018.**

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).

12		Computation of Ratio of Earnings to Fixed Charges and to Fixed Charges and Preference Dividends.

21		Subsidiaries of Registrant.

23		Consent of PricewaterhouseCoopers LLP.

31.1		Certification of the Principal Executive Officer required by Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

31.2		Certification of the Principal Financial Officer required by Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

32.1		Certification of the Principal Executive Officer required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

32.2		Certification of the Principal Financial Officer required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

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.

111

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, 2018	/s/ Brian K. Kobylinski
	Brian K. Kobylinski President, Chief Executive Officer and Director (Principal Executive Officer)



	Dated: March 1, 2018	/s/ Chad M. Paris
		Chad M. Paris Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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 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, 2018
Chad M. Paris	(Principal Financial and Accounting Officer)

/s/ Jeffry N. Quinn	Chairman of the Board of Directors	Dated: March 1, 2018
Jeffry N. Quinn

/s/ James P. Heffernan	Director	Dated: March 1, 2018
James P. Heffernan

/s/ Edgar G. Hotard	Director	Dated: March 1, 2018
Edgar G. Hotard

/s/ James E. Hyman	Director	Dated: March 1, 2018
James E. Hyman

/s/ Mitchell I. Quain	Director	Dated: March 1, 2018
Mitchell I. Quain

/s/ Dr. John Rutledge	Director	Dated: March 1, 2018
Dr. John Rutledge

/s/ James M. Sullivan	Director	Dated: March 1, 2018
James M. Sullivan

112

Exhibit 10.18

RESTRICTED STOCK UNIT AWARD AGREEMENT

PURSUANT TO THE

JASON INDUSTRIES, INC. 2014 OMNIBUS INCENTIVE PLAN

(Time-Vesting)

* * * * *

Participant:

Grant Date:

Number of Time-Vesting Restricted Stock Units Granted: (the “ RSUs ”)

* * * * *

THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this “ Agreement ”), dated as of the Grant Date specified above, is entered into by and between Jason Industries, Inc., a corporation organized in the State of Delaware (the “ Company ”), and the Participant specified above, pursuant to the Jason Industries, Inc. 2014 Omnibus Incentive Plan, as amended from time to time (the “ Plan ”).

WHEREAS, the Company believes it to be in the best interests of the Company and its stockholders for Participant to receive the RSUs (the “ Award ”) provided herein to the Participant; and

WHEREAS , the Committee and the Board have authorized the grant of this Award.

NOW, THEREFORE, in consideration of the mutual covenants and promises herein set forth, the parties mutually covenant and agree as follows:

1. Incorporation By Reference; Plan Document Receipt . This Agreement is subject in all respects to the terms and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the Award provided hereunder), all of which terms and provisions are made a part of and incorporated in this Agreement as if they were each expressly set forth herein. Any capitalized term not defined in this Agreement shall have the meaning as set forth in the Plan. The Participant hereby acknowledges that the Participant has received a copy of the Plan and has read the Plan carefully and fully understands its contents. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.

2. Grant of Award . The Company hereby grants to the Participant, as of the Grant Date specified above, the Award specified above, subject to the vesting criteria set forth in Section 3 below. Except as otherwise provided by the Plan, the Participant agrees and understands

that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s interest in the Company for any reason, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of the shares of Common Stock underlying the RSUs, except as otherwise specifically provided for in the Plan or this Agreement.

3. Vesting .

(a) Time-Vesting . The RSUs shall vest in three equal installments with the first vesting date being the first anniversary of the Grant Date, the second vesting date being the second anniversary of the Grant Date, and the third vesting date being the third anniversary of the Grant Date, provided that the Participant has not incurred a Termination of Employment prior to the applicable vesting date. For the sake of clarity, one third (1/3) of the RSUs shall vest on each of the three vesting dates. There shall be no proportionate or partial vesting in the periods prior to each vesting date and all vesting shall occur only on the appropriate vesting date, subject to the Participant’s continued employment with the Company or any of its Subsidiaries on each applicable vesting date. The foregoing provisions of this Section 3(a) are subject to the provisions of Sections 3(b) through 3(g) hereof.

(b) Committee Discretion to Accelerate Vesting . Notwithstanding any other provision herein to the contrary, the Committee may, in its sole discretion, provide for accelerated vesting of the Award at any time and for any reason.

(c) Involuntary Termination Without Cause; Voluntary Resignation For Good Reason . Subject to Section 3(d) hereof, if the Participant incurs a Termination of Employment by the Company without Cause or there is a voluntary Termination of Employment by the Participant with Good Reason, then the portion of the Award that would have become vested on the next anniversary of the Grant Date immediately following the date of such Termination of Employment had the Participant’s Termination not occurred shall become vested as of the date of such Termination. For purposes of this Agreement, “ Good Reason ” means, with respect to a Participant’s Termination of Employment: (i) in the case where there is an employment agreement or similar agreement in effect between the Company or an Affiliate and the Participant on the Grant Date that defines “good reason” (or words or a concept of like import, such as “Constructive Termination”), a termination due to good reason (or words or a concept of like import), as defined in such agreement; or (ii) in any other case, the occurrence of any of the following events, without the Participant’s advance written consent: (A) any reduction in the Participant’s base salary; (B) any reduction in the Participant’s percentage of base salary available as incentive compensation or bonus opportunity, unless such reduction occurs in connection with a corresponding increase in base salary; (C) a good faith determination by the Participant that there has been a material adverse change in the Participant’s working conditions or status with the Company or an Affiliate, including but not limited to (I) a significant negative change in the nature or scope of the Participant’s authority, powers, functions, duties or responsibilities, or (II) a significant reduction in the level of support services, staff, secretarial and other assistance, office space and accoutrements, or (III) a significant reduction in the authority, duties or responsibilities of the supervisor to whom the Participant is required to report; or (IV) the relocation of the Participant’s principal place of employment to a location more



	2

than fifty (50) miles from the Participant’s then-current principal place of employment with the Company or an Affiliate. Notwithstanding the foregoing, a Participant’s termination shall not be considered to have occurred for “Good Reason” pursuant to clause (ii) above, unless (A) within ninety (90) days following the occurrence of one of the events listed above the Participant provides written notice to the Company setting forth the specific event constituting Good Reason, (B) the Company fails to remedy the event constituting Good Reason within thirty (30) days following its receipt of the Participant’s notice, and (C) the Participant actually terminates his or her employment with the Company and its Affiliates within thirty (30) days following the end of the Company’s remedy period.

(d) Termination in Connection with a Change in Control . In the event of the Participant’s Termination of Employment (i) by the Company without Cause, (ii) by voluntary resignation by the Participant with Good Reason, or (iii) due to the Participant’s death or Disability, in each case, during the period beginning ninety (90) days prior to the consummation of a Change in Control and ending two years following the date of consummation of a Change in Control, then any unvested portion of Award that would have been forfeited on the date of the Participant’s Termination of Employment shall become fully vested as of the date of such Termination (or if the termination occurs prior to a Change in Control, on the date of the Change in Control).

(e) Termination by Death or Disability . Subject to Section 3(d), if the Participant’s Termination of Employment is due to the Participant’s death or Disability, then the Award shall become fully vested as of the date of such Termination.

(f) Voluntary Resignation . If the Participant’s Termination of Employment is voluntary other than with Good Reason, then the unvested portion of the Award shall terminate and expire as of the date of such Participant’s Termination.

(g) Termination for Cause . If the Participant’s Termination (i) is for Cause or (ii) is a voluntary Termination (as provided in Section 3(f)) after the occurrence of an event that is then grounds for a Termination for Cause, then the entire Award, whether vested or unvested, shall thereupon be forfeited and cancelled for no value without any consideration as of the date of such Termination.

(h) Forfeiture . Any portion of the Award that does not become vested in accordance with the provisions of this Section 3 shall be automatically forfeited and cancelled for no value without any consideration being paid therefor and otherwise without any further action of the Company whatsoever. For the avoidance of doubt, any portion of the Award that does not become vested on or prior to the third anniversary of the Grant Date shall be automatically forfeited and cancelled as of such date for no value and without any consideration being paid therefore and otherwise without any further action of the Company whatsoever.

4. Settlement . Within thirty (30) days following the date of vesting, the Company shall settle the Award by issuing to the Participant the number of shares of Common Stock, free and clear of all restrictions (other than as may apply under Section 9) that correspond to the number of RSUs that have become so vested on the applicable vesting date.



	3

5. Dividends; Rights as Stockholder . Cash dividends paid (for dividend record dates occurring during the period from the Grant Date to the date Shares are issued hereunder pursuant to Section 4) on shares of Common Stock issuable hereunder shall be credited to a dividend book entry account on behalf of the Participant with respect to each RSU granted to the Participant, provided that such cash dividends shall not be deemed to be reinvested in shares of Common Stock and shall be held uninvested and without interest and paid in cash at the same time that the shares of Common Stock underlying the RSUs are delivered to the Participant in accordance with the provisions hereof. Stock dividends on shares of Common Stock shall be credited to a dividend book entry account on behalf of the Participant with respect to each RSU granted to the Participant, provided that such stock dividends shall be paid in shares of Common Stock at the same time that the shares of Common Stock underlying the RSUs are delivered to the Participant in accordance with the provisions hereof. For the sake of clarity, in the event any portion of the unvested RSUs is forfeited and cancelled in accordance with this Agreement or the Plan, any accrued dividends on shares of Common Stock underlying such forfeited RSUs shall be automatically forfeited for no value without any consideration being paid therefor and otherwise without any further action of the Company whatsoever. Except as otherwise provided herein, the Participant shall have no rights as a stockholder with respect to any shares of Common Stock underlying any RSU unless and until the Participant has become the holder of record of such shares.

6. Non-Transferability . No portion of the Award may be sold, assigned, transferred, encumbered, hypothecated or pledged by the Participant, other than to the Company as a result of forfeiture of the RSUs as provided herein, unless and until the Award is settled in accordance with the provisions hereof and, with respect to the RSUs, the Participant has become the holder of record of shares of Common Stock issuable hereunder.

7. Governing Law . All questions concerning the construction, validity and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the choice of law principles thereof.

8. Withholding of Tax . The Company shall have the power and the right to deduct or withhold, or require the Participant to remit to the Company, an amount sufficient to satisfy any federal, state, local and foreign taxes of any kind (including, but not limited to, the Participant’s FICA and SDI obligations) which the Company, in its sole discretion, deems necessary to be withheld or remitted to comply with the Code and/or any other applicable law, rule or regulation with respect to the Award and, if the Participant fails to do so, the Company may otherwise refuse to settle the Award as otherwise required pursuant to this Agreement. The foregoing provisions of this Section 8 to the contrary notwithstanding, the Participant may direct the Company to satisfy any such required withholding obligation with regard to the Participant by reducing the amount of cash or shares of Common Stock, having an aggregate Fair Market Value equal to the statutory maximum withholding obligation, otherwise deliverable to the Participant pursuant to Section 4.

9. Legend . The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of Common Stock issued pursuant to this Agreement, or may enter stop transfer orders consistent with the foregoing in the case of shares represented by book entry. The Participant shall, at the



	4

request of the Company, promptly present to the Company any and all certificates representing shares of Common Stock acquired pursuant to this Agreement in the possession of the Participant in order to carry out the provisions of this Section 9.

10. Securities Representations . This Agreement is being entered into by the Company in reliance upon the following express representations and warranties of the Participant. The Participant hereby acknowledges, represents and warrants that:

(a) The Participant has been advised that the Participant may be an “affiliate” within the meaning of Rule 144 under the Securities Act and in this connection the Company is relying in part on the Participant’s representations set forth in this Section 10.

(b) If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the shares of Common Stock issued hereunder may be sold only in compliance with Rule 144.

(c) If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the Participant understands that (i) the exemption from registration under Rule 144 will not be available unless (A) a public trading market then exists for the Common Stock of the Company, (B) adequate information concerning the Company is then available to the public, and (C) other terms and conditions of Rule 144 or any exemption therefrom are complied with, and (ii) any sale of the shares of Common Stock issuable hereunder may be made only in limited amounts in accordance with the terms and conditions of Rule 144 or any exemption therefrom.

11. Entire Agreement; Amendment . This Agreement, together with the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The Committee shall have the right, in its sole discretion, to modify or amend this Agreement to the extent permitted by the Plan.

