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

FORM 10-K

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

For the fiscal year ended December 31, 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

JASN-20191231_G1.JPG

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

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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act: Common Stock, $0.0001 par value per share (traded on the OTCQX Best Market)

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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

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

The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant, as of June 28, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $12.2 million (based upon the closing price of $0.65 per share on The Nasdaq Stock Market, LLC as of such date).

There were 28,508,977 shares of common stock issued and outstanding as of February 21, 2020.

Documents Incorporated by Reference

Portions of the registrant’s definitive proxy statement relating to its 2020 Annual Meeting of Shareholders (the “2020 Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K. The 2020 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.


JASON INDUSTRIES, INC.
TABLE OF CONTENTS

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1


Cautionary Note Regarding Forward-Looking Statements
Unless otherwise indicated, references to “Jason Industries,” the “Company,” “we,” “our” and “us” in this Annual Report on Form 10-K refer to Jason Industries, Inc. and its consolidated subsidiaries.
This report contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Specifically, forward-looking statements may include statements relating to our future financial performance, changes in the markets for our products, our expansion plans and opportunities, and other statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.
These forward-looking statements are based on information available to us 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 our views as of any subsequent date, and we do 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, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include the following:
•our ability to identify and complete strategic alternatives;
•level of demand for our products;
•competition in our markets;
•volatility in the prices of raw materials and our ability to pass along increased costs;
•our ability to successfully complete divestitures and implement restructuring plans;
•our ability to grow and manage growth profitably;
•our ability to access additional capital and/or the capital markets;
•changes in applicable laws or regulations;
•our 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 we may be adversely affected by other economic, business, trade, inflation and/or competitive factors; and
•other risks and uncertainties indicated in this report, including those discussed under “Risk Factors” in Item 1A of Part I of this report, as such may be amended or supplemented in Part II, Item 1A, “Risk Factors”, of our subsequently filed Quarterly Reports on Form 10-Q.

2


PART I
ITEM 1. BUSINESS
Our Business
Jason Industries, a Delaware corporation originally formed in May 2013, is a global industrial manufacturing company with significant market share positions in each of its two segments: industrial and engineered components. The Company provides critical components and manufacturing solutions to customers across a wide range of end markets, industries and geographies through its global network of 23 manufacturing facilities and nine sales, 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 our 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 of the evaluation, the Company reduced the number of operating and reportable segments from four to three: industrial, engineered components and fiber solutions. The prior year segment disclosures have been updated to conform with the current year presentation.
During 2019, the Company determined that both the North American fiber solutions business and the Metalex business within the engineered components segment met the criteria to be classified as discontinued operations. As a result, the Company’s prior period results of operations, financial position and notes to the financial statements have been recast to be presented on a continuing operations basis, except where noted. The assets and liabilities of the North American fiber solutions business and the Metalex business have been presented as held for sale for the periods prior to the sale. On August 30, 2019 and on December 13, 2019, the Company completed the divestitures of its North American fiber solutions business and its Metalex business, respectively. Previously, on August 30, 2017, the Company completed the sale of the European fiber solutions business, which did not meet the criteria for discontinued operations presentation at the time of the divestiture. As such, the results of the European fiber solutions business are presented within continuing operations through the date of the sale.
On August 12, 2019, we announced that our Board of Directors had engaged financial advisors to advise us as we conduct a process to evaluate strategic alternatives. This evaluation includes, but is not limited to, a potential sale, strategic merger, consolidation or business combination, acquisition, recapitalization, financing consisting of equity and/or debt securities, and/or a restructuring of the Company’s debt, focused on maximizing the value of the Company for its stakeholders.
The Company focuses on markets with long-term sustainable growth characteristics and where it is, or has the opportunity to become, the industry leader. The industrial segment focuses on the production of industrial brushes, polishing buffs and compounds, abrasives, and roller technology products that are used in a broad range of industrial and infrastructure applications. The engineered components segment designs, engineers, and manufactures seating products used in heavy industry (construction, agriculture, and material handling), turf care, and power sports applications.
Description of Business Segments
Our global platform encompasses a diverse group of industries, geographies and end markets. Through our business segments, we deliver an array of industrial consumables and critical manufactured components to a number of industries, including aerospace, automotive, construction, engineering, plastic, steel, hardware, welding, shipbuilding, industrial equipment, motorcycles, and lawn and turf care. The highly fragmented nature of our end markets creates growth opportunities given our established global footprint and leading share positions.
Net sales from continuing operations are distributed amongst the segments as follows:
Year ended December 31,
2019 2018 2017
Net sales
Industrial 59.6  % 56.4  % 52.4  %
Engineered Components 40.4  % 43.6  % 41.6  %
Fiber Solutions —  % —  % 6.0  %
100.0  % 100.0  % 100.0  %
See more information regarding our segments and sales by geography within Part II, Item 8, Note 16 “Business Segments, Geographic and Customer Information” in the notes to the consolidated financial statements.

3


Industrial
Market/Industry Overview
The industrial segment’s product lines are comprised 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 market for industrial products is highly fragmented with most participants having single or limited product lines and serving specific geographic markets. While the industrial business competes with numerous domestic and international companies across a variety of product lines, we do not believe that any one competitor directly competes with us on all of our product lines. We believe we are the only market participant that reaches all regions of the world. End users of industrial products are broadly diversified across many sectors of the economy. In the long-term, the industrial market is closely tied to overall growth in industrial production, which we believe has fundamental long-term growth potential.
The industrial market is also characterized by the need for sophisticated manufacturing equipment, the ability to produce a broad number of niche products and the flexibility in manufacturing operations to adapt to ever-changing customer demands and schedules. We believe entry into markets by competitors with lower labor costs, including foreign competitors, will be limited because labor is a relatively small portion of total manufacturing costs. Additionally, the cost of labor, manufacturing, shipping and logistics is dramatically rising in countries such as China and customers continue to have increasing demand for shorter lead times and lower inventory and carrying costs.
Key Products
Through the industrial business, which represented 59.6% of our 2019 revenue, we produce and supply industrial brushes, polishing buffs and compounds, abrasives, and roller technology products. Our industrial business, which operates under the Osborn name, has been in operation since 1887. Our products are used in a variety of applications with no single customer or industry accounting for a significant portion of business revenue. We have strategic facilities located globally, including production sites in low-cost locations such as China, India, Portugal, Romania and Mexico.
The industrial business is a one-stop provider of standard and customized brush, polishing, and abrasives products used across multiple industries, including aerospace, automotive, construction, engineering, plastic, steel, hardware, welding and shipbuilding, among others. Our broad product suite is composed of brush types used for a variety of applications, including material deburring, removal and cleaning, conveying and transportation systems, and thermal sealing systems. These products are marketed under the leading brand name Osborn®. Our buff products are comprised of industrial buffs and abrasives used primarily to finish parts requiring a high degree of luster and/or a satin or textured surface. In addition to manufacturing buffs, we also produce the industry’s broadest product line of buffing compounds available in liquid or bar form that are customized to specific end use requirements. Our abrasive products include cutting and grinding discs, flap discs and wheels, as well as diamond cutting wheels and tools. We also service customers with products complementing our brush, polishing, and abrasives lines, including heavy-duty idler rollers for high-capacity precision load handling.
We have representatives who reach more than 19,000 customers in approximately 112 countries worldwide. During 2019, the industrial segment derived approximately 43% of its sales from North America and the majority of the remaining revenue from Europe. We service our diverse customer base through our primary U.S. facilities in Indiana and Ohio and 12 foreign countries, including joint ventures in China and Taiwan. Our manufacturing and service locations allow us to work on a regional and local basis with customers to develop custom products and provide significant technical support, resulting in strong relationships with our top customers that average 25 years. On April 1, 2019, we acquired Schaffner Manufacturing Company, Inc., which expanded our polishing and abrasive product line offerings within North America. In addition, we have invested in state-of-the-art laboratories in Indiana and Germany to provide further technical design, testing and support capabilities for our customers.
Engineered Components
Market/Industry Overview
The engineered components segment’s product line includes motorcycle seats; operator seats for construction, agriculture, lawn and turf care and other industrial equipment markets; and seating for the power sports market, all under the Milsco brand. The market for engineered components products is comprised primarily of large domestic and international participants, who often award contracts to be the sole supplier for a particular motorcycle, riding lawn mower or other construction, agriculture or material handling platform. We believe that competitive differentiation is based mostly on innovative styling, ergonomic comfort, manufacturing flexibility, quality, price and delivery.
Motorcycle production has experienced a decline over the past several years and we believe future demand will mirror global motorcycle market trends. The construction market is closely tied to overall growth in industrial production, which we believe has long-term growth potential. Demand for lawn, turf care and power sports equipment is primarily dependent on weather and trends in personal consumption expenditures, recreational and leisure activities, and residential and commercial

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real estate construction and sales. The market for lawn and turf care equipment has declined in the past year due to channel inventory destocking, limited growth in U.S. housing construction, and on a long-term basis we expect it to mirror general economic conditions.
Key Products
Through the engineered components segment, which represented 40.4% of our 2019 revenue, we provide highly engineered upholstered and foam-in place static and suspension seating solutions for a variety of applications, including motorcycle, agricultural, construction, industrial, lawn and turf care, and power sports. The engineered components segment operates under the Milsco brand, which was originally established as a harness maker in 1924 and, early in its history, gained notice as the first company to put padded seating on tractors and farm equipment. Milsco has provided high-quality seats since 1934.
The engineered components segment offers a distinct vertically integrated operating model, which includes a full range of functions, such as research and development, design and engineering, manufacturing of components and final assembly. Through our broad manufacturing capabilities and high quality products, we have established longstanding relationships with our top customers, which average over 30 years.
Competitive Strengths
We believe the following key characteristics provide a competitive advantage and position us for future growth:
Established Industry Leader Across Our Businesses
Our businesses have developed leading positions across various niche markets that enhance end user’s comfort, safety and productivity. For example, in our turf care seats and polishing product lines, we believe we are more than twice the size of the next largest direct competitor. Our market share positions have created a stable platform upon which to grow and our significant brand recognition helps to sustain our market share positions. Our products are often viewed as a brand of choice for quality, dependability, value and continuous innovation. As a result, we have served many of our customers for over 25 years. Despite leading positions in many of our markets, we face competitive challenges in others. In our industrial and engineered components segments, certain of our competitors are small and family-owned, operate with lower operating expenses, have lower profit expectations and/or supply lower cost commodity products, which allows such competitors to compete with us on pricing. In our engineered components segment, specifically with respect to highly technical seats for the agricultural and construction vehicle markets, the cost to customers of switching from a current supplier’s products to ours is high, and we believe certain of our competitors have established long-term and entrenched relationships with such customers. These costs and relationships make it challenging to convince such customers to purchase products from us instead of from their existing supplier.
Superior Design & Manufacturing Solutions
We have a track record of providing customers with innovative, customized solutions through production flexibility and collaboration with their design and manufacturing teams. We have consistently refined manufacturing processes to incorporate design technologies that improve design capabilities, breadth of product offering, product quality and manufacturing efficiency.
Across our businesses, we maintain teams of engineers and designers as well as a diverse product selection in numerous geographic regions, which allows us to respond quickly to real-time customer needs. Our versatile design and manufacturing capabilities enable us to deliver differentiated and highly-customized solutions for customers by leveraging experienced engineering staff and technologically advanced manufacturing equipment. We believe our diverse product offerings and customized design and manufacturing capabilities have made us a preferred choice within many industries and an entrenched key solutions provider to customers.
We believe we have become a partner at each stage in product development, which has deepened our relationships with an already entrenched customer base and driven revenue growth from existing accounts and new customers.
Scalable Business Philosophy
We use a consistent strategy and focus and deploy capital and resources across our businesses to projects with the highest returns on invested capital. Through corporate strategic planning initiatives, we annually assess our three-year outlook and goals, by using a policy deployment matrix disseminated throughout the organization. Management utilizes the strategic plan and resulting policy deployment matrix to develop an annual budget and profit plan and monitors progress towards long-term strategic goals.
Across our businesses, our management team is focused on enhancing product innovation, efficiency, global accessibility and competitiveness. Shared best practices serve to continually improve the processes and products that our

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customers depend on by delivering customized, value-added solutions across the platform. This global reach offers customers a consistent and fully integrated manufacturing partner capable of serving their needs on a global, regional and local basis.
Diverse, Global Footprint with Growing Presence in Emerging Markets
We maintain 23 global manufacturing locations, consisting of nine in the United States and 14 in foreign countries, giving us a strong international presence. Approximately 37% of our 2019 revenue from continuing operations was generated from products manufactured outside of the United States. In addition, our global presence enables us to take advantage of low-cost manufacturing at our facilities in China, India, Portugal, Romania, and Mexico and to meet the needs of local customers with operations in those regions. We continue to build upon our established presence in low-cost production locations through the expansion of owned operations and the development of joint ventures and sourcing relationships in Asia, Eastern Europe and Mexico. Our management believes that this global footprint also provides channels of organic growth through the introduction of products into new markets. Our management frequently evaluates our manufacturing, warehouse, distribution and sales locations to identify revenue enhancement opportunities, optimize production costs and ensure proximity to key customers.
Growth Strategies
We are focused on delivering long-term profitable growth through a number of avenues. Our growth initiatives are developed based on strategic plans conducted on an annual basis within each of our businesses. These plans are regularly reviewed and updated by our leadership team. As a result, we have a uniform strategy that focuses all of our resources on the following key initiatives:
Margin Growth
We are focused on continuous improvement in our profit margins through the development of higher-margin products, continued operational improvements and active product portfolio management. We anticipate our strategy of shifting toward innovative higher-value engineered products will continue to improve our pricing power and profitability. Among other initiatives, we are focused on redesigning products to reduce material costs, continuing to reduce labor-intensive manufacturing processes and reducing logistics costs, which have traditionally been a significant component of overall costs and an important consideration when choosing our strategic manufacturing locations.
We are focused on creating operational effectiveness at each of our business segments through deployment of lean principles and implementation of continuous operational improvement initiatives. While many of these activities have focused on implementing shop floor improvements, we have also targeted our selling and administrative functions in order to reduce the cost of serving our customers. We are also focused on improving profitability through an active evaluation of customer pricing and margins and a reduction in the number of parts and product variations that are produced. While these initiatives may result in lower overall sales, they are focused on creating shareholder value through higher margins and profitability, diversification, as well as lower inventory levels and working capital requirements.
We continuously evaluate our manufacturing footprint and utilization of manufacturing capacity. In recent years, we have completed or announced the consolidation of manufacturing facilities across our businesses. Reduction of fixed costs through optimization of manufacturing footprint and capacity will continue to be a driver of margin expansion and improving profitability.
Market Share Gains
While our businesses pursue growth within new and existing markets through customized strategies targeted for the markets we serve, they also are tasked with identifying and pursuing key growth opportunities through new products, geographies, sales channels and diversifying end markets served. Management believes we have the potential to increase market share due to the highly fragmented nature of our end markets. Each business has identified specific opportunities to expand market share, with associated incremental revenue targets.
Product Innovation
Management believes that our strategy of developing innovative products will position us for continued growth. Working in collaboration with key customers, the design and manufacture of customized products that deliver value will support this growth. We believe that developing new products will allow us to deepen our value-added relationships with customers, open new opportunities for revenue generation, improve pricing power and enhance profitability. We have a focused and dedicated strategy for continuous innovation, which is supported by sophisticated manufacturing capabilities and engineering expertise. Research and development costs from continuing operations incurred in the development of new products or significant improvements to existing products were $4.8 million in the year ended December 31, 2019, $2.4 million in the year ended December 31, 2018 and $3.3 million in the year ended December 31, 2017. This continued focus on innovation has driven successful new product introductions, which we believe will enable continued growth.

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Acquisitions
We use acquisitions to increase revenues with existing customers and to expand revenues to both new markets and customers. We intend to pursue acquisitions that are accretive to EBITDA (earnings before interest, income taxes, depreciation and amortization) margins post-synergies, have a strategic focus that aligns with our core strategy and generate the appropriate estimated return on investment as part of our capital resource and allocation process. On April 1, 2019, we acquired Schaffner Manufacturing Company, Inc., which expanded our polishing product line offerings within North America in the industrial segment.
Customers
We have an entrenched base of blue chip customers that are leaders in their respective markets. Our customer relationships often span decades in each business. Additionally, our customer base is diversified. In our industrial segment, no customers were at or above 10% of the revenue of such segment. In our engineered components segment, two customers were at or above 10% of the revenues of such segment. No customers were at or above 10% of consolidated 2019, 2018 or 2017 revenues. In 2019, our five largest customers represented a combined 23% of 2019 revenues.
Suppliers and Raw Materials
Polyurethane foam, vinyl, plastics, steel, cloth, steel wire, and abrasive grains are the primary raw materials that we use to manufacture our products. There are a limited number of domestic and foreign suppliers of these raw materials. We generally order supplies on a purchase order basis and generally incur inbound freight charges to transport the raw materials to our production facilities. Although our contracts and long term arrangements with our customers generally do not expressly allow us to pass through increases in our raw materials, energy costs, freight charges and other inputs, we endeavor to discuss price adjustments with our customers on a case by case basis where it makes business sense. For the year ended December 31, 2019, the spend with our top three material suppliers accounted for 11% of total material spend and our largest supplier accounted for approximately 5% of total spend. We make an ongoing effort to reduce and contain raw material costs. We do not engage in raw material commodity hedging contracts, and instead attempt to reflect raw material price changes in the sale price of our products.
Seasonality
We experience seasonality of demand for our products in the engineered components segment. Due to our experience in this market, we have adapted our business operations to manage this seasonality. We also depend upon general economic conditions and other market factors beyond our control, and we serve customers in cyclical industries. See “Seasonality and Working Capital” in the accompanying “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained herein for further discussion.
Employees
As of December 31, 2019, we had approximately 1,940 employees and manufactured products in 23 locations around the world. Contracts are negotiated on a local basis, significantly mitigating the risk of a company-wide or segment level work stoppage. We have approximately 235 unionized hourly employees in the United States. Additionally, approximately 730 of our employees reside in Europe where local works councils with collective bargaining or other similar agreements are common and approximately 370 of our employees reside in Mexico where collective bargaining agreements are common. We believe we have a strong relationship with our employees, including those represented by labor unions.
Environmental Matters
Our operations and facilities are subject to extensive federal, state, local and foreign laws and regulations related to pollution and the protection of the environment, health, safety and natural resources, including those governing, among other things, emissions to air, discharges to water, the use, generation, handling, storage, treatment and disposal of hazardous substances and wastes and other materials and the remediation of contaminated sites. The operation of manufacturing plants entails risks in these areas, and a failure by us to comply with applicable environmental laws and regulations, or to obtain and comply with the permits required for its operations, could result in civil or criminal fines, penalties, enforcement actions, third party claims for property damage and personal injury, requirements to clean up property or to pay for the capital or operating costs of cleanup, or regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, including the installation of pollution control equipment or remedial actions. Moreover, if applicable environmental, health and safety laws and regulations, or the interpretation or enforcement thereof, become more stringent in the future, we could incur capital or operating costs beyond those currently anticipated.
Compliance with environmental laws has not historically had a material adverse effect on our capital expenditures, earnings or competitive position, and we anticipate that such compliance will not have a material effect on our business or financial condition in the future.

