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

FORM 10-Q

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

For the quarterly period ended March 29, 2019

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

For the transition period from  __________ to __________ 

Commission File Number: 001-36051
JASONLOGOA57.JPG
JASON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
46-2888322
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
 
 
 
833 East Michigan Street, Suite 900
Milwaukee, Wisconsin
 
53202
(Address of principal executive offices)
 
(Zip Code)
 

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

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

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ý No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer ý
Smaller reporting company ¨
 
Emerging growth company ¨

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

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

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.0001 par value per share
Warrants to purchase Common Stock
JASN
JASNW
The NASDAQ Stock Market LLC
The NASDAQ Stock Market LLC

As of May 6, 2019 , there were 28,090,557 shares of common stock of the Company issued and outstanding. 



JASON INDUSTRIES, INC.
TABLE OF CONTENTS

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



1


PART I – FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
Jason Industries, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts) (Unaudited)
 
 
 
 
 
Three Months Ended
 
March 29, 2019
 
March 30, 2018
Net sales
$
141,978

 
$
167,254

Cost of goods sold
113,398

 
131,582

Gross profit
28,580

 
35,672

Selling and administrative expenses
25,221

 
27,524

Loss on disposals of property, plant and equipment - net
8

 
234

Restructuring
1,573

 
602

Operating income
1,778

 
7,312

Interest expense
(8,231
)
 
(8,027
)
Equity income
84

 
100

Other income - net
24

 
71

Loss before income taxes
(6,345
)
 
(544
)
Tax provision
711

 
94

Net loss
(7,056
)
 
(638
)
Redemption premium and accretion of dividends on preferred stock
812

 
1,727

Net loss available to common shareholders of Jason Industries
$
(7,868
)
 
$
(2,365
)
 
 
 
 
Net loss per share available to common shareholders of Jason Industries:
 
 
 
Basic and diluted
$
(0.28
)
 
$
(0.09
)
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
Basic and diluted
27,962

 
27,329

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


2


Jason Industries, Inc.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(In thousands) (Unaudited)
 
Three Months Ended
 
March 29, 2019
 
March 30, 2018
Net loss
$
(7,056
)
 
$
(638
)
Other comprehensive (loss) income:
 
 
 
Employee retirement plan adjustments, net of tax
15

 
3

Foreign currency translation adjustments
(1,566
)
 
2,415

Net change in unrealized gains on cash flow hedges, net of tax benefit (expense) of $205 and ($531), respectively
(637
)
 
1,627

Total other comprehensive (loss) income
(2,188
)
 
4,045

Comprehensive (loss) income
$
(9,244
)
 
$
3,407

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


3


Jason Industries, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts) (Unaudited)
 
 
 
March 29, 2019
 
December 31, 2018
 
 
 
 
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
45,153

 
$
58,169

Accounts receivable - net of allowances for doubtful accounts of $1,688 at March 29, 2019 and $1,812 at December 31, 2018
74,956

 
60,559

Inventories
66,700

 
63,747

Other current assets
12,246

 
13,664

Total current assets
199,055

 
196,139

Property, plant and equipment - net of accumulated depreciation of $118,285 at March 29, 2019 and $112,406 at December 31, 2018
131,285

 
134,869

Right-of-use operating lease assets
41,522

 
—

Goodwill
43,623

 
44,065

Other intangible assets - net
112,191

 
116,529

Other assets - net
10,961

 
11,995

Total assets
$
538,637

 
$
503,597

 
 
 
 
Liabilities and Shareholders ’ (Deficit) Equity
 
 
 
Current liabilities
 
 
 
Current portion of long-term debt
$
6,515

 
$
6,544

Current portion of operating lease liabilities
7,564

 
—

Accounts payable
56,395

 
47,497

Accrued compensation and employee benefits
15,643

 
14,452

Accrued interest
86

 
89

Other current liabilities
12,822

 
17,281

Total current liabilities
99,025

 
85,863

Long-term debt
386,425

 
387,244

Long-term operating lease liabilities
35,467

 
—

Deferred income taxes
16,696

 
17,725

Other long-term liabilities
16,796

 
20,548

Total liabilities
554,409

 
511,380

 
 
 
 
Commitments and contingencies (Note 15)

 

 
 
 
 
Shareholders ’ (Deficit) Equity
 
 
 
Preferred stock, $0.0001 par value (5,000,000 shares authorized, 41,421 shares issued and outstanding at March 29, 2019, including 809 shares declared on February 1, 2019 and issued on April 1, 2019, and 40,612 shares issued and outstanding at December 31, 2018, including 794 shares declared on November 1, 2018 and issued on January 1, 2019)
41,421

 
40,612

Jason Industries common stock, $0.0001 par value (120,000,000 shares authorized; issued and outstanding: 27,998,324 shares at March 29, 2019 and 27,394,978 shares at December 31, 2018)
3

 
3

Additional paid-in capital
155,203

 
155,533

Retained deficit
(186,640
)
 
(180,360
)
Accumulated other comprehensive loss
(25,759
)
 
(23,571
)
Total shareholders ’ (deficit) equity
(15,772
)
 
(7,783
)
Total liabilities and shareholders ’ (deficit) equity
$
538,637

 
$
503,597

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

4


Jason Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
 
Three Months Ended
 
March 29, 2019
 
March 30, 2018
Cash flows from operating activities
 
 
 
Net loss
$
(7,056
)
 
$
(638
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
 
 
 
Depreciation
6,460

 
6,709

Amortization of intangible assets
2,901

 
4,098

Amortization of deferred financing costs and debt discount
737

 
711

Non-cash operating lease expense
2,043

 
—

Equity income
(84
)
 
(100
)
Deferred income taxes
(885
)
 
(1,254
)
Loss on disposals of property, plant and equipment - net
8

 
234

Dividends from joint venture
728

 
—

Share-based compensation
876

 
231

Net increase (decrease) in cash due to changes in:
 
 
 
Accounts receivable
(14,806
)
 
(14,500
)
Inventories
(3,338
)
 
(4,076
)
Other current assets
65

 
(1,150
)
Accounts payable
8,882

 
8,980

Accrued compensation and employee benefits
1,263

 
3,985

Accrued interest
(3
)
 
(61
)
Accrued income taxes
321

 
17

Operating lease liabilities, net
(2,126
)
 
—

Other - net
(3,235
)
 
631

Total adjustments
(193
)
 
4,455

Net cash (used in) provided by operating activities
(7,249
)
 
3,817

Cash flows from investing activities
 
 
 
Proceeds from disposals of property, plant and equipment
189

 
49

Payments for property, plant and equipment
(3,468
)
 
(3,622
)
Acquisitions of patents
(5
)
 
(9
)
Net cash used in investing activities
(3,284
)
 
(3,582
)
Cash flows from financing activities
 
 
 
Payments of First and Second Lien term loans
(775
)
 
(775
)
Proceeds from other long-term debt
1,641

 
1,247

Payments of other long-term debt
(1,992
)
 
(1,963
)
Payments of finance lease obligation
(89
)
 
—

Value added tax paid from building sale
(707
)
 
—

Other financing activities - net
(396
)
 
(13
)
Net cash used in financing activities
(2,318
)
 
(1,504
)
Effect of exchange rate changes on cash and cash equivalents
(165
)
 
373

Net decrease in cash and cash equivalents
(13,016
)
 
(896
)
Cash and cash equivalents, beginning of period
58,169

 
48,887

Cash and cash equivalents, end of period
$
45,153

 
$
47,991

Supplemental disclosure of cash flow information
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
7,496

 
$
7,377

Income taxes, net of refunds
$
1,595

 
$
1,192

Non-cash lease activities:
 
 
 
Right-of-use operating assets obtained in exchange for new operating lease obligations
$
410

 
$
—

Right-of-use finance assets obtained in exchange for new finance lease obligations
$
65

 
$
—

Non-cash investing activities:
 
 
 
Property, plant and equipment acquired through additional liabilities
$
1,634

 
$
653

Non-cash financing activities:

 
 
Non-cash preferred stock created from dividends declared
$
809

 
$
748

Exchange of preferred stock for common stock of Jason Industries, Inc.
$
—

 
$
12,136

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

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
















5

Jason Industries, Inc.
Condensed Consolidated Statements of Shareholders’ (Deficit) Equity
(In thousands) (Unaudited)

 
Preferred Stock
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
Shareholders'
(Deficit) Equity
Balance at December 31, 2018
$
40,612

 
$
3

 
$
155,533

 
$
(180,360
)
 
$
(23,571
)
 
$
(7,783
)
Cumulative impact of accounting changes
—

 
—

 
—

 
776

 
—

 
776

Dividends declared
809

 
—

 
(812
)
 
—

 
—

 
(3
)
Share-based compensation
—

 
—

 
876

 
—

 
—

 
876

Tax withholding related to vesting of restricted stock units
—

 
—

 
(394
)
 
—

 
—

 
(394
)
Net loss
—

 
—

 
—

 
(7,056
)
 
—

 
(7,056
)
Employee retirement plan adjustments, net of tax
—

 
—

 
—

 
—

 
15

 
15

Foreign currency translation adjustments
—

 
—

 
—

 
—

 
(1,566
)
 
(1,566
)
Net changes in unrealized gains on cash flow hedges, net of tax
—

 
—

 
—

 
—

 
(637
)
 
(637
)
Balance at March 29, 2019
$
41,421

 
$
3

 
$
155,203

 
$
(186,640
)
 
$
(25,759
)
 
$
(15,772
)

 
Preferred Stock
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
Shareholders’
(Deficit) Equity
Balance at December 31, 2017
$
49,665

 
$
3

 
$
143,788

 
$
(167,710
)
 
$
(20,062
)
 
$
5,684

Cumulative impact of accounting changes
—

 
—

 
—

 
510

 
(126
)
 
384

Dividends declared
748

 
—

 
(751
)
 
—

 
—

 
(3
)
Share-based compensation
—

 
—

 
231

 
—

 
—

 
231

Tax withholding related to vesting of restricted stock units
—

 
—

 
(7
)
 
—

 
—

 
(7
)
Net loss
—

 
—

 
—

 
(638
)
 
—

 
(638
)
Employee retirement plan adjustments, net of tax
—

 
—

 
—

 
—

 
3

 
3

Foreign currency translation adjustments
—

 
—

 
—

 
—

 
2,415

 
2,415

Net changes in unrealized gains on cash flow hedges, net of tax
—

 
—

 
—

 
—

 
1,627

 
1,627

Exchange of preferred stock for common stock of Jason Industries, Inc.
(12,136
)
 
—

 
12,136

 
—

 
—

 
—

Balance at March 30, 2018
$
38,277

 
$
3

 
$
155,397

 
$
(167,838
)
 
$
(16,143
)
 
$
9,696


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

6

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




1.
Description of Business and Basis of Presentation
Description of Business
Jason Industries, Inc. (“Jason Industries”), including its subsidiaries (collectively, the “Company”), is a global industrial manufacturing company. In the first quarter of 2019, as part of a review of the Company’s organizational structure, the Company made certain strategic leadership changes which required a reassessment of reportable segments. Based on this evaluation, the Company changed how it makes operating decisions, assesses performance of the business, and allocates resources. As a result, the Company reduced the number of operating and reportable segments from four to three: industrial, engineered components, and fiber solutions. The prior year disclosures have been updated to conform with current year presentation.
The Company operates in the United States and 13 foreign countries. The Company’s industrial segment, formerly the finishing segment, focuses on the production of industrial brushes, polishing buffs and compounds, abrasives, and roller technology products that are used in a broad range of industrial and infrastructure applications. The engineered components segment, the combined former seating and components segments, designs, engineers, and manufactures seating, safety and filtration products used in heavy industry (construction, agriculture, and material handling), turf care, power sports, rail and general industrial applications. The fiber solutions segment, formerly the acoustics segment, manufactures technical, non-woven fiber-based acoustical, thermal, and structural products serving automotive and other end markets.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial reporting and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. For additional information, including the Company’s significant accounting policies, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2018 and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q).
The Company’s fiscal year ends on December 31 . Throughout the year, the Company reports its results using a fiscal calendar whereby each three month quarterly reporting period is approximately thirteen weeks in length, ending on a Friday. The exceptions are the first quarter, which begins on January 1 , and the fourth quarter, which ends on December 31 . For 2019 , the Company’s fiscal quarters are comprised of the three months ending March 29 ,  June 28 ,  September 27 and December 31 . In 2018 , the Company’s fiscal quarters were comprised of the three months ended March 30 , June 29 , September 28 and December 31 .
In the opinion of management, all adjustments considered necessary for a fair statement of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Interim results are not necessarily indicative of the results that may be expected for the entire fiscal year.
Recently issued accounting standards
Accounting standards adopted in the current fiscal year
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “ Leases (Topic 842) ” (“ASU 2016-02”). ASU 2016-02 establishes new accounting and disclosure requirements for leases. See Note 6 , “Leases” for further discussion regarding the adoption of this standard.
In August 2017, the FASB issued ASU 2017-12, “ Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ” (“ASU 2017-12”). ASU 2017-12 broadens the scope of financial and nonfinancial strategies eligible for hedge accounting and makes certain targeted improvements to simplify the application of hedge accounting guidance. In addition, the standard amends the presentation and disclosure requirements for hedges and is intended to more closely align the hedge accounting guidance with a company’s risk management strategies. The Company adopted ASU 2017-12 effective January 1, 2019. The adoption of this guidance did not have an impact on the Company’s condensed consolidated financial statements or the related disclosures within the accompanying notes.