12. Notices . Any notice hereunder by the Participant shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the General Counsel of the Company. Any notice hereunder by the Company shall be given to the Participant in writing and such notice shall be deemed duly given only upon receipt thereof at such address as the Participant may have on the payroll files with the Company.

13. No Right to Employment . Any questions as to whether and when there has been a Termination and the cause of such Termination shall be determined in the sole discretion of the Committee. Nothing in this Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries or its Affiliates to terminate the Participant’s employment or service at any time, for any reason and with or without Cause.

14. Transfer of Personal Data . The Participant authorizes, agrees and unambiguously consents to the transmission by the Company (or any Subsidiary) of any personal data information related to the Award granted under this Agreement for legitimate business purposes



	5

(including, without limitation, the administration of the Plan). This authorization and consent is freely given by the Participant.

15. Compliance with Laws . The grant of RSUs and the issuance of shares of Common Stock hereunder shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act, the Exchange Act and in each case any respective rules and regulations promulgated thereunder) and any other law, rule regulation or exchange requirement applicable thereto. The Company shall not be obligated to issue the RSUs or any shares of Common Stock pursuant to this Agreement if any such issuance would violate any such requirements; provided, in such event as the Company is prohibited from issuing shares of Common Stock, the Company shall pay to the Participant (unless otherwise prohibited by law), within thirty (30) days following the date of vesting of RSUs, cash in an amount equal to the aggregate Fair Market Value of shares of Common Stock represented by such vested RSUs. As a condition to the settlement of the RSUs, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation.

16. Binding Agreement; Assignment . This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns and the Participant and the Participant’s heirs, executors, administrators, legal representatives and permitted assigns. The Participant shall not assign (except in accordance with Section 6 hereof) any part of this Agreement without the prior express written consent of the Company.

17. Headings . The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.

18. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.

19. Further Assurances . Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as either party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.

20. Severability . The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

21. Acquired Rights . The Participant acknowledges and agrees that: (a) the Company may terminate or amend the Plan at any time in accordance with the terms thereof as in effect on the Grant Date and not inconsistent with the provisions of Section 11 hereof; (b) the Award



	6

made under this Agreement is completely independent of any other award or grant and is made at the sole discretion of the Company; (c) no past grants or awards (including, without limitation, the Award granted hereunder) give the Participant any right to any grants or awards in the future whatsoever; and (d) any benefits granted under this Agreement are not part of the Participant’s ordinary salary, and shall not be considered as part of such salary in the event of severance, redundancy or resignation.

* * * * *

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

JASON INDUSTRIES, INC.

By:

Name:

Title:

PARTICIPANT

Name:



	7

Exhibit 10.22

FIRST AMENDMENT TO FIRST LIEN CREDIT AGREEMENT

FIRST AMENDMENT TO FIRST LIEN CREDIT AGREEMENT (this “ First Amendment ”), dated as of February 1, 2018, among JASON INCORPORATED, a Wisconsin corporation (the “ Borrower ”), the Guarantors party hereto, and DEUTSCHE BANK AG NEW YORK BRANCH (“ DBNY ”), as administrative agent under the Credit Agreement referred to below (in such capacity, the “ Administrative Agent ”), as an L/C Issuer and as Swing Line Lender. Unless otherwise indicated, all capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement referred to below.

W I T N E S S E T H :

WHEREAS, the Borrower, the Guarantors party thereto from time to time, the Administrative Agent, various lenders and other parties thereto from time to time have entered into that certain First Lien Credit Agreement, dated as of June 30, 2014 (as amended, supplemented and/or otherwise modified prior to the First Amendment Effective Date (as defined below), the “ Credit Agreement ”);

WHEREAS, pursuant to and in accordance with Section 10.01 of the Credit Agreement, the Borrower has requested and the Administrative Agent and the Required Lenders have agreed to (i) amend the Credit Agreement and (ii) consent to, and authorize a future amendment to the Credit Agreement to effect, the Agency Transfer (as defined below), in each case on, and subject to the terms, set forth herein;

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION I. Defined Terms; Rules of Construction . Capitalized terms used herein and not otherwise defined herein have the meanings assigned to such terms in the Credit Agreement. The rules of construction specified in Sections 1.02 through 1.11 of the Credit Agreement shall apply to this First Amendment, including the terms defined in the preamble and recitals hereto.

SECTION II. Amendments to Credit Agreement .

1. Section 7.02 of the Credit Agreement is hereby amended by (i) deleting the text “and” at the end of clause (w) of said section, (ii) deleting the period (“.”) at the end of clause (x) of said section and inserting the text “; and” in lieu thereof and (iii) inserting the following as clause (y) immediately following clause (x) of said section:

“(y) contributions of the Equity Interests of any Restricted Subsidiary that is not a Loan Party to any other Restricted Subsidiary that is not a Loan Party to the extent necessary in connection with any intercompany reorganization and/or other activities related to tax planning; provided that no Event of Default shall have occurred and be continuing.”

2. Section 9.10 of the Credit Agreement is hereby amended by inserting the following text at the end of clause (b)(ii) thereof:

“(including any Disposition of Equity Interests of a Restricted Subsidiary that is not a Loan Party to another Restricted Subsidiary that is not a Loan Party in connection with an Investment permitted under Section 7.02(y) )”.

SECTION III. Agency Transfer . Pursuant to and in accordance with Section 9.06 of the Credit Agreement, each Loan Party and each Lender signatory to this First Amendment hereby:

1. consents to (i) the replacement of DBNY, in its capacity as the Administrative Agent and (ii) the appointment of The Bank of New York Mellon (“ BNYM ”) as successor Administrative Agent for all purposes under the Loan Documents (the “ Agency Transfer ”);

2. authorizes DBNY and BNYM to enter into a customary agency resignation and assignment agreement and such other documentation, instruments and/or amendments to the Credit Agreement and the other Loan Documents as may be required or advisable in the judgment of DBNY and BNYM to effectuate the Agency Transfer, including amendments to the Loan Documents (x) incorporating the terms set forth on Exhibit I hereto and (y) providing that DBNY may retain its roles as Swing Line Lender and L/C Issuer and all of its rights, powers and privileges as Swing Line Lender and L/C Issuer notwithstanding anything to the contrary in the Credit Agreement (the “ Agency Transfer Documentation ”);

3. agrees that, upon delivery of a notice of resignation by DBNY as Administrative Agent to the Lenders, the L/C Issuers and the Borrower and the execution and delivery of the Agency Transfer Documentation, BNYM shall be appointed as the successor Administrative Agent (without any requirement for any further consent of the Lenders and the Loan Parties) and succeed as Administrative Agent in accordance with the provisions of the Credit Agreement and the Agency Transfer Documentation; and

4. waives any notice requirements, including any notice periods, applicable to DBNY and/or BNYM in connection with the Agency Transfer pursuant to Section 9.06 of the Credit Agreement.

SECTION IV. Miscellaneous Provisions .

1. This First Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Loan Document.

2. This First Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrower and the Administrative Agent.

3. THIS FIRST AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

4. This First Amendment shall become effective on the date (the “ First Amendment Effective Date ”) when each of the following conditions shall have been satisfied (which, in the case of the condition referred to in clause (iii)) below, may be satisfied concurrently with the occurrence of the First Amendment Effective Date):

(followed promptly by originals) unless otherwise specified, in form and substance reasonably satisfactory to the Administrative Agent;

(ii) (A) on the First Amendment Effective Date both immediately prior to and after giving effect to this First Amendment, no Default or Event of Default shall exist and (B) each of the representations and warranties set forth in the Credit Agreement and in the other Loan Documents shall be true and correct in all material respects (or, if qualified by materiality, in all respects) on and as of the First Amendment Effective Date with the same effect as though made on and as of the First Amendment Effective Date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects (or, if qualified by materiality, in all respects) as of such earlier date; and

(iii) the Administrative Agent shall have been paid all fees and expenses owing to it pursuant to the terms of the Credit Agreement or as otherwise separately agreed in writing in connection with this First Amendment and the related transactions.

5. By executing and delivering a copy hereof, the Borrower and each other Loan Party hereby (A) agrees that, notwithstanding the effectiveness of this First Amendment, after giving effect to this First Amendment, the Guaranty and the Liens created pursuant to the Collateral Documents for the benefit of the Secured Parties continue to be in full force and effect on a continuous basis and (B) affirms, acknowledges and confirms all of its obligations and liabilities under the Credit Agreement and each other Loan Document to which it is a party (including the Closing Date Intercreditor Agreement), in each case after giving effect to this First Amendment, all as provided in such Loan Documents, and acknowledges and agrees that such obligations and liabilities continue in full force and effect on a continuous basis in respect of, and to secure, the Obligations under the Credit Agreement and the other Loan Documents, in each case after giving effect to this First Amendment.

6. From and after the First Amendment Effective Date, (i) all references in the Credit Agreement and each of the other Loan Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement, as modified hereby and (ii) this First Amendment shall be deemed to constitute a “Loan Document” for all purposes of the Credit Agreement.

7. Section 10.14 of the Credit Agreement is hereby incorporated by reference into this First Amendment and shall apply to this First Amendment, mutatis mutandi .

[ Remainder of page left intentionally blank. ]

* * *

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this First Amendment as of the date first above written.

JASON INCORPORATED

JASON PARTNERS HOLDINGS INC.

JASON HOLDINGS I, INC.

By: /s/ Chad M. Paris

Name: Chad M. Paris

Title: CFO

ADVANCE WIRE PRODUCTS, INC.

ASSEMBLED PRODUCTS, INC.

JASON INTERNATIONAL HOLDINGS, INC.

JASON NEVADA, INC.

JASON OHIO CORPORATION

METALEX CORPORATION

MORTON MANUFACTURING COMPANY

By: /s/ Chad M. Paris

Name: Chad M. Paris

Title: CFO

DEUTSCHE BANK AG NEW YORK BRANCH, as Administrative Agent

By: /s/ Marcus Tarkington

Name: Marcus Tarkington

Title: Director

By: /s/ Dusan Lazarov

Name: Dusan Lazarov

Title: Director

[LENDERS]

By:___________________________________


	Name:

Title:

[Lender signatures are on file with the Registrant]

Exhibit I

Certain Amendments to Loan Documents

[See attached]

1. Amendments to Credit Agreement .

General . The parties hereby agree and acknowledge that, from and after the Effective Date, BNYM shall be, and shall be deemed to be, the Administrative Agent under the Credit Agreement and the other Loan Documents. In furtherance of the foregoing, all defined terms referencing DBNY as the Administrative Agent in the Credit Agreement and the other Loan Documents are hereby amended to reference BNYM as the Administrative Agent thereunder. For the avoidance of doubt, BNYM will not be succeeding DBNY in its roles as L/C Issuer or Swingline Lender.

Amendment to Section 1.01 of the Credit Agreement . The parties hereby agree that the following definitions are hereby amended and restated to read as follows:

“ Administrative Agent ” means The Bank of New York Mellon, in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

“ Effective Yield ” shall mean, as to any Indebtedness, the effective yield on such Indebtedness consistent with generally accepted financial practices, taking into account the applicable interest rate margins, any interest rate floors (the effect of which floors shall be determined in a manner set forth in the proviso below), or similar devices and all fees, including upfront or similar fees or original issue discount (amortized over the shorter of (i) the remaining weighted average life to maturity of such Indebtedness and (ii) the four years following the date of incurrence thereof) payable generally to Lenders or other institutions providing such Indebtedness, but excluding any arrangement, structuring, ticking, or other similar fees payable in connection therewith that are not generally shared with the relevant Lenders and, if applicable, consent fees for an amendment paid generally to consenting Lenders; provided that with respect to any Indebtedness that includes a “LIBOR floor” or “Base Rate floor,” (a) to the extent that the Eurocurrency Rate or Base Rate (without giving effect to any floors in such definitions), as applicable, on the date that the Effective Yield is being calculated is less than such floor, the amount of such difference shall be deemed added to the interest rate margin for such Indebtedness for the purpose of calculating the Effective Yield and (b) to the extent that the Eurocurrency Rate or Base Rate (without giving effect to any floors in such definitions), as applicable, on the date that the Effective Yield is being calculated is greater than such floor, then the floor shall be disregarded in calculating the Effective Yield.