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Available Information
Our internet website address is www.jasoninc.com. We make available free of charge (other than an investor’s own internet access charges) through our internet website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to those reports, and our proxy statements, on the same day they are electronically filed with, or furnished to, the U.S. Securities and Exchange Commission (the “SEC”). We are not including the information contained on or available through our website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K.
Information About Our Executive Officers
The following table sets forth information concerning our executive officers as of February 21, 2020:
Name Age Position
Brian K. Kobylinski 53 President, Chief Executive Officer and Chairmen of the Board of Directors
Chad M. Paris 38 Senior Vice President and Chief Financial Officer
Timm Fields 52 Senior Vice President and General Manager - Engineered Components
Keith A.Walz 52 Senior Vice President and General Manager - Industrial
Kevin Kuznicki 58 Senior Vice President, General Counsel and Secretary
John J. Hengel 61 Vice President - Finance, Treasurer and Assistant Secretary
Brian K. Kobylinski has served as President and Chief Executive Officer since December 2016, and also as Chairman of the Board of Directors since June 2018. Prior to being named Chief Executive Officer, Mr. Kobylinski served as President & Chief Operating Officer since April 8, 2016. Prior to joining Jason Industries, Mr. Kobylinski served as Executive Vice President, Energy Segment and China for Actuant Corporation based in Milwaukee, Wisconsin. During his 23 years with Actuant Corporation, Mr. Kobylinski progressed through a number of management roles, including Vice President - Industrial and Energy Segments, Vice President - Business Development and Global Business Leader - Hydratight. Mr. Kobylinski received his Masters of Business Administration from the University of Wisconsin - Madison and his Bachelors of Art from St. Norbert College.
Chad M. Paris has served as Senior Vice President and Chief Financial Officer since February 2018 and August 2017, respectively. Mr. Paris joined Jason Industries in June 2014 and worked in several financial management roles at the Company, including Vice President and Chief Financial Officer, Vice President - Finance Finishing Americas, Vice President of Investor Relations, Financial Planning and Analysis, and Director of External Reporting. Prior to joining Jason Industries, Mr. Paris was a senior manager in the audit practice at Deloitte & Touche LLP. Mr. Paris is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants. Mr. Paris earned a Bachelor of Business Administration degree in finance and real estate and a Master of Science degree in management, with an accounting concentration, both from the University of Wisconsin - Milwaukee.
Timm Fields has served as Senior Vice President and General Manager - Engineered Components since February 2019. Mr. Fields previously served as the Vice President and General Manager - Seating, joining Jason Industries in November 2017. Prior to joining Jason Industries, Mr. Fields held various leadership positions at Illinois Tool Works (“ITW”) from 2008 to 2017, and most recently as Vice President and General Manager of the firm’s North American Residential Construction business. Prior to ITW, Mr. Fields held various leadership roles in Sales, Marketing, Materials, and Operations for S&S Cycle, Inc. and United Conveyor Corporation. Mr. Fields holds a bachelor’s degree in Business Management with a concentration in Marketing from Valparaiso University and a Masters of Business Administration from the University of Chicago Booth School of Business.
Keith A. Walz has served as our Senior Vice President and General Manager - Industrial since February 2018. Mr. Walz previously served as the Vice President and General Manager - Finishing and Vice President of Corporate Development and Strategy, joining Jason Industries in March 2015. Prior to joining Jason Industries, Mr. Walz served as the Vice President of Corporate Development at Brady Corporation based in Milwaukee, Wisconsin. Prior to joining Brady Corporation, Mr. Walz was a founding Partner of Kinsale Capital, a private investment firm focused on control equity investments in the middle market from 2006 to 2010. Prior to forming Kinsale Capital, Mr. Walz served as Managing Director at ABN AMRO Capital. Mr. Walz holds his bachelor’s degree in finance from the University of Arkansas and a Master of Business Administration from DePaul University.
Kevin Kuznicki has served as Senior Vice President, General Counsel and Secretary since April 2018. Prior to joining Jason Industries, Mr. Kuznicki held various roles with Polycom, Carrier Access Corporation, and Adient plc/Johnson Controls International plc, and most recently served as VP and Deputy General Counsel of Adient. Mr. Kuznicki is or has been a member of the CEB Legal Leadership Council, the American Bar Association - Business Law Section, and Europe, Chicago and Colorado’s chapters of the Association of Corporate Counsel. He has been admitted to practice law in Indiana, Illinois,

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

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ITEM 1A. RISK FACTORS
An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below and all of the other information contained in this report before deciding to invest in our securities. If any of the events or developments described below occur, our business, financial condition and/or results of operations could be negatively affected. In that case, the trading price of our securities could decline, and you could lose all or part of your investment.
Risk Factors Relating to Our Business
We are exploring and evaluating strategic alternatives and there can be no assurance that we will be successful in identifying, or completing any strategic alternative or that any such strategic alternative will yield additional value for shareholders.
On August 12, 2019, we announced that our Board of Directors had engaged financial advisors to explore strategic alternatives. This process could result in, among other things, a sale of the Company and/or one or all of its business segments, a strategic merger, a consolidation or business combination, one or more asset divestitures, one or more potential acquisitions, a recapitalization, or an out-of-court or in-court restructuring of the Company’s debt, in one or more transactions, or continuing to operate with our current business plan and strategy. There can be no assurance that the exploration of strategic alternatives will result in the identification or consummation of any transaction. In addition, we may incur substantial expenses associated with identifying, evaluating and executing potential strategic alternatives.
The process of exploring strategic alternatives may be time consuming, costly and disruptive to our business operations and if we are unable to effectively manage the process, our business, financial condition, liquidity, and results of operations could be adversely affected. Our announcement on August 12, 2019 and other announcements related to strategic alternatives may result in a perception that there is uncertainty about the future of our business and operations with customers, suppliers, and employees, regardless of the actual circumstances. Such perceptions may negatively affect our business, disrupt our operations and divert the attention of our Board of Directors, management, and employees, all of which could materially and adversely affect our business and operations. In addition, our stock price may experience periods of increased volatility as a result of such perceptions and speculation about the future of our business and operations.
We also cannot assure you that any potential transaction or other strategic alternative, if identified, evaluated and consummated, will provide greater value to our shareholders than that reflected in the current stock price. Any potential transaction would be dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, the interest of third parties in our business and the availability of financing to potential buyers on reasonable terms. We do not undertake to provide updates or make further comments regarding the evaluation of strategic alternatives, unless otherwise required by law.
We are affected by developments in the industries in which our customers operate.
We derive our revenues largely from customers in the following industry sectors: construction, agricultural, material handling, turf care, power sports, transportation, and general industrial and infrastructure applications. Factors affecting any of these industries in general, or any of our customers in particular, could adversely affect us because our revenue growth largely depends on the continued growth of our customers’ businesses in their respective industries. These factors include:
•economic conditions in the markets in which our customers operate, in particular, the United States and Europe, including recessionary periods such as the 2008/2009 global economic downturn;
•product design changes or manufacturing process changes that may reduce or eliminate demand for the components we supply;
•technological developments that may reduce or eliminate the need for our customers’ products;
•loss of market share for our customers’ products, which may lead our customers to reduce or discontinue purchasing our products and to reduce prices, thereby exerting pricing pressure on us;
•our customers’ failure to successfully market their products, to gain or retain widespread commercial acceptance of their products or to compete effectively in their industries; and
•seasonality of demand for our customers’ products which may cause our manufacturing capacity to be underutilized for periods of time.
We expect that future sales will continue to depend on the success of our customers. If economic conditions and demand for our customers’ products deteriorate, we may experience a material adverse effect on our business, operating results, liquidity and financial condition.

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Some of our business segments are cyclical. A downturn or weakness in overall economic activity can have a material negative impact on us.
Historically, sales of products that we manufacture have been subject to cyclical variations caused by changes in general economic conditions. During recessionary periods, we have been adversely affected by reduced demand for our products. In addition, the strength of the economy generally may affect the rates of expansion, consolidation, renovation and equipment replacement in the industries we serve. If economic conditions deteriorate, we may experience a material adverse effect on our business, operating results, liquidity and financial condition.
Volatility in the prices of raw materials and energy prices and our ability to pass along increased costs to our customers could adversely affect our results of operations.
The prices of raw materials critical to our business and performance, such as steel, are based on global supply and demand conditions. Certain raw materials used by us, including polyurethane foam, vinyl, plastics, steel, cloth, steel wire, and abrasive grains are only available from a limited number of suppliers, and it may be difficult to find alternative suppliers at the same or similar costs. Our material costs may also be adversely impacted by tariffs or other trade duties on imports. Although our contracts and long term arrangements with our customers generally do not expressly allow us to pass through increases in our raw materials, energy costs and other inputs to our customers, we endeavor to discuss price adjustments with our customers on a case by case basis where it makes business sense. While we strive to pass through increases in the price of raw materials to our customers (other than increases in order amounts which are subject to negotiation), we may not be able to do so in the future, and volatility in the prices of raw materials may affect customer demand for certain products. In addition, we, along with our suppliers and customers, rely on various energy sources for a number of activities connected with our business, such as the transportation of raw materials and finished products. Energy and utility prices, including electricity and water prices, and in particular prices for petroleum-based energy sources, are volatile. Increased supplier and customer operating costs arising from volatility in the prices of energy sources, such as increased energy and utility costs and transportation costs, could be passed through to us and we may not be able to increase our product prices sufficiently or at all to offset such increased costs. The impact of any volatility in the prices of energy or the raw materials on which we rely, including the reduction in demand for certain products caused by such price volatility, could result in a loss of revenue and profitability and adversely affect our results of operations, liquidity and financial condition.
Divestitures and discontinued operations could negatively impact our business, and contingent liabilities from businesses that we sell could adversely affect our financial results.
As part of our portfolio management and strategic alternatives process, we review our operations for businesses which may no longer be aligned with our strategic initiatives and long-term objectives. Divestitures pose risks and challenges that could negatively impact our business. For example, when we decide to sell a business, we may be unable to do so on satisfactory terms and within our anticipated time-frame, and even after reaching a definitive agreement to sell a business, the sale may be subject to satisfaction of pre-closing conditions, which may not be satisfied, as well as regulatory and governmental approvals, which may prevent us from completing a transaction on acceptable terms. Upon completing a divestiture, we may be subject to certain post-closing obligations or sale price adjustments such as indemnifications or working capital adjustments, and disputes may arise with buyers that negatively impact the consideration received in a divestiture. In addition, the impact of the divestiture on our revenue and net earnings may be larger than projected, which could distract management. Divestitures may also involve continued financial involvement, as we may be required to retain responsibility for, or agree to indemnify buyers against contingent liabilities related to businesses sold, such as lawsuits, tax liabilities, product liability claims or environmental matters. Under these types of arrangements, performance by the divested businesses or other conditions outside our control could affect our future financial results.
We compete with numerous other manufacturers in each of our segments and competition from these providers may affect the profitability of our business.
The industries we serve are highly competitive. We compete with numerous companies that manufacture industrial and engineered components products. Many of our competitors have international operations and significant financial resources and some have substantially greater manufacturing, research and design and marketing resources than us. These competitors may, among others:
•respond more quickly to new or emerging technologies;
•have greater name recognition, critical mass or geographic market presence;
•be better able to take advantage of acquisition opportunities;
•adapt more quickly to changes in customer requirements;
•devote greater resources to the development, promotion and sale of their products;

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•be better positioned to compete on price for their products, due to any combination of low-cost labor, raw materials, components, facilities or other operating items, or willingness to make sales at lower margins than us;
•consolidate with other competitors in the industry which may create increased pricing and competitive pressures on our business; and
•be better able to utilize excess capacity which may reduce the cost of their products or services.
Competitors with lower cost structures may have a competitive advantage when bidding for business with our customers. We also expect our competitors to continue to improve the performance of their current products or services, to reduce prices of their existing products or services and to introduce new products or services that may offer greater performance and improved pricing. Additionally, we may face competition from new entrants to the industries in which we operate. Any of these developments could cause a decline in sales and average selling prices, loss of market share of our products or profit margin compression.
In addition, our level of indebtedness and financial condition may make it difficult for us to continue to negotiate acceptable payment terms with our vendors and customers or may result in one or more of our suppliers making demand for adequate assurance, including demand for payment in advance. If we are unable to negotiate acceptable payment terms with our customers, or if material suppliers demand payment in advance, it could have a material adverse effect on our operating results, liquidity, financial condition and our competitive position, and it may also make it more difficult for us to obtain future financing.
We face risks related to sales through distributors and other third parties.
We sell a portion of our products through third parties such as distributors, agents and channel partners (collectively referred to as distributors). Using third parties for distribution exposes us to many risks, including competitive pressure, concentration, credit risk, and compliance risks. Distributors may sell products that compete with our products, and we may need to provide financial and other incentives to focus distributors on the sale of our products. We may rely on one or more key distributors for a product, and the loss of these distributors could reduce our revenue. Distributors may face financial difficulties, including bankruptcy, which could harm our collection of accounts receivable and financial results. Violations of the Foreign Corrupt Practices Act or similar laws by distributors or other third-party intermediaries could have a material impact on our business. Failing to manage risks related to our use of distributors may reduce sales, increase expenses, and weaken our competitive position.
We may not be able to maintain our engineering, technological and manufacturing expertise.
The markets for our products are characterized by changing technology and evolving process development. The continued success of our business will depend upon our ability to:
•hire, retain and expand our pool of qualified engineering and technical personnel;
•maintain technological leadership in our industry;
•successfully anticipate or respond to changes in manufacturing processes in a cost-effective and timely manner; and
•successfully anticipate or respond to changes in cost to serve in a cost-effective and timely manner.
We cannot be certain that we will develop the capabilities required by our customers in the future. The emergence of new technologies, industry standards or customer requirements may render our equipment, inventory or processes obsolete or uncompetitive. We may have to acquire new technologies and equipment to remain competitive. The acquisition and implementation of new technologies and equipment may require us to incur significant expense and capital investment, which could reduce our margins and affect our operating results. When we establish or acquire new facilities, we may not be able to maintain or develop our engineering, technological and manufacturing expertise due to a lack of trained personnel, effective training of new staff or technical difficulties with machinery. Failure to anticipate and adapt to customers’ changing technological needs and requirements or to hire and retain a sufficient number of engineers and maintain engineering, technological and manufacturing expertise may have a material adverse effect on our business.
We may be unable to realize the expected benefits of capital expenditures, which could adversely affect our profitability and operations.
We expect to continue to invest in our business through capital expenditures to support our facilities and purchases of production equipment and acquisitions. There can be no assurance that these investments will generate any specific return on investment.

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We may be unable to realize the expected benefits of our restructuring actions, which could adversely affect our profitability and operations.
In order to align our resources with our growth strategies, operate more efficiently and control costs, we have periodically announced restructuring plans, which include workforce reductions, plant closures and consolidations and other cost reduction initiatives. On March 1, 2016, as part of a strategic review of organizational structure and operations, we announced a global cost reduction and restructuring program. This program was ongoing during 2017 and 2018 and was completed in 2019. In 2019, additional restructuring initiatives were identified across the business segments and we anticipate continuing to identify future actions that will result in us 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. We may undertake additional restructuring actions and workforce reductions in the future. As these plans and actions are complex, unforeseen factors could result in expected savings and benefits to be delayed or not realized to the full extent planned, and our operations and business may be disrupted.
We may encounter difficulties in completing or integrating acquisitions, which could adversely affect our operating results.
We expect to expand our presence in new end markets, expand our capabilities or product lines and acquire new customers, some of which may occur through acquisitions. These transactions may involve acquisitions of entire companies, portions of companies, the entry into joint ventures and acquisitions of businesses or selected assets. Potential challenges related to our acquisitions and joint ventures include:
•paying an excessive price for acquisitions and incurring higher than expected acquisition costs;
•difficulty in integrating acquired operations, systems, assets and businesses;
•difficulty in implementing financial and management controls, reporting systems and procedures;
•difficulty in maintaining customer, supplier, employee or other favorable business relationships of acquired operations and restructuring or terminating unfavorable relationships;
•ensuring sufficient due diligence prior to an acquisition and addressing unforeseen liabilities of acquired businesses;
•making acquisitions in new end markets, geographies or technologies where our knowledge or experience is limited;
•failing to realize the benefits from goodwill and intangible assets resulting from acquisitions which may result in write-downs;
•failing to achieve anticipated business volumes; and
•making acquisitions which force us to divest other businesses.
Any of these factors could prevent us from realizing the anticipated benefits of an acquisition, including additional revenue, operational synergies and economies of scale. Our failure to realize the anticipated benefits of acquisitions could adversely affect our business and operating results.
Our goodwill and other intangible assets represent a substantial amount of our total assets. A decline in future operating performance at one or more of our reporting units could result in the further impairment of goodwill or other intangible assets, which could have a material adverse effect on our financial condition and results of operations.
At December 31, 2019, goodwill and other intangible assets totaled $110.3 million, or approximately 28% of our total assets. The goodwill results from our acquisitions, representing the excess of cost over the fair value of the net tangible and other identifiable intangible assets we have acquired. We assess annually whether there has been impairment in the value of our goodwill. If future operating performance at one or more of our reporting units were to fall below current or planned levels, we could be required to recognize a non-cash charge to operating earnings for goodwill (at our industrial reporting unit) or record an impairment charge related to other intangible assets. Given the continued significance of the Company’s goodwill and intangible assets, any additional significant goodwill or intangible asset impairment could reduce earnings and shareholders’ equity in such period and have a material adverse effect on our financial condition and results of operations.
If we fail to develop new and innovative products or if customers in our markets do not accept them, our results could be negatively affected.
Our products must be kept current to meet our customers’ needs. To remain competitive, we therefore must develop new and innovative products on an ongoing basis. If we fail to make innovations or the market does not accept our new products, our sales and results would likely suffer. We invest significantly in the research and development of new products. These expenditures do not always result in products that will be accepted by the market. To the extent they do not, whether as a function of the product or the business cycle, we will have increased expenses without significant sales to benefit us. Failure to

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develop successful new products may also cause potential customers to purchase competitors’ products, rather than invest in products manufactured by us.
The potential impact of failing to deliver products on time could increase the cost of the products.
In most instances, we guarantee that we will deliver a product by a scheduled date. If we subsequently fail to deliver the product as scheduled, we may be held responsible for cost impacts and/or other damages resulting from any delay. To the extent that these failures to deliver may occur, the total damages for which we could be liable could significantly increase the cost of the products; as such, we could experience reduced profits or, in some cases, a loss for that contract. Additionally, failure to deliver products on time could result in damage to customer relationships, the potential loss of customers, and reputational damage which could impair our ability to attract new customers.
Increasing costs of doing business in many countries in which we operate may adversely affect our business and financial results.
Increasing costs such as labor, overhead costs and tariffs in the countries in which we operate may erode our profit margins and compromise our price competitiveness. Historically, the low cost of labor in certain of the countries in which we operate has been a competitive advantage but labor costs in these countries, such as China, have been increasing. Our profitability also depends on our ability to manage and contain our other operating expenses such as the cost of utilities, factory supplies, factory space costs, equipment rental, repairs and maintenance and freight and packaging expenses. In the event we are unable to manage any increase in our tariffs, labor and other operating expenses in an environment where revenue does not increase proportionately, our financial results would be adversely affected.
Our international scope requires us to obtain financing in various jurisdictions.
We operate manufacturing facilities in the United States and 13 foreign countries, which creates financing challenges for us. These challenges include navigating local legal and regulatory requirements associated with obtaining financing in the respective foreign jurisdictions in which we operate. In the event that we are not able to obtain financing on satisfactory terms in any of these jurisdictions, it could significantly impair our ability to run our foreign operations on a cost effective basis or to grow such operations. Failure to manage such challenges may adversely affect our business and results of operations.
We have operations in many countries and such operations may be subject to a number of risks specific to these countries.
Our international operations across many different jurisdictions may be subject to a number of risks specific to these countries, including:
•export duties, tariffs, import controls and trade barriers (including quotas);
•adverse trade policies or adverse changes to any of the policies of either the United States or any of the foreign jurisdictions in which we operate;
•less flexible employee relationships which can be difficult and expensive to terminate;
•labor unrest;
•political and economic instability (including war and acts of terrorism);
•inadequate infrastructure for our operations (i.e., lack of adequate power, water, transportation and raw materials);
•health concerns and related government actions;
•risk of governmental expropriation of our property;
•less favorable, or relatively undefined, intellectual property laws;
•unexpected changes in regulatory requirements and laws;
•difficulty in repatriating cash (or the cost to do so);
•longer customer payment cycles and difficulty in collecting trade accounts receivable;
•adverse changes in tax rates or regulations;
•legal or political constraints on our ability to maintain or increase prices;
•burdens of complying with a wide variety of labor practices and foreign laws, including those relating to export and import duties, environmental policies and privacy issues;
•inability to utilize net operating losses incurred by our foreign operations against future income in the same jurisdiction; and