7

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



Accounting standards to be adopted in future fiscal periods
In August 2018, the FASB issued ASU 2018-14, “ Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans ” (“ASU 2018-14”). ASU 2018-14 modifies certain disclosure requirements for pension and other postretirement plans, such as eliminating disclosure requirements to disclose the amounts in accumulated other comprehensive loss expected to be recognized as a component of net periodic benefit cost over the next fiscal year and the impact that a 1% increase or decrease in the medical trend rate would have on the accumulated postretirement benefit obligation. The standard is effective for interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted. As the scope of ASU 2018-14 is limited to only financial disclosure requirements, the standard will not have an impact on the Company’s condensed consolidated financial statements. The Company is currently assessing the impact that this standard will have on the employee benefit plan disclosures within the notes to the condensed consolidated financial statements, as well as the planned timing of adoption.
2.
Revision of Previously Reported Financial Information
During the first quarter of 2019, the Company identified an error in the income tax provision and deferred income taxes as of and for the year ended December 31, 2018. As a result of this income tax error, the Company restated its consolidated financial statements as of and for the year ended December 31, 2018 on Form 10-K/A. See the Form 10-K/A for additional details regarding the error.
As a result of this error, the Company’s previously reported tax provision for the three months ended March 30, 2018 was overstated by $0.2 million within the condensed consolidated statement of operations. While the impact of this error is not material to the previously reported quarterly interim period, the Company has revised its condensed consolidated financial statements for the three months ended March 30, 2018 included herein to reflect the correction of this error. Amounts throughout the condensed consolidated financial statements and notes thereto have been adjusted to incorporate the revised amounts, where applicable.
The impact of the required correction to the condensed consolidated statement of operations and comprehensive income (loss) were as follows:
 
For the Three Months Ended
 
March 30, 2018
 
As Reported
 
Adjustments
 
As Revised
Tax provision
275

 
(181
)
 
94

Net loss
(819
)
 
181

 
(638
)
Net loss attributable to Jason Industries
(819
)
 
181

 
(638
)
Net loss available to common shareholders of Jason Industries
(2,546
)
 
181

 
(2,365
)
 
 
 
 
 
 
Net loss per share available to common shareholders of Jason Industries:
Basic and diluted
(0.09
)
 
—

 
(0.09
)
 
 
 
 
 
 
Comprehensive income
3,226

 
181

 
3,407

    
The above corrections did not impact total net cash provided by (used in) operating, investing or financing activities within the condensed consolidated statements of cash flows for any previous period. Other than the adjustments to net loss for the three months ended March 30, 2018, as described above, which impacted recorded retained deficit and total shareholders ’ deficit, there were no other impacts to the condensed consolidated statement of shareholders ’ (deficit) equity. There was no impact to the Company ’ s previously reported “segment” Adjusted EBITDA for the three months ended March 30, 2018.
3.
Net Sales
The industrial segment operates principally as a provider of industrial brushes, polishing buffs and compounds, abrasives and roller technology products that are used in a broad range of industrial and infrastructure applications. The Company typically sells products within this business under purchase orders through both direct to customer and distribution

8

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



sales channels. The Company generally transfers control and recognizes net sales when the product is shipped to the customer. Within the industrial segment, there are certain custom products for customers with minimum stocking agreements for which the Company recognizes net sales over time. Revenue from products transferred to customers over time accounted for less than 1% of industrial net sales for both the three months ended March 29, 2019 and March 30, 2018 .
The engineered components segment operates principally as a seating and component Original Equipment Manufacturer (“OEM”) within the lawn and turf care, agriculture, construction, power sports, rail and general industrial markets. The Company sells products within this business under both purchase orders and under contracts for custom products primarily through the direct to customer sales channel. The Company transfers control and recognizes net sales at a point in time upon shipment to the customer for these contracts.
The fiber solutions segment operates principally as an automotive OEM Tier-1 and Tier-2 supplier. The products in this business are generally custom products sold direct to customers that are awarded by platform to a sole supplier for the life of the platform which can span several years. The Company transfers control and recognizes net sales at a point in time upon shipment to the customer for these contracts.
The Company disaggregates net sales by geography based on the country of origin of the final sale with the external customer, which in certain cases may be manufactured in other countries at facilities within the Company’s global network. The following table summarizes net sales disaggregated by geography and reportable segment:
 
Three Months Ended March 29, 2019
 
Industrial
 
Engineered Components
 
Fiber Solutions
 
Total
United States
$
16,959

 
$
56,531

 
$
26,138

 
$
99,628

Europe
29,707

 
—

 
—

 
29,707

Mexico
2,212

 
—

 
9,515

 
11,727

Other
859

 
57

 
—

 
916

Total
$
49,737

 
$
56,588

 
$
35,653

 
$
141,978

 
Three Months Ended March 30, 2018
 
Industrial
 
Engineered Components
 
Fiber Solutions
 
Total
United States
$
17,788

 
$
67,404

 
$
33,381

 
$
118,573

Europe
33,238

 
2,023

 
—

 
35,261

Mexico
2,021

 
—

 
10,468

 
12,489

Other
931

 
—

 
—

 
931

Total
$
53,978

 
$
69,427

 
$
43,849

 
$
167,254



9

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



The Company disaggregates net sales by sales channel as either direct or distribution net sales. Direct net sales are defined as net sales ordered by and sold directly to the end customer without the involvement of a third party. For our OEM customers, direct sales include certain spare parts and accessories which are intended for resale to end consumers. Distribution net sales are defined as net sales ordered by and sold to a third party that intends to resell the products to the end consumer. The following table summarizes net sales disaggregated by sales channel and reportable segment:
 
Three Months Ended March 29, 2019
 
Industrial
 
Engineered Components
 
Fiber Solutions
 
Total
Direct
$
25,704

 
$
54,540

 
$
35,653

 
$
115,897

Distribution
24,033

 
2,048

 
—

 
26,081

Total
$
49,737

 
$
56,588

 
$
35,653

 
$
141,978

 
Three Months Ended March 30, 2018
 
Industrial
 
Engineered Components
 
Fiber Solutions
 
Total
Direct
$
30,748

 
$
68,173

 
$
43,849

 
$
142,770

Distribution
23,230

 
1,254

 
—

 
24,484

Total
$
53,978

 
$
69,427

 
$
43,849

 
$
167,254


4.
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 fiscal years ended 2016, 2017, 2018 and the three months ended March 29, 2019 and are expected to be completed by the end of 2019. As of December 31, 2018, the Company announced that the 2016 program was deemed to be complete, with costs incurred during 2019 under the program related to completion of actions previously identified prior to closure of the program.
In 2019, additional restructuring initiatives were identified across the business segments, and the Company anticipates continuing to identify future actions including 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. As these are not part of the 2016 program, such costs are presented separately below in “Other Restructuring Actions.”
Restructuring costs are presented separately on the condensed consolidated statements of operations.

10

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



2016 Program
The following table presents the restructuring costs recognized by the Company under the 2016 program by reportable segment. The other costs incurred under the 2016 program for the three months ended March 29, 2019 primarily include charges related to the closure of a U.K. plant within the engineered components segment and the consolidation of two U.S. plants within the fiber solutions segment. The other costs incurred under the 2016 program for the three months ended March 30, 2018 primarily include charges related to the consolidation of two U.S. plants within the engineered components segment and the consolidation of two U.S. plants within the fiber solutions segment. Based on the announced restructuring actions to date, the Company expects to incur total restructuring costs of approximately $17.4 million under the 2016 program.
2016 Program
 
Industrial
 
Engineered Components
 
Fiber Solutions
 
Corporate
 
Total
Restructuring charges - three months ended March 29, 2019:
 
 
 
 
 
 
 
 
 
 
Severance costs
 
$
(35
)
 
$
11

 
$
3

 
$
173

 
$
152

Lease termination costs (1)
 
—

 
—

 
—

 
—

 
—

Other costs
 
—

 
1,015

 
139

 
—

 
1,154

Total
 
$
(35
)
 
$
1,026

 
$
142

 
$
173

 
$
1,306

 
 
 
 
 
 
 
 
 
 
 
Restructuring charges - three months ended March 30, 2018:
 
 
 
 
 
 
 
 
 
 
Severance costs
 
$
(79
)
 
$
—

 
$
—

 
$
—

 
$
(79
)
Lease termination costs (1)
 
36

 
—

 
—

 
—

 
36

Other costs
 
49

 
274

 
322

 
—

 
645

Total
 
$
6

 
$
274

 
$
322

 
$
—

 
$
602

The following table presents the cumulative restructuring costs recognized by the Company under the 2016 program by reportable segment. The 2016 program began in the first quarter of 2016 and as such, the cumulative restructuring charges represent the cumulative charges incurred since the inception of the 2016 program through March 29, 2019 .     
2016 Program
 
Industrial
 
Engineered Components
 
Fiber Solutions
 
Corporate
 
Total
Cumulative restructuring charges - period ended March 29, 2019:
 
 
 
 
 
 
 
 
 
 
Severance costs
 
$
4,744

 
$
953

 
$
1,080

 
$
761

 
$
7,538

Lease termination costs (1)
 
428

 
—

 
172

 
—

 
600

Other costs
 
2,403

 
3,682

 
3,039

 
—

 
9,124

Total
 
$
7,575

 
$
4,635

 
$
4,291

 
$
761

 
$
17,262


11

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



The following table represents the restructuring liabilities:
 
Severance
costs
 
Lease
termination
costs (1)
 
Other costs
 
Total
Balance - December 31, 2018
$
457

 
$
—

 
$
325

 
$
782

Current period restructuring charges
152

 
—

 
1,154

 
1,306

Cash payments
(425
)
 
—

 
(1,177
)
 
(1,602
)
Foreign currency translation adjustments
(3
)
 
—

 
—

 
(3
)
Non-cash charges and other
(1
)
 
—

 
—

 
(1
)
Balance - March 29, 2019
$
180

 
$
—

 
$
302

 
$
482

 
 
 
 
 
 
 
 
 
Severance
costs
 
Lease
termination
costs (1)  
 
Other costs
 
Total
Balance - December 31, 2017
$
907

 
$
76

 
$
1,079

 
$
2,062

Current period restructuring charges
(79
)
 
36

 
645

 
602

Cash payments
(298
)
 
(37
)
 
(884
)
 
(1,219
)
Foreign currency translations adjustments
(2
)
 