“ Eurocurrency Rate ” means:

(a) for any Interest Period with respect to a Eurocurrency Rate Loan, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the commencement of such Interest Period by reference to the interest settlement rates for deposits in Dollars (as published by Reuters on page LIBOR01 of the Reuters Screen) (as set forth by (i) the Intercontinental Exchange Group, or (ii) any publicly available successor service or entity that has been authorized by the U.K. Financial Conduct Authority to administer the London Interbank Offered Rate for a period equal to such Interest Period), and

(b) for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m. (London time) on such date by reference to the interest settlement rates for deposits in Dollars (as published by Reuters on page LIBOR01 of the Reuters Screen) from time to time with a term of one month (as set forth by (i) the Intercontinental Exchange Group, or (ii) any publicly available successor service or entity that has been authorized by the U.K. Financial Conduct Authority to administer the London Interbank Offered Rate),

in the case of clauses (a) and (b) above, multiplied by Statutory Reserves, provided that, in the case of clauses (a) and (b) above, the Eurocurrency Rate with respect to Initial Term Loans, shall not be less than 1.00% per annum; provided further that, subject to clauses (i) and (ii) of immediately succeeding sentence, if the Administrative Agent is unable to determine the Eurocurrency Rate for the relevant interest period under clause (a) or (b), the Administrative Agent shall use the Eurocurrency Rate for the immediately preceding interest period. Notwithstanding the foregoing:

(i)

subject to clause (ii) below, if on the relevant Eurocurrency determination date the relevant London interbank offered rate for U.S. dollar deposits has been discontinued, then the Administrative Agent shall use (a) an industry-accepted successor rate to the relevant London interbank offered rate for U.S. dollar deposits or (b) if no such industry-accepted successor rate exists, the most comparable substitute or successor rate to the relevant London interbank offered rate for U.S. dollar deposits, in each case as determined by a financial agent (which may be an affiliate of the Administrative Agent) appointed by the Administrative Agent; and


(ii)	if the financial agent has determined a substitute or successor rate, the Administrative Agent shall notify the Borrower and the Lenders of such rate and the Borrower and the Lenders agree to enter into any amendments to this Agreement that are necessary to implement such rate.

The Administrative Agent and financial agent shall be held harmless for any acts or omissions in connection with the calculation of the Eurocurrency Rate in accordance with clauses (i) and (ii) of the preceding sentence.

“ Fee Letters ” means collectively (a) the Fee Letter, dated as of March 16, 2014, as modified by that certain Commitment Letter Joinder, dated as of April 7, 2014, among Buyer Sub and the Commitment Parties; and (b) that certain Fee Schedule dated as of _____________, 2018 between the Borrower and BNYM, in each case, as the same may be amended, restated modified or supplemented.

Amendment of Section 2.03(g) of the Credit Agreement . The parties hereby agree that Section 2.03(g) of the Credit Agreement is amended by adding the following at the end thereof:

The Administrative Agent shall be under no obligation to invest the Cash Collateral in Cash Equivalents unless it receives a written direction from the Borrower directing and authorizing the relevant investment. The Administrative Agent shall not in any way be held liable for the selection of Cash Equivalents, for determining whether an investment constitutes a Cash Equivalent or by reason of any insufficiency in the Cash Collateral resulting from any loss on any Cash Equivalent included therein. In addition, the Administrative Agent shall not have any liability in respect of losses incurred as a result of the liquidation of any investment prior to its stated maturity or the failure of the Borrower to provide timely written investment direction.

Amendment of Section 9.03 of the Credit Agreement . The parties hereby agree that Section 9.03(b) of the Credit Agreement is amended by adding the following at the end thereof:

“ provided, further , that prior to taking any action, the Administrative Agent may require an indemnity (such indemnity to be reasonably satisfactory to the Administrative Agent in all respects) from the Required Lenders or Lenders, as applicable, against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any action.”

Amendment of Section 9.03 of the Credit Agreement . The parties hereby agree that Section 9.03 of the Credit Agreement is amended by adding the following clauses (f)-(j):

(f) shall not be responsible for (i) perfecting, maintaining, monitoring, preserving or protecting the security interest or lien granted under this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, (ii) the filing, re-filing, recording, re-recording or continuing or any document, financing statement, mortgage, assignment, notice, instrument of further assurance or other instrument in any public office at any time or times or (iii) providing, maintaining, monitoring or preserving insurance on or the payment of taxes with respect to any of the Collateral. The actions described in items (i) through (iii) shall be the sole responsibility of the Borrower.

(g) shall not be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Administrative Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.

(h) shall not be liable for any error of judgment made in good faith by a responsible officer of the Administrative Agent unless it shall be proved that the Administrative Agent was negligent in ascertaining the pertinent facts.

(i) shall not be required to qualify in any jurisdiction in which it is not presently qualified to perform its obligations as Administrative Agent.

(j) shall not be responsible or liable for any failure or delay in the performance of its obligations under this Agreement or the other Credit Documents arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fire; flood; terrorism; wars and other military disturbances; sabotage; epidemics; riots; business interruptions; loss or malfunctions of utilities, computer (hardware or software) or communication services; accidents; labor disputes; acts of civil or military authority and governmental action.

Amendment of Section 9.03 of the Credit Agreement . The parties hereby agree that Section 9.03 of the Credit Agreement is amended by adding the following paragraphs at the end thereof:

Delivery of any reports, information and documents to the Administrative Agent is for informational purposes only and the Administrative Agent’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Borrower’s compliance with any of its covenants hereunder.

No provision of this Agreement or any other Credit Document or any agreement or instrument contemplated hereby or thereby, the transactions contemplated hereby or thereby shall require the Administrative Agent to: (i) expend or risk its own funds or provide indemnities in the performance of any of its duties hereunder or the exercise of any of its rights or power or (ii) otherwise incur any financial liability in the performance of its duties or the exercise of any of its rights or powers.

The Administrative Agent has accepted and is bound by the Loan Documents executed by the Administrative Agent as of the date of this Agreement and, as directed in writing by the Required Lenders, the Administrative Agent shall execute additional Loan Documents delivered to it after the date of this Agreement; provided, however , that such additional Loan Documents do not adversely affect the rights, privileges, benefits and immunities of the Administrative Agent. The Administrative Agent will not otherwise be bound by, or be held obligated by, the provisions of any credit agreement, indenture or other agreement governing the Obligations (other than this Agreement and the other Loan Documents to which the Administrative Agent is a party).

For the avoidance of doubt the Borrower, the Guarantors and the Lenders hereby agree that the Administrative Agent shall be under no obligation to make any determination, demand or request, grant or withhold any approval or consent or deliver any notice pursuant to the defined terms “Additional Refinancing Lender”, “Collateral and Guarantee Requirement”, “Credit Agreement Refinancing Indebtedness”, “Excluded Assets”, “Excluded Subsidiary”, “Guarantors”, “Management Agreement”, “Material Domestic Subsidiary, “Material Foreign Subsidiary”, “Mortgages”, “Parity Intercreditor Agreement”, “Permitted Refinancing”, “Revaluation Date”, “Second Lien Parity Intercreditor Agreement”, “Subordinated Debt”, and pursuant to Sections 2.03(b) and (g), 2.14, 2.15, 2.16, 5.05(b), 6.01(a) and (d), 6.07, 6.11, 6.12, 6.18, 7.03 (g) and (i), 7.04(d), 8.01(h), 10.01, 9.02(d) and (e) without the written direction of Required Lenders or Lenders, as applicable.”

Amendment of Section 9.10 of the Credit Agreement . The parties hereby agree that Section 9.10 of the Credit Agreement is amended by deleting the last paragraph thereof and adding the following paragraphs at the end thereof:

Beyond the exercise of reasonable care in the custody of the Collateral in its possession, the Administrative Agent will not have any duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto. The Administrative Agent will be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and the Administrative Agent will not be liable or responsible for any loss or diminution in the value of any of the Collateral by reason of the act or omission of any carrier, forwarding agency or other agent or bailee selected by the Administrative Agent in good faith.

The Administrative Agent will not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Liens in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder, except to the extent such action or omission constitutes gross negligence or willful misconduct on the part of the Administrative Agent, as determined by a court of competent jurisdiction in a final, nonappealable order, for the validity or sufficiency of the Collateral or any agreement or assignment contained therein, for the validity of the title of any grantor to the Collateral, for insuring the Collateral or for the payment of taxes, charges, assessments or Liens upon the Collateral or otherwise as to the maintenance of the Collateral. The Administrative Agent hereby disclaims any representation or warranty to the present and future holders of the Obligations concerning the perfection of the Liens granted hereunder or in the value of any of the Collateral.

In the event that the Administrative Agent is required to acquire title to an asset for any reason, or take any managerial action of any kind in regard thereto, in order to carry out any fiduciary or trust obligation for the benefit of another, which in the Administrative Agent’s sole discretion may cause the Administrative Agent to be considered an “owner or operator” under any environmental laws or otherwise cause the Administrative Agent to incur, or be exposed to, any environmental liability or any liability under any other federal, state or local law, the Administrative Agent reserves the right, instead of taking such action, either to resign as Administrative Agent or to arrange for the transfer of the title or control of the asset to a court appointed receiver. The Administrative Agent will not be liable to any person for any environmental liability or any environmental claims or contribution actions under any federal, state or local law, rule or regulation by reason of the Administrative Agent’s actions and conduct as authorized, empowered and directed hereunder or relating to any kind of discharge or release or threatened discharge or release of any hazardous materials into the environment.

Amendment to Section 10.02(b) of the Credit Agreement . The parties hereby agree that Section 10.02(b) of the Credit Agreement shall be amended by deleting the reference to “material breach” therein.

Amendment to Section 10.04 and 10.05 of the Credit Agreement . The parties hereby agree that Section 10.04 and the first paragraph of Section 10.05 of the Credit Agreement shall be deleted in its entirety and replaced with the following:

“10.04 Attorney Costs and Expenses . The Borrower agrees (a) if the Closing Date occurs, (1) to pay or reimburse the Administrative Agent, the Syndication Agent, the Documentation Agent, the Senior Managing Agent, the Arrangers and the Bookrunners and their respective Affiliates for all reasonable and documented out-of-pocket costs and expenses incurred in connection with the preparation, negotiation, syndication, execution and delivery of this Agreement and the other Loan Documents, and (2) to pay or reimburse the Administrative Agent and its Affiliates for all reasonable and documented out-of-pocket costs and expenses incurred in connection with the administration of this Agreement and the other Loan Documents and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including, in each case, all Attorney Costs, which shall be limited to (i) counsel to each of DBNY and BNYM in connection with the Agency Transfer and (ii) counsel to the Administrative Agent and its Affiliates, one counsel to the Syndication Agent, the Documentation Agent, the Senior Managing Agent, the Arrangers and the Bookrunners and their respective Affiliates, taken as a whole, and, if reasonably necessary, one local counsel in each relevant jurisdiction material to the interests of the Lenders, taken as a whole and (b) from and after the Closing Date, to pay or reimburse the Administrative Agent, the L/C Issuers and the Lenders for all reasonable and documented out-of-pocket costs, charges and expenses incurred in connection with the enforcement or protection of any rights or remedies under this Agreement or the other Loan Documents (including all such costs, charges and expenses incurred during any legal proceeding, including any proceeding under any Debtor Relief Law, and including all respective Attorney Costs, which shall be limited to (i) counsel to each of DBNY and BNYM in connection with the Agency Transfer and (ii) Attorney Costs of counsel to the Administrative Agent and its Affiliates and, if reasonably necessary, one local counsel in each relevant jurisdiction material to the interests of the Lenders taken as a whole and, solely in the case of an actual conflict of interest, one additional counsel in each relevant jurisdiction to each group of similarly situated affected parties). The agreements in this Section 10.04 shall survive the termination of the Aggregate Commitments and repayment of all other Obligations. All amounts due under this Section 10.04 shall be paid within 30 days following receipt by the Borrower of an invoice relating thereto setting forth such expenses in reasonable detail (provided that the Lender need not be required to disclose any confidential information or to the extent prohibited by law or regulation); provided that, with respect to the Closing Date, all amounts due under this Section 10.04 shall be paid on the Closing Date solely to the extent invoiced to the Borrower within two Business Days of the Closing Date. If any Loan Party fails to pay when due any costs, charges, expenses or other amounts payable by it hereunder or under any Loan Document, such amount may be paid on behalf of such Loan Party by the Administrative Agent in its discretion following five Business Days’ prior written notice to the Borrower. For the avoidance of doubt, this Section 10.04 shall not apply to Taxes, except any Taxes that represent costs and expenses arising from any non-Tax claim.