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•economies that are emerging or developing, that may be subject to greater currency volatility, negative growth, high inflation, limited availability of foreign exchange and other risks.
These factors may harm our results of operations, and any measures that we may implement to reduce the effect of volatile currencies and other risks of our international operations may not be effective. In our experience, entry into new international markets requires considerable management time as well as start-up expenses for market development, hiring and establishing office facilities before any significant revenue is generated. As a result, initial operations in a new market may operate at low margins or may be unprofitable.
Our international sales and operations are subject to applicable laws relating to trade, export controls and foreign corrupt practices, the violation of which could adversely affect our operations.
We are subject to applicable international trade, customs, export controls and economic sanctions laws and regulations of the United States and other countries and the Foreign Corrupt Practices Act and other anti-bribery laws that generally bar bribes or unreasonable gifts to foreign governments or officials. Changes in such laws may restrict our business practices, including cessation of business activities in sanctioned countries or with sanctioned entities, and may result in modifications to compliance programs. Violation of these laws or regulations could result in sanctions or fines and could have a material adverse effect on our financial condition, results of operations and cash flows. In addition, changes or modifications to existing trade agreements between the United States and other countries could also have a material adverse effect on our financial condition, results of operations and cash flows.
We are subject to risks of currency fluctuations and related hedging operations, and the devaluation of the currencies of countries in which we conduct our manufacturing operations, particularly the Euro, that may negatively affect the profitability of our business.
We report our financial results in U.S. dollars. Approximately 34% of our net sales in 2019 were in currencies other than the U.S. dollar. Changes in exchange rates among other currencies, especially the Euro to the U.S. dollar, may negatively affect our net sales, cost of sales, gross profit and net income where our expenses and revenues are denominated in different currencies. We cannot predict the effect of future exchange rate fluctuations. We may from time to time use financial instruments, primarily short-term forward contracts, to hedge Euro and other currency commitments arising from foreign currency obligations. If our hedging activities are not successful or if we change or reduce these hedging activities in the future, we may experience significant unexpected expenses from fluctuations in exchange rates.
We depend on our key executive officers, managers and skilled personnel and may have difficulty retaining and recruiting qualified employees and managing the cost of labor.
Our success depends to a large extent upon the continued services of our executive officers, senior management personnel, managers and other skilled personnel and our ability to recruit and retain skilled personnel to maintain and expand our operations. We could be affected by the loss of any of our executive officers who are responsible for formulating and implementing our business plan and strategy. In addition, we need to recruit and retain additional management personnel and other skilled employees. However, competition is high for skilled technical personnel among companies that rely on engineering and technology, and the loss of qualified employees or an inability to attract, retain and motivate additional skilled employees required for the operation and expansion of our business could hinder our ability to conduct design, engineering and manufacturing activities successfully and develop marketable products. We may not be able to attract the skilled personnel we require or retain those whom we have trained at our own cost. If we are not able to do so, our business and our ability to continue to grow could be negatively affected and we could face additional competition from those who leave and work for our competitors.
We continue to be dependent on our production personnel to manufacture our products in a cost-effective and efficient manner. We believe there is significant competition for production personnel with the skills and technical knowledge that we require. Our ability to continue efficient operations, reduce production costs, and consolidate operations will depend, in large part, on our success in recruiting, training, integrating and retaining sufficient numbers of production personnel to support our production, cost savings and consolidation targets. New hires require significant training and it may take significant time before they achieve full productivity. As a result, we may incur significant costs to attract, train and retain employees, including significant expenditures related to salaries and benefits. If we are unable to hire and train sufficient numbers of effective production personnel, our business would be adversely affected.
Many of our customers do not commit to long-term production schedules, which makes it difficult for us to schedule production accurately and achieve maximum efficiency of our manufacturing capacity.
Generally, our customers do not commit to long-term contracts. Many of our customers do not commit to firm production schedules and we continue to experience reduced lead-times in customer orders. Additionally, customers may change production quantities or delay production with little lead-time or advance notice. Therefore, we rely on and plan our production and inventory levels based on our customers’ advance orders, commitments or forecasts, as well as our internal

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assessments and forecasts of customer demand. The volume and timing of sales to our customers may vary due to, among other factors:
•variation in demand for or discontinuation of our customers’ products;
•our customers’ attempts to manage their inventory;
•design changes;
•changes in our customers’ manufacturing strategies; and
•acquisitions of or consolidation among customers.
The variations in volume and timing of sales make it difficult to schedule production and optimize manufacturing capacity. This uncertainty may require us to increase staffing and incur other expenses in order to meet an unexpected increase in customer demand, potentially placing a significant burden on our resources. Additionally, an inability to respond to such increases may cause customer dissatisfaction, which may negatively affect our customers’ relationships.
Further, in order to secure sufficient production scale, we may make capital investments in advance of anticipated customer demand. Such investments may lead to low utilization levels if customer demand forecasts change and we are unable to utilize the additional capacity. Because fixed costs make up a large proportion of our total production costs, a reduction in customer demand can have a significant adverse impact on our gross profits and operating results. Additionally, we order materials and components based on customer forecasts and orders and suppliers may require us to purchase materials and components in minimum quantities that exceed customer requirements, which may have an adverse impact on our gross profits and operating results. In the past, anticipated orders from some of our customers have failed to materialize and delivery schedules have been deferred as a result of changes in our customers’ business needs. We have also allowed long-term customers to delay orders to absorb excess inventory. Such order fluctuations and deferrals may have an adverse effect on our business, operating results and/or financial conditions.
We may incur additional expenses and delays due to technical problems or other interruptions at our manufacturing facilities or those of our suppliers.
Disruptions in operations due to technical problems or other interruptions such as floods or fire would adversely affect the manufacturing capacity of our facilities or those of our suppliers. Such interruptions could cause delays in production and cause us to incur additional expenses such as charges for expedited deliveries for products that are delayed. In addition, our customers have the ability to cancel purchase orders in the event of any delays in production and may decrease future orders if delays are persistent. Additionally, to the extent that such disruptions do not result from damage to our physical property, these may not be covered by our business interruption insurance. Any such disruptions may adversely affect our business, operations, and financial results.
The operations of our manufacturing facilities may be disrupted by union activities and other labor-related problems.
We have labor unions at certain of our facilities. As of December 31, 2019, we had approximately 235 unionized personnel in the United States. For such employees, we have entered into collective bargaining agreements with the respective labor unions. In addition, a significant portion of our labor force at our operations in Europe are members of local works councils subject to collective bargaining or similar agreements and a significant portion of our labor force at our operations in Mexico have collective bargaining agreements. In the future, such agreements may limit our ability to contain increases in our labor costs as our ability to control future labor costs depends partly on the outcome of wage negotiations with our employees. Any future collective bargaining agreements may lead to further increases in our labor costs. Although our employees in certain other facilities are currently not unionized, there can be no assurance that they will continue to remain as such.
Union activities and other labor-related problems not linked to union activities may disrupt our operations and adversely affect our business and results of operations. We cannot provide any assurance that we will not be affected by any such labor unrest, or increase in labor cost, or interruptions to the operations of our existing manufacturing plants or new manufacturing plants that we may set up in the future. Any disruptions to our manufacturing facilities as a result of labor-related disturbances could affect our ability to meet delivery and efficiency targets resulting in an adverse effect on our customer relationships and our financial results. Such disruptions may not be covered by our business interruption insurance.

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Any disruption in our information systems could disrupt our operations and would be adverse to our business and financial operations.
We depend on various information systems to support our customers’ requirements and to successfully manage our business, including managing orders, supplies, accounting controls and payroll. Any inability to successfully manage the procurement, development, implementation or execution of our information or communication systems and back-up systems, including matters related to system security, reliability, performance and access, as well as any inability of these systems to fulfill their intended purpose within our business, could have an adverse effect on our business and financial performance. Such disruptions may not be covered by our business interruption insurance.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
In the ordinary course of business, we collect and store sensitive data, including our proprietary business information and that of our customers, suppliers and business partners, as well as personally identifiable information of our customers and employees, in our data centers and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures, our information technology, infrastructure and business processes may be vulnerable to malicious attacks or breached due to employee error, malfeasance or other disruptions, including as a result of rollouts of new systems. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure, failure to protect, failure to ensure the proper transfer or other loss of information could violate applicable privacy, data security and other laws and subject us to legal claims or proceedings and/or regulatory penalties, disruption of our operations, damage of our reputation, financial loss through unauthorized payments and/or cause a loss of confidence in our products and services, which could adversely affect our business. For example, the General Data Protection Regulation (Regulation (EU) 2016/679) (the “GDPR”), which took full effect on May 25, 2018, applies to all of our activities conducted from an establishment in the European Union or related to products and services that we offer to European Union users. A breach in our network or failure to properly protect or prevent the improper transfer of data could result in significant financial penalties for noncompliance (including possible fines of up to 4% of global annual turnover for the preceding financial year or €20 million (whichever is higher) for the most serious infringements).
Natural disasters, epidemics and other events outside our control, and our inability to successfully mitigate the effects of such events, may harm our business.
Some of our facilities are located in areas that may be affected by natural disasters such as hurricanes, earthquakes, water shortages, tsunamis and floods. All facilities are subject to other natural or man-made disasters such as fires, acts of terrorism, failures of utilities and epidemics or pandemics such as the novel coronavirus COVID-19. If such an event were to occur, our business could be harmed due to the event or our inability to successfully mitigate the effects of the particular event. Potential harms include the loss of business continuity, the loss of business data and damage to infrastructure.
Our production and supply chains could be severely affected if our employees or the regions in which our facilities or suppliers are located are affected by a significant outbreak of any disease, epidemic or pandemic. For example, a facility could be closed by government authorities for a sustained period of time, some or all of our workforce could be unavailable due to quarantine, fear of catching the disease or other factors, and local, national or international transportation or other infrastructure could be affected, leading to delays or loss of production. In addition, our suppliers and customers are subject to similar risks, which could lead to a shortage of components or a reduction in our customers’ demand for our services.
We rely on a variety of common carriers to transport our materials from our suppliers, and to transport products from us to our customers. Problems suffered by any of these common carriers, whether due to a natural disaster, labor problem, act of terrorism, increased energy prices, epidemics or pandemics or some other issue, could result in shipping delays, increased costs or some other supply chain disruption and could therefore have a material adverse effect on our operations.
In addition, some of our facilities possess certifications, machinery, equipment or tooling necessary to work on specialized products that our other locations lack. If work is disrupted at one of these facilities, it may not be practicable or feasible to transfer such specialized work to another facility without significant costs and delays. Thus, any disruption in operations at a facility possessing specialized certifications, machinery, equipment or tooling could adversely affect our ability to provide products to our customers and thus negatively affect our relationships and financial results.
Political and economic developments could adversely affect our business.
Increased international political instability and social unrest, evidenced by the threat or occurrence of terrorist attacks, enhanced national security measures and the related decline in consumer confidence may hinder our ability to do business. Any escalation in these events or similar future events may disrupt our operations or those of our customers and suppliers and could affect the availability of raw materials and components needed to manufacture our products or the means to transport those materials to manufacturing facilities and finished products to customers. These events may have an adverse effect on the world

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economy and consumer confidence and spending, which could adversely affect our revenue and operating results. The effect of these events on the volatility of the world financial markets could in the future lead to volatility of the market price of our securities and may limit the capital resources available to us, our customers and suppliers.
Sales of our products may result in exposure to product liability, intellectual property infringement and other claims.
Our manufactured products can expose us to potential liabilities. For instance, our manufacturing businesses expose us to potential product liability claims resulting from injuries caused by defects in products we design or manufacture, as well as potential claims that products we design or processes we use infringe on third-party intellectual property rights. Such claims could subject us to significant liability for damages, subject the infringing portion of our business to injunction and, regardless of their merits, could be time-consuming and expensive to resolve. We may also have greater potential exposure from warranty claims and product recalls due to problems caused by product design. Although we have product liability insurance coverage, it may not be sufficient to cover the full extent of our product liability, if at all, and may also be subject to the satisfaction of a deductible. A successful product liability claim in excess or outside of our insurance coverage or any material claim for which insurance coverage was denied or limited and for which indemnification was not available could have a material adverse effect on our business, results of operations and/or financial condition.
If our manufacturing processes and products do not comply with applicable statutory and regulatory requirements, or if we manufacture products containing design or manufacturing defects, demand for our products may decline and we may be subject to liability claims.
Our designs, manufacturing processes and facilities need to comply with applicable statutory and regulatory requirements. We may also have the responsibility to ensure that products we design satisfy safety and regulatory standards including those applicable to our customers and to obtain any necessary certifications. In addition, our customers’ products and the manufacturing processes that we use to produce them are often highly complex. As a result, products that we manufacture may at times contain manufacturing or design defects, and our manufacturing processes may be subject to errors or not be in compliance with applicable statutory and regulatory requirements or demands of our customers. Defects in the products we manufacture or design, whether caused by a design, manufacturing or component failure or error, or deficiencies in our manufacturing processes, may result in delayed shipments to customers, replacement costs or reduced or canceled customer orders. If these defects or deficiencies are significant, our business reputation may also be damaged. The failure of the products that we manufacture or our manufacturing processes and facilities to comply with applicable statutory and regulatory requirements may subject us to legal fines or penalties and, in some cases, require us to shut down or incur considerable expense to correct a manufacturing process or facility. In addition, these defects may result in liability claims against us or expose us to liability to pay for the recall of a product or to indemnify our customers for the costs of any such claims or recalls which they face as a result of using items manufactured by us in their products. Even if our customers are responsible for the defects, they may not assume, or may not have resources to assume, responsibility for any costs or liabilities arising from these defects, which could expose us to additional liability claims.
Compliance or the failure to comply with regulations and governmental policies could cause us to incur significant expense.
We are subject to a variety of local and foreign laws and regulations including those relating to labor and health and safety concerns and import/export duties and customs. Such laws may require us to pay mandated compensation in the event of workplace accidents and penalties in the event of incorrect payments of duties or customs. Additionally, we may need to obtain and maintain licenses and permits to conduct business in various jurisdictions. If we or the businesses or companies we acquire have failed or fail in the future to comply with such laws and regulations, then we could incur liabilities and fines and our operations could be suspended. Such laws and regulations could also restrict our ability to modify or expand our facilities, could require us to acquire costly equipment, or could impose other significant expenditures.
If our products are subject to warranty claims, our business reputation may be damaged and we may incur significant costs.
We generally provide warranties to our customers for defects in materials and workmanship and where our products do not conform to specifications. A successful claim for damages arising as a result of such defects or deficiencies may affect our business reputation. In addition, a successful claim for which we are not insured, where the damages exceed insurance coverage, where we cannot recover from our vendors to the extent their materials or workmanship were defective, or any material claim for which insurance coverage is denied or limited and for which indemnification is not available, could have a material adverse effect on our business, operating results and financial condition. In addition, as we pursue new end-markets, warranty requirements will vary and we may be less effective in pricing our products to appropriately capture the warranty costs.
We are or may be required to obtain and maintain quality or product certifications for certain markets.
In some countries, our customers require or prefer that we obtain certain certifications for our products and testing facilities with regard to specifications/quality standards. Consequently, we need to obtain and maintain the relevant certifications so that our customers are able to sell their products, which are manufactured by us, in these countries. If we are

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unable to meet and maintain the requirements needed to secure or renew such certifications, we may not be able to sell our products to certain customers and our financial results may be adversely affected.
Our income tax returns are subject to current tax legislation and review by taxing authorities, and the final determination of our tax liability with respect to changes in tax legislation, tax audits and any related litigation could adversely affect our financial results.
Although we believe that our tax estimates are reasonable and that we prepare our tax filings in accordance with all applicable current tax laws, the final determination with respect to any tax audits and changes in tax legislation, and any related litigation, could be materially different from our estimates or from our historical income tax provisions and accruals. The results of an audit, tax reform or litigation could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments. We are undergoing tax audits in various jurisdictions and we regularly assess the likelihood of an adverse outcome resulting from such examinations to determine the adequacy of our tax reserves.
On December 22, 2017, the President of the United States signed into law comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”) which has and will continue to impact our provision for income taxes. The legislation significantly changed U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system, limiting the deductibility of interest payments and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries.
Failure of our customers to pay the amounts owed to us in a timely manner may adversely affect our financial condition, liquidity, and operating results.
We generally provide payment terms ranging from 30 to 60 days. As a result, we generate significant accounts receivable from sales to our customers, representing 18.9% and 18.5% of current assets as of December 31, 2019 and December 31, 2018, respectively. Accounts receivable from sales to customers were $33.1 million and $36.2 million as of December 31, 2019 and December 31, 2018, respectively. As of December 31, 2019, the largest amount owed by a single customer was approximately 5% of total accounts receivable. As of December 31, 2019, our allowance for doubtful accounts was approximately $1.1 million. If any of our significant customers have insufficient liquidity, we could encounter significant delays or defaults in payments owed to us by such customers, and we may need to extend our payment terms or restructure the receivables owed to us, which could have a significant adverse effect on our financial condition and liquidity. Any deterioration in the financial condition or liquidity of our customers will increase the risk of uncollectible receivables. Global economic uncertainty could also affect our customers’ ability to pay our receivables in a timely manner or at all or result in customers going into bankruptcy or reorganization proceedings, which could also affect our ability to collect our receivables.
Our failure to comply with environmental laws could adversely affect our business and financial condition.
We are subject to various federal, state, local and foreign environmental laws and regulations, including regulations governing the use, storage, discharge and disposal of hazardous substances used in our manufacturing processes.
We are also subject to laws and regulations governing the recyclability of products, the materials that may be included in products, and our obligations to dispose of these products after end-users have finished with them. Additionally, we may be exposed to liability to our customers relating to the materials that may be included in the components that we procure for our customers’ products. Any violation or alleged violation by us of environmental laws could subject us to significant costs, fines or other penalties.
We are also required to comply with an increasing number of product environmental compliance regulations focused on the restriction of certain hazardous substances. Non-compliance could result in significant costs and penalties.
In addition, increasing governmental focus on climate change may result in new environmental regulations that may negatively affect us, our suppliers and our customers by requiring us to incur additional direct costs to comply with new environmental regulations, as well as additional indirect costs as a result of our customers or suppliers passing on additional compliance costs. These costs may adversely affect our operations and financial condition.
Environmental liabilities that may arise in the future could be material to us.
Our operations, facilities and properties are subject to extensive and evolving laws and regulations pertaining to air emissions, wastewater discharges, the handling and disposal of solid and hazardous materials and wastes, the remediation of contamination, and otherwise relating to health, safety and the protection of the environment. As a result, we are involved from time to time in administrative or legal proceedings relating to environmental and health and safety matters, and have in the past and will continue to incur capital costs and other expenditures relating to such matters. We also cannot be certain that identification of presently unidentified environmental conditions, more vigorous enforcement by regulatory authorities or other unanticipated events will not arise in the future and give rise to additional environmental liabilities, compliance costs and/or

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penalties that could be material. Further, environmental laws and regulations are constantly evolving and it is impossible to predict accurately the effect they may have upon our financial condition, results of operations or cash flows.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, investments and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments, including non-U.S. governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations.
Acquisitions, expansions or infrastructure investments may require us to increase our level of indebtedness or issue additional equity.
Should we desire to undertake significant additional expansion activities, make substantial investments in our infrastructure or consummate significant additional acquisition opportunities, our capital needs would increase and we may need to increase available borrowings under our credit facilities or access public or private debt and equity markets. There can be no assurance, however, that we will be successful in raising additional debt or equity on terms that we would consider acceptable.
An increase in the level of indebtedness could, among other things:
•make it difficult for us to obtain financing in the future for working capital, capital expenditures, debt service requirements, acquisitions or other purposes;
•limit our flexibility in planning for or reacting to changes in our business;
•affect our ability to pay dividends;
•make us more vulnerable in the event of a downturn in our business; and
•affect certain financial covenants with which we must comply in connection with our credit facilities.
Additionally, a further equity issuance could dilute the ownership interest of existing stockholders.
Risk Factors Relating to Our Indebtedness
We have a substantial amount of indebtedness, which may limit our operating flexibility and could adversely affect our results of operations, liquidity and financial condition.
We have approximately $389.0 million of indebtedness as of December 31, 2019, consisting of $374.3 million in U.S. term loans, $13.9 million in borrowings under existing non-U.S. debt agreements, and $0.8 million of finance leases. Net leverage, defined as total indebtedness less cash divided by Adjusted EBITDA, was 12.0x as of December 31, 2019.
Our indebtedness and leverage could have important consequences to our investors, including, but not limited to:
•increasing our vulnerability to, and reducing our flexibility to respond to, general adverse economic and industry conditions;
•requiring the dedication of a substantial portion of our cash flow from operations to the payment of principal, and interest on our indebtedness, thereby reducing our liquidity and reducing the availability of such cash flow to fund working capital, capital expenditures, acquisitions, joint ventures or other general corporate purposes;
•limiting our flexibility in planning for, or reacting to, changes in our business, the competitive environment and the industry in which we operate;
•placing us at a competitive disadvantage as compared to our competitors that are not as highly leveraged
•limiting our ability to borrow additional funds and increasing the cost of any such borrowing; and
•limiting our access to traditional credit markets to complete a refinancing of our debt prior to its maturity.
A breach of a covenant or restriction contained in our U.S. credit facility (the “Senior Secured Credit Facilities”) could result in a default that could in turn permit the affected lenders to accelerate the repayment of principal and accrued interest on our outstanding loans and terminate their commitments to lend additional funds. If the lenders under such indebtedness accelerate the repayment of our borrowings, we cannot assure that we will have sufficient assets to repay those borrowings as well as other indebtedness.