3

 
5

 
6

Balance - March 30, 2018
$
528

 
$
78

 
$
845

 
$
1,451

(1)
Commencing on January 1, 2019, the Company recognizes lease termination costs in accordance with Accounting Standards Codification (“ASC”) 842, “Leases” (“ASC 842”) which addresses termination costs related to both financing and operating lease obligations. Prior to January 1, 2019, the Company recognized such costs in accordance with ASC 420, “Exit and Disposal Cost Obligations” related to operating leases. Prior period results continue to be reported under the accounting standards in effect for those periods.
At March 29, 2019 and December 31, 2018 , the restructuring liabilities related to the 2016 program were classified as other current liabilities on the condensed consolidated balance sheets. At March 29, 2019 and December 31, 2018 , the accrual for other costs primarily relates to the consolidation of two U.S. plants within the engineered components and fiber solutions segments.
Other Restructuring Actions
The following table presents the restructuring costs recognized by the Company for other restructuring actions by reportable segment. Based on the actions identified to date, the Company expects to incur other restructuring costs of approximately $1.4 million .
Other Restructuring Actions
 
Industrial
 
Engineered Components
 
Fiber Solutions
 
Corporate
 
Total
Restructuring charges - three months ended March 29, 2019:
 
 
 
 
 
 
 
 
 
 
Severance costs
 
$
199

 
$
—

 
$
65

 
$
—

 
$
264

Other costs
 
3

 
—

 
—

 
—

 
3

Total
 
$
202

 
$
—

 
$
65

 
$
—

 
$
267

The following table represents the restructuring liabilities:
 
Severance
costs
 
Other costs
 
Total
Balance - December 31, 2018


 


 


Current period restructuring charges
$
264

 
$
3

 
$
267

Cash payments
(69
)
 
(3
)
 
(72
)
Balance - March 29, 2019
$
195

 
$
—

 
$
195

At March 29, 2019 , the restructuring liabilities were classified as other current liabilities on the condensed consolidated balance sheet.

12

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



5.
Inventories
Inventories consisted of the following:
 
March 29, 2019
 
December 31, 2018
Raw material
$
33,923

 
$
31,501

Work-in-process
4,151

 
3,672

Finished goods
28,626

 
28,574

Total inventories
$
66,700

 
$
63,747

6.
Leases
Adoption of ASU 2016-02, “Leases (Topic 842)”
On January 1, 2019, the Company adopted ASU 2016-02, “Leases (Topic 842)” and all related amendments using the modified retrospective method with no adjustments to comparative prior periods. The Company also elected certain practical expedients that allowed the Company to (1) recognize a cumulative-effect adjustment to the opening balance of retained earnings; (2) forgo reassessment of its prior conclusions on (a) whether an expired or existing contract contains a lease, (b) the lease classification of expired or existing leases, and (c) whether any costs incurred for expired or existing leases qualified as initial direct costs; and (3) use an accounting policy election by class of underlying asset to choose whether or not to separate non-lease components from lease components. Subsequent to the date of adoption, the Company recognizes and measures new or modified leases in accordance with ASC 842. Prior to January 1, 2019, the Company recognized and measured leases in accordance with ASC 840, “Leases” and prior period results continue to be reported under the accounting standards in effect for those periods.
Under the modified retrospective approach for the adoption of ASC 842, the adoption resulted in the recording of a right-of-use (“ROU”) asset of $43.3 million and a lease liability of $45.3 million within the condensed consolidated balance sheet on January 1, 2019. The difference between the ROU asset and lease liability on the date of adoption relates to the reclassification of $3.0 million of certain previously recorded deferred rent balances to the ROU asset and to the reclassification of $1.1 million of other intangible assets - net related to below market rents that resulted from the June 30, 2014 go public business combination to the ROU asset.
In addition, in accordance with the implementation guidance of ASU 2016-02, on January 1, 2019 the Company recorded the cumulative impact of adopting the new standard on the condensed consolidated financial statements in which the Company recorded a deferred gain within other long-term liabilities of $1.0 million , $0.8 million net of tax, to retained deficit related to a previous sale leaseback of its Libertyville, Illinois facility.
Finance and Operating Lease Obligations
The Company’s lease portfolio includes both real estate and non-real estate type leases which are accounted for as either finance or operating leases. Real estate leases generally include office, warehouse and manufacturing facilities and non-real estate leases generally include office equipment, manufacturing machinery, vehicles and other transportation equipment. The Company’s leases have remaining lease terms of less than 1 year to 13 years. Many of the leases include provisions that enable the Company to renew the lease, and a number of leases are subject to various escalation clauses. Renewal options that are deemed reasonably certain are included as part of the lease term for purposes of calculating the ROU asset and lease liability. Operating lease ROU assets and lease liabilities are recorded on the date the Company takes possession of the leased assets on the balance sheet with expense recognized on a straight-line basis over the lease term. Leases with an estimated total term of 12 months or less are not recorded on the balance sheet and the lease expense is recognized on a straight-line basis over the lease term. The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants.
The Company determines if an arrangement is a lease at inception. The Company will only reassess the lease classification when modifications or changes to key terms are made to a lease agreement. Generally, the Company’s real estate type leases contain both lease components and non-lease components. Non-lease components of real estate type leases are excluded from the calculation of the ROU asset and lease liability and are excluded from lease expense. For the Company’s non-real estate type leases, non-lease components are included in the calculation of the ROU asset and lease liability and included in lease expense over the term of the lease. The Company uses a discount rate to calculate the ROU asset and lease liability. When the implicit rate is known or provided in the lease documents, the Company is required to use this rate as the discount rate. In cases in which the implicit rate is not known, the Company uses an estimated incremental borrowing rate

13

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



based upon the sovereign treasury rate for the currency in which the lease liability is denominated on the date the Company takes possession of the leased asset adjusted for various factors, such as term and an internal credit spread.
The Company’s components of lease expense was as follows:
 
 
Three Months Ended
 
 
March 29, 2019
Finance lease expense:
 
 
Amortization of right-of-use assets
 
$
40

Interest on lease liabilities
 
11

Operating lease expense
 
2,718

Other lease expense
 
179

Total
 
$
2,948

    
Based on the nature of the ROU asset, amortization of finance right-of-use assets, operating lease expense and other lease expense are recorded within either cost of goods sold or selling and administrative expenses and interest on finance lease liabilities is recorded within interest expense on the condensed consolidated statements of operations. Other lease expense includes lease expense for leases with an estimated total term of 12 months or less, variable lease expense related to variations in lease payments as a result of a change in factors or circumstances occurring after the lease possession date and sublease income.
The Company’s balance sheet information related to leases was as follows:
 
 
March 29, 2019
Finance Leases
 
 
Property, plant and equipment - net
 
$
190

 
 
 
Current portion of long-term debt
 
$
279

Long-term debt
 
302

Total finance lease liabilities
 
$
581

 
 
 
Operating Leases
 
 
Right-of-use operating lease assets
 
$
41,522

 
 
 
Current portion of operating lease liabilities
 
$
7,564

Long-term operating lease liabilities
 
35,467

Total operating lease liabilities
 
$
43,031


Other information related to the Company’s leases was as follows:
 
March 29, 2019
Weighted-average remaining lease term (in years)
 
Finance leases
1.63

Operating leases
7.62

Weighted-average discount rate
 
Finance leases
7.5
%
Operating leases
7.2
%
Cash paid for amounts included in the measurement of lease liabilities
 
Operating cash flows from finance leases
$
11

Operating cash flows from operating leases
2,762

Financing cash flows from finance leases
89



14

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



Future minimum lease payments required under finance and operating leases for each of the 12-month rolling periods below in effect at March 29, 2019 are as follows:
 
Finance Leases
 
Operating Leases
April 2019 to March 2020
$
316

 
$
10,273

April 2020 to March 2021
275

 
8,630

April 2021 to March 2022
28

 
6,873

April 2022 to March 2023
5

 
5,654

April 2023 to March 2024
2

 
4,460

Thereafter
—

 
20,668

Total future undiscounted lease payments
626

 
56,558

Less: imputed interest
(45
)
 
(13,527
)
Total lease obligations
$
581

 
$
43,031


As of March 29, 2019 , the operating leases that the Company signed but have not yet commenced are immaterial.
Future minimum lease payments required under long-term operating leases in effect at December 31, 2018 were as follows:
2019
 
$
10,654

2020
 
8,849

2021
 
7,296

2022
 
6,045

2023
 
4,654

Thereafter
 
21,691

 
 
$
59,189

Total rental expense under operating leases was $11.9 million and $12.2 million for the years end December 31, 2018 and December 31, 2017 , respectively.
7.
Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill, all of which is within the Company’s industrial segment, was as follows:
 
 
Balance as of December 31, 2018
$
44,065

Foreign currency impact
(442
)
Balance as of March 29, 2019
$
43,623

The Company’s other intangible assets - net consisted of the following:
 
 
 
March 29, 2019
 
December 31, 2018
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Patents
$
2,039

 
$
(1,105
)
 
$
934

 
$
2,038

 
$
(1,018
)
 
$
1,020

Customer relationships
105,218

 
(32,423
)
 
72,795

 
105,539

 
(30,634
)
 
74,905

Trademarks and other intangibles
54,794

 
(16,332
)
 
38,462

 
56,405

 
(15,801
)
 
40,604

Total other intangible assets - net
$
162,051

 
$
(49,860
)
 
$
112,191

 
$
163,982

 
$
(47,453
)
 
$
116,529

In accordance with the implementation guidance of ASU 2016-02, the Company reclassified $1.1 million of other intangible assets - net related to below market rents that resulted from the June 30, 2014 go public business combination to the right-of-use operating lease assets as of January 1, 2019. In accordance with the adoption methodology of ASU 2016-02, the other intangible assets-net balance as of December 31, 2018 was not restated.

15

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



Amortization of intangible assets was $2.9 million and $4.1 million for the three months ended March 29, 2019 and March 30, 2018 , respectively. Included within amortization expense for the three months ended March 30, 2018 , was $2.3 million of accelerated amortization expense in the engineered components segment related to the exit from non-core product lines for smart utility meter subassemblies in 2018. Excluding the impact of any future acquisitions, the Company anticipates the annual amortization for each of the next five fiscal years and thereafter to be the following:
2019
$
11,707

2020
11,706

2021
11,564

2022
11,391

2023
11,382

Thereafter
58,779

 
$
116,529

8.
Debt and Hedging Instruments
The Company’s debt consisted of the following:
 
March 29, 2019
 
December 31, 2018
First Lien Term Loans
$
291,765

 
$
292,540

Second Lien Term Loans
89,887

 
89,887

Debt discount on Term Loans
(2,440
)
 
(2,669
)
Deferred financing costs on Term Loans
(3,678
)
 
(4,052
)
Foreign debt
16,825

 
17,469

Finance lease obligations (1)
581

 
613

Total debt
392,940

 
393,788

Less: Current portion (1)  
(6,515
)
 
(6,544
)
Total Long-Term Debt
$
386,425

 
$
387,244

(1)
Subsequent to January 1, 2019, the Company recognizes and measures new or modified leases in accordance with ASC 842. Prior to January 1, 2019, the Company recognized and measured leases in accordance with ASC 840, “Leases” and prior period results continue to be reported under the accounting standards in effect for those periods. See Note 6 , “ Leases ” for further information.
Senior Secured Credit Facilities
As of March 29, 2019 , the Company’s U.S. credit facility (the “Senior Secured Credit Facilities”) included (i) term loans in an aggregate principal amount of $310.0 million (“First Lien Term Loans”) maturing June 30, 2021, of which $291.8 million is outstanding, (ii) term loans in an aggregate principal amount of $110.0 million (“Second Lien Term Loans”) maturing June 30, 2022, of which $89.9 million is outstanding, and (iii) a revolving loan of up to $34.3 million (“Revolving Credit Facility”) maturing June 30, 2020. The borrowing capacity of the revolving loan remains at $34.3 million until June 30, 2019, and thereafter, $30.0 million until June 30, 2020.
The principal amount of the First Lien Term Loans amortizes in quarterly installments equal to $0.8 million , with the balance payable at maturity. At the Company’s election, the interest rate per annum applicable to the loans under the Senior Secured Credit Facilities is based on a fluctuating rate of interest determined by reference to either (i) a base rate determined by reference to the higher of (a) the administrative agent’s prime rate, (b) the federal funds effective rate plus 0.50% or (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 are subject to a floor of 1.00% in the case of Eurocurrency loans. The applicable margin for loans under the