Section 10.05 Indemnification by the Borrower . The Borrower shall indemnify and hold harmless each Agent, Agent-Related Person, Lender, Arranger and Bookrunner and their respective Affiliates and controlling Persons, and their respective officers, directors, employees, partners, agents, advisors and other representatives of each of the foregoing and their respective successors (collectively the “ Indemnitees ”) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses, charges and disbursements (including Attorney Costs but limited in the case of legal fees and expenses to the reasonably and documented out out-of-pocket fees, disbursements and other charges of counsel to Administrative Agent and its Affiliates, one counsel to all other Indemnitees taken as a whole, and, if reasonably necessary, one local counsel for all Indemnitees taken as a whole in each relevant jurisdiction that is material to the interests of the Lenders, and in the case of an actual or potential conflict of interest, one additional counsel in each relevant jurisdiction to each group of similarly situated affected Indemnitees ), joint or several, of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Commitment, Loan or Letter of Credit or the use or proposed use of the proceeds therefrom including any refusal by an L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit, (c) any actual or alleged presence or Release of Hazardous Materials at, in, on, under or from any property or facility currently or formerly owned, leased or operated by the Loan Parties or any Subsidiary, or any Environmental Liability or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) (a “ Proceeding ”) and regardless of whether any Indemnitee is a party thereto or whether or not such Proceeding is brought by the Borrower or any other person and, in each case, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee (all of the foregoing, collectively, the “ Indemnified Liabilities ”); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses, charges or disbursements resulted from (w) the gross negligence, bad faith or willful misconduct of such Indemnitee or of any of its controlled Affiliates or their respective directors, officers, employees, partners, advisors or other representatives, as determined by a final non-appealable judgment of a court of competent jurisdiction, (x) any dispute solely among Indemnitees other than any claims by or against an Indemnitee in its capacity or in fulfilling its role as an administrative agent or arranger or any similar role under any Facility and other than any claims arising out of any act or omission of any Holdco, the Borrower or any of their Affiliates or (y) settlements effected without the Borrower’s prior written consent (such consent not to be unreasonably withheld, delayed or conditioned), but if settled with the Borrower’s written consent, or if there is a final judgment against an Indemnitee in any such Proceeding, the Borrower shall indemnify and hold harmless such Indemnitee to the extent and the manner set forth above. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through electronic, telecommunications or other information transmission systems, including, without limitation, SyndTrak, IntraLinks, the internet, email or similar electronic transmission systems in connection with this Agreement, in each case, except to the extent any such damages are found in a final non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of such Indemnitee (or its controlling Persons, controlled Affiliates or their respective directors, officers, employees, partners, advisors or other representatives), nor shall the Sponsor or any Indemnitee, Loan Party or any Subsidiary have any liability for any special, punitive, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date); it being agreed that this sentence shall not limit the indemnification obligations of any Holdco or any Subsidiary (including, in the case of any Loan Party, in respect of any such damages incurred or paid by an Indemnitee to a third party and for any out-of-pocket expenses). In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 10.05 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, any Subsidiary of any Loan Party, its directors, equity holders or creditors or an Indemnitee or any other Person, whether or not any Indemnitee is otherwise a party thereto and whether or not any of the transactions contemplated hereunder or under any of the other Loan Documents are consummated. All amounts due under this Section 10.05 shall be paid within thirty (30) days after written demand therefor (together with reasonable backup documentation supporting such reimbursement request); provided , however , that such Indemnitee shall promptly refund such amount to the extent that there is a final judicial or arbitral determination that such Indemnitee was not entitled to indemnification rights with respect to such payment pursuant to the express terms of clauses (w) through (y) above. The agreements in this Section 10.05 shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations. For the avoidance of doubt, this Section 10.05 shall not apply to Taxes, except any Taxes that represent liabilities, obligations, losses, damages, penalties, claims, demands, actions, prepayments, suits, costs, expenses, charges and disbursements arising from any non-Tax claims.”

Amendment to Schedule 10.02(a) of the Credit Agreement . The parties hereby agree that Schedule 10.02(a) of the Credit Agreement is amended to provide notice to the Administrative Agent as follows:

“if to the Administrative Agent, to The Bank of New York Mellon., 2001 Bryan Street, Suite 1000, Dallas, Texas 75201, Attention of Stacie Row (E-mail: lpcoe-agentsvcs@bnymellon.com, Telecopy No. (214) 468-5539, Telephone No. (214) 468-5525 with a copy to Emmet, Marvin & Martin, LLP, 120 Broadway, New York, New York 10271, Attention of Elizabeth M. Clark, Esq. (E-mail: eclark@emmetmarvin.com, Telecopy No. (212) 238-3200, Telephone No. (212) 238-3037”.

Exhibit 10.23

FIRST AMENDMENT TO SECOND LIEN CREDIT AGREEMENT

FIRST AMENDMENT TO SECOND LIEN CREDIT AGREEMENT (this “ First Amendment ”), dated as of February 1, 2018, among JASON INCORPORATED, a Wisconsin corporation (the “ Borrower ”), the Guarantors party hereto, and DEUTSCHE BANK AG NEW YORK BRANCH (“ DBNY ”), as administrative agent under the Credit Agreement referred to below (in such capacity, the “ Administrative Agent ”). Unless otherwise indicated, all capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement referred to below.

W I T N E S S E T H :

WHEREAS, the Borrower, the Guarantors party thereto from time to time, the Administrative Agent, various lenders and other parties thereto from time to time have entered into that certain Second Lien Credit Agreement, dated as of June 30, 2014 (as amended, supplemented and/or otherwise modified prior to the First Amendment Effective Date (as defined below), the “ Credit Agreement ”);

SECTION II. Amendments to Credit Agreement .

2. Section 9.10 of the Credit Agreement is hereby amended by inserting the following text at the end of clause (b)(ii) thereof:

SECTION III. Agency Transfer . Pursuant to and in accordance with Section 9.06 of the Credit Agreement, each Loan Party and each Lender signatory to this First Amendment hereby:

3. agrees that, upon delivery of a notice of resignation by DBNY as Administrative Agent to the Lenders and the Borrower and the execution and delivery of the Agency Transfer Documentation, BNYM shall be appointed as the successor Administrative Agent (without any requirement for any further consent of the Lenders and the Loan Parties) and succeed as Administrative Agent in accordance with the provisions of the Credit Agreement and the Agency Transfer Documentation; and

4. waives any notice requirements, including any notice periods, applicable to DBNY and/or BNYM in connection with the Agency Transfer pursuant to Section 9.06 of the Credit Agreement.

SECTION IV. Miscellaneous Provisions .

1. This First Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Loan Document.

3. THIS FIRST AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

(i) the Administrative Agent’s receipt of counterparts of this First Amendment executed by the Borrower, each Guarantor, the Administrative Agent and the Required Lenders, each of which shall be original, pdf or facsimile copies or delivered by other electronic method (followed promptly by originals) unless otherwise specified, in form and substance reasonably satisfactory to the Administrative Agent;

7. Section 10.14 of the Credit Agreement is hereby incorporated by reference into this First Amendment and shall apply to this First Amendment, mutatis mutandi .

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* * *

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this First Amendment as of the date first above written.

JASON INCORPORATED

JASON PARTNERS HOLDINGS INC.

JASON HOLDINGS I, INC.

By: /s/ Chad M. Paris

Name: Chad M. Paris

Title: CFO

ADVANCE WIRE PRODUCTS, INC.

ASSEMBLED PRODUCTS, INC.

JASON INTERNATIONAL HOLDINGS, INC.

JASON NEVADA, INC.

JASON OHIO CORPORATION

METALEX CORPORATION

MORTON MANUFACTURING COMPANY

By: /s/ Chad M. Paris

Name: Chad M. Paris

Title: CFO

DEUTSCHE BANK AG NEW YORK BRANCH, as Administrative Agent

By: /s/ Marcus Tarkington

Name: Marcus Tarkington

Title: Director

By: /s/ Dusan Lazarov

Name: Dusan Lazarov

Title: Director

[LENDERS]

By:___________________________________


	Name:

Title:

[Lender signatures are on file with the Registrant]

Exhibit I

Certain Amendments to Loan Documents

[See attached]

1. Amendments to Credit Agreement .

Amendment to Section 1.01 of the Credit Agreement . The parties hereby agree that the following definitions are hereby amended and restated to read as follows:

“ Administrative Agent ” means The Bank of New York Mellon, in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

“ Eurocurrency Rate ” means:

(i)


(ii)	if the financial agent has determined a substitute or successor rate, the Administrative Agent shall notify the Borrower and the Lenders of such rate and the Borrower and the Lenders agree to enter into any amendments to this Agreement that are necessary to implement such rate.

Amendment of Section 9.03 of the Credit Agreement . The parties hereby agree that Section 9.03(b) of the Credit Agreement is amended by adding the following at the end thereof:

Amendment of Section 9.03 of the Credit Agreement . The parties hereby agree that Section 9.03 of the Credit Agreement is amended by adding the following clauses (f)-(j):

(i) shall not be required to qualify in any jurisdiction in which it is not presently qualified to perform its obligations as Administrative Agent.

Amendment of Section 9.03 of the Credit Agreement . The parties hereby agree that Section 9.03 of the Credit Agreement is amended by adding the following paragraphs at the end thereof:

“10.04 Attorney Costs and Expenses . The Borrower agrees (a) if the Closing Date occurs, (1) to pay or reimburse the Administrative Agent, the Syndication Agent, the Documentation Agent, the Senior Managing Agent, the Arrangers and the Bookrunners and their respective Affiliates for all reasonable and documented out-of-pocket costs and expenses incurred in connection with the preparation, negotiation, syndication, execution and delivery of this Agreement and the other Loan Documents, and (2) to pay or reimburse the Administrative Agent and its Affiliates for all reasonable and documented out-of-pocket costs and expenses incurred in connection with the administration of this Agreement and the other Loan Documents and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including, in each case, all Attorney Costs, which shall be limited to (i) counsel to each of DBNY and BNYM in connection with the Agency Transfer and (ii) counsel to the Administrative Agent and its Affiliates, one counsel to the Syndication Agent, the Documentation Agent, the Senior Managing Agent, the Arrangers and the Bookrunners and their respective Affiliates, taken as a whole, and, if reasonably necessary, one local counsel in each relevant jurisdiction material to the interests of the Lenders, taken as a whole and (b) from and after the Closing Date, to pay or reimburse the Administrative Agent and the Lenders for all reasonable and documented out-of-pocket costs, charges and expenses incurred in connection with the enforcement or protection of any rights or remedies under this Agreement or the other Loan Documents (including all such costs, charges and expenses incurred during any legal proceeding, including any proceeding under any Debtor Relief Law, and including all respective Attorney Costs, which shall be limited to (i) counsel to each of DBNY and BNYM in connection with the Agency Transfer and (ii) Attorney Costs of counsel to the Administrative Agent and its Affiliates and, if reasonably necessary, one local counsel in each relevant jurisdiction material to the interests of the Lenders taken as a whole and, solely in the case of an actual conflict of interest, one additional counsel in each relevant jurisdiction to each group of similarly situated affected parties). The agreements in this Section 10.04 shall survive the termination of the Aggregate Commitments and repayment of all other Obligations. All amounts due under this Section 10.04 shall be paid within 30 days following receipt by the Borrower of an invoice relating thereto setting forth such expenses in reasonable detail (provided that the Lender need not be required to disclose any confidential information or to the extent prohibited by law or regulation); provided that, with respect to the Closing Date, all amounts due under this Section 10.04 shall be paid on the Closing Date solely to the extent invoiced to the Borrower within two Business Days of the Closing Date. If any Loan Party fails to pay when due any costs, charges, expenses or other amounts payable by it hereunder or under any Loan Document, such amount may be paid on behalf of such Loan Party by the Administrative Agent in its discretion following five Business Days’ prior written notice to the Borrower. For the avoidance of doubt, this Section 10.04 shall not apply to Taxes, except any Taxes that represent costs and expenses arising from any non-Tax claim.