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In connection with the August 30, 2019 sale of the North American fiber solutions business, we received net cash proceeds, as defined by the Senior Secured Credit Facilities, of $62.6 million, of which $57.6 million was remaining after permitted reinvestments as of December 31, 2019. We intend to continue to reinvest these net proceeds as permitted under the terms of the Senior Secured Credit Facilities; therefore, no mandatory prepayment is anticipated at this time. To the extent that there are net proceeds that are not reinvested within twelve months of receipt, or within 180 days of a contractual commitment if such commitment is made during the twelve month period, a mandatory prepayment will be required.
We have substantial interest expense on our debt and our credit ratings are below “investment grade.” As of December 31, 2019, our First Lien U.S. term loan of $284.4 million matures on June 30, 2021, and our Second Lien U.S. term loan of $89.9 million matures on June 30, 2022. We may be unable to access capital to refinance our debt. If we are able to access capital, alternative capital sources may be more costly than our existing borrowings. Refinancing our debt on less favorable terms than in the existing credit facility could have a significant impact on our cash flow from operations.
To the extent that our access to credit is restricted because of our own performance or conditions in the capital markets generally, our financial condition would be materially adversely affected. Our level of indebtedness may make it difficult to service our debt and may adversely affect our ability to obtain additional financing, use operating cash flow in other areas of our business or otherwise adversely affect our operations. This could result in, among other things, a sale of the Company and/or one or both of our business segments, asset divestitures, a recapitalization, or an out-of-court or in-court restructuring of the Company’s debt.
Our Senior Secured Credit Facilities contain restrictive covenants that may impair our ability to conduct business.
The Senior Secured Credit Facilities contain a number of customary affirmative and negative covenants that, among other things, limit or restrict the ability of Jason Incorporated and its Restricted Subsidiaries (as defined in the Senior Secured Credit Facilities) to: incur additional indebtedness (including 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. To comply with these covenants, Jason Incorporated and its Restricted Subsidiaries are limited in the amount of cash that can be distributed to us in the form of dividends, loans or other distributions.
In addition, under the Revolving Credit Facility, if the aggregate outstanding amount of all Revolving Loans, swingline loans and certain letter of credit obligations (letters of credit in excess of $5.0 million) exceeds $10 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. As a result of these covenants and restrictions, we are limited in how we conduct our business and we may be unable to raise additional debt or other financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. Failure to comply with such restrictive covenants may lead to default and acceleration under our Senior Secured Credit Facilities and may impair our ability to conduct business. We may not be able to maintain compliance with these covenants in the future and, if we fail to do so, we may not be able to obtain waivers from the lenders and/or amend the covenants, which may adversely affect our financial condition.
Upon the occurrence of an event of default under our Senior Secured Credit Facilities, the lenders could elect to accelerate payments due and terminate all commitments to extend further credit. Consequently, we may not have sufficient assets to repay the Senior Secured Credit Facilities, as well as other secured and unsecured indebtedness.
Upon the occurrence of an event of default under our Senior Secured Credit Facilities, the lenders thereunder could elect to declare all amounts outstanding under the Senior Secured Credit Facilities to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders under the Senior Secured Credit Facilities could proceed against the collateral granted to them to secure that indebtedness. We have pledged a significant portion of our assets as collateral under the Senior Secured Credit Facilities. If the lenders under our Senior Secured Credit Facilities accelerate the repayment of borrowings, we cannot assure that we will have sufficient assets to repay the Senior Secured Credit Facilities, as well as other secured and unsecured indebtedness.
An adverse change in the interest rates for our borrowings could adversely affect our financial condition.
We pay interest on outstanding borrowings under our Senior Secured Credit Facilities at interest rates that fluctuate based upon changes in certain short term prevailing interest rates. An adverse change in these rates could have a material adverse effect on our financial position, results of operations and cash flows and our ability to borrow money in the future. At times, we will enter into interest rate swaps to hedge some of this risk. If the duration of interest rate swaps exceeds one month, we will have to mark-to-market the value of such swaps which could cause us to recognize losses.

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Risk Factors Relating to Our Securities and Capital Structure
General Securities and Capital Structure Risk Factors
The market price of our common stock may decline.
Fluctuations in the price of our common stock could contribute to the loss of all or part of your investment. Trading in our common stock has been limited. Any of the factors listed below could have a material adverse effect on your investment and our common stock may trade at prices significantly below the price you paid for it. In such circumstances, the trading price of our common stock may not recover and may experience a further decline.
Factors affecting the trading price of our common stock may include:
•actual or anticipated fluctuations in our financial results or the financial results of companies perceived to be similar to us;
•changes in the market’s expectations about our operating results;
•success of competitors;
•our operating results failing to meet the expectation of securities analysts or investors in a particular period;
•changes in financial estimates and recommendations by securities analysts concerning us or our markets in general;
•operating and stock price performance of other companies that investors deem comparable to us;
•our ability to market new and enhanced products on a timely basis;
•changes in laws and regulations affecting our business;
•commencement of, or involvement in, litigation involving us;
•changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;
•our ability to refinance our debt maturities;
•the outcome of our strategic alternatives process;
•the volume of common stock available for public sale;
•any major change in our board or management;
•sales of substantial amounts of our common stock by our directors, executive officers or significant shareholders or the perception that such sales could occur; and
•general economic and political conditions such as recession; interest rate, fuel price, and international currency fluctuations; and acts of war or terrorism.
As of December 31, 2019, there were 28,508,977 shares of our common stock issued and outstanding. As of January 14, 2020, our common stock trades on the OTCQX Best Market. Our stock is thinly traded (approximately 1.0%, or 286,000 shares, of our stock traded on an average daily basis during the year ended December 31, 2019), and you may have difficulty in selling your shares.
There is currently no market for our Series A Preferred Stock and it is unlikely one will develop. If an active market develops, the trading price of our Series A Preferred Stock could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control.
Many of the factors listed above are beyond our control. In addition, broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our common stock, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to us could depress the price of our securities regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.
Our business and/or reputation could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading value of our securities.
Certain of our shareholders have made, and may in the future make strategic proposals, suggestions, or requests for changes concerning the operation of our business, our business strategy, corporate governance considerations, or other matters

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that may not be fully aligned with our own. Responding to actions by activist shareholders can be costly and time-consuming, disrupt our operations and divert the attention of management and our employees. Perceived uncertainties as to our future direction may result in the loss of potential business opportunities, damage to our reputation, and may make it more difficult to attract and retain qualified directors, personnel and business partners. These actions could also cause our stock price to experience periods of volatility.
Two of our largest shareholders have significant influence over our management and affairs and could exercise this influence against other shareholders’ best interests.
At January 31, 2020, Mr. Nelson Obus, one of our directors and, through Wynnefield Partners Small Cap Value LP and various other entities, one of our largest shareholders, beneficially owned approximately 18.4% of our outstanding shares of common stock. In addition, at January 31, 2020, Mr. Jeffry N. Quinn, one of our directors and largest shareholders, beneficially owned approximately 10.6% of our outstanding shares of common stock. As a result, pursuant to our bylaws and applicable laws and regulations, Messrs. Obus and Quinn, together with our executive officers and other directors, are able to exercise significant influence over our company, including, but not limited to, any shareholder approvals for the election of our directors and, indirectly, the selection of our senior management, the amount of dividend payments, if any, our annual budget, increases or decreases in our share capital, new securities issuance, mergers and acquisitions and any amendments to our bylaws. Furthermore, this concentration of ownership may delay or prevent a change of control or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which could decrease the market price of our shares.
A significant number of additional shares of our common stock may be issued upon the exercise or conversion of existing securities, which issuances would substantially dilute existing shareholders and may depress the market price of our common stock.
As of January 31, 2020, there were 28,508,977 shares of our common stock outstanding. In addition, (i) 5,197,700 shares of common stock can be issued upon conversion of our Series A Preferred Stock, which includes 1,629,839 shares of common stock potentially issuable upon conversion of additional shares of Series A Preferred Stock received as dividends over the next five years and assumes that the conversion ratio is not adjusted, and (ii) 5,137,597 shares of common stock are available for future issuance under our 2014 Omnibus Incentive Plan. From time to time, we may seek to obtain Board of Directors approval for additional future issuances of common stock. The issuance of shares of common stock would substantially dilute the proportionate ownership and voting power of existing security holders, and their issuance, or the possibility of their issuance, may depress the market price of our common stock.
Anti-takeover provisions contained in our certificate of incorporation and bylaws, our Shareholder Rights Agreement, the increased conversion rate triggered by a “fundamental change”, as well as provisions of Delaware law, could impair a takeover attempt.
Our second amended and restated certificate of incorporation (the “certificate of incorporation”) and bylaws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our Board of Directors. These provisions include:
•no cumulative voting in the election of directors, which limits the ability of minority shareholders to elect director candidates;
•the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death, or removal of a director, which prevents shareholders from being able to fill vacancies on our Board of Directors;
•the ability of our Board of Directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without shareholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
•a prohibition on shareholder action by written consent, which forces shareholder action to be taken at an annual or special meeting of our shareholders;
•the requirement that a special meeting of shareholders may be called only by the chairman of the Board of Directors, the chief executive officer, or the Board of Directors, which may delay the ability of our shareholders to force consideration of a proposal or to take action, including the removal of directors;
•limiting the liability of, and providing indemnification to, our directors and officers;
•controlling the procedures for the conduct and scheduling of shareholder meetings;
•providing that directors may be removed prior to the expiration of their terms by shareholders only for cause; and

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•advance notice procedures that shareholders must comply with in order to nominate candidates to our Board of Directors or to propose matters to be acted upon at a shareholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
These provisions, alone or together, could delay hostile takeovers and changes in control of us or changes in our Board of Directors and management.
Our Board of Directors adopted a Shareholder Rights Agreement on September 1, 2019 that, in general terms, works by imposing a significant penalty upon any person or group which acquires 30% or more of our outstanding common stock without the approval of our Board of Directors. The existence of this Shareholder Rights Agreement could discourage a potential acquirer, including potential acquirers that otherwise seek a transaction with us that would be attractive. In addition, the increased conversion rate of the Series A Preferred Stock into shares of our common stock that would be triggered by a “fundamental change” (as defined in the Certificate of Designations, Preferences, Rights and Limitations of the Series A Preferred Stock (the “Certificate of Designations”)) could also discourage a potential acquirer, including potential acquirers that otherwise seek a transaction with us that would be attractive.
As a Delaware corporation, we are also subject to provisions of Delaware law including Section 203 of the Delaware General Corporation Law, which prevents some shareholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock.
Any provision of our certificate of incorporation, bylaws, Certificate of Designations or Delaware law, as well as our Shareholder Rights Agreement, that has the effect of delaying or deterring a change in control could limit the opportunity for our security holders to receive a premium for their securities and could also affect the price that some investors are willing to pay for our securities.
Our only significant asset is our indirect ownership of Jason Incorporated and such ownership may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or preferred stock or satisfy our other financial obligations.
As of January 31, 2020, we have no direct operations and no significant assets other than the indirect ownership of Jason Incorporated. We depend on Jason Incorporated for distributions, loans and other payments to generate the funds necessary to meet our financial obligations, including our expenses as a publicly traded company, and to pay any dividends with respect to our preferred stock and common stock. Legal and contractual restrictions in agreements governing our senior secured credit facilities and future indebtedness of Jason Incorporated, as well as the financial condition and operating requirements of Jason Incorporated, may limit our ability to obtain cash from Jason Incorporated. As of December 31, 2019, Jason Incorporated and its Restricted Subsidiaries are not currently able to distribute cash to Jason Industries, Inc. in accordance with the restricitions of the Credit Agreements. The earnings from, or other available assets of, Jason Incorporated may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or satisfy its other financial obligations. In addition, the terms of our Series A Preferred Stock may from time to time prevent us from paying cash dividends on our common stock.
Series A Preferred Stock Risk Factors
We are not obligated to pay dividends on the Series A Preferred Stock if prohibited by law; the terms of our financing agreements may limit our ability to pay such dividends; and we will not be able to pay cash dividends if we have insufficient cash to do so.
Under Delaware law, dividends on capital stock may only be paid from “surplus” or, if there is no “surplus,” from the corporation’s net profits for the then-current or the preceding fiscal year. Unless we operate profitably, our ability to pay dividends on the Series A Preferred Stock would require the availability of adequate “surplus,” which is defined as the excess, if any, of our net assets (total assets less total liabilities) over our capital.
Financing agreements, whether ours or those of our subsidiaries and whether in place now or in the future, may contain restrictions on our ability to pay cash dividends on our capital stock, including the Series A Preferred Stock. These limitations may cause us to be unable to pay dividends on the Series A Preferred Stock unless we can refinance amounts outstanding under those agreements. Since we are not obligated to declare or pay cash dividends, we do not intend to do so to the extent we are restricted by any of our financing agreements.
The dividends payable by us on the Series A Preferred Stock may exceed our current and accumulated earnings and profits, as calculated for U.S. federal income tax purposes. If that occurs, it will result in the amount of the dividends that exceed such earnings and profits being treated for U.S. federal income tax purposes first as a return of capital to the extent of the beneficial owner’s adjusted tax basis in the Series A Preferred Stock, and the excess, if any, over such adjusted tax basis as

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capital gain. Such treatment will generally be unfavorable for corporate beneficial owners and may also be unfavorable to certain other beneficial owners.
Further, even if adequate surplus is available to pay dividends on the Series A Preferred Stock, we may not have sufficient cash to pay cash dividends on the Series A Preferred Stock. Even if we do have sufficient cash to pay dividends, our capital allocation strategy may result in the Company electing to pay dividends in additional shares of Series A Preferred Stock. We have in the past, and may elect in the future, to pay dividends on the Series A Preferred Stock in shares of additional Series A Preferred Stock; however, our ability to pay dividends in shares of our Series A Preferred Stock may be limited by the number of shares of Series A Preferred Stock we are authorized to issue under our certificate of incorporation. As of January 1, 2020, we had 43,950 shares of our Series A Preferred Stock issued and outstanding out of 100,000 authorized shares.
The Series A Preferred Stock does not have an established trading market, which may negatively affect its market value and the ability to transfer or sell such shares.
The shares of Series A Preferred Stock do not have an established trading market. Since the Series A Preferred Stock has no stated maturity date, investors seeking liquidity will be limited to selling their shares in the secondary market or converting their shares to common shares and selling in the secondary market. We do not intend to list the Series A Preferred Stock on any securities exchange. We cannot assure you that an active trading market in the Series A Preferred Stock will develop or, even if it develops, we cannot assure you that it will last. In either case, the trading price of the Series A Preferred Stock could be adversely affected and the ability of a holder of Series A Preferred Stock to transfer shares of Series A Preferred Stock will be limited. We are not aware of any entity making a market in the shares of our Series A Preferred Stock which we anticipate may further limit liquidity.
The conversion rate of the Series A Preferred Stock may not be adjusted for all dilutive events.
The number of shares of our common stock that a holder of Series A Preferred Stock is entitled to receive upon conversion of the Series A Preferred Stock is subject to adjustment for certain specified events, including, but not limited to, the issuance of certain stock dividends on our common stock, the issuance of certain rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness, or assets, cash dividends and certain issuer tender or exchange offers, as set forth in the Certificate of Designations. However, the conversion rate may not be adjusted for other events, such as the exercise of stock options or other equity awards held by our employees or offerings of our common stock or securities convertible into common stock (other than those set forth in the Certificate of Designations) for cash or in connection with acquisitions, which may adversely affect the market price of our common stock. Further, if any of these other events adversely affects the market price of our common stock, we expect it to also adversely affect the market price of our Series A Preferred Stock. In addition, the terms of our Series A Preferred Stock do not restrict our ability to offer common stock or securities convertible into common stock in the future or to engage in other transactions that could dilute our common stock. We have no obligation to consider the interests of the holders of our Series A Preferred Stock in engaging in any such offering or transaction. If we issue additional shares of common stock, those issuances may materially and adversely affect the market price of our common stock and, in turn, those issuances may adversely affect the trading price of the Series A Preferred Stock.
Series A Preferred Stock holders may be adversely affected if a “fundamental change” occurs
If a “fundamental change” (as defined in the Certificate of Designations) occurs, we will under certain circumstances increase the conversion rate by a number of additional shares of our common stock for shares of Series A Preferred Stock converted in connection with such fundamental change as described in the Certificate of Designations. While this feature is designed to, among other things, compensate holders of Series A Preferred Stock for lost option time value of their shares of Series A Preferred Stock as a result of the fundamental change, it may not adequately compensate holders of Series A Preferred Stock for their loss as a result of such transaction. In addition, the conversion rate as adjusted will not exceed the $1,000 liquidation preference, divided by 66 2/3% of $10.49, the closing sale price of our common stock on June 30, 2014. However, if the adjustment is based on an amount per share that is less than the floor of 66 2/3% of $10.49, holders will likely receive a number of shares of common stock worth less than the $1,000 liquidation preference per share of Series A Preferred Stock, plus any accumulated and unpaid dividends thereon. Holders of our Series A Preferred Stock will have no claim against the Company for the difference between the value of the consideration received upon a conversion in connection with a fundamental change and the $1,000 liquidation preference per share of Series A Preferred Stock, plus any accumulated and unpaid dividends thereon.
These provisions will not afford protection to holders of Series A Preferred Stock in the event of other transactions that could adversely affect the value of the Series A Preferred Stock. For example, transactions such as leveraged recapitalizations, refinancings, restructurings, or acquisitions initiated by us may not constitute a fundamental change. In the event of any such transaction, holders would not have the protection afforded by the provisions applicable to a fundamental change even though each of these transactions could increase the amount of our indebtedness, or otherwise adversely affect our capital structure or any credit ratings, thereby adversely affecting the holders of Series A Preferred Stock.