16

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



Revolving Credit Facility may be subject to adjustment based upon Jason Incorporated’s (an indirect wholly-owned subsidiary of the Company) consolidated first lien net leverage ratio.
Under the Revolving Credit Facility, if the aggregate outstanding amount of all Revolving Loans, swingline loans and certain letter of credit obligations exceeds $10.0 million 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, currently specified at 4.50 to 1.00 , with a decrease to 4.25 to 1.00 on December 31, 2019 and remaining at that level thereafter. If such outstanding amounts do not exceed $10.0 million at the end of any fiscal quarter, no financial covenants are applicable.
At March 29, 2019 , the interest rates on the outstanding balances of the First Lien Term Loans and Second Lien Term Loans were 7.1% and 10.6% , respectively. At March 29, 2019 , the Company had a total of $29.4 million of availability for additional borrowings under the Revolving Credit Facility since the Company had no outstanding borrowings but had letters of credit outstanding of $4.9 million which reduce availability under the facility.
Under the Senior Secured Credit Facilities, the Company is subject to mandatory prepayments if certain requirements are met. At March 29, 2019 and December 31, 2018 , there was no required mandatory excess cash flow prepayment required under the Senior Secured Credit Facilities.
Foreign debt
The Company has the following foreign debt obligations, including various overdraft facilities and term loans:
 
March 29, 2019
 
December 31, 2018
Germany
$
14,411

 
$
15,002

Mexico
1,857

 
2,000

India
557

 
467

Total foreign debt
$
16,825

 
$
17,469

These various foreign loans are comprised of individual outstanding obligations ranging from approximately $0.2 million to $8.8 million and $0.1 million to $9.3 million as of March 29, 2019 and December 31, 2018 , respectively. Certain of the Company’s foreign borrowings contain financial covenants requiring maintenance of a minimum equity ratio and/or maximum leverage ratio, among others. The Company was in compliance with these covenants as of March 29, 2019 .
The foreign debt obligations in Germany primarily relate to term loans of $14.2 million at March 29, 2019 and $15.0 million at December 31, 2018 . 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 .
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 totaling $210.0 million at both March 29, 2019 and December 31, 2018 . 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 three months ended March 29, 2019 and March 30, 2018 , the Company recognized $0.4 million of interest income and $0.2 million of interest expense, respectively, related to the Swaps. Based on current interest rates, the Company expects to recognize interest income of $1.1 million related to the Swaps in the next 12 months.

17

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



The fair values of the Company’s Swaps are recorded on the condensed consolidated balance sheets with the corresponding offset recorded as a component of accumulated other comprehensive loss. The fair value of the Swaps was $1.0 million at March 29, 2019 and $1.9 million at December 31, 2018 , respectively. See the amounts recorded on the condensed consolidated balance sheets within the table below:
 
March 29, 2019
 
December 31, 2018
Interest rate swaps:
 
 
 
Recorded in other current assets
$
902

 
$
1,325

Recorded in other assets - net
123

 
542

Total net asset derivatives designated as hedging instruments
$
1,025

 
$
1,867

9.
Share-Based Compensation
In 2014, the Company’s Board of Directors approved 3,473,435 shares of common stock to be reserved and authorized for issuance under the 2014 Omnibus Incentive Plan (the “2014 Plan”) to certain executive officers, senior management employees, and members of the Board of Directors. On February 27, 2018, the Company’s Board of Directors unanimously approved an amendment to the 2014 Plan to increase the number of authorized shares of common stock by 4,000,000 shares. At March 29, 2019 , there were 1,352,484 shares of common stock that remained authorized and available for future grants.
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 (“RSUs”) and performance share units, which are restricted stock units with vesting conditions contingent upon achieving certain performance goals. Share-based compensation expense is reported in selling and administrative expenses in the Company’s condensed consolidated statements of operations.
The Company recognized the following share-based compensation expense:
 
Three Months Ended
 
March 29, 2019
 
March 30, 2018
Restricted stock units
$
774

 
$
124

Adjusted EBITDA vesting awards
102

 
107

Total share-based compensation expense
$
876

 
$
231

 
 
 
 
Total income tax benefit recognized
$
214

 
$
57

As of March 29, 2019 , total unrecognized compensation cost related to share-based compensation awards was approximately $6.6 million , which the Company expects to recognize over a weighted average period of approximately 2.2 years .
The following table sets forth the restricted and performance share unit activity:
 
 
 
 
 
Performance Share Units
 
Restricted Stock Units
 
Adjusted EBITDA Vesting Awards
 
Units
(thousands)
 
Weighted-Average Grant-Date Fair Value
 
Units
(thousands)
 
Weighted-Average Grant-Date Fair Value
Outstanding at December 31, 2018
3,150

 
$
2.89

 
908

 
$
1.30

Granted
705

 
1.64

 
705

 
1.64

Issued
(885
)
 
2.42

 
—

 
—

Deferred
35

 
2.98

 
—

 
—

Forfeited
(130
)
 
2.96

 
(23
)
 
1.44

Outstanding at March 29, 2019
2,875

 
$
2.73

 
1,590

 
$
1.45


18

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



Restricted Stock Units
As of March 29, 2019 , there was $5.0 million of unrecognized share-based compensation expense related to 2,551,205 RSU awards, with a weighted-average grant date fair value of $2.42 , that are expected to vest over a weighted-average period of 2.1 years . Included within the 2,874,844 RSU awards outstanding as of March 29, 2019 are 323,639 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 $5.15 .
In connection with the vesting of RSUs previously granted 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 three months ended March 29, 2019 and March 30, 2018 , there were 246,965 and 2,563 shares, respectively, withheld to satisfy the requirement. The withholding is treated as a reduction in additional paid-in capital in the accompanying condensed consolidated statements of shareholders’ (deficit) equity.
Performance Share Units
Performance share unit awards based on Adjusted EBITDA performance metrics are payable at the end of their respective performance period in common stock. 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 approximately three years.
As of March 29, 2019 , there was $1.6 million of unrecognized share-based compensation expense related to cumulative Adjusted EBITDA based vesting performance share unit awards, which is expected to be recognized over a weighted average period of 2.3 years .
Adjusted EBITDA Vesting Awards - 2019 Grant
In the first quarter of 2019, the Company granted performance share unit awards based on achievement of an Adjusted EBITDA performance target during a three year measurement period ending December 31, 2021. The number of share units awarded can range from zero to 100% 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.
Compensation expense of the Adjusted EBITDA based performance share unit awards is currently being recognized related to an estimated payout of 100% of target, or 704,500 shares.
Adjusted EBITDA Vesting Awards - 2017 Grant
In the third quarter of 2017, the Company granted performance share unit awards based on achievement of an Adjusted EBITDA performance target during a three year measurement period ending March 30, 2020. The number of share units awarded can range from zero to 100% 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.
Compensation expense of the Adjusted EBITDA based performance share unit awards is currently being recognized related to an estimated payout of 100% of target, or 885,180 shares.
10.
Earnings per Share
Basic income (loss) per share is calculated by dividing net income (loss) attributable 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 and convertible preferred stock. Public warrants (“warrants”) consist of warrants to purchase shares of Jason Industries common stock which are quoted on Nasdaq under the symbol “JASNW.”

19

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



The reconciliation of the numerator and denominator of the basic and diluted loss per share calculation and the anti-dilutive shares are as follows:
 
Three Months Ended
(share amounts in thousands)
March 29, 2019
 
March 30, 2018
Net loss per share attributable to Jason Industries common shareholders
 
 
 
Basic and diluted loss per share
$
(0.28
)
 
$
(0.09
)
 
 
 
 
Numerator:
 
 
 
Net loss available to common shareholders of Jason Industries
$
(7,868
)
 
$
(2,365
)
 
 
 
 
Denominator:
 
 
 
Basic and diluted weighted-average shares outstanding
27,962

 
27,329

 
 
 
 
Weighted average number of anti-dilutive shares excluded from denominator:
 
 
 
Warrants to purchase Jason Industries common stock (1)
13,994

 
13,994

Conversion of Series A 8% Perpetual Convertible Preferred (2)
3,339

 
3,309

Restricted stock units
2,761

 
1,023

Performance share units
944

 
1,316

Total
21,038

 
19,642

(1)  
Each outstanding warrant entitles the holder to purchase one share of the Company’s common stock at a price of $12.00 per share. The warrants expire on June 30, 2019.

(2)  
Includes the impact of 809 additional Series A Preferred Stock shares from a stock dividend declared on February 1, 2019 to be paid in additional shares of Series A Preferred Stock on April 1, 2019 . The Company included the preferred stock within the condensed consolidated balance sheets as of the declaration date. Conversion is presented at the voluntary conversion ratio of approximately 81.18 common shares for each preferred share.

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 are 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 ASC Topic 260.
11.
Income Taxes
At the end of each three month period, the Company estimates a base effective tax rate expected for the full year based on the most recent forecast of its pre-tax income (loss), permanent book and tax differences, and global tax planning strategies. The Company uses this base rate to provide for income taxes on a year-to-date basis, excluding the effect of significant, unusual, discrete or extraordinary items, and items that are reported net of their related tax effects. The Company records the tax effect of significant, unusual, discrete or extraordinary items, and items that are reported net of their tax effects in the period in which they occur.
The effective tax rate was (11.2)% and (17.3)% for the three months ended March 29, 2019 and March 30, 2018 , respectively. The effective income tax rate for both 2019 and 2018 reflects the amount of taxable income or loss at the U.S. Federal statutory rate, taxable earnings or losses derived in foreign jurisdictions with tax rates that differ from the U.S. Federal statutory rate, the impact of the global intangible low taxed income (“GILTI”) and interest deduction limitations contained in the Tax Cuts and Jobs Act (the “Tax Reform Act”), and discrete items. The net discrete tax expense was $0.1 million for the three months ended March 29, 2019 and the net discrete tax benefit was immaterial for the three months ended March 30, 2018 .