Section 10.05 Indemnification by the Borrower . The Borrower shall indemnify and hold harmless each Agent, Agent-Related Person, Lender, Arranger and Bookrunner and their respective Affiliates and controlling Persons, and their respective officers, directors, employees, partners, agents, advisors and other representatives of each of the foregoing and their respective successors (collectively the “ Indemnitees ”) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses, charges and disbursements (including Attorney Costs but limited in the case of legal fees and expenses to the reasonably and documented out out-of-pocket fees, disbursements and other charges of counsel to Administrative Agent and its Affiliates, one counsel to all other Indemnitees taken as a whole, and, if reasonably necessary, one local counsel for all Indemnitees taken as a whole in each relevant jurisdiction that is material to the interests of the Lenders, and in the case of an actual or potential conflict of interest, one additional counsel in each relevant jurisdiction to each group of similarly situated affected Indemnitees ), joint or several, of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Commitment or Loan or the use or proposed use of the proceeds therefrom, (c) any actual or alleged presence or Release of Hazardous Materials at, in, on, under or from any property or facility currently or formerly owned, leased or operated by the Loan Parties or any Subsidiary, or any Environmental Liability or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) (a “ Proceeding ”) and regardless of whether any Indemnitee is a party thereto or whether or not such Proceeding is brought by the Borrower or any other person and, in each case, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee (all of the foregoing, collectively, the “ Indemnified Liabilities ”); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses, charges or disbursements resulted from (w) the gross negligence, bad faith or willful misconduct of such Indemnitee or of any of its controlled Affiliates or their respective directors, officers, employees, partners, advisors or other representatives, as determined by a final non-appealable judgment of a court of competent jurisdiction, (x) any dispute solely among Indemnitees other than any claims by or against an Indemnitee in its capacity or in fulfilling its role as an administrative agent or arranger or any similar role under any Facility and other than any claims arising out of any act or omission of any Holdco, the Borrower or any of their Affiliates or (y) settlements effected without the Borrower’s prior written consent (such consent not to be unreasonably withheld, delayed or conditioned), but if settled with the Borrower’s written consent, or if there is a final judgment against an Indemnitee in any such Proceeding, the Borrower shall indemnify and hold harmless such Indemnitee to the extent and the manner set forth above. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through electronic, telecommunications or other information transmission systems, including, without limitation, SyndTrak, IntraLinks, the internet, email or similar electronic transmission systems in connection with this Agreement, in each case, except to the extent any such damages are found in a final non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of such Indemnitee (or its controlling Persons, controlled Affiliates or their respective directors, officers, employees, partners, advisors or other representatives), nor shall the Sponsor or any Indemnitee, Loan Party or any Subsidiary have any liability for any special, punitive, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date); it being agreed that this sentence shall not limit the indemnification obligations of any Holdco or any Subsidiary (including, in the case of any Loan Party, in respect of any such damages incurred or paid by an Indemnitee to a third party and for any out-of-pocket expenses). In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 10.05 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, any Subsidiary of any Loan Party, its directors, equity holders or creditors or an Indemnitee or any other Person, whether or not any Indemnitee is otherwise a party thereto and whether or not any of the transactions contemplated hereunder or under any of the other Loan Documents are consummated. All amounts due under this Section 10.05 shall be paid within thirty (30) days after written demand therefor (together with reasonable backup documentation supporting such reimbursement request); provided , however , that such Indemnitee shall promptly refund such amount to the extent that there is a final judicial or arbitral determination that such Indemnitee was not entitled to indemnification rights with respect to such payment pursuant to the express terms of clauses (w) through (y) above. The agreements in this Section 10.05 shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations. For the avoidance of doubt, this Section 10.05 shall not apply to Taxes, except any Taxes that represent liabilities, obligations, losses, damages, penalties, claims, demands, actions, prepayments, suits, costs, expenses, charges and disbursements arising from any non-Tax claims.”

Amendment to Schedule 10.02(a) of the Credit Agreement . The parties hereby agree that Schedule 10.02(a) of the Credit Agreement is amended to provide notice to the Administrative Agent as follows:

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “ Agreement ”), dated as of February 27, 2018 is entered into by and between Jason Industries, Inc., a Delaware corporation (the “ Company ”) and Keith A. Walz (“ Executive ”).

WHEREAS, Company has agreed to promote Executive with certain conditions; and

WHEREAS, in furtherance of the foregoing, Company and the Executive wish to enter into this Agreement in order to set forth the terms of Executive’s employment with the Company during the Employment Period (as herein defined) .

NOW THEREFORE, in consideration of the promises and mutual covenants set forth herein, and other consideration, the receipt and sufficiency of which is hereby acknowledged, the Executive and the Company, intending to be legally bound, agree as follows:

1. Employment . The Company agrees to employ Executive, and Executive hereby desires to be employed by the Company to serve as Senior Vice President & General Manager – Finishing, upon the terms and conditions as set forth in this Agreement on an at-will basis, for the period beginning on February 27, 2018 (the “ Effective Date ”) unless and until his employment is terminated pursuant to Section 4 hereof (such period, the “ Employment Period ”) . Executive acknowledges that either he or the Company may terminate his employment at any time for any reason.

2. Position and Duties .

(a) Title and Duties . During the Employment Period, Executive shall serve as the Senior Vice President & General Manager – Finishing of the Company. As such, he shall have the normal duties, responsibilities and authority of such position, subject to the power of the Company’s Chief Executive Officer and its Board of Directors, to expand or limit such duties, responsibilities and authority within the confines of the ordinary duties, responsibilities and authority of a Senior Vice President & General Manager – Finishing. At such time as Executive’s employment with the Company terminates, he will be deemed to have resigned from any positions with the Company Group (defined below) or any other affiliated entity, including any officer or director position.

(b) Reporting; Business Time . Executive shall report to the Company’s Chief Executive Officer, and Executive shall devote his best efforts and his full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company and its respective direct or indirect subsidiaries whether currently existing or hereafter acquired or formed (collectively, the “ Company Group ”). Executive shall perform his duties and responsibilities to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner. Executive shall not serve as a director (or in any similar type position) for any company or other entity (other than a member of the Company Group) without the prior written approval of the Board of Directors of the Company (the “ Board ”).

3. Base Salary, Incentive Compensation, Benefits, Expenses and Indemnification .

(a) Base Salary . During the Employment Period, Executive’s base salary shall be in an amount set by the Board (or a committee thereof), but under no circumstances will it be less than $305,000.00 per annum (the “ Base Salary ”), which salary shall be payable in regular installments in accordance with the Company’s general payroll practices and shall be subject to customary withholding. The Base Salary shall be subject to annual increases by the Board (or a committee thereof), in its sole discretion, which increases shall thereafter be Executive’s “Base Salary” for all purposes under this Agreement.

(b) Bonus . During the Employment Period, Executive will participate in the Company’s annual bonus plan applicable to senior executives and thereunder be eligible to receive an annual cash bonus (the “ Bonus ”) in the amount of 50% of the Base Salary upon achievement of target-level performance (the “ Target Bonus ”). The actual amount of any Bonus shall be determined pursuant to the annual bonus plan, which shall be determined by the Board. All Bonuses shall be paid in the calendar year following the calendar year to which they relate at the same time bonuses are paid to other senior executives of the Company, and the Company shall use commercially reasonable efforts to make payment of any such Bonus by March 15 of the calendar year following the calendar year to which such Bonus relates. To the extent any terms of the applicable bonus plan conflict with the terms of this Agreement, the plan’s terms shall control. In addition, the Company may amend, restate or terminate its bonus plan in its sole discretion from time to time and Executive’s receipt of any bonus is subject to meeting eligibility requirements.

(c) Benefits . During the Employment Period, Executive (i) shall be eligible to participate in all of the Company’s standard employee benefit programs for which executive employees of the Company are generally eligible, including life and health insurance benefits, dental, group accident, (collectively, the “ Benefits ”) as well as 401(k) and Flex 125, after meeting all requirements for participation (including any requirements regarding length of employment); and (ii) shall be eligible for four weeks paid vacation annually (“ Vacation ”) (which vacation benefits shall accrue and shall otherwise be in accordance with the Company’s policy for employee vacation time).

(d) Expenses . The Company shall reimburse Executive for all reasonable expenses (“ Expenses ”) incurred by him in the course of performing his duties under this Agreement which are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company’s requirements with respect to reporting and documentation of such expenses. If any expense reimbursement to Executive under this Agreement, including this paragraph and paragraph 22 hereof, is determined to be “deferred compensation” within the meaning of Section 409A, then the reimbursement shall be made to Executive as soon as practicable after submission for the reimbursement, but no later than December 31 of the year following the year during which such expense was incurred. Further, expenses eligible for reimbursement, including those hereunder and pursuant to paragraph 22 hereof, shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.

4. Termination Without Cause or pursuant to a Constructive Termination .

(a) Qualifying Termination . Except as applies under paragraph 4(b) , if Executive’s employment by the Company is terminated without Cause (as herein defined) or by Executive pursuant to a Constructive Termination (as herein defined), then (i) the Employment Period shall be deemed to have ended as of the date of the termination of employment (the “ Termination Date ”), and (ii) Executive shall be entitled to receive (A) all earned and accrued Base Salary through the Termination Date, any then accrued and unpaid Bonus for any fiscal year of the Company which ended prior to the Termination Date, all earned but unused Vacation as of the Termination Date, and, subject to the timely submission of required documentation, all unpaid, reimbursable Expenses as of the Termination Date (the “ Accrued Obligations ”), and subject to Executive’s continued compliance with paragraphs 6 , 7 , 8 , 9 and 10 hereof, (B) an amount equal to one times (1X) Executive’s Base Salary in effect on the Termination Date, payable in equal monthly installments, in accordance with the Company’s normal payroll practices in effect on the Termination Date, for the twelve (12) month period following the Termination Date, (C) an amount (the “ Pro-Rata Amount ”) equal to the product of (p) the percentage of the days in the applicable calendar year that Executive is employed by the Company and (q) Executive’s annual Bonus for such full year if Executive’s employment had not terminated (without regard to any subjective performance goals), payable in accordance with paragraph 3(c) hereof, (E) if the Executive and/or his dependents elect continuation coverage under COBRA, payment by the Company of the COBRA premiums for the Executive and/or his dependents in the same amount paid by the Company prior to the Termination Date during the period beginning on the Termination Date and ending on the first to occur of (xx) the date twelve (12) months after the Termination Date and (yy) the first day Executive becomes eligible for similar benefits under another employer’s plans, (F) to the extent allowed under the applicable plans, continued participation in the Company’s life, long-term disability, and group accident plans beginning on the Termination Date and ending on the first to occur of (xx) the date twelve (12) months after the Termination Date and (yy) the first day Executive becomes eligible for similar benefits under another employer’s plans, and (G) outplacement services provided by a nationally-recognized outplacement firm, such services to be commensurate with the services commonly provided to a person in a position comparable to Executive’s position with the Company, subject, in each case, to withholding and other appropriate deductions.

(b) Qualifying Termination in Connection with a Change in Control . If the Termination Date occurs on or in the twelve (12) months following a Change in Control (as herein defined) due to Executive’s termination of employment by the Company without Cause or by Executive pursuant to a Constructive Termination (“Change in Control Termination”), then, in lieu of the payments and benefits set out in the preceding provisions of paragraph 4(a) , (i) the Employment Period shall be deemed to have ended as of the Termination Date and (ii) Executive shall be entitled to receive (A) the Accrued Obligations, and subject to Executive’s continued compliance with paragraphs 6 , 7 , 8 , 9 and 10 hereof, (B) an amount equal to one and one-half times (1.5X) Executive’s Base Salary in effect on the Termination Date, payable in equal monthly installments, in accordance with the Company’s normal payroll practices in effect on the Termination Date, for the eighteen (18) month period following the Termination Date, (C) the Pro-Rata Amount as set forth in paragraph 4(a), (D) if the Executive and/or his dependents elect continuation coverage under COBRA, payment by the Company of the COBRA premiums for the Executive and/or his dependents in the same amount paid by the Company prior to the Termination Date during the period beginning on the Termination Date and ending on the first to occur of (xx) the date eighteen (18) months after the Termination Date and (yy) the first day Executive becomes eligible for similar benefits under another employer’s plans, (E) to the extent allowed under the applicable plans, continued participation in the Company’s life, long-term disability, and group accident plans beginning on the Termination Date and ending on the first to occur of (xx) the date eighteen (18) months after the Termination Date and (yy) the first day Executive becomes eligible for similar benefits under another employer’s plans, and (F) outplacement services provided by a nationally-recognized outplacement firm, such services to be commensurate with the services commonly provided to a person in a position comparable to Executive’s position with the Company, subject, in each case, to withholding and other appropriate deductions. For purposes of this paragraph 4(b) “ Change in Control ” shall have the meaning set forth in the Company’s 2014 Omnibus Incentive Plan.