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In addition, holders of Series A Preferred Stock will have no additional rights upon a fundamental change, and will have no right not to convert the Series A Preferred Stock into shares of our common stock.
Our obligation to satisfy the additional shares requirement could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness and equitable remedies.
We have reserved a number of shares of our common stock for issuance upon the conversion of the Series A Preferred Stock equal to the aggregate conversion rate, which, under limited circumstances, is less than the maximum number of shares of common stock that we might be required to issue upon such conversion.
On issuance of the Series A Preferred Stock, we reserved, and are obligated under the terms of the Series A Preferred Stock to keep reserved at all times, a number of shares of our common stock equal to the aggregate liquidation preference divided by the closing sale price of our common stock on the date of the closing of our issuance of the Series A Preferred Stock. This is less than the maximum number of shares of our common stock issuable upon conversion of the Series A Preferred Stock in connection with a fundamental change where we could, depending on the stock price at the time, be required to issue upon conversion of the Series A Preferred Stock, shares of common stock representing the $1,000 liquidation preference per share divided by 66 2/3% of $10.49, the closing sale price of our common stock on June 30, 2014. In that circumstance, we would not have reserved the full amount of shares of our common stock issuable upon conversion of the Series A Preferred Stock. While we may satisfy our obligation to issue shares upon conversion of the Series A Preferred Stock by utilizing authorized, unreserved and unissued shares of common stock, if any, or by redesignating reserved shares or purchasing shares in the open market, there can be no assurance that we would be able to do so at that time.
We may issue additional series of preferred stock that rank equally to the Series A Preferred Stock as to dividend payments and liquidation preference and these future issuances may adversely affect the market price for our common stock.
Neither our certificate of incorporation nor the Certificate of Designations prohibits us from issuing additional series of preferred stock that would rank equally to the Series A Preferred Stock as to dividend payments and liquidation preference. Our certificate of incorporation provides that we have the authority to issue up to 5,000,000 shares of preferred stock, including up to 100,000 shares of Series A Preferred Stock. The issuances of other series of preferred stock could have the effect of reducing the amounts available to the Series A Preferred Stock in the event of our liquidation, winding-up or dissolution. It may also reduce cash dividend payments on the Series A Preferred Stock if we do not have sufficient funds to pay dividends on all Series A Preferred Stock outstanding and outstanding parity preferred stock.
Additional issuances and sales of preferred stock, or the perception that such issuances and sales could occur, may cause prevailing market prices for our common stock to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to us.
Holders of our Series A Preferred Stock have no voting rights except under limited circumstances.
Except with respect to certain material and adverse changes to the Series A Preferred Stock as described in the Certificate of Designations, holders of Series A Preferred Stock do not have voting rights and will have no right to vote for any members of our Board of Directors, except as may be required by Delaware law.
Holders of our Series A Preferred Stock may be subject to tax if we make or fail to make certain adjustments to the conversion rate of the Series A Preferred Stock even though the holders of Series A Preferred Stock do not receive a corresponding cash distribution.
The conversion rate of the Series A Preferred Stock is subject to adjustment in certain circumstances, including the payment of cash dividends. If the conversion rate is adjusted as a result of a distribution that is taxable to our common shareholders, such as a cash dividend, holders of Series A Preferred Stock may be deemed to have received a dividend subject to U.S. federal income tax without the receipt of any cash. In addition, a failure to adjust (or to adjust adequately) the conversion rate after an event that increases a holder of Series A Preferred Stock’s proportionate interest in us could be treated as a deemed taxable dividend to the holder of Series A Preferred Stock. If a “fundamental change” (as defined in the Certificate of Designations) occurs, under some circumstances, we will increase the conversion rate for shares of Series A Preferred Stock converted in connection with such fundamental change. Such increase may also be treated as a distribution subject to U.S. federal income tax as a dividend. If a holder of Series A Preferred Stock is a non-U.S. holder, any deemed dividend may be subject to U.S. federal withholding tax at a 30% rate, or such lower rate as may be specified by an applicable treaty, which may be set off against subsequent payments on the Series A Preferred Stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
As of December 31, 2019, we owned or leased the following facilities:
Number of Locations Square Footage
Manufacturing Warehouse Sales / Distribution / Admin Total Owned Leased Total
Industrial 19    —    4    23    582,420    601,880    1,184,300   
Engineered Components 5    2    2    9    164,000    555,045    719,045   
Corporate —    —    1    1    —    19,000    19,000   
24    2    7    33    746,420    1,175,925    1,922,345   
We consider our facilities suitable and adequate for the purposes for which they are used and do not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities. Our largest facilities are located in the United States, Mexico and Germany. We also maintain a presence in China, France, India, Portugal, Romania, Singapore, Spain, Sweden, Taiwan, Ireland and the United Kingdom. In 2019, we closed a manufacturing facility in Jackson, Mississippi in the industrial segment and the sale of the facility was completed on February 7, 2020. See Note 10 “Leases” in the notes to the consolidated financial statements for information regarding our lease commitments.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are subject to litigation incidental to its business, as well as other litigation of a non-material nature in the ordinary course of business. See Note 17, “Commitments and Contingencies” under the heading “Litigation Matters” in the notes to the consolidated financial statements for further information.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Until January 14, 2020, our common stock was traded on the Nasdaq Stock Market under the symbol “JASN.” As of January 14, 2020, our common stock now trades on the OTCQX Best Market under the symbol “JASN.” Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. There is no established trading market for the Series A Preferred Stock, but the shares trade in the over the counter market under the symbol “JSSNP.”
Holders
As of December 31, 2019, there were 28,508,977 shares of common stock outstanding, held of record by 76 holders, and 43,950 shares of Series A Preferred Stock outstanding held of record by 5 holders, which includes 860 shares of Series A Preferred Stock issued on January 1, 2020. The number of record holders of our common stock and Series A Preferred Stock does not include DTC participants or beneficial owners holding shares through nominee names.
Dividends
We have not paid any dividends on our common stock to date. It is our present intention to retain any earnings for use in our business operations and, accordingly, we do not anticipate the Board of Directors declaring any dividends in the foreseeable future on our common stock. In addition, certain of our loan agreements restrict the payment of dividends and the terms of our Series A Preferred Stock may from time to time prevent us from paying cash dividends on our common stock.
Recent Issuer Purchases of Equity Securities
The following table contains detail related to the repurchase of common stock based on the date of trade during the three months ended December 31, 2019:
2019 Fiscal Month
Total Number of Shares Purchased (1)
Average Price Paid per Share ($)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
September 28 to October 31 —    —    —    N/A   
November 1 to November 29 2,421    0.17    —    N/A   
November 30 to December 31 21,187    0.22    —    N/A   
Total 23,608    0.21    —   
(1) Represents shares of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock unit and performance share unit awards. The 2014 Omnibus Incentive Plan and the award agreements permit participants to satisfy all or a portion of the statutory federal, state and local withholding tax obligations arising in connection with plan awards by electing to (1) have the Company reduce the number of shares otherwise deliverable or (2) deliver shares already owned, in each case having a value equal to the amount to be withheld. During the year ended December 31, 2019, the Company withheld 415,723 shares that employees presented to the Company to satisfy withholding taxes in connection with the vesting of restricted stock unit and performance share unit awards.
(2) The Company is not currently participating in a share repurchase program.

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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data as of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018 and 2017 have been derived from Jason Industries’ audited consolidated financial statements, including the notes thereto, appearing elsewhere in this Annual Report on Form 10-K. The selected financial data as of December 31, 2017, 2016 and 2015 and for the years ended December 31, 2016 and 2015 have been derived from the Company’s financial records.
During 2019, the Company determined that both the North American fiber solutions business and the Metalex business met the criteria to be classified as discontinued operations. As a result, the Company’s historical results of operations, financial position and notes to financial statements have been recast to be presented on a continuing operations basis, except where noted. The assets and liabilities of the North American fiber solutions and the Metalex businesses have been presented as held for sale for periods prior to the sale. On August 30, 2019, the Company completed the divestiture of the North American fiber solutions business, which represented the remaining component of the fiber solutions segment. Previously, on August 30, 2017, the Company completed the sale of the European fiber solutions business, which did not meet the criteria for discontinued operations presentation at the time of the divestiture and the results of operations and financial position are included in continuing operations through the date of the sale. On December 13, 2019, the Company completed the sale of the Metalex business within the engineered components segment.
The historical results presented below are not necessarily indicative of the results to be expected for any future period. This information should be read in conjunction with “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the Company’s consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.
  Year Ended December 31,
(in thousands, except per share data) 2019 2018 2017 2016 2015
Statement of Operations Data:
Net sales $ 337,897    $ 367,959    $ 382,096    $ 390,239    $ 396,291   
Cost of goods sold 263,291    277,852    295,076    303,879    305,023   
Gross profit 74,606    90,107    87,020    86,360    91,268   
Selling and administrative expenses 78,200    78,752    77,611    86,731    98,792   
Impairment charges —    —    —    4,002    94,126   
Loss (gain) on disposals of property, plant and equipment-net 303    (1,318)   (320)   837    (66)  
Restructuring    3,954    877    2,475    5,307    1,883   
Operating (loss) income (7,851)   11,796    7,254    (10,517)   (103,467)  
Interest expense-net (32,978)   (33,277)   (32,951)   (31,771)   (31,810)  
Gain on extinguishment of debt —    —    2,201    —    —   
Equity income 316    1,024    952    681    884   
Loss on divestiture    —    —    (8,730)   —    —   
Other income-net 1,098    758    258    874    95   
Loss from continuing operations before income taxes (39,415)   (19,699)   (31,016)   (40,733)   (134,298)  
Tax provision (benefit) 4,016    (5,046)   (15,614)   (11,340)   (30,005)  
Net loss from continuing operations (43,431)   (14,653)   (15,402)   (29,393)   (104,293)  
Net (loss) income from discontinued operations, net of tax (38,177)   1,493    10,929    (41,916)   17,251   
Net loss $ (81,608)   $ (13,160)   $ (4,473)   $ (71,309)   $ (87,042)  
Less net gain (loss) attributable to noncontrolling interests —    —    5    (4,074)   (12,584)  
Net loss attributable to Jason Industries $ (81,608)   $ (13,160)   $ (4,478)   $ (67,235)   $ (74,458)  
Accretion of preferred stock dividends and redemption premium 3,347    4,070    3,783    3,600    3,600   
Net loss allocable to common shareholders of Jason Industries $ (84,955)   $ (17,230)   $ (8,261)   $ (70,835)   $ (78,058)  
Basic and diluted net (loss) income per share allocable to common shareholders of Jason Industries:
Net loss per share from continuing operations $ (1.64)   $ (0.68)   $ (0.74)   $ (1.29)   $ (4.31)  
Net (loss) income per share from discontinued operations (1.34)   0.06    0.42    (1.86)   0.78   
Basic and diluted net loss per share $ (2.98)   $ (0.62)   $ (0.32)   $ (3.15)   $ (3.53)  
Weighted-average shares outstanding: Basic and diluted 28,484    27,595    26,082    22,507    22,145   


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  As of December 31,
(in thousands) 2019 2018 2017 2016 2015
Consolidated Balance Sheet Data:
Cash and cash equivalents $ 84,526    $ 46,698    $ 38,840    $ 34,247    $ 24,059   
Right-of-use operating lease assets 20,910    —    —    —    —   
Total assets 387,101    503,597    546,323    583,836    697,092   
Current portion of operating lease liabilities 4,275    —    —    —    —   
Long-term operating lease liabilities 19,136    —    —    —    —   
Long-term debt 378,950    386,101    389,697    414,841    421,545   
Total liabilities 477,960    511,380    540,639    586,978    612,098   
Total stockholders’ (deficit) equity   (90,859)   (7,783)   5,684    (3,142)   84,994   


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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations of the Company should be read in conjunction with the consolidated financial statements for the years ended December 31, 2019, 2018 and 2017, including the notes thereto, included elsewhere in this Annual Report on Form 10-K. The Company’s actual results may not be indicative of future performance. This discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those discussed in “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included in Part I, Item IA or in other parts of this Annual Report on Form 10-K. Actual results may differ materially from those contained in any forward-looking statements.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains certain financial measures, in particular EBITDA and Adjusted EBITDA, which are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These non-GAAP financial measures are being presented because management believes that they provide readers with additional insight into the Company’s operational performance relative to its competitors. EBITDA and Adjusted EBITDA are key measures used by the Company to evaluate its performance. The Company does not intend for these non-GAAP financial measures to be a substitute for any GAAP financial information. Readers of this MD&A should use these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures. Reconciliations of EBITDA and Adjusted EBITDA to net income, the most comparable GAAP measure, are provided in this MD&A.
Fiscal Year
Our fiscal year ends on December 31. Throughout the year, we report our 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, our fiscal quarters were comprised of the three months ended March 29, June 28, September 27 and December 31. In 2018, our fiscal quarters were comprised of the three months ended March 30, June 29, September 28, and December 31.
Overview
We are a global industrial manufacturing company with significant market share positions in each of our two segments: industrial and engineered components. We provide critical components and manufacturing solutions to customers across a wide range of end markets, industries and geographies through our global network of 23 manufacturing facilities and nine sales, administrative and/or warehouse facilities throughout the United States and 13 foreign countries. We have 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 a review of our organizational structure, we made certain strategic leadership changes which required a reassessment of reportable segments. Based on this evaluation, we changed how we make operating decisions, assess performance of the business, and allocate resources. As a result, we 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 the current year presentation.
During the year ended December 31, 2019, we determined that both the North American fiber solutions and Metalex businesses met the criteria to be classified as discontinued operations. As a result, our prior period results of operations and financial position have been recast to be presented on a continuing operations basis, except where noted. The assets and liabilities of the North American fiber solutions and Metalex businesses have been presented as held for sale for periods prior to the sale. On August 30, 2019, we completed the divestiture of our North American fiber solutions business, within the fiber solutions segment. Previously, on August 30, 2017, we completed the sale of the European fiber solutions business, which did not meet the criteria for discontinued operations presentation at the time of the divestiture and the results of operations and financial position are included in continuing operations through the date of the sale. On December 13, 2019, we completed the sale of our Metalex business within the engineered components segment.
On April 1, 2019, we acquired Schaffner Manufacturing Company, Inc. (“Schaffner”), which manufactures high-quality polishing and finishing products. These products are manufactured and distributed by the industrial segment.
We focus on markets with long-term sustainable growth characteristics and where we are, or have the opportunity to become, the industry leader. Our 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 former seating segment, designs, engineers, and manufactures seating products used in heavy industry (construction, agriculture, and material handling), turf care, and power sports applications.
On August 12, 2019, we announced that our Board of Directors had engaged financial advisors to advise us as we conduct a process to evaluate strategic alternatives. This evaluation includes, but is not limited to, a potential sale, strategic

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merger, consolidation or business combination, acquisition, recapitalization, financing consisting of equity and/or debt securities, and/or a restructuring of the Company’s debt, focused on maximizing the value of the Company for its stakeholders.
During the years ended December 31, 2019, 2018 and 2017, approximately 37%, 40% and 43%, respectively, of our sales were derived from customers outside the United States. As a diversified, global business, our operations are affected by worldwide, regional and industry-specific economic and political factors. Our geographic and industry diversity, as well as the wide range of our 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 our Company. Our individual businesses monitor key competitors and customers, including, to the extent possible, their sales, to gauge relative performance and the outlook for the future.
General Market Conditions and Trends; Business Performance and Outlook
Demand for our products declined in 2019 when compared with 2018, with lower sales in both our industrial and engineered components segments. Demand was higher in 2018 when compared with 2017, with higher sales in both our industrial and engineered components segments.
Demand in our industrial segment is largely dependent upon overall industrial production levels in the markets it serves. We believe that gross domestic product (“GDP”) and industrial production levels in our served markets will grow modestly in the near term. However, if there is no growth, or if GDP or production levels do not increase or shrink, there could be reduced demand for the industrial segment’s products, which would have a material negative impact on the industrial segment’s net sales and/or income from continuing operations.
The engineered components segment is principally impacted by demand from U.S.-based original equipment manufacturers serving the motorcycle, lawn and turf care, construction, material handling, agricultural and power sports market segments. In recent years, power sports production and the lawn and turf care equipment market have contracted, and global construction activity has been stable. We believe that, in the near term, the lawn and turf care industry will stabilize, and the power sports, construction and agriculture equipment and motorcycle industry will soften. However, if such industries weaken more than anticipated, there could be reduced demand for the engineered components segment’s products, which would have a material negative impact on the engineered components segment’s net sales and/or income from continuing operations.
We expect overall market conditions to remain challenging due to macro-economic uncertainties and monetary, fiscal, and trade policies of countries where we do business. While individual businesses and end markets continue to experience volatility, we expect to benefit as general economic conditions in North America and Western Europe are expected to experience modest growth. Regarding economic conditions, as discussed above, we expect the following in the near term:
•modest global GDP growth;
•slowing global industrial production;
•continued lower demand in the motorcycle industry;
•slowing demand in the construction and agriculture industries; and
•stabilizing demand in the lawn and turf care market.
Strategic Initiatives
Our strategic initiatives support an overall capital allocation strategy that focuses on decreasing leverage through maximizing earnings and operating cash flow. The Company continues to identify restructuring activities designed to expand Adjusted EBITDA margins. To achieve this target, our strategic initiatives include:
Continued footprint rationalization - We serve our customers through a global network of manufacturing facilities, sales offices, warehouses and joint venture facilities throughout the United States and 13 foreign countries. Our geographic footprint has evolved over time with a focus on maximizing geographic coverage while optimizing costs. Over the past several years, we have closed several facilities in higher cost, mature markets and shifted production to lower cost regions such as Mexico, India and Eastern Europe. We continuously evaluate our manufacturing footprint and utilization of manufacturing capacity. In recent years, we have completed or announced the consolidation of manufacturing facilities across our businesses. Reduction of fixed costs through optimization of manufacturing footprint and capacity will continue to be a driver of margin expansion and improving profitability.
In 2019 in the industrial segment, we closed a manufacturing facility in Jackson, Mississippi that was acquired with Schaffner, shifting production to available capacity in our other facilities. We have accelerated the consolidation of Schaffner’s remaining three plants in Pittsburgh, Pennsylvania and Northville and Livonia, Michigan. In 2018, we closed the United Kingdom manufacturing facility in the engineered components segment. We believe that geographic proximity to existing and potential customers provides logistical efficiencies, as well as important strategic and cost advantages, and have also taken steps

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to realign our footprint. We anticipate that costs associated with any future rationalization activities, as well as the capital required for any new facilities, will be funded by existing cash balances and funds generated from operating activities.
Margin Expansion - We are focused on creating operational effectiveness at each of our business segments through deployment of lean principles and implementation of continuous operational improvement initiatives. While many of these activities have focused on implementing shop floor improvements, we have also targeted our selling and administrative functions in order to reduce the cost of serving our customers. We are also focused on improving profitability through an active evaluation of customer pricing and margins and a reduction in the number of parts and product variations that are produced. While these initiatives may result in lower overall sales, they are focused on creating shareholder value through higher margins and profitability, as well as lower inventory levels and working capital requirements.
Acquisitions - We use acquisitions to increase revenues with existing customers and to expand revenues to both new markets and customers. We intend to pursue acquisitions that are accretive to EBITDA (earnings before interest, income taxes, depreciation and amortization) margins post-synergies, have strategic focus that aligns with our core strategy and generate the appropriate estimated return on investment as part of our capital resource and allocation process.
In 2019, we acquired Schaffner, which manufactures high-quality polishing and finishing products. These products are manufactured and distributed by the industrial segment. During the year ended December 31, 2019, the industrial segment’s net sales had a 6.9% positive impact from the Schaffner acquisition.
Product Innovation - During the past several years, our research and development activities have placed more focus on developing new products that are of higher value to our customers with superior performance over alternative and competitive products, thereby providing customers with a better value proposition. We believe that developing new and innovative products will allow us to deepen our value-added relationships with customers, open new opportunities for revenue generation, enhance pricing power and improve margins. This strategy has been particularly effective in our engineered components segment where new cut and sew products have been developed to capitalize on industry trends.
Factors that Affect Operating Results
Our results of operations and financial performance are influenced by a number of factors, including the timing of new product introductions, general economic conditions and customer buying behavior. Our business is complex, with multiple segments serving a broad range of industries worldwide. We have manufacturing and sales facilities around the world, and we operate in numerous regulatory and governmental environments. Comparability of future results could be impacted by any number of unforeseen issues.
Key Events
In addition to the factors described above, the following strategic and operational events, which occurred during the years ended December 31, 2019, 2018 and 2017, affected our results of operations:
Divestitures. On December 13, 2019 we completed the divestiture of the Metalex business within the engineered components segment for a net purchase price of $5.9 million. On August 30, 2019, we completed the divestiture of the North American fiber solutions business for a net purchase price of $78.6 million. On August 30, 2017, we completed the divestiture of the European operations within the fiber solutions segment located in Germany (“Acoustics Europe”) for a net purchase price of $8.1 million. See Note 2, “Discontinued Operations and Divestitures” in the consolidated financial statements for further discussion.
Acquisitions. On April 1, 2019, we acquired Schaffner, which manufactures high-quality polishing and finishing products, for a purchase price of $11.0 million. These products are manufactured and distributed by the industrial segment. During the year ended December 31, 2019, the industrial segment’s net sales had a 6.9% positive impact from the Schaffner acquisition. The acquisition was accounted for as a business combination. The operating results and cash flows of Schaffner are included in the Company’s consolidated financial statements from April 1, 2019, the date of the acquisition.
Tax Cuts and Jobs Act. On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Tax Reform Act”). The legislation significantly changed U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act also added many new provisions including changes to bonus depreciation and the deductions for executive compensation and interest expense, among others. The Tax Reform Act permanently reduced the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. See further discussion of the Tax Reform Act within “Consolidated Results of Operations” below.