20

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



The amount of gross unrecognized tax benefits was $2.2 million as of March 29, 2019 and $2.1 million as of December 31, 2018 , all of which would reduce the Company’s effective tax rate if recognized.
During the next twelve months, the Company believes it is reasonably possible that the total amount of unrecognized tax benefits will stay the same. The Company recognizes interest and penalties related to tax matters in its tax provision. The Company has an immaterial amount of accrued interest and penalties that were recognized as a component of the income tax provision as of March 29, 2019 and December 31, 2018 .
12.
Shareholders ’ (Deficit) Equity
The changes in the components of accumulated other comprehensive loss, net of taxes, for the three months ended March 29, 2019 and March 30, 2018 were as follows:
 
Employee retirement plan adjustments
 
Foreign currency translation adjustments
 
Net unrealized gains on cash flow hedges
 
Total
Balance at December 31, 2018
$
(1,831
)
 
$
(23,151
)
 
$
1,411

 
$
(23,571
)
Other comprehensive loss before reclassifications
—

 
(1,566
)
 
(304
)
 
(1,870
)
Amounts reclassified from accumulated other comprehensive loss
15

 
—

 
(333
)
 
(318
)
Balance at March 29, 2019
$
(1,816
)
 
$
(24,717
)
 
$
774

 
$
(25,759
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee retirement plan adjustments
 
Foreign currency translation adjustments
 
Net unrealized gains on cash flow hedges
 
Total
Balance at December 31, 2017
$
(1,517
)
 
$
(18,596
)
 
$
51

 
$
(20,062
)
Cumulative impact of accounting changes
(137
)
 
—

 
11

 
(126
)
Other comprehensive income before reclassifications
—

 
2,415

 
1,475

 
3,890

Amounts reclassified from accumulated other comprehensive loss
3

 
—

 
152

 
155

Balance at March 30, 2018
$
(1,651
)
 
$
(16,181
)
 
$
1,689

 
$
(16,143
)
Series A Preferred Stock Dividends
The Company paid the following dividends on the Series A Preferred Stock in additional shares of Series A Preferred Stock during the three months ended March 29, 2019 :
Payment Date
 
Record Date
 
Amount Per Share
 
Total Dividends Paid
 
Preferred Shares Issued
January 1, 2019
 
November 15, 2018
 
$20.00
 
$796
 
794
On February 1, 2019 , the Company declared a $20.00 per share dividend on its Series A Preferred Stock to be paid in additional shares of Series A Preferred Stock on April 1, 2019 to holders of record on February 15, 2019 . As of March 29, 2019 , the Company has recorded the 809 additional Series A Preferred Stock shares declared for the dividend of $0.8 million within preferred stock in the condensed consolidated balance sheets.
Exchange of preferred stock for common stock of Jason Industries, Inc.
On January 22, 2018, certain holders of the Company’s Series A Preferred Stock exchanged 12,136 shares of Series A Preferred Stock for 1,395,640 shares of the Company’s common stock, a conversion rate of 115 shares of common stock for each share of Series A Preferred Stock. Under the terms of the Series A Preferred Stock agreements, holders of the Series A Preferred Stock have the option to convert each share of Series A Preferred Stock into approximately 81.18 shares of the Company’s common stock, subject to certain adjustments in the conversion rate. The excess of the book value of the Series A Preferred Stock over the par value of the Company’s common stock issued in the exchange was recorded as an increase to additional paid-in capital on the condensed consolidated balance sheets. The fair value of the redemption premium, represented by the excess of the exchange conversion rate over the agreement conversion rate, was recorded as a reduction to net loss available to common shareholders of Jason Industries within the condensed consolidated statements of operations.

21

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



13.
Business Segments, Geographic and Customer Information
In the first quarter of 2019, as part of a review of the Company’s organizational structure, the Company made certain strategic leadership changes which required a reassessment of reportable segments. Based on this evaluation, the Company changed how it makes operating decisions, assesses performance of the business, and allocates resources. As a result, the Company reduced the number of operating and reportable segments from four to three . Reportable segments include the former finishing segment renamed as the industrial segment, the former seating and components segments combined into one engineered components segment, and the former acoustics segment renamed as the fiber solutions segment. The prior year disclosures have been updated to conform with current year presentation.
Net sales information relating to the Company’s reportable segments was as follows:
 
Three Months Ended
 
March 29, 2019
 
March 30, 2018
Industrial
$
49,737

 
$
53,978

Engineered Components
56,588

 
69,427

Fiber Solutions
35,653

 
43,849

Net Sales
$
141,978

 
$
167,254

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, 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 restructuring charges, transaction-related expenses, other professional fees, purchase accounting adjustments, lease expense associated with vacated facilities and non-cash share based compensation expense.
Management believes that Adjusted EBITDA provides a clear picture of the Company’s operating results by eliminating expenses and income that are not reflective of the underlying business performance. Certain corporate-level administrative expenses such as payroll and benefits, incentive compensation, travel, marketing, accounting, auditing and legal fees and certain other expenses are kept within the corporate results and are not allocated to the business segments. Shared expenses across the Company that directly relate to the performance of our three 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 Adjusted EBITDA to operating results presented on a GAAP basis.

22

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



Adjusted EBITDA information relating to the Company’s reportable segments is presented below followed by a reconciliation of total segment Adjusted EBITDA to consolidated loss before income taxes:
 
Three Months Ended
 
March 29, 2019
 
March 30, 2018
Segment Adjusted EBITDA
 
 
 
Industrial
$
6,841

 
$
7,799

Engineered Components
5,736

 
9,003

Fiber Solutions
3,566

 
5,778

Total segment Adjusted EBITDA
$
16,143

 
$
22,580

Interest expense
(192
)
 
(247
)
Depreciation and amortization
(9,204
)
 
(10,704
)
Loss on disposal of property, plant and equipment - net
(8
)
 
(234
)
Restructuring
(1,400
)
 
(602
)
Integration and other restructuring costs
(90
)
 
(356
)
Total segment income before income taxes
5,249

 
10,437

Corporate general and administrative expenses
(2,085
)
 
(2,867
)
Corporate interest expense
(8,039
)
 
(7,780
)
Corporate depreciation
(157
)
 
(103
)
Corporate restructuring
(173
)
 
—

Corporate transaction-related expenses
(340
)
 
—

Corporate integration and other restructuring costs
76

 
—

Corporate share-based compensation
(876
)
 
(231
)
Loss before income taxes
$
(6,345
)
 
$
(544
)
Assets held by reportable segments were as follows:
 
March 29, 2019
 
December 31, 2018
Industrial
$
237,187

 
$
230,185

Engineered Components
163,942

 
145,409

Fiber Solutions
128,051

 
124,822

Total segments
529,180

 
500,416

Corporate and eliminations
9,457

 
3,181

Consolidated total assets
$
538,637

 
$
503,597


23

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



14.
Fair Value Measurements
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.
•
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 condensed 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 $385.5 million at March 29, 2019 and $387.4 million at December 31, 2018 . 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.
15.
Commitments and Contingencies
Litigation Matters
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 March 29, 2019 and December 31, 2018 , 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.

24

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



16.
Subsequent Events
On April 1, 2019, the Company acquired 100% of the stock of Schaffner Manufacturing Company, Inc. (“Schaffner”), a North American manufacturer of high-quality polishing and finishing products with annual sales of approximately $20 million , for a preliminary cash purchase price of $11 million which was funded with available cash on hand. Schaffner develops products for specialized applications including flap wheels, buffing wheels, and buffing compounds, serving a range of industries. It currently operates four manufacturing facilities in Pennsylvania, Michigan, and Mississippi. Through the acquisition of Schaffner, the Company expanded its polishing product line offerings within North America. The business will be integrated into the Company’s industrial segment. The preliminary purchase price allocation is not disclosed as the initial accounting is incomplete as of the filing date.

    



25


ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Note Regarding Forward-Looking Statements
Unless otherwise indicated, references to “Jason Industries,” the “Company,” “we,” “our” and “us” in this Quarterly Report on Form 10-Q 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 market 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 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, among others:
•
the level of demand for the Company’s products;
•
competition in the Company’s markets;
•
volatility in the prices of raw materials and the Company’s ability to pass along increased costs;
•
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 proposed and potential regulations related to 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, as well as those disclosed in the Company’s other filings with the Securities and Exchange Commission (the “SEC”), including those discussed under “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2018 , which may be amended or supplemented in Part II, Item 1A, “Risk Factors,” of the Company’s subsequently filed Quarterly Reports on Form 10-Q (including this report).
Introductory Note
The following discussion and analysis of financial condition and results of operations of the Company should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2018 , and related notes thereto, along with the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s 2018 Annual Report on Form 10-K/A.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains certain financial measures, in particular the presentation of EBITDA and Adjusted EBITDA, which are not presented in accordance with GAAP. These non-GAAP financial measures are being presented because they provide readers of this MD&A with additional insight into the Company’s operational performance relative to comparable prior periods presented and relative to its peer group. 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

26


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 2019 , the Company’s fiscal quarters are comprised of the three months ended March 29, June 28, September 27 , and December 31. In 2018 , the Company’s fiscal quarters were comprised of the three months ended March 30,   June 29,   September 28, and December 31 . Throughout this MD&A, we refer to the period from January 1, 2019 through March 29, 2019 as the “ first quarter of 2019 ” or the “ first quarter ended March 29, 2019 ”. Similarly, we refer to the period from January 1, 2018 through March 30, 2018 as the “ first quarter of 2018 ” or the “ first quarter ended March 30, 2018 ”.
Revision of the Condensed Consolidated Financial Statements
During the first quarter of 2019, we identified an error in the income tax provision presented within the condensed consolidated financial statements for the three months ended March 30, 2018. This MD&A has been revised to reflect the revision of the income tax provision. See Note 2 , “ Revision of Previously Reported Financial Information ” in the notes to the condensed consolidated financial statements for further information.
Overview
Jason Industries is a global industrial manufacturing company with significant market share positions in each of its three segments: industrial, engineered components, and fiber solutions. The Company provides critical components and manufacturing solutions to customers across a wide range of end markets, industries and geographies through its global network of 28 manufacturing facilities and 14 sales offices, administrative and/or warehouse 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. In the first quarter of 2019, as part of a review of the Company’s organizational structure, the Company made certain strategic leadership changes which required a reassessment of reportable segments. Based on this evaluation, the Company changed how it makes operating decisions, assesses performance of the business, and allocates resources. As a result, the Company reduced the number of operating and reportable segments from four to three: industrial, engineered components, and fiber solutions. The prior year disclosures have been updated to conform with current year presentation.
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 industrial segment, formerly the finishing segment, focuses on the production of industrial brushes, polishing buffs and compounds, abrasives, and roller technology products that are used in a broad range of industrial and infrastructure applications. The engineered components segment, the combined former seating and components segments, designs, engineers, and manufactures seating, safety, and filtration products used in heavy industry (construction, agriculture, and material handling), turf care, power sports, rail and general industrial applications. The fiber solutions segment, formerly the acoustics segment, manufactures technical, non-woven fiber-based acoustical, thermal, and structural products serving automotive and other end markets.
During the three months ended March 29, 2019 and March 30, 2018 , approximately 30% and 29% , respectively, of the Company’s net sales based on the country of origin of the final sale with the external customer were from outside of the United States. 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 primarily uses 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.

27


Consolidated Results of Operations
The following table sets forth our consolidated results of operations (in thousands) (unaudited):  
 
Three Months Ended
 
March 29, 2019
 
March 30, 2018
Net sales
$
141,978

 
$
167,254

Cost of goods sold
113,398

 
131,582

Gross profit
28,580

 
35,672

Selling and administrative expenses
25,221

 
27,524

Loss on disposals of property, plant and equipment - net
8

 
234

Restructuring
1,573

 
602

Operating income
1,778

 
7,312

Interest expense
(8,231
)
 
(8,027
)
Equity income
84

 
100

Other income - net
24

 
71

Loss before income taxes
(6,345
)
 
(544
)
Tax provision
711

 
94

Net loss
$
(7,056
)
 
$
(638
)
Redemption premium and accretion of dividends on preferred stock
812

 
1,727

Net loss available to common shareholders of Jason Industries
$
(7,868
)
 
$
(2,365
)
 
 
 
 
Total other comprehensive (loss) income
$
(2,188
)
 
$
4,045

Other financial data: (1)  
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/(Decrease)
(in thousands, except percentages)
March 29, 2019
 
March 30, 2018
 
$
 
%
Consolidated
 
 
 
 
 
 
 
Net sales
$
141,978

 
$
167,254

 
$
(25,276
)
 
(15.1
)%
Net loss
(7,056
)
 
(638
)
 
6,418

 
1,006.0

Net loss as a % of net sales
5.0
%
 
0.4
%
 
460 bps
Adjusted EBITDA
14,058

 
19,713

 
(5,655
)
 
(28.7
)
Adjusted EBITDA % of net sales
9.9
%
 
11.8
%
 
(190) 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 a reconciliation of Adjusted EBITDA to net loss.