(c) Termination Due to Death or Disability . If Executive’s employment by the Company is terminated by reason of the death or long-term disability of Executive, then (i) the Employment Period shall be deemed to have ended as of the date Executive ceases to be employed by the Company, and (ii) Executive shall be entitled to receive (A) the Accrued Obligations, and (B) an amount (the “ Pro-Rata Amount ”) equal to the product of (p) the percentage of the days in the applicable calendar year that Executive is employed by the Company and (q) the annual Bonus Executive would have received, based on performance goals, if Executive’s employment had not terminated, payable in accordance with paragraph 3(c) hereof. For purposes of this paragraph 4(c) , Executive will be deemed to have a “long-term disability” if, for physical or mental reasons, Executive is unable to perform the essential functions of Executive’s duties under this Agreement for ninety (90) consecutive days, or one hundred twenty (120) days during any twelve (12) month period, as determined in accordance with this paragraph 4(c) . The disability of Executive will be determined by a medical doctor selected by written agreement of the Company and Executive upon the request of either party by notice to the other. If the Company and Executive cannot agree on the selection of a medical doctor, each of them will select a medical doctor and the two medical doctors will select a third medical doctor who will determine whether Executive has a disability. The determination of the medical doctor selected under this paragraph 4(c) will be binding on both parties. Executive must submit to a reasonable number of examinations by the medical doctor making the determination of disability under this paragraph 4(c) and Executive hereby authorizes the disclosure and release to the Company of such determination and all supporting medical records. If Executive is not legally competent, Executive’s legal guardian or duly authorized attorney-in-fact will act in Executive’s stead, under this paragraph 4(c) , for the purposes of submitting Executive to the examinations, and providing the authorization of disclosure, required under this paragraph 4(c) .

(d) Termination for Cause or Voluntarily By Executive . If Executive’s employment by the Company is terminated by the Company for Cause or due to Executive’s voluntary resignation other than by Constructive Termination, then (i) the Employment Period shall be deemed to have ended as of the date Executive ceases to be employed by the Company and (ii) Executive shall be entitled to receive the Accrued Obligations. Executive shall provide fifteen (15) days notice of the date he intends to resign.

(e) No Obligations . Except as expressly provided in paragraphs 4(a) , 4(b) and 4(c) above, or as required by law, upon the date Executive ceases to be employed by the Company (i) all of Executive’s rights to Base Salary, Bonus, and Benefits hereunder (if any) shall cease and (ii) no other severance compensation or retirement benefits shall be payable by the Company Group to Executive.

(f) Definition of Cause . For purposes of this Agreement, “ Cause ” shall mean (i) Executive’s conviction by a court (or plea of guilty or no contest) of a felony, or any crime involving theft, dishonesty or moral turpitude; (ii) act(s) or omission(s) by Executive which are willful and deliberate act(s) or omission(s) which harm or injure the business, operations, financial condition, properties, assets, prospects, value or reputation of the Company Group in any material respect; (iii) Executive’s willful misconduct which results in material harm to the Company Group or which has a material adverse effect on the business, operations, properties, assets, prospects, value or business relationships of the Company Group; (iv) Executive’s willful disregard of the lawful and reasonable directives of the Board or Executive’s willful failure to observe policies or standards approved by the Company, Company Group, or their Boards of Directors, including policies or standards regarding employment practices (including nondiscrimination and sexual harassment policies); (v) the use of illegal drugs or repetitive abuse of other drugs; (vi) repetitive excessive consumption of alcohol, which results in material harm to the Company Group or its subsidiaries; or (vii) Executive’s gross negligence or willful misconduct with respect to any member of the Company Group which results in material harm to the Company Group and/or which has a material adverse effect on the business, operations, properties, assets, prospects, value or business relationships of any member of the Company Group; or (viii) a material breach by Executive of any material covenant or agreement between Executive and any member of the Company Group, including paragraphs 6 , 7 , 8 , 9 and 10 hereof; provided that if the breach is not a breach of paragraphs 6 , 7 , 8 , 9 and 10 hereof or any other restrictive covenant and is capable of remedy, Executive shall have ten (10) days from notification of the breach by the Company in which to remedy such breach. For avoidance of doubt a breach of paragraphs 6 , 7 , 8 , 9 and 10 or any other restrictive covenant shall not be subject to remedy and any such breach shall be considered “Cause” for termination.

(g) Definition of Constructive Termination . For purposes of this Agreement, “ Constructive Termination ” shall mean a voluntary termination of employment by Executive for any of the following reasons, without the express written consent of Executive, unless such events are corrected in all material respects by the Company within thirty (30) days following written notification by Executive to the Board: (i) the material reduction or diminution by the Board of the duties, responsibilities, authority or reporting relationship of Executive; (ii) a material reduction of Executive’s Base Salary; (iii) a relocation of Executive’s principal office by more than fifty (50) miles from his principal office on the Effective Date; (iv) any failure of the Company to assign or any successor to assume the Company’s obligations under this Agreement at or following the occurrence of a Change in Control; or (v) a material breach of this Agreement by the Company. Executive shall provide the Board with a written notice that an event has occurred and will serve as cause for Constructive Termination within thirty (30) days after the date Executive had knowledge, or should have had knowledge, of the first occurrence of such circumstances, and actually terminate employment within thirty (30) days following the expiration of the Company’s cure period as set forth above (in which cure does not occur). Otherwise, any claim of such circumstances as “Constructive Termination” shall be deemed irrevocably waived by Executive.

(h) General Release . Notwithstanding anything herein contained to the contrary, (i) Executive shall not be entitled to receive any payments, Benefits or other compensation under this paragraph 4 (beyond the Accrued Obligations) unless and until Executive has executed and delivered to the Company a general release substantially in the form attached hereto as Exhibit A (a “ General Release ”) (with such changes thereto as may be required due to (A) changes in the law or if Executive’s termination of employment is part of a reduction in force requiring a longer (45-day) opportunity to consider the Release or (B) to comply with Older Workers Benefit Protection Act (“OWBPA”) or state law requirements) within sixty (60) days of the Termination Date, and the time for revocation of such release has elapsed and (ii) to the extent that the payment of any amount constitutes “nonqualified deferred compensation” for purposes of Code Section 409A, any such payment scheduled to occur during the first sixty (60) days following the termination of employment shall not be paid until the first regularly scheduled pay period following the sixtieth (60 ^th ) day following such termination and shall include payment of any amount that was otherwise scheduled to be paid prior thereto .

(i) Separation From Service . For purposes of this Agreement, termination of employment means a “separation from service” under Code Section 409A and Treasury Regulation Section 1.409A-1(h). For this purpose, whether a termination of employment has occurred is determined based on whether the Company and Executive reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to less than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period.

(j) Payroll Practices . All payments, benefits or other compensation under this paragraph 4 shall be paid in accordance with normal payroll practices as in effect on the Termination Date, except as provided in subparagraph (h) hereof, and subject to required payroll withholdings over the course of the period provided for within the applicable subsection above.

(k) No Mitigation . Executive shall be under no obligation to seek other employment after his termination of employment with the Company and the obligations of the Company to Executive which arise upon the termination of his employment pursuant to this paragraph 4 shall not be subject to mitigation or offset by any compensation, income or benefits earned by, or provided to, Executive during the applicable severance payment period other than as provided in the case of Benefits if Executive accepts other employment during such period.

5. Golden Parachute Tax . In the event that any payments, entitlements or benefits (whether made or provided pursuant to this Agreement or otherwise) provided to Executive constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code (“ Code ”), may be subject to an excise tax imposed pursuant to Section 4999 of the Code, then, Executive shall be entitled to the greater of, as determined on an after-tax basis (taking into account any such excise tax), (i) such parachute payments or (ii) the greatest reduced amount of such parachute payments as would result in no amount of such parachute payments being subject to such excise tax. Any such payment reduction contemplated by the preceding sentence shall be implemented as follows: first , by reducing any payments to be made to Executive under paragraph 4(a)(ii)(B) or 4(b)(ii)(B) hereof, as applicable; second , by reducing any other cash payments to be made to Executive but only if the value of such cash payments is not greater than the parachute value of such payments; third , by cancelling the acceleration of vesting of any outstanding equity-based compensation awards that are subject to performance vesting, the performance goals for which were met as of Executive’s date of termination or if later the date of the occurrence of the change in control; fourth , by cancelling the acceleration of vesting of any restricted stock or restricted stock unit awards; fifth , by eliminating the Company’s payment of the cost of any post-termination continuation of medical and dental benefits for Executive and his eligible dependents and sixth , by cancelling the acceleration of vesting of any stock options or stock appreciation rights. In the case of the reductions to be made pursuant to each of the above-mentioned clauses, the payment and/or benefit amounts to be reduced and the acceleration of vesting to be cancelled shall be reduced or cancelled in the inverse order of their originally scheduled dates of payment or vesting, as applicable, and shall be so reduced (x) only to the extent that the payment and/or benefit otherwise to be paid or the vesting of the award that otherwise would be accelerated, would be treated as a “parachute payment” within the meaning of Section 280G(b)(2)(A) of the Code, and (y) only to the extent necessary to achieve the required reduction hereunder . The determination of such after-tax amount under clauses (i) and (ii), above, shall be made by a nationally recognized certified public accounting firm that is selected by the Company and for purposes of present valuing any such payments under Treasury Regulation 1.280G-1 Q&A 32, the discount rate to be used shall be the applicable Federal rate as in effect on the Effective Date.

6. Confidential Information . Executive acknowledges that the information, observations and data obtained by him while employed by any member of the Company Group concerning the business or affairs of the Company Group or provided to the Company Group by its customers and suppliers, that is not known generally to the public (“ Confidential Information ”), are the property of the Company Group. Therefore, Executive agrees that during his employment and for a period of two (2) years thereafter he shall not disclose to any unauthorized person or use for his own purposes any Confidential Information without the prior written consent of the Board other than in a good faith effort to promote the interests of the Company Group, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of Executive’s acts or omissions. With respect to any Confidential Information constituting a trade secret under applicable law, Executive agrees not to use or disclose such information for so long as the item continues to constitute a trade secret ( i.e. , the two (2) year restriction shall not apply to such information). Executive shall deliver to the Company at the termination of the Employment Period, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) or the business of any member of the Company Group which he may then possess or have under his control. Notwithstanding the foregoing, nothing in this paragraph 6 shall be construed to in any way limit the rights of the Company to protect confidential or proprietary information which constitute trade secrets under applicable trade secret laws. The terms and conditions of this Agreement shall remain strictly confidential, and Executive hereby agrees not to disclose the terms and conditions hereof to any person or entity, other than immediate family members, legal advisors or personal tax or financial advisors, or prospective future employers solely for the purpose of disclosing the limitations on Executive’s conduct imposed by the provisions of this paragraph 6 who, in each case, shall be instructed by Executive to keep such information confidential.

7. Inventions and Patents . Executive acknowledges that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information (whether or not patentable) which relate to the Company Group’s actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by Executive while employed by the Company Group (“ Work Product ”) belong to the applicable member of the Company Group. Executive will promptly disclose such Work Product to the Company and perform all actions requested by the Company (whether during or after employment) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).

8. Non-Solicitation; Non-Competition.

(a) In further consideration of the compensation to be paid to Executive hereunder, Executive acknowledges that in the course of his employment with the Company Group, he has and will continue to become familiar with the Company Group’s trade secrets and with other Confidential Information concerning the Company Group and that his services shall be of special, unique and extraordinary value to the Company Group. Therefore, Executive agrees that while an employee of the Company Group, Executive will not directly or indirectly compete against any member of the Company Group or directly or indirectly divert or attempt to divert any business from any member of the Company Group anywhere such company is doing business.

(b) Executive agrees that for the twelve (12) months following the termination of his employment, Executive will not, directly or indirectly, solicit for the purpose of providing, or otherwise provide, any products or services competitive with the products or services offered by (or planned to be offered by, assuming Executive was aware of those plans while employed by Company) the Company Group to any customer of the Company Group with whom/which Executive had contact on behalf of the Company Group during the twenty-four (24) months preceding the end of Executive’s employment with the Company.

(c) Executive agrees that for the twelve (12) months following the termination of his employment, Executive will not, directly or indirectly, solicit for the purpose of providing, or otherwise provide, any products or services competitive with the products or services offered by (or planned to be offered by, assuming Executive was aware of those plans while employed by Company) the Company Group to any customer of the Company Group about whom/which Executive acquired non-public information during the twenty-four (24) months preceding the end of Executive’s employment with the Company.