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Key Financial Definitions
Net sales. Net sales reflect the sales of our products net of allowances for variable consideration, including rebates, discounts and product returns. Several factors affect net sales in any period, including general economic conditions, weather conditions, the timing of acquisitions and divestitures and the purchasing habits of our customers.
Cost of goods sold. Cost of goods sold includes all costs of manufacturing the products we sell. Such costs include direct and indirect materials, direct and indirect labor costs, including fringe benefits, supplies, utilities, depreciation, facility rent, insurance, pension benefits and other manufacturing related costs. The largest component of cost of goods sold is the cost of materials, which represents 46% of net sales for the year ended December 31, 2019. Fluctuations in cost of goods sold are caused primarily by changes in sales levels, changes in the mix of products sold, productivity of labor, and changes in the cost of raw materials. In addition, following acquisitions, cost of goods sold will be impacted by step-ups in the value of inventories required in connection with the accounting for acquired businesses.
Selling and administrative expenses. Selling and administrative expenses primarily include the cost associated with our sales and marketing, finance, human resources, administration, engineering and technical services functions. Certain corporate level administrative expenses such as payroll and benefits, incentive compensation, travel, accounting, auditing, legal, and other professional advisor fees and certain other expenses are kept within our corporate results and not allocated to our business segments.
Impairment charges. As required by GAAP, when certain conditions or events occur, we recognize impairment losses to reduce the carrying value of goodwill, other intangible assets and property, plant and equipment to their estimated fair values.
(Loss) gain on disposals of property, plant and equipment - net. In the ordinary course of business, we dispose of fixed assets that are no longer required in our day to day operations with the intent of generating cash from those sales.
Restructuring. In the past several years, we have made changes to our worldwide manufacturing footprint to reduce our fixed cost base. These actions have resulted in employee severance and other related charges, changes in our operating cost structure, movement of manufacturing operations and product lines between facilities, exit costs for consolidation and closure of plant facilities, employee relocation and contract termination costs. It is likely that we will incur such costs in future periods as well. These operational changes and restructuring costs affect comparability between periods and segments.
Interest expense—net. Interest expense-net consists of interest paid to our lenders under our worldwide credit facilities, cash paid or received on interest rate hedge contracts and amortization of deferred financing costs net of interest income earned on cash and cash equivalents.
Gain on extinguishment of debt. Gain on extinguishment of debt primarily consists of gains recorded related to the repurchases of second lien term loan debt, net of the associated write-off of previously unamortized debt discount and deferred financing costs on the second lien term loans related to the extinguishment.
Equity income. We maintain non-controlling interests in Asian joint ventures that are part of our industrial segment and record a proportional share in the earnings of these joint ventures as required by GAAP. The amount of equity income recorded is dependent upon the underlying financial results of the joint ventures.
Loss on divestiture. On August 30, 2017, we completed the divestiture of our Acoustics Europe business. The loss on divestiture relates to the excess of the net assets of the business over the sales price less costs to sell and recognition of cumulative foreign currency translation adjustments upon closing of the divestiture.
Other income—net. Other income is principally comprised of royalty income received from non-U.S. licensees, the employee benefit plan non-service cost components of net periodic benefit costs, and other non-recurring non-operational items.
Tax (benefit) provision. Our tax (benefit) provision is impacted by a number of factors, including the amount of taxable earnings derived in foreign jurisdictions with tax rates that are different than the U.S. federal statutory rate, state tax rates in the jurisdictions where we do business, tax minimization planning and our ability to utilize various tax credits and net operating loss carryforwards. Income tax expense also includes the impact of provision to return adjustments, changes in valuation allowances and changes in reserve requirements for unrecognized tax benefits. In 2017, 2018 and 2019, the income tax benefit was also impacted by the provisions of the Tax Reform Act.
Accretion of preferred stock dividends and redemption premium. We record accretion of preferred stock dividends to reflect cumulative dividends on our preferred stock. The redemption premium relates to the exchange of Series A Preferred Stock for common stock of Jason Industries, Inc. and represents the excess of the exchange conversion rate over the agreement conversion rate. The accretion amounts are subtracted from net loss to arrive at the net loss allocable to common shareholders for the purposes of calculating the Company’s net loss per share allocable to common shareholders.

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General Factors Affecting the Results of Operations
Foreign exchange. We have a significant portion of our operations outside of the U.S. As such, the results of our operations are based on currencies other than the U.S. dollar. Changes in foreign currency exchange rates influence our financial results, and therefore the ability to compare results between periods and segments.
Seasonality. Our engineered components segment is subject to seasonal variation due to the markets it serves and the stocking requirements of its customers. The peak season has historically been during the period from November through May. Sales during these months are typically greater due to the shipments required to fill the inventory at retail stores and customer warehouses. There are, however, variations in the seasonal demands from year to year depending on weather, customer inventory levels, and model year changes. This seasonality and annual variations of this seasonality could impact the ability to compare results between time periods.


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Consolidated Results of Operations
The following table sets forth our consolidated results of operations:
  Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
(in thousands)
Net sales $ 337,897    $ 367,959    $ 382,096   
Cost of goods sold 263,291    277,852    295,076   
Gross profit 74,606    90,107    87,020   
Selling and administrative expenses 78,200    78,752    77,611   
Loss (gain) on disposals of property, plant and equipment-net 303    (1,318)   (320)  
Restructuring    3,954    877    2,475   
Operating (loss) income (7,851)   11,796    7,254   
Interest expense-net (32,978)   (33,277)   (32,951)  
Gain on extinguishment of debt —    —    2,201   
Equity income 316    1,024    952   
Loss on divestiture    —    —    (8,730)  
Other income-net 1,098    758    258   
Loss from continuing operations before income taxes (39,415)   (19,699)   (31,016)  
Tax provision (benefit) 4,016    (5,046)   (15,614)  
Net loss from continuing operations (43,431)   (14,653)   (15,402)  
Net (loss) income from discontinued operations, net of tax (38,177)   1,493    10,929   
Net loss $ (81,608)   $ (13,160)   $ (4,473)  
Less net gain (loss) attributable to noncontrolling interests —    —    5   
Net loss attributable to Jason Industries $ (81,608)   $ (13,160)   $ (4,478)  
Accretion of preferred stock dividends and redemption premium 3,347    4,070    3,783   
Net loss allocable to common shareholders of Jason Industries $ (84,955)   $ (17,230)   $ (8,261)  
Total other comprehensive (loss) income $ (5,072)   $ (3,383)   $ 12,232   
Other financial data: (1)
(in thousands, except percentages) Year Ended December 31, 2019 Year Ended December 31, 2018 Increase/(Decrease)
$ %
Consolidated
Net sales $ 337,897    $ 367,959    $ (30,062)   (8.2)%  
Net loss from continuing operations (43,431)   (14,653)   28,778    196.4   
Net loss from continuing operations as a % of net sales 12.9  % 4.0  % 890 bps   
Adjusted EBITDA from continuing operations 24,818    36,661    (11,843)   (32.3)  
Adjusted EBITDA from continuing operations as a % of net sales 7.3  % 10.0  % (270) bps  

Year Ended December 31, 2018 Year Ended December 31, 2017 Increase/(Decrease)
(in thousands, except percentages) $ %
Consolidated
Net sales $ 367,959    $ 382,096    $ (14,137)   (3.7) %
Net loss from continuing operations (14,653)   (15,402)   (749)   (4.9)  
Net loss from continuing operations as a % of net sales 4.0  % 4.0  % — bps   
Adjusted EBITDA from continuing operations 36,661    32,615    4,046    12.4   
Adjusted EBITDA from continuing operations as a % of net sales 10.0  % 8.5  % 150 bps   
(1) Adjusted EBITDA and Adjusted EBITDA as a % of net sales are financial measures that are not presented in accordance with GAAP. See “Key Measures the Company Uses to Evaluate Its Performance” below for our definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income.

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The Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Net sales. Net sales were $337.9 million for the year ended December 31, 2019, a decrease of $30.1 million, or 8.2%, compared with $368.0 million for the year ended December 31, 2018, reflecting decreased net sales in the engineered components segment of $23.9 million and the industrial segment of $6.1 million. The decrease of $6.1 million includes $14.4 million of incremental net sales as a result of the April 1, 2019 Schaffner acquisition.
See “Segment Financial Data” within this Item 7, “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 $7.0 million on consolidated net sales during the year ended December 31, 2019 compared with 2018, negatively impacting the industrial segment’s net sales by $7.0 million. This was due principally to the net strengthening of the U.S. dollar against the Euro during the year ended December 31, 2019.
Cost of goods sold. Cost of goods sold was $263.3 million for the year ended December 31, 2019, compared with $277.9 million for the year ended December 31, 2018. The decrease in cost of goods sold was primarily due to lower sales volumes across both segments, a $4.9 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 segment and lower headcount across both segments. The decrease was partially offset by higher manufacturing costs in the industrial segment due to the Schaffner acquisition of $10.8 million, lower material and labor efficiencies related to sales volume declines in both the engineered components and industrial segments, raw material, and wage inflation across both segments, increased healthcare costs in the industrial segment, unfavorable product mix in the engineered components segment, accelerated lease and depreciation expense of $1.3 million primarily related to planned facility consolidations in the engineered components and industrial segments and higher freight costs.
Gross profit. For the reasons described above, gross profit was $74.6 million for the year ended December 31, 2019, compared with $90.1 million for the year ended December 31, 2018.
Selling and administrative expenses. Selling and administrative expenses were $78.2 million for the year ended December 31, 2019, compared with $78.8 million for the year ended December 31, 2018, a decrease of $0.6 million.
The decrease is primarily due to decreased incentive compensation, lower headcount across both segments, decreased corporate professional fees and a $1.5 million decrease related to foreign currency exchange rates. The decrease was partially offset by higher selling and administrative costs in the industrial segment due to the Schaffner acquisition of $2.6 million, a $0.7 million increase in transaction-related expenses primarily related to the Schaffner acquisition, the Company’s strategic alternative process, and increased healthcare costs.
Loss (gain) on disposals of property, plant and equipment—net. Loss on disposals of property, plant and equipment - net for the year ended December 31, 2019 was $0.3 million, compared to a gain of $1.3 million for the year ended December 31, 2018. The loss on disposals of property, plant and equipment - net for the year ended December 31, 2019 includes a loss of $0.3 million on the sale of a former Schaffner building in the industrial segment. The gain on disposals of property, plant and equipment - net for the year ended December 31, 2018 includes a gain of $1.3 million on the sale of a building related to the closure of the engineered components segment’s U.K. facility.
Restructuring. In 2019 and 2018, restructuring costs primarily include activities which align with our strategic initiatives of continued footprint rationalization and margin expansion. Such activities are typically identified by management as part of the annual strategic planning process, with priority assigned to those that maximize the financial return for the Company. In the first quarter of 2019, additional restructuring activities resulting in one-time employee termination benefits were identified upon a review of the Company’s organizational structure resulting in certain strategic leadership changes as well as in response to end market decline in the industrial segment. Additionally, with the acquisition of Schaffner Manufacturing Company, Inc. on April 1, 2019, further footprint rationalization activities were identified during the due diligence process which were executed upon throughout the remainder of 2019.
Restructuring costs were $4.0 million for the year ended December 31, 2019 compared to $0.9 million for the year ended December 31, 2018. During 2019, such costs included severance costs in corporate and the industrial segment related to the segment reorganization in the first quarter of 2019 and work force reductions throughout 2019 in response to declining end market demand. Other restructuring costs included plant closure and consolidation costs in the industrial segment and engineered components segments and 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. During 2018, such costs were primarily move costs related to the closure of a U.S. facility in the industrial segment and the closure of a U.K. facility in the engineered components segment, partially offset by a reduction in expense as a result of the statute of limitations expiring on certain unasserted employment matter claims in Brazil that were reserved within the industrial segment.

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Operating (loss) income. For the reasons described above, operating (loss) income was a loss of $7.9 million for the year ended December 31, 2019, compared with income of $11.8 million for the year ended December 31, 2018.
Interest expense—net. Interest expense-net was $33.0 million for the year ended December 31, 2019 compared with $33.3 million for the year ended December 31, 2018. The decrease in interest expense-net primarily relates to a decrease in outstanding long-term debt balances, partially offset by an increase in interest expense-net caused by higher variable interest rates. The effective interest rate on the Company’s total outstanding indebtedness for the year ended December 31, 2019 was 8.3% as compared to 8.2% for the year ended December 31, 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 $0.3 million for the year ended December 31, 2019 compared to $1.0 million for the year ended December 31, 2018. The decrease in equity income is due to lower sales volumes in our joint ventures in China and Taiwan.
Other income—net. Other income-net was $1.1 million for the year ended December 31, 2019, compared with $0.8 million for the year ended December 31, 2018. Other income - net for the year ended December 31, 2019 includes the reclassification to earnings of foreign currency translation gains of $0.8 million for the wind down and substantial dissolution of certain U.K. entities and $0.5 million of income from transition services performed subsequent to business divestitures, partially offset by $0.3 million of transaction-related expenses related to debt financing activities and $0.2 million of employee benefit plan non-service costs. Other income - net for the year ended December 31, 2018 includes $0.4 million of income related to proceeds from a settlement in the engineered components segment associated with periods prior to the Company’s go public business combination and $0.1 million of employee benefit plan non-service costs.
Loss from continuing operations before income taxes. For the reasons described above, loss from continuing operations before income taxes was $39.4 million for the year ended December 31, 2019 compared with $19.7 million for the year ended December 31, 2018.
Tax provision (benefit). The tax provision was $4.0 million for the year ended December 31, 2019, compared with a tax benefit of $5.0 million for the year ended December 31, 2018. The effective tax rate for the year ended December 31, 2019 was a negative 10.2%, compared with 25.6% for the year ended December 31, 2018. The Company’s tax provision (benefit) is impacted by a number of factors, including, among others, the amount of taxable income or loss at the U.S. federal statutory rate, the amount of taxable earnings derived in foreign jurisdictions in which the majority have tax rates higher than the U.S. federal statutory rate, permanent items, state tax rates in jurisdictions where we do business and the ability to utilize various tax credits and net operating loss carry forwards to reduce income tax expense. The income tax provision (benefit) also includes the impact of provision to return adjustments, adjustments to valuation allowances and reserve requirements for unrecognized tax positions. For the years ended December 31, 2019 and 2018, the tax provision and tax benefit, respectively, were impacted by the enactment of the Tax Reform Act.
The 2019 effective tax rate of negative 10.2% was impacted by establishing valuation allowances totaling $13.3 million for federal and state deferred tax assets primarily related to the carryforward arising from the interest deduction limitation provision included in the Tax Reform Act. The increase in valuation allowances impacted the effective tax rate by 34.2%.
The 2018 effective tax rate of 25.6% differs from the U.S. federal statutory rate of 21% due primarily to the impact of state taxes and the finalization of accounting for provisions of the Tax Reform Act discussed in the paragraph below, partially offset by the impact of higher foreign tax rates when compared to the 21% U.S. federal statutory tax rate (primarily in Germany and Mexico).
The Company recognized the provisional impact of the Tax Reform Act in its consolidated financial statements for the year ended December 31, 2017. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act, the Company revalued its ending net deferred tax liabilities at December 31, 2017 and recognized a provisional $11.1 million tax benefit in the Company’s consolidated statements of operations for the year ended December 31, 2017. The Company had an estimated $54.5 million of undistributed foreign earnings and profits subject to the deemed mandatory repatriation and recognized a provisional $5.3 million of income tax expense in the Company’s consolidated statements of operations for the year ended December 31, 2017. During the year ended December 31, 2018, the Company finalized the accounting for these items and recorded an adjustment to reduce the amount of income tax expense attributable to the deemed mandatory repatriation of foreign subsidiary earnings and profits by $0.5 million. The final adjustment required to revalue net deferred tax liabilities was immaterial.
See Note 14, “Income Taxes” in the consolidated financial statements for a complete reconciliation of the U.S. statutory tax rate to the effective tax rate and more information on the Tax Reform Act and tax events in 2019 and 2018 affecting each year’s respective tax rates.