28


The Three Months Ended March 29, 2019 Compared with the Three Months Ended March 30, 2018
Net sales . Net sales were $142.0 million for the three months ended March 29, 2019 , a decrease of $25.3 million , or 15.1% , compared with $167.3 million for the three months ended March 30, 2018 , reflecting decreased net sales in the engineered components segment of $12.8 million , the fiber solutions segment of $8.2 million and the industrial segment of $4.2 million . See “Segment Financial Data” within Item 2, “Management’s Discussion and Analysis,” for further discussion on net sales for each segment.
Changes in foreign currency exchange rates compared with the U.S. dollar had a net negative impact of $2.7 million on consolidated net sales during the three months ended March 29, 2019 compared with 2018 , negatively impacting the industrial segment’s net sales by $2.7 million . This was due principally to the net strengthening of the U.S. dollar against the Euro in the three months ended March 29, 2019 compared to the three months ended March 30, 2018 .
Cost of goods sold . Cost of goods sold was $113.4 million for the three months ended March 29, 2019 , compared with $131.6 million for the three months ended March 30, 2018 . The decrease in cost of goods sold was primarily due to lower sales volumes across all segments, lower manufacturing costs of $4.4 million in the engineered components segment due to the exit from non-core product lines for smart utility meter subassemblies, a $2.0 million decrease related to foreign currency exchange rates, reduced material usage and labor costs as a result of continuous improvement programs in the engineered components and fiber solutions segments and reduced costs resulting from the Company’s global cost reduction and restructuring program as a result of the closure of the Richmond, Indiana facility in the fiber solutions segment. The decrease was partially offset by higher labor and material usage costs in the fiber solutions segment as a result of lower operational efficiencies, labor inefficiencies related to sales volume decline in the engineered components segment and raw material inflation in the engineered components and fiber solutions segments.
Gross profit . For the reasons described above, gross profit was $28.6 million for the three months ended March 29, 2019 , compared with $35.7 million for the three months ended March 30, 2018 .
Selling and administrative expenses . Selling and administrative expenses were $25.2 million for the three months ended March 29, 2019 , compared with $27.5 million for the three months ended March 30, 2018 , a decrease of $2.3 million . The decrease is primarily due to decreased incentive compensation, a $0.6 million decrease related to foreign currency exchange rates and lower health care costs. The decrease was partially offset by an increase in share-based compensation expense of $0.6 million due to restricted stock units granted in May 2018 and $0.3 million of transaction-related expenses related to acquisitions.
Loss on disposals of property, plant and equipment - net . Loss on disposals of property, plant and equipment - net for the three months ended March 29, 2019 was $0.0 million compared to $0.2 million for the three months ended March 30, 2018 . The loss on disposals of property, plant and equipment - net for the three months ended March 30, 2018 includes a loss of $0.2 million from the disposition of equipment in connection with the consolidation of two U.S. facilities in the engineered components segment.
Restructuring . Restructuring costs were $1.6 million for the three months ended March 29, 2019 compared with $0.6 million for the three months ended March 30, 2018 . During 2019, such costs were primarily transitional costs of moving production to U.S. facilities as a result of the closure of a U.K. facility in the engineered components segment, move costs related to the closure of a U.S. facility in the fiber solutions segment and $0.3 million for severance activities in the industrial segment and corporate related to the segment reorganization in the first quarter of 2019. During 2018, such costs were primarily move costs related to the consolidation of two U.S. facilities in the engineered components segment and the closure of a U.S. facility in the fiber solutions segment.
Interest expense . Interest expense was $8.2 million for the three months ended March 29, 2019 compared with $8.0 million for the three months ended March 30, 2018 . The increase in interest expense primarily relates to higher interest rates for the three months ended March 29, 2019 as compared to the three months ended March 30, 2018 , partially offset by the decrease in outstanding long-term debt balances. The effective interest rate on the Company’s total outstanding indebtedness for the three months ended March 29, 2019 was 8.4% as compared to 7.9% for the three months ended March 30, 2018 .
See “Senior Secured Credit Facilities” in the “Liquidity and Capital Resources” section of this MD&A for further discussion.
Equity income . Equity income was $0.1 million for both the three months ended March 29, 2019 and March 30, 2018 .
Other income - net . Other income - net was $0.0 million for the three months ended March 29, 2019 and $0.1 million for the three months ended March 30, 2018 .
Loss before income taxes . For the reasons described above, loss before income taxes was $6.3 million for the three months ended March 29, 2019 , compared with $0.5 million for the three months ended March 30, 2018 .

29


Tax provision . The tax provision was $0.7 million for the three months ended March 29, 2019 , compared with $0.1 million for the three months ended March 30, 2018 . The effective tax rate for the three months ended March 29, 2019 was (11.2)% , compared with (17.3)% for the three months ended March 30, 2018 . The net discrete tax provision was $0.1 million for the three months ended March 29, 2019 and the net discrete tax benefit was immaterial for the three months ended March 30, 2018 .
The Company’s tax provision is impacted by a number of factors, including, among others, new provisions included in the Tax Reform Act, the amount of taxable earnings or losses at the U.S. federal statutory rate, the amount of taxable earnings or losses derived in foreign jurisdictions with tax rates that differ from the U.S. federal statutory rate, permanent items, state tax rates, the ability to utilize foreign net operating loss carry forwards and adjustments to valuation allowances. The effective tax rate for the three months ended March 29, 2019 was impacted by the levels of U.S. and foreign pre-tax losses and earnings, respectively, pre-tax losses in foreign jurisdictions for which no tax benefit was recognized, U.S. interest disallowance and the new GILTI tax provisions.
Net loss . For the reasons described above, net loss was $7.1 million for the three months ended March 29, 2019 , compared with $0.6 million for the three months ended March 30, 2018 .
Other comprehensive (loss) income. Other comprehensive loss was $2.2 million for the three months ended March 29, 2019 compared with other comprehensive income of $4.0 million for the three months ended March 30, 2018 .
Other comprehensive loss for unrealized gains on cash flow hedges was $0.6 million for the three months ended March 29, 2019 compared with other comprehensive income of $1.6 million for the three months ended March 30, 2018 . Gains and losses on cash flow hedges are based on the changes in current interest rates and market expectations of the timing and amount of future interest rate changes. For the three months ended March 29, 2019 , the fair value of the hedging instruments decreased, based on actual and future expectations for short-term interest rate decreases. For the three months ended March 30, 2018 , the fair value of the hedging instruments increased, based on actual and future expectations for interest rate increases.
Other comprehensive loss for foreign currency translation adjustments was $1.6 million for the three months ended March 29, 2019 compared with other comprehensive income for foreign currency translation adjustments of $2.4 million for the three months ended March 30, 2018 . Foreign currency translation adjustments are based on fluctuations in the value of foreign currencies (primarily the Euro) against the U.S. Dollar each period.
Adjusted EBITDA . Adjusted EBITDA was $14.1 million , or 9.9% of net sales for the three months ended March 29, 2019 , compared with $19.7 million , or 11.8% of net sales for the three months ended March 30, 2018 , a decrease of $5.7 million , or 28.7% . The decrease reflects lower Adjusted EBITDA in the engineered components segment of $3.3 million , the fiber solutions segment of $2.2 million and the industrial segment of $1.0 million , partially offset by lower corporate expenses of $0.8 million .
Changes in foreign currency exchange rates compared with the U.S. dollar had a negative impact of $0.4 million on consolidated Adjusted EBITDA during the three months ended March 29, 2019 compared to the three months ended March 30, 2018 , negatively impacting the industrial segment’s Adjusted EBITDA by $0.4 million .
See “Segment Financial Data” within Item 2, “Management’s Discussion and Analysis,” for further discussion on Adjusted EBITDA for each segment.
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, provision (benefit) for income taxes, depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA, excluding the impact of operational restructuring charges and non-cash or non-operational losses or gains, including goodwill and long-lived asset impairment charges, gains or losses on disposal of property, plant and equipment, divestitures and extinguishment of debt, integration and other restructuring charges, transaction-related expenses, other professional fees, purchase accounting adjustments, lease expense associated with vacated facilities and non-cash share based compensation expense.
Management believes that Adjusted EBITDA provides a more clear picture of the Company’s operating results by eliminating expenses and income that are not reflective of the underlying business performance. The Company uses this metric to facilitate a comparison of 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 8 , “ Debt and Hedging Instruments ”, and below) definition of EBITDA excludes income of partially owned affiliates, unless such earnings have been received in cash.

30


Set forth below is a reconciliation of Adjusted EBITDA to net loss (in thousands):
 
Three Months Ended
 
March 29, 2019
 
March 30, 2018
Net loss
$
(7,056
)
 
$
(638
)
Interest expense
8,231

 
8,027

Tax provision
711

 
94

Depreciation and amortization
9,361

 
10,807

EBITDA
11,247

 
18,290

Adjustments:
 
 
 
Restructuring (1)
1,573

 
602

Transaction-related expenses (2)
340

 
—

Integration and other restructuring costs (3)
14

 
356

Share-based compensation (4)
876

 
231

Loss on disposals of property, plant and equipment - net (5)
8

 
234

Total adjustments
2,811

 
1,423

Adjusted EBITDA
$
14,058

 
$
19,713

(1)  
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 financing leases in 2018 and financing and operating leases in 2019. See Note 4 , “ Restructuring Costs ” of the accompanying condensed consolidated financial statements for further information.
(2)  
Transaction-related expenses primarily consist of professional fees and other expenses related to acquisitions.
(3)  
During the three months ended March 29, 2019 , integration and other restructuring costs includes $0.1 million of legal settlement income related to proceeds from a supplier claim in the engineered components segment associated with periods prior to the Company’s go public business combination, partially offset by $0.1 million of lease expense for a facility vacated in connection with plant consolidations in the fiber solutions segment.
During the three months ended March 30, 2018 , integration and other restructuring costs includes costs associated with a force majeure incident at a supplier in the engineered components segment that resulted in incremental costs to maintain production. Such costs are not included in restructuring for GAAP purposes and were subsequently recovered through insurance during the remainder of 2018.
(4)  
Represents share-based compensation expense for awards under the Company’s 2014 Omnibus Incentive Plan. See Note 9 , “ Share-Based Compensation ” of the accompanying condensed consolidated financial statements for further information.
(5)  
Loss on disposals of property, plant and equipment - net for the three months ended March 30, 2018 includes a loss of $0.2 million from the disposition of equipment in connection with the consolidation of two U.S. facilities in the engineered components segment.
Adjusted EBITDA percentage of net sales . Adjusted EBITDA as a percentage of net sales is an important metric that the Company uses to evaluate its operational effectiveness and business segments.

31


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 three months ended March 29, 2019 and March 30, 2018 . 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 a reconciliation of Adjusted EBITDA to Net Loss which is the nearest GAAP measure.
 