(d) Executive agrees that for the twelve (12) months following the termination of his employment, Executive will not request or advise any customer, supplier, licensee, licensor, landlord or other business relation of the Company Group with whom/which Executive had contact on behalf of the Company Group during the twenty-four (24) months preceding the termination of Executive’s employment with the Company to withdraw, curtail or cancel its business dealings with such member of the Company Group.

(e) Executive agrees that for the twelve (12) months following the termination of his employment, Executive will not directly or indirectly recruit or solicit any employee of the Company Group for employment or encourage any employee of the Company Group to leave such member of the Company Group’s employ. An employee shall be deemed covered by this clause (e) while employed by the Company Group and for a period of twelve (12) months thereafter.

(f) In addition, Executive agrees that for the twelve (12) months following the termination of his employment, Executive will not provide, in any capacity, Restricted Services to any business located in the United States or Germany which provides services or products competitive with those sold or provided by any member of the Company Group during the twenty-four (24) months preceding the end of Executive’s employment with the Company. The term “Restricted Services” shall mean services similar to those which Executive provided any member of the Company Group during the twenty-four (24) months preceding Executive’s termination of employment, for whatever reason, and which would involve use or disclosure of the Company’s Confidential Information.

(g) In the event of the breach by Executive of any of the provisions of this

paragraph 8 , the Company shall be entitled, in addition to all other available rights and remedies, to withhold any or all of the amounts agreed to be paid to Executive hereunder and the Company shall also be entitled to terminate his employment status hereunder and the provision of any benefits and compensation conditioned upon such status.

9. Non-Solicitation; Non-Competition for a Change In Control Termination .

(a) In further consideration of the compensation to be paid to Executive hereunder, Executive acknowledges that in the event of a Change in Control Termination his knowledge of the Company Group’s trade secrets and other Confidential Information concerning the Company Group and his services shall be of additional special, unique and extraordinary value to the Company Group. Therefore, Executive agrees that following a Change in Control Termination he shall be subject to the restrictions identified in paragraph 8 above, but that the time periods identified in paragraph 8 above shall be extended from twelve (12) months to eighteen (18) months.

(b) In the event of the breach by Executive of any of the provisions of this paragraph 9 , the Company shall be entitled, in addition to all other available rights and remedies, to withhold any or all of the amounts agreed to be paid to Executive hereunder and the Company shall also be entitled to terminate his employment status hereunder and the provision of any benefits and compensation conditioned upon such status.

10. Non-Disparagement . During the Employment Period and for the two year period following the Termination Date, Executive agrees not to make public statements or communications that disparage the Company Group or their businesses, services, products or their affiliates or their current, former or future directors or executive officers (in their capacity as such), or with respect to any current or former director or executive officer or shareholder of the Company Group or its affiliates (in their capacity as such). The foregoing shall not be violated by truthful statements made in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings).

11. Remedies . In addition and supplementary to other rights and remedies existing in its favor, the Company may apply to the court of law or equity of competent jurisdiction, without posting any bond, for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof, including paragraphs 6 , 7 , 8 , 9 and 10 hereof. In the event of a violation by Executive of paragraphs 6 , 7 , 8 , 9 and 10 hereof, any severance being paid to Executive pursuant to this Agreement or otherwise shall immediately cease.

12. Government Cooperation . Nothing in this agreement prohibits Executive from reporting possible violations of local, state, foreign or federal law or regulation, or related facts, to any governmental agency or entity or making other reports or disclosures that, in each case, are protected under the whistleblower provisions of local, state, foreign or federal law or regulation. Without limitation, Executive may report possible violations of law or regulation and related facts to the U.S. Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General. Executive not need the prior authorization of the Company to make any such reports or disclosures, and you do not need to notify the Company that he has made such reports or disclosures.

13. Choice of Law . All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Wisconsin, without giving effect to any choice of law or conflict of law rules or provisions that could cause the applications of the laws of any jurisdiction other than the State of Wisconsin. Each of the parties agrees that any dispute between the parties shall be resolved only in the courts of the State of Wisconsin or the United States District Court for the Eastern District of Wisconsin and the appellate courts having jurisdiction of appeals in such courts. In that context, and without limiting the generality of the foregoing, each of the parties hereto irrevocably and unconditionally (a) submits in any proceeding relating to this Agreement or Executive’s employment by any member of the Company Group, or for the recognition and enforcement of any judgment in respect thereof (a “ Proceeding ”), to the exclusive jurisdiction of the courts of the State of Wisconsin , the court of the United States of America for the Eastern District of Wisconsin , and appellate courts having jurisdiction of appeals from any of the foregoing, and agrees that all claims in respect of any such Proceeding shall be heard and determined in such Wisconsin State court or, to the extent permitted by law, in such federal court, (b) consents that any such Proceeding may and shall be brought in such courts and waives any objection that Executive or the Company may now or thereafter have to the venue or jurisdiction of any such Proceeding in any such court or that such Proceeding was brought in an inconvenient court and agrees not to plead or claim the same, (c) WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR EXECUTIVE’S EMPLOYMENT BY THE COMPANY OR ANY MEMBER OF THE COMPANY GROUP, OR EXECUTIVE’S OR THE COMPANY GROUP’S PERFORMANCE UNDER, OR THE ENFORCEMENT OF, THIS AGREEMENT, (d) agrees that service of process in any such Proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at Executive’s or the Company’s address as provided in paragraph 20 hereof, and (e) agrees that nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of Wisconsin . Each party shall be responsible for its own legal fees incurred in connection with any dispute hereunder; provided that the Company shall reimburse Executive for the costs (including reasonable attorneys’ fees) incurred in connection with any such dispute if Executive prevails as a result of a final, non-appealable determination on the substantive claims that are involved in such dispute; provided, however, that the Company shall have no obligations under this paragraph 13 if the Executive has breached, or is in breach of, paragraphs 6 , 7 , 8 , 9 or 10 hereof.

14. Representation by Executive . Executive represents and warrants to the Company that he is not a party to any agreement containing a noncompetition provision or other restriction with respect to (i) the nature of any services or business which he is obligated or likely obligated to perform or conduct for the Company (or any other member of the Company Group) under this Agreement, or (ii) the disclosure or use of any information which directly or indirectly relates to the nature of the business of any member of the Company Group or the services to be rendered or likely to be rendered by Executive under this Agreement.

15. Complete Agreement . This Agreement shall embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof or thereof in any way.

16. Successor and Assigns . This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company and their respective successors, heirs and assigns. Executive hereby consents to the assignment of this Agreement to any of Company’s successors, assigns, or purchasers of its assets.

17. Amendment . This Agreement may be amended, and any provision hereof may be waived, at any time by written agreement between the Company (with the approval of the Board) and Executive.

18. Counterparts . This Agreement may be executed in one or more counterparts, all of which together shall constitute but one agreement.

19. No Waiver . No failure or delay on the part of the Company or Executive in enforcing or exercising any right or remedy hereunder shall operate as a waiver thereof.

20. Severability and Legal Construction . If any provision or clause of this Agreement, or portion thereof shall be held by any court or other tribunal of competent jurisdiction to be illegal, invalid, void, or unenforceable in such jurisdiction, all other provisions of this Agreement, other than those as to which it has been held invalid, illegal, void or unenforceable, shall nevertheless remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination that any provision, or the application of any such provision, is illegal, invalid, void, or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties hereto as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the greatest extent possible. In the event the parties are unable to reach an agreement, any court or other tribunal shall have the authority to modify the Agreement so as to make it enforceable. Nothing in this Agreement is intended to nor shall be interpreted to impermissibly burden Executive’s ability to practice law, and the post-employment restrictions imposed on Executive under this Agreement are expressly limited in effect to the extent permissible under and consistent with Wisconsin Supreme Court Rule 20:5.6.

21. Notices . For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of delivery, if delivered by hand, (b) on the date of transmission, if delivered by confirmed facsimile or electronic mail, (c) on the first business day following the date of deposit, if delivered by guaranteed overnight delivery service, or (d) on the fourth business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

Jason Industries, Inc.

833 East Michigan Street, Suite 900
Milwaukee, WI 53202

Attention: Chief Executive Officer

or at such other address as the Company, by notice to Executive, shall designate in writing from time to time.

(a) If such notice is to Executive, at Executive’s address as shown on the Company’s records, or at such other address as Executive, by notice to the Company, shall designate in writing from time to time.

22. Section 409A . Notwithstanding any provision of this Agreement to the contrary:

(a) If and to the extent any payment or benefits under this Agreement are otherwise subject to the requirements of Code Section 409A, the intent of the parties is that such payment and benefits shall comply with Code Section 409A and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted, and such payment and benefits shall be paid or provided under such other conditions determined by the Company that cause such payment and benefits, to be in compliance therewith. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the parties hereto of the applicable provision without violating the provisions of Code Section 409A. The Company makes no representation that any or all of the payments or benefits provided under this Agreement will be exempt from or comply with Code Section 409A and makes no undertaking to preclude Code Section 409A from applying to any such payments or benefits. In no event whatsoever shall the Company Group be liable for any additional tax, interest or penalty that may be imposed on Executive by Code Section 409A or damages for failing to comply with Code Section 409A.

(b) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following Executive’s termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”

(c) Each severance payment payable to Executive under this Agreement shall be treated as a separate and distinct “payment” for purposes of Code Section 409A. Accordingly, any such payments that would otherwise be payable (i) within 2-1/2 months after the end of the Company’s taxable year containing Executive’s employment termination date, or (ii) within 2-½ months after Executive’s taxable year containing Executive’s employment termination date, whichever occurs later (the “Short Term Deferral Period”), are exempt from Code Section 409A. Furthermore, any such payments paid after the Short Term Deferral Period are exempt from Code Section 409A as severance pay due to an involuntary separation from service to the extent that the sum of those payments is equal to or less than the maximum amount described in Treasury Regulation Section 1.409A-1(b)(9)(iii)(A) (the “Involuntary Separation Amount”) because such payments are payable only upon Executive’s “involuntary” separation from service for purposes of Code Section 409A. Accordingly, the sum of (A) such payments that are paid within the Short Term Deferral Period and (B) such payments paid after the Short Term Deferral Period that do not exceed the Involuntary Separation Amount are exempt from Code Section 409A and, therefore, notwithstanding any provision of the Plan to the contrary, if Executive is a “specified employee” (as defined in Code Section 409A), only those payments that are not otherwise exempt from Code Section 409A under clause (A) and (B) above and that would otherwise have been payable in the first six (6) months following Executive’s termination of employment will not be paid to Executive until the date that is six months after the date of Executive’s termination of employment (or, if earlier, Executive’s date of death). Any such deferred payments will be paid in a lump sum on the first day after such six month delay; provided that no such actions shall reduce the amount of any payments otherwise payable to Executive under this Agreement. Thereafter, the remainder of any such payments shall be payable in accordance with Section 4(a) and 4(b), as applicable.

(d) All expenses or other reimbursements to Executive under this Agreement, if any, shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive (provided that if any such reimbursements constitute taxable income to the Executive, such reimbursements shall be paid no later than March 15th of the calendar year following the calendar year in which the expenses to be reimbursed were incurred), and no such reimbursement or expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year.

(e) Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days”), the actual date of payment within the specified period shall be within the sole discretion of the Company.

(f) In no event shall any payment under this Agreement that constitutes “deferred compensation” for purposes of Code Section 409A be offset by any other payment pursuant to this Agreement or otherwise.

(g) To the extent required under Code Section 409A, (i) any reference herein to the term “Agreement” shall mean this Agreement and any other plan, agreement, method, program, or other arrangement, with which this Agreement is required to be aggregated under Code Section 409A, and (ii) any reference herein to the term “Company” and “Company Group” shall mean the Company, the Company Group, and all persons with whom the Company and the Company Group would be considered a single employer under Code Section 414(b) or 414(c).

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above.

JASON INDUSTRIES, INC.

/s/ Brian Kobylinski

Name: Brian Kobylinski

Title: President & Chief Executive Officer

EXECUTIVE

/s/ Keith A. Walz

Keith A. Walz

Exhibit A

GENERAL RELEASE

Release of Claims by Executive . I, Keith A. Walz (“ Executive ”), in consideration of and subject to the performance by Jason Industries, Inc. (the “ Company ”) of its material obligations under the Employment Agreement, dated as of February 27, 2018 (the “ Agreement ”), do hereby release and forever discharge as of the date hereof the Company and any present and former directors, officers, agents, representatives, employees, subsidiaries, successors and assigns of the Company and its direct or indirect owners (collectively, the “ Released Parties ”) to the extent provided below. The Released Parties are intended third-party beneficiaries of this General Release, and this General Release may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Released Parties hereunder. Terms used herein but not otherwise defined shall have the meanings given to them in the Agreement.