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Net loss from continuing operations. For the reasons described above, net loss was $43.4 million for the year ended December 31, 2019 compared with $14.7 million for the year ended December 31, 2018.
Other comprehensive (loss) income. Other comprehensive loss was $5.1 million for the year ended December 31, 2019 compared with $3.4 million for the year ended December 31, 2018. The increase was driven by the change in unrealized (losses) gains on cash flow hedges and an increase in employee retirement plan adjustments in 2019 compared with 2018, partially offset by a decrease in unfavorable foreign currency translation adjustments in 2019 compared to 2018.
Other comprehensive loss for foreign currency translation adjustments was $3.1 million for the year ended December 31, 2019 compared with $4.6 million for the year ended December 31, 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.
Employee retirement plan adjustments was a loss of $0.4 million for the year ended December 31, 2019, compared with $0.2 million for the year ended December 31, 2018. The employee retirement plan adjustments are based on actuarial valuations using a December 31 measurement date that include key assumptions regarding discount rates, expected returns on plan assets, retirement and mortality rates, future compensation increases, and health care cost trend rates. The employee retirement plan loss for the year ended December 31, 2019 primarily relates to actuarial losses recognized in the German pension plan within the industrial segment due to a decrease in the discount rate, partially offset by actuarial gains in U.S. plans within the industrial segment due to higher actual plan asset returns compared with the expected returns on plan assets.
Other comprehensive loss for unrealized losses on cash flow hedges was $1.6 million for the year ended December 31, 2019, compared with an other comprehensive gain of $1.3 million for the year ended December 31, 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 year ended December 31, 2019, the fair value of the hedging instruments decreased, based on actual and future expectations for short-term interest rate decreases. For the year ended December 31, 2018, the fair value of the hedging instruments increased, based on actual and future expectations for interest rate increases.
Adjusted EBITDA. For the year ended December 31, 2019, Adjusted EBITDA was $24.8 million, or 7.3% of net sales, compared with $36.7 million, or 10.0% of net sales, for the year ended December 31, 2018, a decrease of $11.8 million. The decrease reflects lower Adjusted EBITDA in the industrial segment of $8.0 million and the engineered components segment of $4.6 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 $1.0 million on consolidated Adjusted EBITDA for the year ended December 31, 2019 compared with the year ended December 31, 2018, negatively impacting the industrial segment’s Adjusted EBITDA by $1.0 million.
See “Segment Financial Data” within this Item 7, “Management’s Discussion and Analysis,” for further discussion on Adjusted EBITDA for each segment.
The Year Ended December 31, 2018 Compared with the Year Ended December 31, 2017
Net sales. Net sales were $368.0 million for the year ended December 31, 2018, a decrease of $14.1 million, or 3.7%, compared with $382.1 million for the year ended December 31, 2017, reflecting decreased net sales in the fiber solutions segment of $22.7 million related to the sale of the Acoustics Europe business, partially offset by increased net sales in the industrial segment of $7.4 million and in the engineered components segment of $1.2 million.
Changes in foreign currency exchange rates compared with the U.S. dollar had a net positive impact of $5.2 million on consolidated net sales during the year ended December 31, 2018 compared with 2017, positively impacting the industrial and the engineered components segments’ net sales by $4.6 million and $0.6 million, respectively.This was due principally to the net weakening of the U.S. dollar against the Euro and British Pound during the year ended December 31, 2018.
See “Segment Financial Data” within Item 7, “Management’s Discussion and Analysis”, for further discussion on net sales for each segment.
Cost of goods sold. Cost of goods sold was $277.9 million for the year ended December 31, 2018, compared with $295.1 million for the year ended December 31, 2017. The decrease in cost of goods sold was primarily due to the sale of the Acoustics Europe business of $19.0 million in the fiber solutions segment, lower labor and material usage costs in the engineered components segment as a result of operational efficiencies, and reduced costs resulting from the Company’s global cost reduction and restructuring program. The decrease was partially offset by increased cost of goods sold related to raw material inflation and higher freight costs in the industrial and engineered components segments, a $3.8 million increase related to foreign currency exchange rates and higher net sales volume in the industrial and engineered components segments.
The reduced costs resulting from the Company’s global cost reduction and restructuring program were due to lower manufacturing costs as a result of the closure of the Richmond, Virginia facility and the wind down of a facility in Brazil in the industrial segment.

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Gross profit. For the reasons described above, gross profit was $90.1 million for the year ended December 31, 2018, compared with $87.0 million for the year ended December 31, 2017.
Selling and administrative expenses. Selling and administrative expenses were $78.8 million for the year ended December 31, 2018, compared with $77.6 million for the year ended December 31, 2017, an increase of $1.2 million. The increase is primarily due to increased share-based compensation expense of $1.3 million, a $1.1 million increase related to foreign currency exchange rates and higher headcount due to open positions in 2017 and in the industrial segment due to additional selling personnel in 2018. The increase was partially offset by reduced selling and administrative expenses in the fiber solutions segment due to the divestiture of the Acoustics Europe business of $2.5 million and decreased incentive compensation of $0.2 million.
(Gain) loss on disposals of property, plant and equipment—net. Gain on disposals of property, plant and equipment - net for the year ended December 31, 2018 was $1.3 million, compared to $0.3 million for the year ended December 31, 2017. The gain on disposals of property, plant and equipment - net for the year ended December 31, 2018 includes a gain of $1.3 million on the sale of a building related to the closure of the engineered components segment’s U.K. facility. The gain on disposals of property, plant and equipment - net for the year ended December 31, 2017 includes a gain of $0.5 million on the sale of a building related to the closure of the industrial segment’s Richmond, Virginia facility. Changes in the level of fixed asset disposals are dependent upon a number of factors, including changes in the level of asset sales, operational restructuring activities, and capital expenditure levels.
Restructuring. Restructuring costs were $0.9 million for the year ended December 31, 2018 compared to $2.5 million for the year ended December 31, 2017. During 2018 and 2017, such costs primarily relate to actions resulting from the global cost reduction and restructuring program announced on March 1, 2016. During 2018, such costs were primarily related to the closure of a U.S. facility in the industrial segment and the closure of a U.K. facility in the engineered components segment, partially offset by a reduction in expense as a result of the statute of limitations expiring on certain unasserted employment matter claims in Brazil that were reserved within the industrial segment. During 2017, such costs were primarily move costs related to the consolidation of two U.S. facilities in the industrial segment and the closure of a facility in Brazil in the industrial segment.
Operating income. For the reasons described above, operating income was $11.8 million for the year ended December 31, 2019, compared with $7.3 million for the year ended December 31, 2018.
Interest expense—net. Interest expense-net was $33.3 million for the year ended December 31, 2018 compared with$33.0 million for the year ended December 31, 2017. The increase in interest expense-net primarily relates to higher interest rates for the year ended December 31, 2018 as compared to the year ended December 31, 2017, partially offset by a decrease in outstanding long-term debt balances. The effective interest rate on the Company’s total outstanding indebtedness for the year ended December 31, 2018 was 8.2% as compared to 7.6% for the year ended December 31, 2017.
See “Senior Secured Credit Facilities” in the Liquidity and Capital Resources section of this MD&A for further discussion.
Gain on extinguishment of debt. Gain on extinguishment of debt was $2.2 million for the year ended December 31, 2017 and relates to the repurchase of $20.0 million of second lien term loans for $16.8 million in the second and third quarters of 2017. In connection with the repurchase, the Company wrote off $0.4 million of previously unamortized debt discount and $0.4 million of previously unamortized deferred financing costs, which were recorded as a reduction to the gain on extinguishment of debt. See “Senior Secured Credit Facilities” in the Liquidity and Capital Resources section of this MD&A for further discussion. In the fourth quarter of 2017, the Company retired $2.4 million of foreign debt with cash received from the sale of Acoustics Europe and incurred a $0.2 million prepayment fee, which was recorded as an offset to the gain on extinguishment of debt.
Equity income. Equity income was $1.0 million for both the years ended December 31, 2018 and 2017.
Loss on divestiture. Loss on divestiture was $8.7 million for the year ended December 31, 2017. On August 30, 2017, the Company completed the divestiture of its Acoustics Europe business. The divestiture resulted in an $8.7 million pre-tax loss. See Note 2, “ Discontinued Operations and Divestitures” in the notes to the consolidated financial statements for further information.
Other income—net. Other income-net was $0.8 million for the year ended December 31, 2018, compared with $0.3 million for the year ended December 31, 2017. During 2018 and 2017, other income-net consisted of certain rental and royalty income streams. During 2018, other income-net also includes $0.4 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 and $0.1 million of employee benefit plan non-service costs.

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Loss from continuing operations before income taxes. For the reasons described above, loss before income taxes was $19.7 million for the year ended December 31, 2018 compared with $31.0 million for the year ended December 31, 2017.
Tax benefit. The tax benefit was $5.0 million for the year ended December 31, 2018, compared with $15.6 million for the year ended December 31, 2017. The effective tax rate for the year ended December 31, 2018 was 25.6%, compared with 50.3% for the year ended December 31, 2017. The Company’s tax benefit is impacted by a number of factors, including, among others, the amount of taxable income or loss at the U.S. federal statutory rate, the amount of taxable earnings derived in foreign jurisdictions in which the majority have tax rates higher than the U.S. federal statutory rate after the enactment of the Tax Reform Act, permanent items, state tax rates in jurisdictions where we do business and the ability to utilize various tax credits and net operating loss carry forwards to reduce income tax expense. The income tax benefit also includes the impact of provision to return adjustments, adjustments to valuation allowances and reserve requirements for unrecognized tax positions. For the years ended December 31, 2018 and 2017, the tax benefit was impacted by the enactment of the Tax Reform Act.
The 2018 effective tax rate of 25.6% differs from the U.S. federal statutory rate of 21% due primarily to the impact of state taxes and the finalization of accounting for provisions of the Tax Reform Act discussed in the paragraph below, partially offset by the impact of higher foreign tax rates when compared to the 21% U.S. federal statutory tax rate (primarily in Germany and Mexico).
The 2017 effective tax rate of 50.3% differs from the U.S. federal statutory rate of 35% due primarily to the provision in the Tax Reform Act that reduces the U.S. federal income tax rate to 21% from 35% effective January 1, 2018, state tax benefits, the impact of lower foreign tax rates when compared to the 35% U.S. federal 2017 statutory tax rate (primarily in Germany and Mexico) and the reversal of the valuation allowance on the deferred tax assets at a foreign subsidiary. These items were partially offset by the impact of the tax on the one-time deemed mandatory repatriation of undistributed foreign subsidiary earnings, change in assertion regarding permanent reeinvestment of earnings in our wholly-owned foreign subsidiaries and the vesting and forfeiture of share-based compensation for which no tax benefit will be realized.
The Company recognized the provisional impact of the Tax Reform Act in its consolidated financial statements for the year ended December 31, 2017. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act, the Company revalued its ending net deferred tax liabilities at December 31, 2017 and recognized a provisional $11.1 million tax benefit in the Company’s consolidated statements of operations for the year ended December 31, 2017. The Company had an estimated $54.5 million of undistributed foreign earnings and profits subject to the deemed mandatory repatriation and recognized a provisional $5.3 million of income tax expense in the Company’s consolidated statements of operations for the year ended December 31, 2017. During the year ended December 31, 2018, the Company finalized the accounting for these items and recorded an adjustment to reduce the amount of income tax expense attributable to the deemed mandatory repatriation of foreign subsidiary earnings and profits by $0.5 million. The final adjustment required to revalue net deferred tax liabilities was immaterial.
See Note 14, “Income Taxes” in the consolidated financial statements for a complete reconciliation of the U.S. statutory tax rate to the effective tax rate and more information on the Tax Reform Act and tax events in 2018 and 2017 affecting each year’s respective tax rates.
Net loss from continuing operations. For the reasons described above, net loss from continuing operations was $14.7 million for the year ended December 31, 2018 compared with $15.4 million for the year ended December 31, 2017.
Net gain attributable to noncontrolling interests. There was no net gain attributable to noncontrolling interest for the year ended December 31, 2018, compared with an immaterial net gain for the year ended December 31, 2017. Noncontrolling interests represented the rollover participants interest in JPHI Holdings, Inc. which was reduced to 0% as of February 23, 2017. See Note 11, “Shareholders’ (Deficit) Equity” in the consolidated financial statements for further discussion.
Other comprehensive (loss) income. Other comprehensive loss was $3.4 million for the year ended December 31, 2018 compared with other comprehensive income of $12.2 million for the year ended December 31, 2017. The decrease was driven by less favorable foreign currency translation adjustments in 2018 compared to 2017 and less favorable employee retirement plan adjustments in 2018 compared to 2017, partially offset by the change in unrealized gains (losses) on cash flow hedges.
Other comprehensive loss for foreign currency translation adjustments was $4.6 million for the year ended December 31, 2018 compared with other comprehensive income for foreign currency translation adjustments of $10.5 million for the year ended December 31, 2017. Foreign currency translation adjustments are based on fluctuations in the value of foreign currencies (primarily the Euro) against the U.S. Dollar each period.
Employee retirement plan adjustments was a loss of $0.2 million for the year ended December 31, 2018, compared with a gain of $0.4 million for the year ended December 31, 2017. The employee retirement plan adjustments are based on actuarial valuations using a December 31 measurement date that include key assumptions regarding discount rates, expected returns on plan assets, retirement and mortality rates, future compensation increases, and health care cost trend rates. The employee retirement plan gain for the year ended December 31, 2017 primarily relates to actuarial gains recognized in U.S.

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pension and postretirement health care benefit plans within our industrial segment due to higher actual plan asset returns compared with the expected returns on plan assets and a decrease in expected future claim costs, respectively, partially offset by actuarial losses recognized in a German pension plan within our industrial segment due to an increase in future expected compensation.
Other comprehensive income for unrealized gains on cash flow hedges was $1.3 million for both the year ended December 31, 2018 and 2017. The net change in unrealized gains on cash flow hedges is based on the changes in current interest rates and market expectations of the timing and amount of future interest rate changes. In both 2018 and 2017, the fair value of the hedging instruments increased, based on future expectations for interest rate increases.
Adjusted EBITDA. For the year ended December 31, 2018, Adjusted EBITDA was $36.7 million, or 10.0% of net sales, compared with $32.6 million, or 8.5% of net sales, for the year ended December 31, 2017, an increase of $4.0 million. The increase reflects higher Adjusted EBITDA in engineered components segment of $3.4 million and in the industrial segment of $1.3 million, and lower corporate expenses of $1.4 million. The change in Adjusted EBITDA in the fiber solutions segment includes a $2.1 million decrease from the sale of the Acoustics Europe business. Changes in foreign currency exchange rates compared with the U.S. dollar had a positive impact of $0.7 million on Adjusted EBITDA for the year ended December 31, 2018 compared with the year ended December 31, 2017, positively impacting the industrial and engineered components segments’ Adjusted EBITDA by $0.6 million and $0.1 million, respectively.
See “Segment Financial Data” within this MD&A 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”, a non-GAAP financial measure, 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) from continuing operations 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 operational restructuring charges, transactional legal fees, 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 9, “Debt and Hedging Instruments,” and below) definition of EBITDA excludes income of partially owned affiliates, unless such earnings have been received in cash.

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Set forth below is a reconciliation of Adjusted EBITDA from continuing operations to net loss from continuing operations (unaudited):

  Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
(in thousands)
Net loss from continuing operations $ (43,431)   $ (14,653)   $ (15,402)  
Tax provision (benefit) 4,016    (5,046)   (15,614)  
Interest expense-net 32,978    33,277    32,951   
Depreciation and amortization 22,235    21,137    21,586   
EBITDA 15,798    34,715    23,521   
Adjustments:
Restructuring (1)
3,954    877    2,475   
Transaction-related expenses (2)
1,005    —    —   
Integration and other restructuring costs (3)
1,390    92    (569)  
Share-based compensation (4)
2,368    2,295    979   
Loss (gain) on disposals of property, plant and equipment - net (5)
303    (1,318)   (320)  
Gain on extinguishment of debt (6)
—    —    (2,201)  
Loss on divestiture (7)
—    —    8,730   
Total adjustments 9,020    1,946    9,094   
Adjusted EBITDA $ 24,818    $ 36,661    $ 32,615   

(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 2017 and 2018 and financing and operating leases in 2019. See Note 5, “Restructuring Costs” of the accompanying consolidated financial statements for further information.
(2)Transaction-related expenses primarily consist of professional fees and other expenses related to acquisitions, divestitures and financing activities.
(3)In 2019, integration and other restructuring costs include accelerated lease expense of $0.6 million related to planned facility consolidations in the engineered components and industrial segments and $0.9 million of integration costs related to an acquisition in the industrial segment. This was partially offset by $0.8 million related to the reclassification to earnings of a foreign currency translation gain for the wind down and substantial dissolution of certain U.K. entities.
In 2018, integration and other restructuring costs include $0.2 million for settlement costs related to a legal claim in the former Assembled Products business in the engineered components segment associated with periods prior to the Company’s go public business combination, $0.1 million related to legal entity restructuring activities and $0.1 million associated with the insurance deductible related to a force majeure incident at a supplier in the engineered components segment. The supplier incident had resulted in incremental costs to maintain production throughout 2018, with such costs offset by insurance recoveries received during the third and fourth quarters of 2018. These costs were partially offset by $0.4 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. Such costs are not included in restructuring for GAAP purposes.
In 2017, integration and restructuring costs include the reversal of a liability recorded in acquisition accounting from the Company’s go public business combination in 2014.
(4)Represents share-based compensation expense for awards under the Company’s 2014 Omnibus Incentive Plan. See Note 12, “Share-Based Compensation” of the accompanying consolidated financial statements for further information.
(5)Loss (gain) on disposals of property, plant and equipment - net for the year ended December 31, 2019 includes a loss of $0.3 million on the sale of a building in the industrial segment. Gain on disposals of property, plant and equipment-net for the year ended December 31, 2018 includes a gain of $1.3 million on the sale of a building related to the closure of the engineered components segment’s U.K. facility. Gain on disposals of property, plant and equipment - net for the year ended December 31, 2017 includes a gain of $0.5 million on the sale of a building related to the closure of the industrial segment’s Richmond, Virginia facility.