Three Months Ended
 
Increase/ (Decrease)
(in thousands, except percentages)
March 29, 2019
 
March 30, 2018
 
$
 
%
Industrial
 
 
 
 
 
 
 
Net sales
$
49,737

 
$
53,978

 
$
(4,241
)
 
(7.9
)%
Adjusted EBITDA
6,841

 
7,799

 
(958
)
 
(12.3
)
Adjusted EBITDA % of net sales
13.8
%
 
14.4
%
 
(60) bps
Engineered Components
 
 
 
 
 
 
 
Net sales
$
56,588

 
$
69,427

 
$
(12,839
)
 
(18.5
)%
Adjusted EBITDA
5,736

 
9,003

 
(3,267
)
 
(36.3
)
Adjusted EBITDA % of net sales
10.1
%
 
13.0
%
 
(290) bps
Fiber Solutions
 
 
 
 
 
 
 
Net sales
$
35,653

 
$
43,849

 
$
(8,196
)
 
(18.7
)%
Adjusted EBITDA
3,566

 
5,778

 
(2,212
)
 
(38.3
)
Adjusted EBITDA % of net sales
10.0
%
 
13.2
%
 
(320) bps
Corporate
 
 
 
 
 
 
 
Adjusted EBITDA
$
(2,085
)
 
$
(2,867
)
 
$
782

 
27.3
 %
Consolidated
 
 
 
 
 
 
 
Net sales
$
141,978

 
$
167,254

 
$
(25,276
)
 
(15.1
)%
Adjusted EBITDA
14,058

 
19,713

 
(5,655
)
 
(28.7
)
Adjusted EBITDA % of net sales
9.9
%
 
11.8
%
 
(190) bps

Industrial Segment
 
Three Months Ended
 
Increase/ (Decrease)
(in thousands, except percentages)
March 29, 2019
 
March 30, 2018
 
$
 
%
Net sales
$
49,737

 
$
53,978

 
$
(4,241
)
 
(7.9
)%
Adjusted EBITDA
6,841

 
7,799

 
(958
)
 
(12.3
)
Adjusted EBITDA % of net sales
13.8
%
 
14.4
%
 
(60) bps
Net sales in the industrial segment for the three months ended March 29, 2019 were $49.7 million , a decrease of 7.9% , compared with $54.0 million for the three months ended March 30, 2018 . On a constant currency basis (net negative currency impact of $2.7 million for the three months ended March 29, 2019 ), revenues decreased by $1.5 million for the three months ended March 29, 2019 . The decrease in net sales for the three months ended March 29, 2019 was primarily due to lower sales volume in industrial end markets in Europe and due to timing of orders in the U.S. compared with the prior year, partially offset by increased pricing.
Adjusted EBITDA for the three months ended March 29, 2019 decreased $1.0 million to $6.8 million ( 13.8% of net sales) from $7.8 million ( 14.4% of net sales) for the three months ended March 30, 2018 . On a constant currency basis (net negative currency impact of $0.4 million for the three months ended March 29, 2019 ), Adjusted EBITDA decreased by $0.6 million for the three months ended March 29, 2019 . Excluding currency impact, the decrease in Adjusted EBITDA for the three months ended March 29, 2019 primarily resulted from lower sales volume in industrial end markets, partially offset by increased pricing.

32


Engineered Components Segment
 
Three Months Ended
 
Increase/ (Decrease)
(in thousands, except percentages)
March 29, 2019
 
March 30, 2018
 
$
 
%
Net sales
$
56,588

 
$
69,427

 
$
(12,839
)
 
(18.5
)%
Adjusted EBITDA
5,736

 
9,003

 
(3,267
)
 
(36.3
)
Adjusted EBITDA % of net sales
10.1
%
 
13.0
%
 
(290) bps
Net sales in the engineered components segment for the three months ended March 29, 2019 were $56.6 million , a decrease of $12.8 million , or 18.5% , compared with $69.4 million for the three months ended March 30, 2018 . The decrease during the three months ended March 29, 2019 was primarily due to a $5.7 million decrease related to the exit from non-core product lines for smart utility meter subassemblies, lower sales volumes due to timing of orders in the construction and agriculture markets, lower sales volume due to end market decline in the power sports market and lower sales volumes in rail and perforated and expanded metal product lines. The decrease was partially offset by increased pricing and an increase in sales volume in the turf care market.
Adjusted EBITDA decreased $3.3 million , or 36.3% , for the three months ended March 29, 2019 to $5.7 million ( 10.1% of net sales) compared with $9.0 million ( 13.0% of net sales) for the three months ended March 30, 2018 . The decrease in Adjusted EBITDA for the three months ended March 29, 2019 primarily resulted from the exit from non-core product lines for smart utility meter subassemblies, lower sales volumes in the rail, perforated and expanded metal, construction, agriculture and power sports markets, operational inefficiencies resulting in higher material and labor usage and raw material inflation. The decrease was partially offset by increased pricing, reduced material usage and labor costs as a result of continuous improvement programs and increased sales volumes in the turf care market, decreased incentive compensation and lower workers compensation costs.
Fiber Solutions Segment
 
Three Months Ended
 
Increase/ (Decrease)
(in thousands, except percentages)
March 29, 2019
 
March 30, 2018
 
$
 
%
Net sales
$
35,653

 
$
43,849

 
$
(8,196
)
 
(18.7
)%
Adjusted EBITDA
3,566

 
5,778

 
(2,212
)
 
(38.3
)
Adjusted EBITDA % of net sales
10.0
%
 
13.2
%
 
(320) bps
Net sales in the fiber solutions segment for the three months ended March 29, 2019 were $35.7 million , a decrease of $8.2 million or 18.7% , compared with $43.8 million for the three months ended March 30, 2018 . The decrease during the three months ended March 29, 2019 was primarily due to a net decrease in vehicle platforms, a decrease in demand for car platforms due to a shift from passenger cars to light trucks and sport utility vehicles and lower pricing on existing platforms, partially offset by an increase in non-automotive sales.
Adjusted EBITDA decreased $2.2 million , or 38.3% , for the three months ended March 29, 2019 to $3.6 million ( 10.0% of net sales) compared with $5.8 million ( 13.2% of net sales) for the three months ended March 30, 2018 . The decrease in Adjusted EBITDA for the three months ended March 29, 2019 was primarily due to lower sales volumes, lower pricing on existing platforms, operational inefficiencies resulting in higher material and labor usage and raw material inflation. The decrease was partially offset by lower material usage and labor costs as a result of continuous improvement initiatives, lower manufacturing costs as a result of the closure of the Richmond, Indiana facility, decreased incentive compensation, lower workers compensation costs and reduced health care costs.
Corporate
 
Three Months Ended
 
Increase/ (Decrease)
(in thousands, except percentages)
March 29, 2019
 
March 30, 2018
 
$
 
%
Adjusted EBITDA
$
(2,085
)
 
$
(2,867
)
 
$
782

 
27.3
%
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 director compensation and expenses, and the operating costs of the corporate office.

33


The decrease of $0.8 million in expense in the three months ended March 29, 2019 compared with the prior year primarily resulted from decreased incentive compensation and lower professional and audit fees.
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 March 29, 2019 , the Company had $45.2 million of available cash, $29.4 million of additional borrowings available under the revolving credit facility portion of its U.S. credit agreement, and $11.1 million available under revolving loan facilities that the Company maintains outside the U.S. As of March 29, 2019 , available borrowings under its U.S. revolving credit facility were reduced by outstanding letters of credit of $4.9 million . Included in the Company’s consolidated cash balance of $45.2 million at March 29, 2019 , is cash of $12.9 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 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 provide sufficient resources to fund ongoing operating requirements as well as future capital expenditures and debt service requirements.
Indebtedness
As of March 29, 2019 , the Company’s total outstanding indebtedness of $392.9 million was comprised of term loans outstanding under its Senior Secured Credit Facilities of $375.5 million (net of a debt discount of $2.4 million and deferred financing costs of $3.7 million ), various foreign bank term loans and revolving loan facilities of $16.8 million and finance lease obligations of $0.6 million . No borrowings were outstanding under the U.S. revolving credit facility portion of the Senior Secured Credit Facilities as of March 29, 2019 .
As of December 31, 2018 , the Company’s total outstanding indebtedness of $393.8 million was comprised of term loans outstanding under its Senior Secured Credit Facilities of $375.7 million (net of a debt discount of $2.7 million and deferred financing costs of $4.1 million ), various foreign bank term loans and revolving loan facilities of $17.5 million and finance lease obligations of $0.6 million . No borrowings were outstanding under the U.S. revolving credit facility portion of the Senior Secured Credit Facilities as of December 31, 2018 .
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 $16.8 million as of March 29, 2019 , including borrowings of $14.4 million incurred by the Company’s subsidiaries in Germany, and borrowings totaled $17.5 million as of December 31, 2018 , including borrowings of $15.0 million incurred by the Company’s subsidiaries in Germany. The foreign debt obligations in Germany primarily relate to term loans within our industrial segment of $14.2 million at March 29, 2019 and $15.0 million at December 31, 2018 . The 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, Jason Incorporated, as the borrower, entered into (i) the First Lien Credit Agreement, with Jason Partners Holdings Inc., Jason Holdings, Inc. I, a wholly-owned subsidiary of Jason Partners Holdings Inc. (“Intermediate Holdings”), 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, 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, as amended, provides for (i) term loans in the principal amount of $310.0 million (the “First Lien Term Facility” and the loans thereunder the “First Lien Term Loans”), of which $291.8 million is outstanding as of March 29, 2019 , and (ii) a revolving loan of up to $34.3 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 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 $89.9 million is outstanding as of March 29, 2019 , under the 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 borrowing capacity of the revolving loan remains at $34.3 million until June 30, 2019, and thereafter, $30.0 million until June 30, 2020.

34


The Revolving Credit Facility matures June 30, 2020, the First Lien Term Loans mature June 30, 2021 and the Second Lien Term Loans mature June 30, 2022. The principal amount of the First Lien Term Loans amortizes in quarterly installments equal to $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, 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. 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 administrative agent’s prime rate, (b) the federal funds effective rate plus 0.50% or (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 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 March 29, 2019 and December 31, 2018 . 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 three months ended March 29, 2019 and March 30, 2018 , the Company recognized $0.4 million of interest income and $0.2 million of interest expense, respectively, related to the Swaps. Based on current interest rates, the Company expects to recognize interest income of $1.1 million related to the Swaps in the next 12 months.
The fair values of the Company’s Swaps are recorded on the condensed consolidated balance sheets with the corresponding offset recorded as a component of accumulated other comprehensive loss. The net fair values of the Swaps were net assets of $1.0 million at March 29, 2019 and $1.9 million at December 31, 2018 , respectively. See the amounts recorded on the condensed consolidated balance sheets within the table below:
 
March 29, 2019
 
December 31, 2018
Interest rate swaps:
 
 
 
Recorded in other current assets
$
902

 
$
1,325

Recorded in other assets - net
123

 
542

Total net asset derivatives designated as hedging instruments
$
1,025

 
$
1,867

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 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

35


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. At March 29, 2019 and December 31, 2018 , there was no required mandatory excess cash flow prepayment required under the Senior Secured Credit Facilities.
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 $10.0 million 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, currently specified at 4.50 to 1.00 , with a decrease to 4.25 to 1.00 on December 31, 2019 and remaining at that level thereafter. If such outstanding amounts do not exceed $10.0 million at the end of any fiscal quarter, no financial covenants are applicable. As of March 29, 2019 , the consolidated first lien net leverage ratio was 4.16 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 $10.0 million at March 29, 2019 . As of March 29, 2019 , the Company was in compliance with the financial covenants contained in its 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 41,421 shares of Series A Preferred Stock 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 three months ended March 29, 2019 :
(in thousands, except share and per share amounts)
Payment Date
 
Record Date
 
Amount Per Share
 
Total Dividends Paid
 
Preferred Shares Issued
January 1, 2019
 
November 15, 2018
 
$20.00
 
$796
 
794
On February 1, 2019 , 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 April 1, 2019 to holders of record on February 15, 2019 . As of March 29, 2019 , the Company has recorded the 809 additional Series A Preferred Stock shares declared for the dividend of $0.8 million within preferred stock in the condensed consolidated balance sheets.