I understand that any payments or benefits paid or granted to me under paragraph 4 of the Agreement represent, in part, consideration for signing this General Release and are not salary, wages or benefits to which I was already entitled. I understand and agree that I will not receive the payments and benefits specified in paragraph 4 of the Agreement unless I execute this General Release and do not revoke this General Release within the time period permitted hereafter or breach this General Release.

Except as provided in paragraph 3 below and except for the provisions of the Agreement which expressly survive the termination of my employment with the Company, I knowingly and voluntarily (for myself, my heirs, executors, administrators and assigns) release and forever discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross claims, counter‑claims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date that this General Release becomes effective and enforceable) and whether known or unknown, suspected, or claimed against the Company and/or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, ever had, now have, or hereafter may have, by reason of any matter, cause, or thing whatsoever, from the beginning of my initial dealings with the Company to the date of this General Release, and particularly, but without limitation of the foregoing general terms, any claims arising from or relating in any way to my employment relationship with Company, the terms and conditions of that employment relationship, and the termination of that employment relationship (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Civil Rights Act of 1866, as amended, the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing collectively referred to herein as the “ Claims ”). I understand and intend that this General Release constitutes a general release of all claims and that no reference herein to a specific form of claim, statute or type of relief is intended to limit the scope of this General Release. Notwithstanding anything contained in this General Release to the contrary, Claims shall not include (a) any claims I may have against the Released Parties for a failure to comply with, or a breach of, any provision of the Agreement, (b) any rights I may have to indemnification (i) as an officer, director or employee under the Articles of Incorporation or By-Laws of any of the Released Parties or (ii) pursuant to any insurance policies or contracts of any of the Released Parties, (c) any claims I may have against the Released Parties for vested benefits as of the date of the termination of my employment under any agreement, plan or program of any of the Released Parties, or (d) any right to continuation coverage under COBRA.

I agree that this General Release does not waive or release any rights or claims that I may have under the Age Discrimination in Employment Act of 1967 which arise after the date I execute this General Release. I acknowledge and agree that my separation from employment with the Company in compliance with the terms of the Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in Employment Act of 1967).

In signing this General Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. I expressly consent that this General Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state or local statute that expressly limits the effectiveness of a general release of unknown, unsuspected and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. I acknowledge and agree that this waiver is an essential and material term of this General Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event that I should bring a Claim seeking damages against the Company, or in the event that I should seek to recover against the Company in any Claim brought by a governmental agency on my behalf, this General Release shall serve as a complete defense to such Claims to the maximum extent permitted by law. I further agree that I am not aware of any pending claim, or of any facts that could give rise to a claim, of the type described in paragraph 2 as of the execution of this General Release.


5.	I agree that I will forfeit all amounts payable by the Company pursuant to the Agreement if I challenge the validity of this General Release. However, I understand that nothing in this Agreement prohibits or limits my right to challenge the validity of this Agreement under the Older Worker’s Benefit Protection Act (“OWBPA”).

I agree to reasonably cooperate with the Company in any internal investigation or administrative, regulatory, or judicial proceeding. I understand and agree that my cooperation may include, but not be limited to, making myself available to the Company upon reasonable notice for interviews and factual investigations; appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process; volunteering to the Company pertinent information; and turning over to the Company all relevant documents which are in or may come into my possession all at times and on schedules that are reasonably consistent with my other permitted activities and commitments. I understand that in the event the Company asks for my cooperation in accordance with this provision, the Company will reimburse me solely for reasonable travel expenses, including transportation, lodging and meals, upon my submission of receipts.


7.	I agree that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or myself of any improper or unlawful conduct.

I agree that this General Release and the Agreement are confidential and agree not to disclose any information regarding the terms of this General Release or the Agreement, except to my immediate family and any tax, legal or other counsel that I have consulted regarding the meaning or effect hereof or as required by law, and I will instruct each of the foregoing not to disclose the same to anyone.


9.	Any non‑disclosure provision in this General Release does not prohibit or restrict me (or my attorney) from responding to any inquiry about this General Release or its underlying facts and circumstances by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), or any other self‑regulatory organization or governmental entity.

10.

Whenever possible, each provision of this General Release shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this General Release is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this General Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. This General Release constitutes the complete and entire agreement and understanding among the parties, and supersedes any and all prior or contemporaneous agreements, commitments, understandings or arrangements, whether written or oral, between or among any of the parties, in each case concerning the subject matter hereof.

BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:


1.	I HAVE READ IT CAREFULLY;


2.	I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED, THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990, AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;


3.	I VOLUNTARILY CONSENT TO EVERYTHING IN IT;


4.	I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL READING AND CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;


5.	I HAVE HAD AT LEAST [ 21 ][ 45 ] DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE TO CONSIDER IT AND THE CHANGES MADE SINCE MY FIRST RECEIPT OF THIS RELEASE ARE NOT MATERIAL OR WERE MADE AT MY REQUEST AND WILL NOT RESTART THE REQUIRED [ 21 ][ 45 ] ‑DAY PERIOD;


6.	I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;


7.	I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND


8.	I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

SIGNED: DATE:

Exhibit 12

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

AND TO FIXED CHARGES AND PREFERENCE DIVIDENDS

The following table shows our unaudited ratios of earnings to (a) fixed charges and (b) fixed charges and preference dividends for the periods presented (amounts are in thousands):



	(Unaudited)
	Successor												Predecessor
	Year Ended December 31,									June 30, 2014 Through December 31, 2014			January 1, 2014 Through June 29, 2014			Year Ended December 31,
	2017			2016			2015			June 30, 2014 Through December 31, 2014			January 1, 2014 Through June 29, 2014			2013
(Loss) earnings:
(Loss) income before income taxes	$	(14,857	)	$	(84,349	)	$	(111,856	)	$	(21,869	)	$	(5,528	)	$	42,335
Adjustments:
Less: Equity income from equity investees	(952		)	(681		)	(884		)	(381		)	(831		)	(2,345		)
(Loss) income before income taxes and equity income from equity investees	(15,809		)	(85,030		)	(112,740		)	(22,250		)	(6,359		)	39,990
Add:
Fixed charges	37,170			36,196			35,069			17,805			8,889			18,416
Distributed income of equity investees	—			2,068			—			—			—			1,000
Total earnings (loss)	$	21,361		$	(46,766	)	$	(77,671	)	$	(4,445	)	$	2,530		$	59,406

Fixed charges:
Interest expensed, including amortization of deferred financing costs and accretion of debt discount, excluding loss on early extinguishment of debt	$	33,089		$	31,843		$	31,835		$	16,172		$	7,301		$	15,316
Estimated interest component of rent expense (3)	4,081			4,353			3,234			1,633			1,588			3,100
Total fixed charges	$	37,170		$	36,196		$	35,069		$	17,805		$	8,889		$	18,416

Pre-tax preferred dividend requirements	$	40		$	3,892		$	4,494		$	2,831		$	—		$	4,227
Total fixed charges plus preference dividends	$	37,210		$	40,088		$	39,563		$	20,636		$	8,889		$	22,643

Ratio of earnings to fixed charges (1)	— (2)			— (2)			— (2)			— (2)			— (2)			3.2
Ratio of earnings to fixed charges and preference dividends (1)	— (2)			— (2)			— (2)			— (2)			— (2)			2.6
Amount of deficiency in earnings to fixed charges	$	(15,809	)	$	(85,030	)	$	(112,740	)	$	(22,250	)	$	(6,359	)	$	—
Amount of deficiency in earnings to fixed charges and preference dividends	$	(15,849	)	$	(88,922	)	$	(117,234	)	$	(25,081	)	$	(6,359	)	$	—


(1)	For purposes of calculating the ratios of consolidated earnings to fixed charges and to fixed charges and preference dividends:


•	“earnings” consist of (loss) income before income taxes and equity income from investees, plus fixed charges and distributed income of equity investees;


•	“fixed charges” represent interest expensed and capitalized, and amortization of deferred financing costs and accretion of debt discount; and


•	“preference dividends” refers to the amount of pre-tax earnings that is required to pay the cash dividends on outstanding preference securities and is computed as the amount of (a) the dividend divided by (b) the result of 1 minus the effective income tax rate applicable to continuing operations.

The ratios of earnings to fixed charges and to fixed charges and preference dividends are ratios that have been calculated in accordance with Securities and Exchange Commission rules and regulations. These ratios have no application to our credit and lease facilities and preferred shares and we believe they are not ratios typically used by investors to evaluate our overall operating performance.


(2)	The ratio of earnings to fixed charges and to fixed charges and preference dividends for this period was less than 1.0x.


(3)	Interest inherent in rent expense is an amount representative of the interest factor in rentals (for this purpose, the interest factor is assumed to be one-third of rental expense)

Exhibit 21

MATERIAL SUBSIDIARIES OF THE COMPANY



Name of Subsidiary		Jurisdiction of Incorporation
Osborn-International LTDA		Brazil
JPHI Holdings Inc.		Delaware
Jason Partners Holdings Inc.		Delaware
Jason Holdings, Inc. I		Delaware
Osborn-Unipol S.A.S.		France
Jason Holding GmbH		Germany
Jason GmbH		Germany
Dronco GmbH		Germany
Lea (Hong Kong) Int'l Ltd.		Hong Kong
Advance Wire Products, Inc.		Illinois
Assembled Products, Inc.		Illinois
Metalex Corporation		Illinois
Osborn Lippert Pvt. Ltd.		India
Promek Seating Systems Ltd.		Ireland
Agri Autoparts International Limited		Ireland
Janesville de Mexico S.A. de C.V.		Mexico
JacksonLea de Mexico S.A. de R.L. de C.V.		Mexico
Milsco de Mexico S. de R.L. de C.V.		Mexico
Servicios Administrativos JDM, S. de R.L. de C.V.		Mexico
JHPM S. de R.L. de C.V.		Mexico
Jason DM S. de R.L. de C.V.		Mexico
Jason Nevada, Inc.		Nevada
Jason International Holdings, Inc.		Nevada
Jason Ohio Corporation		Ohio
Shanghai JacksonLea Polishing Materials Co., Ltd.		People's Republic of China
JacksonLea Polishing Materials Co. Ltd.		People's Republic of China
Osborn-Unipol Lda		Portugal
Osborn International Srl		Romania
Jason Asia Holdings Pte. Ltd.		Singapore
Osborn Singapore Pte. Ltd.		Singapore
Osborn-Unipol S.L.		Spain
Osborn International AB		Sweden
Hsin Feng Chemical		Taiwan
Jason Holdings UK Ltd.		United Kingdom
Milsco Manufacturing UK Ltd.		United Kingdom
Jason UK Ltd.		United Kingdom
Webb Jarratt & Co. Ltd.		United Kingdom
Osborn-Unipol Ltd.		United Kingdom
Dronco Abrasives UK Ltd.		United Kingdom
Osborn de Venezuela		Venezuela
Jason Incorporated		Wisconsin

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-202664) and in the Registration Statement on Form S-3 (No. 333-197412) of Jason Industries, Inc. of our report dated March 1, 2018 relating to the financial statements and financial statement schedule, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Milwaukee, Wisconsin

March 1, 2018

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian K. Kobylinski, certify that:


1.	I have reviewed this annual report on Form 10-K of Jason Industries, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 1, 2018



	/s/ Brian K. Kobylinski
	Brian K. Kobylinski President, Chief Executive Officer and Director (Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Chad M. Paris, certify that:


1.	I have reviewed this annual report on Form 10-K of Jason Industries, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 1, 2018



	/s/ Chad M. Paris
	Chad M. Paris Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Jason Industries, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2017 (the “Report”), as filed with the Securities and Exchange Commission, the undersigned, in the capacity indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 1, 2018



	/s/ Brian K. Kobylinski
	Brian K. Kobylinski President, Chief Executive Officer and Director (Principal Executive Officer)

This certification accompanies this report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purpose of Section 18 of the Securities Exchange Act of 1934, as amended.

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 1, 2018



	/s/ Chad M. Paris
	Chad M. Paris Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)