36


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. NOWC as a percentage of trailing twelve month net sales was 14.5% as of March 29, 2019 , 12.5% as of December 31, 2018 and 15.5% as of March 30, 2018 . The calculation of NOWC as a percentage of sales for March 30, 2018 excludes $14.0 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 March 29, 2019 , December 31, 2018 and March 30, 2018 .
NOWC as a percentage of trailing twelve month net sales was favorably impacted by approximately 0.4% and 0.5% as of March 29, 2019 and December 31, 2018 , respectively, related to the exit of the non-core smart utility meter subassemblies product line.
(in thousands)
March 29, 2019
 
December 31, 2018
 
March 30, 2018
Accounts receivable—net
$
74,956

 
$
60,559

 
$
83,890

Inventories-net
66,700

 
63,747

 
75,372

Accounts payable
(56,395
)
 
(47,497
)
 
(62,418
)
NOWC
$
85,261

 
$
76,809

 
$
96,844

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 motorcycle and lawn and turf care 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, customer planning, and model year changes. The Company historically generates approximately 51% - 55% of its annual net 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 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. 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 three months ended March 29, 2019 were $3.5 million , or 2.4% of net sales. Capital expenditures for 2019 are expected to be approximately 2.0% to 2.5% of net sales, but could vary from that depending on business performance, growth opportunities, project activity and the amount of assets we lease instead of purchase. The Company finances its annual capital requirements with funds generated from operations.  
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 29, 2019 and the Three Months Ended March 30, 2018
 
Three Months Ended
(in thousands)
March 29, 2019
 
March 30, 2018
Net cash (used in) provided by operating activities
$
(7,249
)
 
$
3,817

Net cash used in investing activities
(3,284
)
 
(3,582
)
Net cash used in financing activities
(2,318
)
 
(1,504
)
Effect of exchange rate changes on cash and cash equivalents
(165
)
 
373

Net decrease in cash and cash equivalents
(13,016
)
 
(896
)
Cash and cash equivalents at beginning of period
58,169

 
48,887

Cash and cash equivalents at end of period
$
45,153

 
$
47,991

 
 
 
 
Depreciation and amortization
$
9,361

 
$
10,807

Capital expenditures
3,468

 
3,622



37


Cash Flows (Used in) Provided by Operating Activities
Cash flows used in operating activities were $7.2 million for the three months ended March 29, 2019 compared to cash flows provided by operating activities of $3.8 million for the three months ended March 30, 2018 , a decrease of $11.8 million . The decrease was primarily driven by lower operating profit across all segments primarily as a result of lower sales volume for the three months ended March 29, 2019 as compared to the three months ended March 30, 2018 . In addition, the decrease resulted from lower accruals for freight, customer rebates, and health care due to timing of payments and a lower incentive compensation accrual as a result of lower projected attainment percentages. The decrease was partially offset by $0.7 million of cash flows provided by operating activities related to dividends from the Company’s joint venture received during the three months ended March 29, 2019 .
Cash Flows Used in Investing Activities
Cash flows used in investing activities were $3.3 million for the three months ended March 29, 2019 compared with $3.6 million for the three months ended March 30, 2018 . The decrease in cash flows used in investing activities was primarily the result of higher proceeds from disposals of property, plant and equipment of $0.1 million and lower capital expenditures of $0.2 million compared to the prior year period.
Cash Flows Used in Financing Activities
Cash flows used in financing activities were $2.3 million for the three months ended March 29, 2019 compared with $1.5 million for the three months ended March 30, 2018 . The increase in cash flows used in financing activities was driven by remittance of $0.7 million of value added tax during the first quarter of 2019 related to the December 2018 building sale of the Company’s U.K. facility.
Depreciation and Amortization
Depreciation and amortization totaled $9.4 million for the three months ended March 29, 2019 , compared with $10.8 million for the three months ended March 30, 2018 . Depreciation and amortization for the three months ended March 29, 2019 is lower than incurred by the Company in the prior period primarily due to $2.3 million of accelerated intangible amortization expense recorded for a customer relationship intangible asset to reflect the exit of the non-core smart utility meter product lines in the engineered components segment during 2018.
Capital Expenditures
Capital expenditures totaled $3.5 million for the three months ended March 29, 2019 , compared with $3.6 million for the three months ended March 30, 2018 .
Contractual Obligations
There are no material changes to the disclosures regarding contractual obligations made in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018 .
Off-Balance Sheet Arrangements
As of the date of this report, other than changes related to the adoption of the new lease accounting standard as described in Note 6 , “ Leases ”, to the condensed consolidated financial statements, there are no material changes to the disclosures regarding off-balance sheet arrangements made in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018 .
Critical Accounting Policies and Estimates
The condensed consolidated financial statements have been prepared in accordance with GAAP which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K filed with the SEC on March 5, 2019 for the year ended December 31, 2018 and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q) for information with respect to our critical accounting policies, which we believe could have the most significant effect on our reported results and require subjective or complex judgments by management. Management believes that as of March 29, 2019 and during the period from January 1, 2019 through March 29, 2019 , there has been no material change to this information.
New Accounting Pronouncements
See Note 1 , “ Description of Business and Basis of Presentation ” under the heading “Recently issued accounting standards” of the accompanying condensed consolidated financial statements.

38


ITEM 3. 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 $32.8 million , or 23% , of our sales originated in a currency other than the U.S. dollar during the first three months of 2019 . 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 three months ended March 29, 2019 , sales denominated in Euros approximated $24.5 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 $2.4 million , respectively, and the change in our net (loss) income would increase or decrease by approximately $0.1 million . The net assets and liabilities of our non-U.S. dollar denominated subsidiaries, which totaled approximately $163.0 million as of March 29, 2019 , are translated into USD at the exchange rates in effect at the end of the period. The resulting translation adjustments are recorded in shareholders’ (deficit) equity as cumulative translation adjustments. The cumulative translation adjustments recorded in accumulated other comprehensive loss at March 29, 2019 resulted in a decrease to shareholders’ deficit of $24.7 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 following the initial transaction date, 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 March 29, 2019 , 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 March 29, 2019 , long-term debt denominated in currencies other than the USD totaled approximately $15.5 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 “administrative agent’s prime rate, the federal funds effective rate,” the Eurocurrency rate, or a Eurocurrency rate determined by reference to LIBOR, subject to an established floor. Until recently, applicable interest rates have been lower than the designated floor in our Senior Secured Credit Facilities; therefore, interest rates have not been subject to change. However, now that interest rates exceed the established floor, a 25 basis point increase or decrease in the applicable interest rates on our variable rate debt would increase or decrease annual interest expense by approximately $0.4 million , including the impact of interest rate swaps discussed in the paragraph below.
As of March 29, 2019 , 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. 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 . As of March 29, 2019 , LIBOR exceeded 2.08% ; therefore, assuming interest rates remain above 2.08% , a 25 basis point increase or decrease in interest rates would increase or decrease annual interest expense by $0.4 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 initiatives to further mitigate the impact of commodity raw material price fluctuations as improved efficiencies across all locations are achieved. As of March 29, 2019 , the Company did not have any commodity hedging instruments in place.

39


ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)), that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 29, 2019 . Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 29, 2019 , our disclosure controls and procedures were not effective at a reasonable level of assurance, due to the material weakness in our internal control over financial reporting discussed below.
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.
We did not maintain effective internal controls over the accounting for the recoverability of deferred tax assets. Specifically, the internal controls to assess the recoverability of a deferred tax asset for disallowed interest expense were not performed at the appropriate level of precision. This control deficiency resulted in the overstatement of the tax provision and net deferred tax liabilities as of and for the year ended December 31, 2018. As a result of this error, we restated our previously reported annual financial statements for the year and quarter ended December 31, 2018 on Form 10-K/A and revised the Company's previously issued unaudited condensed consolidated financial statements as of and for the three months ended March 30, 2018. Additionally, this control deficiency could result in additional misstatements of the aforementioned balances that would result in a material misstatement to the Company’s annual or interim consolidated financial statements that would not be prevented or detected.

Remediation Plan
During 2019, we intend to enhance the control activities related to the analysis of the recoverability of our deferred tax assets. We believe this remediation plan will effectively remediate the material weakness, but the material weakness will not be considered remediated until the control operates for a sufficient period of time and management has concluded through testing, that this control is operating effectively.

Changes in Internal Control Over Financial Reporting
The adoption and implementation of ASC 842, “Leases” is considered a change in the Company’s internal control over financial reporting during the quarter ended March 29, 2019 , that has materially affected the Company’s internal control over financial reporting. The Company implemented internal controls to ensure it properly assessed the impact of the new accounting standard related to leases on its consolidated financial statements to facilitate the adoption on January 1, 2019 and subsequent accounting under the new guidance. Except as stated above, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended March 29, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.




40


PART II — OTHER INFORMATION
ITEM 1A. RISK FACTORS
There are no material changes to the disclosures regarding risk factors made in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018 .
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table contains detail related to the repurchase of common stock based on the date of trade during the quarter ended March 29, 2019 :
2019 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
January 1 to February 1
 
87,958
 
1.51
 
—
 
N/A
February 2 to March 1
 
1,837
 
1.40
 
—
 
N/A
March 2 to March 29
 
157,170
 
1.64
 
—
 
N/A
Total
 
246,965
 
1.59
 
—
 
 
(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 three months ended March 29, 2019 , the Company withheld 246,965 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.
As disclosed in Note 12 , “ Shareholders ’ (Deficit) Equity ” of the accompanying condensed consolidated financial statements and under the heading “Liquidity and Capital Resources-Series A Preferred Stock” in MD&A, the Company paid the January 1, 2019 dividend on its Series A Preferred Stock by issuing an additional 794 shares of Series A Preferred Stock. These shares were issued in reliance on the private placement exemption from the registration requirements of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act. Holders of the Series A Preferred Stock have the option to convert each share of Series A Preferred Stock initially into approximately 81.18 shares of the Company’s common stock, subject to certain adjustments in the conversion rate.

41


ITEM 6. EXHIBITS
The exhibits listed in the exhibit index below are filed as part of this Quarterly Report on Form 10-Q.
EXHIBIT INDEX
Exhibit Number
 
Description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101.INS
 
XBRL Instance Document
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
101.LAB
 
XBRL Taxonomy Extension Labels Linkbase Document
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document





42


SIGNATURES
In accordance with the requirements 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: May 13, 2019
/s/ Brian K. Kobylinski
 
Brian K. Kobylinski
President, Chief Executive Officer and Chairman of the Board of Directors
(Principal Executive Officer)  
 
Dated: May 13, 2019
/s/ Chad M. Paris
 
 
Chad M. Paris
Senior Vice President and Chief Financial Officer
(Principal Accounting Officer)
 
 


43


EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “ Agreement ”), dated as of February 25, 2019 is entered into by and between Jason Industries, Inc., a Delaware corporation (the “ Company ”) and Timm Fields (“ 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 – Engineered Components, upon the terms and conditions as set forth in this Agreement on an at-will basis, for the period beginning on February 25, 2019 (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 – Engineered Components 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 – Engineered Components. 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 ”).

1


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 $320,000 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 60% 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.

2

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

3

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.

4

(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

5

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

6

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

7

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

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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

9

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,

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(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,

11

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

With a copy to:

Jason Industries, Inc.
833 East Michigan Street, Suite 900
Milwaukee, WI 53202
Attention: General Counsel

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

12

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),

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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).


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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above.
JASON INDUSTRIES, INC.


    
Name: Brian Kobylinski
Title: President, Chairman & Chief Executive Officer


EXECUTIVE


    
Timm Fields




Exhibit A
GENERAL RELEASE
Release of Claims by Executive . I, Timm Fields (“ 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 25, 2019 (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.

1.
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.

2.
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.

3.
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).

4.
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”).




6.
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.

8.
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 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 quarterly report on Form 10-Q 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: May 13, 2019
 
/s/ Brian K. Kobylinski
 
 
Brian K. Kobylinski
President, Chief Executive Officer and Chairman of the Board of Directors
(Principal Executive Officer)  
 







Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Chad M. Paris, certify that:
1.
I have reviewed this quarterly report on Form 10-Q 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: May 13, 2019
 
/s/ Chad M. Paris
 
 
Chad M. Paris
Senior Vice President and Chief Financial Officer
(Principal 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 Quarterly Report of Jason Industries, Inc. (the “Company”) on Form 10-Q, for the period ended March 29, 2019 , as filed with the Securities and Exchange Commission (the “Report”), the undersigned, in the capacity and on the date 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: May 13, 2019
 
/s/ Brian K. Kobylinski
 
 
Brian K. Kobylinski
President, Chief Executive Officer and Chairman of the Board of Directors
(Principal Executive Officer)  
 

This certification accompanies this report on Form 10-Q 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
In connection with the Quarterly Report of Jason Industries, Inc. (the “Company”) on Form 10-Q, for the period ended March 29, 2019 , as filed with the Securities and Exchange Commission (the “Report”), the undersigned, in the capacity and on the date 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 her 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: May 13, 2019
 
/s/ Chad M. Paris
 
 
Chad M. Paris
Senior Vice President and Chief Financial Officer
(Principal Accounting Officer)
 

This certification accompanies this report on Form 10-Q 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.