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(6)Represents gains on extinguishment of Second Lien Term Loan debt, net of a prepayment fee to retire foreign debt in the fourth quarter of 2017. See Note 9, “Debt and Hedging Instruments” of the accompanying consolidated financial statements for further information.
(7)On August 30, 2017, the Company completed the divestiture of its Acoustics Europe business. The divestiture resulted in an $8.7 million pre-tax loss. See Note 2, “Discontinued Operations and Divestitures” of the accompanying consolidated financial statements for further information.
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.
Segment Financial Data
The table below presents the Company’s net sales, Adjusted EBITDA and Adjusted EBITDA as a percentage of net sales for each of its reportable segments for the years ended December 31, 2019 and 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 our definition of Adjusted EBITDA and a reconciliation of the Company’s consolidated Adjusted EBITDA to Net Loss, which is the nearest GAAP measure.
Year Ended December 31, 2019 Year Ended December 31, 2018 Increase/(Decrease)
(in thousands, except percentages) $ %
Industrial
Net sales $ 201,517    $ 207,637    $ (6,120)   (2.9) %
Adjusted EBITDA 20,945    28,979    (8,034)   (27.7)  
Adjusted EBITDA % of net sales 10.4  % 14.0  % (360) bps  
Engineered Components
Net sales $ 136,380    $ 160,322    $ (23,942)   (14.9) %
Adjusted EBITDA 15,098    19,747    (4,649)   (23.5)  
Adjusted EBITDA % of net sales 11.1  % 12.3  % (120) bps  
Corporate
Adjusted EBITDA $ (11,225)   $ (12,065)   $ 840    7.0  %
Consolidated
Net sales $ 337,897    $ 367,959    $ (30,062)   (8.2) %
Adjusted EBITDA 24,818    36,661    (11,843)   (32.3)  
Adjusted EBITDA % of net sales 7.3  % 10.0  % (270) bps  
The table below presents the Company’s net sales, Adjusted EBITDA and Adjusted EBITDA as a percentage of net sales for each of its reportable segments for the years ended December 31, 2018 and 2017.
Year Ended December 31, 2018 Year Ended December 31, 2017 Increase/(Decrease)
(in thousands, except percentages) $ %
Industrial
Net sales $ 207,637    $ 200,284    $ 7,353    3.7  %
Adjusted EBITDA 28,979    27,661    1,318    4.8   
Adjusted EBITDA % of net sales 14.0  % 13.8  % 20 bps   
Engineered Components
Net sales $ 160,322    $ 159,129    $ 1,193    0.7  %
Adjusted EBITDA 19,747    16,348    3,399    20.8   
Adjusted EBITDA % of net sales 12.3  % 10.3  % 200 bps   
Fiber Solutions
Net sales $ —    $ 22,683    $ (22,683)   (100.0) %
Adjusted EBITDA —    2,059    (2,059)   (100.0)  
Adjusted EBITDA % of net sales —  % 9.1  % —   
Corporate
Adjusted EBITDA $ (12,065)   $ (13,453)   $ 1,388    10.3  %
Consolidated
Net sales $ 367,959    $ 382,096    $ (14,137)   (3.7) %
Adjusted EBITDA 36,661    32,615    4,046    12.4   
Adjusted EBITDA % of net sales 10.0  % 8.5  % 150 bps   


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Industrial Segment
Year Ended December 31, 2019 Year Ended December 31, 2018 Increase/(Decrease)
(in thousands, except percentages) $ %
Net sales $ 201,517    $ 207,637    $ (6,120)   (2.9) %
Adjusted EBITDA 20,945    28,979    (8,034)   (27.7)  
Adjusted EBITDA % of net sales 10.4  % 14.0  % (360) bps  
For the year ended December 31, 2019, net sales were $201.5 million, a decrease of $6.1 million, or 2.9%, compared with $207.6 million for the year ended December 31, 2018. For the year ended December 31, 2019, the Schaffner acquisition on April 1, 2019 contributed $14.4 million of incremental net sales. Changes in exchange rates had a net negative impact of $7.0 million for the year ended December 31, 2019. Excluding the impact of the Schaffner acquisition and the negative currency impact, net sales were $194.1 million, a decrease of $13.5 million or 6.5%. The $13.5 million decrease in net sales for the year ended December 31, 2019 was primarily due to lower sales volume in industrial end markets in Europe and the U.S., partially offset by increased pricing.
Adjusted EBITDA for the year ended December 31, 2019 decreased $8.0 million to $20.9 million (10.4% of net sales) from $29.0 million (14.0% of net sales) for the year ended December 31, 2018. For the year ended December 31, 2019, the Schaffner acquisition contributed $0.9 million of incremental Adjusted EBITDA. Changes in exchange rates had a net negative impact of $1.0 million for the year ended December 31, 2019. Excluding the impact of the Schaffner acquisition and the negative currency impact, Adjusted EBITDA was $21.0 million (10.8% of net sales) for the year ended December 31, 2019, a decrease of $8.0 million or 27.6%. The $8.0 million decrease primarily resulted from lower sales volume in industrial end markets, lower material and labor efficiencies related to sales volume declines, raw material and wage inflation, increased healthcare costs, higher freight costs, unfavorable product mix and $0.7 million of lower equity income due to lower sales volumes in our joint ventures in China and Taiwan. The decrease was partially offset by increased sales pricing, lower head count and decreased incentive compensation.
Year Ended December 31, 2018 Year Ended December 31, 2017 Increase/(Decrease)
(in thousands, except percentages) $ %
Net sales $ 207,637    $ 200,284    $ 7,353    3.7  %
Adjusted EBITDA 28,979    27,661    1,318    4.8   
Adjusted EBITDA % of net sales 14.0  % 13.8  % 20 bps   
For the year ended December 31, 2018, net sales were $207.6 million, an increase of $7.4 million, or 3.7%, compared with $200.3 million for the year ended December 31, 2017. On a constant currency basis (net positive currency impact of $4.6 million for the year ended December 31, 2018), revenues increased by $2.8 million for the year ended December 31, 2018. Excluding currency impact, the increase in net sales for the year ended December 31, 2018 was primarily due to increases in volume in industrial end markets globally and increased pricing, partially offset by a $0.6 million decrease associated with the wind down of the industrial segment’s facility in Brazil and decreases in volume associated with strategic decisions related to exiting unprofitable customers and products.
Adjusted EBITDA for the year ended December 31, 2018 increased $1.3 million to $29.0 million (14.0% of net sales) from $27.7 million (13.8% of net sales) for the year ended December 31, 2017. On a constant currency basis (net positive impact of $0.6 million for the year ended December 31, 2018), Adjusted EBITDA increased $0.7 million for the year ended December 31, 2018. Excluding currency impact, the increase in Adjusted EBITDA for the year ended December 31, 2018 was primarily due to increases in sales volume in industrial end markets globally, increased pricing and decreased incentive compensation, partially offset by increased compensation costs due to additional selling personnel in 2018 supporting commercial growth initiatives, raw material inflation, increased freight costs and increased manufacturing costs due to operational inefficiencies related to the Richmond, Virginia plant closure and move of production to the Richmond, Indiana facility.


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Engineered Components Segment
Year Ended December 31, 2019 Year Ended December 31, 2018 Increase/(Decrease)
(in thousands, except percentages) $ %
Net sales $ 136,380    $ 160,322    $ (23,942)   (14.9) %
Adjusted EBITDA 15,098    19,747    (4,649)   (23.5)  
Adjusted EBITDA % of net sales 11.1  % 12.3  % (120) bps  
For the year ended December 31, 2019, net sales were $136.4 million, a decrease of $23.9 million or 14.9%, compared with $160.3 million for the year ended December 31, 2018. The decrease in net sales was primarily due to lower sales volumes due to end market declines in the construction, agriculture, power sports, and turf care markets. The decrease in volume was partially offset by increased pricing on core product lines.
Adjusted EBITDA decreased $4.6 million, or 23.5%, for the year ended December 31, 2019 to $15.1 million (11.1% of net sales) compared to $19.7 million (12.3% of net sales) for the year ended December 31, 2018. The decrease in Adjusted EBITDA for the year ended December 31, 2019 primarily resulted from lower sales volumes, lower material and labor efficiencies related to sales volume declines, raw material and wage inflation, unfavorable product mix compared with the prior period and higher freight costs. The decrease was partially offset by increased pricing on core product lines, reduced material usage and labor costs as a result of continuous improvement programs, lower head count and decreased incentive compensation.
Year Ended December 31, 2018 Year Ended December 31, 2017 Increase/(Decrease)
(in thousands, except percentages) $ %
Net sales $ 160,322    $ 159,129    $ 1,193    0.7  %
Adjusted EBITDA 19,747    16,348    3,399    20.8   
Adjusted EBITDA % of net sales 12.3  % 10.3  % 200 bps   
For the year ended December 31, 2018, net sales were $160.3 million, an increase of $1.2 million or 0.7%, compared with $159.1 million for the year ended December 31, 2017. On a constant currency basis (net positive currency impact of $0.6 million for the year ended December 31, 2018), revenues increased by $0.6 million for the year ended December 31, 2018. The increase in net sales for the year ended December 31, 2018 was primarily due to increases in sales volumes in the construction and agriculture markets and improved pricing, partially offset by a decrease in sales volume in the power sports market and lower volume in the turf care market due to a late start to spring resulting in a shortened selling season.
For the year ended December 31, 2018, Adjusted EBITDA was $19.7 million (12.3% of net sales), compared to $16.3 million (10.3% of net sales) for the year ended December 31, 2017. On a constant currency basis (net positive currency impact of $0.1 million for the year ended December 31, 2018), Adjusted EBITDA increased by $3.3 million for the year ended December 31, 2018. The increase in Adjusted EBITDA for the year ended December 31, 2018 was primarily due to improved pricing, increased sales volume in the construction and agriculture markets and lower material usage and labor costs from continuous improvement projects, partially offset by decreased sales volume in the power sports and turf care markets, increased incentive compensation, raw material inflation and higher freight costs.

Fiber Solutions Segment
Year Ended December 31, 2018 Year Ended December 31, 2017 Increase/(Decrease)
(in thousands, except percentages) $ %
Net sales $ —    $ 22,683    $ (22,683)   (100.0) %
Adjusted EBITDA —    2,059    (2,059)   (100.0)  
Adjusted EBITDA % of net sales —  % 9.1  % —   
For the year ended December 31, 2017, net sales were $22.7 million and Adjusted EBITDA was $2.1 million. On August 30, 2017, the Company completed the divestiture of its European fiber solutions business, which did not meet the criteria for discontinued operations presentation at the time of the divestiture.


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Corporate
Year Ended December 31, 2019 Year Ended December 31, 2018 Increase/(Decrease)
(in thousands, except percentages) $ %
Adjusted EBITDA $ (11,225)   $ (12,065)   $ 840    7.0  %
Corporate expense is principally comprised of 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 other corporate operating costs.
The decrease of $0.8 million in corporate expense for the year ended December 31, 2019 primarily resulted from lower compensation costs due to lower head count, lower third party professional fees and decreased incentive compensation, partially offset by increased healthcare costs and wage inflation.
Year Ended December 31, 2018 Year Ended December 31, 2017 Increase/(Decrease)
(in thousands, except percentages) $ %
Adjusted EBITDA $ (12,065)   $ (13,453)   $ 1,388    10.3  %
The $1.4 million decrease in corporate expense in 2018 primarily resulted from lower third party professional fees and decreased incentive compensation, partially offset by increased compensation costs due to higher head count from open positions in 2017.
Liquidity and Capital Resources
Background
Our primary sources of liquidity are cash generated from our operations, available cash and borrowings under our U.S. and foreign credit facilities. As of December 31, 2019, we had $102.0 million of total liquidity, including $84.5 million of available cash, $10.0 million of additional borrowings available under the Revolving Credit Facility portion of our U.S. credit agreement, and $7.5 million available under revolving loan facilities that we maintain outside the U.S. Included in our consolidated cash balance of $84.5 million at December 31, 2019 is cash of $13.3 million held at our non-U.S. operations. These non-U.S. funds, with some restrictions and tax implications, are available for repatriation as deemed necessary by us. The Revolving Credit Facility portion of our U.S. credit agreement and foreign revolving loan facilities are available for working capital requirements, capital expenditures and other general corporate purposes.
In connection with the August 30, 2019 sale of the North American fiber solutions business, we received net cash proceeds, as defined by the Senior Secured Credit Facilities, of $62.6 million, of which $57.6 million was remaining after permitted reinvestments as of December 31, 2019. We intend to continue to reinvest these net proceeds as permitted under the terms of the Senior Secured Credit Facilities. Permitted reinvestments include capital expenditures, repairs and maintenance and permitted acquisitions, if such reinvestments occur within twelve months following receipt of such net cash proceeds or within 180 days of a contractual commitment if such a commitment is made during the twelve month period. To the extent there are net cash proceeds that are not reinvested during the aforementioned period, a mandatory prepayment of debt is required.
On August 12, 2019, we announced that our Board of Directors had engaged financial advisors to advise us as we conduct a process to evaluate strategic alternatives. This evaluation includes, but is not limited to, a potential sale, strategic merger, consolidation or business combination, acquisition, recapitalization, financing consisting of equity and/or debt securities, and/or a restructuring of the Company’s debt, focused on maximizing the value of the Company for its stakeholders.
As of December 31, 2018, the Company had $46.7 million of available cash, $29.4 million of additional borrowings available under the revolving credit facility portion of its U.S. credit agreement, and $8.9 million available under short-term revolving loan facilities that the Company maintains outside the U.S. As of December 31, 2018, 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 $46.7 million at December 31, 2018 was $22.0 million of cash held at Jason’s non-U.S. operations.
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 through the next twelve months. As of December 31, 2019, our First Lien U.S. term loan of $284.4 million matures on June 30, 2021, and our Second Lien U.S. term loan of $89.9 million matures on June 30, 2022. We will need to refinance our debt, obtain alternative forms of financings or investments to achieve our longer-term strategic plans. We can make no assurances we will be able to refinance our debt, obtain alternative forms of financing or investments. Furthermore, if economic conditions or demand for our products deteriorates, we may experience a material adverse effect on our business, operating results, liquidity and financial condition. In addition, the process of exploring

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strategic alternatives may be time consuming, costly and disruptive to our business operations and if we are unable to effectively manage the process, our business, financial condition, liquidity, and results of operations could be adversely affected.
Indebtedness
As of December 31, 2019, our total outstanding indebtedness of $384.8 million was comprised of term loans outstanding under our Senior Secured Credit Facilities of $370.1 million (net of a debt discount of $1.7 million and deferred financing costs of $2.5 million), various foreign bank term loans and revolving loan facilities of $13.9 million and finance lease obligations and other debt of $0.8 million. No borrowings were outstanding under the U.S. revolving credit facility portion of the Senior Secured Credit Facilities as of December 31, 2019.
As of December 31, 2018, our total outstanding indebtedness of $391.8 million was comprised of term loans outstanding under our 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 $15.5 million and finance lease obligations and other debt 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.
We maintain various bank term loan and revolving loan facilities outside the U.S. for local operating and investing needs. Borrowings under these facilities totaled $13.9 million as of December 31, 2019, including borrowings of $13.4 million incurred by our subsidiaries in Germany, compared to $15.5 million as of December 31, 2018, including borrowings of $15.0 million incurred by our subsidiaries in Germany. The foreign debt obligations in Germany primarily relate to term loans within our industrial segment of $12.5 million at December 31, 2019 and $15.0 million at December 31, 2018. The borrowings bear interest at fixed and variable rates ranging from 1.8% to 4.7% and are subject to repayment in varying amounts through 2025.
Net leverage, defined as total indebtedness less cash divided by Adjusted EBITDA, was 12.0x and 5.1x as of December 31, 2019 and 2018, respectively. The table below summarizes net leverage as of December 31, 2019 and 2018:
(in thousands) December 31, 2019 December 31, 2018
Current and long-term debt $ 384,750    $ 391,788   
Add: Debt discounts and deferred financing costs 4,261    6,721   
Add: Liabilities held for sale - long-term debt —    2,000   
Less: Assets held for sale - cash and cash equivalents —    (11,471)  
Less: Cash and cash equivalents (84,526)   (46,698)  
Net Debt $ 304,485    $ 342,340   
Adjusted EBITDA - continuing operations $ 24,818    $ 36,661   
Adjusted EBITDA - discontinued operations(1)
—    30,550   
Acquisition Adjusted EBITDA(2)
457    —   
Pro Forma Adjusted EBITDA $ 25,275    $ 67,211   
Net leverage 12.0x    5.1x   
(1) Cash and cash equivalents, long-term debt and Adjusted EBITDA related to discontinued operations are included in the calculation of net leverage as of December 31, 2018 as it was prior to the completion of the divestitures.
(2) Acquisition Adjusted EBITDA includes Adjusted EBITDA prior to the date of the acquisition on April 1, 2019.
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, 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., Jason Holdings, Inc. I, 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”). Jason Partners Holdings Inc. is wholly owned by Jason Industries, Inc. while Jason Incorporated and Jason Holdings, Inc. I are indirect wholly-owned subsidiaries of Jason Industries, Inc.
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 $284.4 million is outstanding as of December 31, 2019, and (ii) a revolving loan of up to $25.5 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

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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 December 31, 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”). During 2019, we amended our Revolving Credit Facility to extend the maturity date to December 31, 2020. The amendment reduced the borrowing capacity from $30.0 million to $25.5 million, subject to compliance with a consolidated first lien net leverage ratio as discussed in the Covenants section below. In connection with the amendment, we paid deferred financing costs of $0.3 million which have been recorded within other assets-net within the consolidated balance sheets.
The Revolving Credit Facility matures December 31, 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., Jason Holdings, Inc. I, 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, Jason Holdings, Inc. I’s 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., Jason Holdings, Inc. I 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 the London Interbank Offered Rate (“LIBOR”), adjusted for statutory reserve requirements, plus an applicable margin equal to (x) 4.50% in the case of the First Lien Term Loans, (y) 3.25% in the case of the Revolving Credit Facility or (z) 8.00% in the case of the Second Lien Term Loans. Borrowings under the First Lien Term Facility and Second Lien Term Facility are subject to a floor of 1.00% in the case of Eurocurrency loans. The applicable margin for loans under the Revolving Credit Facility may be subject to adjustment based upon Jason Incorporated’s consolidated first lien net leverage ratio.
Interest Rate Hedge Contracts. To manage exposure to fluctuations in interest rates, we entered into forward interest rate swap agreements (“Swaps”) in 2015 with notional values totaling $210.0 million at December 31, 2019 and December 31, 2018. The Swaps have been designated by us 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. For the years ended December 31, 2019, 2018, and 2017 we recognized $0.9 million of interest income, $0.2 million of interest income and $1.9 million of interest expense related to the Swaps, respectively. Based on current interest rates, the Company expects to recognize $0.3 million of interest expense related to the Swaps in 2020.
The fair values of our Swaps are recorded on the consolidated balance sheets with the corresponding offset recorded as a component of accumulated other comprehensive loss. The fair value of the Swaps was a net liability of $0.3 million at December 31, 2019 and a net asset of $1.9 million at December 31, 2018, respectively. See the amounts recorded on the consolidated balance sheets within the table below:
(in thousands) December 31, 2019 December 31, 2018
Interest rate swaps:
Recorded in other current assets $ —    $ 1,325   
Recorded in other assets - net —    542   
Recorded in other current liabilities (260)   —   
Total net asset derivatives designated as hedging instruments $ (260)   $ 1,867   

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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 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. In connection with the August 30, 2019 sale of the North American fiber solutions business, we received net cash proceeds, as defined by the Senior Secured Credit Facilities, of $62.6 million, of which $57.6 million was remaining after permitted reinvestments as of December 31, 2019. We intend to continue to reinvest these net proceeds as permitted under the terms of the Senior Secured Credit Facilities; therefore, no mandatory prepayment is anticipated at this time. To the extent that there are net proceeds that are not reinvested within twelve months of receipt, or within 180 days of a contractual commitment if such commitment is made during the twelve month period, a mandatory prepayment will be required. As of December 31, 2019 and December 31, 2018, there was no required mandatory excess cash flow prepayment under the Senior Secured Credit Facilities.
In December 2019, the Company made a voluntary prepayment of $5.0 million on the First Lien Term Loans, utilizing the proceeds from the sale of the Metalex business and from the sale of a facility within the industrial segment. In connection with the payment, the Company wrote off immaterial amounts of previously unamortized debt discount and deferred financing costs, which were recorded as additional interest expense.
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. To comply with these covenants, Jason Incorporated and its Restricted Subsidiaries are limited in the amount of cash that can be distributed to Jason Industries, Inc. in the form of dividends, loans or other distributions. These restrictions are triggered if Jason Incorporated and its Restricted Subsidiaries do not achieve a consolidated net leverage ratio that is equal to or less than 5.25 to 1.00 on a trailing twelve-month basis calculated in accordance with the provisions of the Credit Agreements. As of December 31, 2019, the consolidated net leverage ratio for Jason Incorporated and its Restricted Subsidiaries exceeded 5.25 to 1.00; therefore, it is not currently able to distribute cash to Jason Industries, Inc.
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 of 4.25 to 1.00 as of December 31, 2019 (which will decrease to 4.00 to 1.00 on June 26, 2020 and 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 December 31, 2019, the consolidated first lien net leverage ratio was 7.52 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). Because the consolidated first lien net leverage ratio at December 31, 2019 exceeded 4.25 to 1.00, borrowings under the Revolving Credit Facility are limited to a total of $10.0 million (which includes letters of credit in excess of $5.0 million). At December 31, 2019, we had letters of credit outstanding of $3.6 million and had no outstanding borrowings outstanding under the Revolving Credit Facility. As of December 31, 2019, we were in compliance with the financial covenants contained in our 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 43,950 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

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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 our 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.
We paid the following dividends on the Series A Preferred Stock in additional shares of Series A Preferred Stock during the year ended December 31, 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    1   
April 1, 2019 February 15, 2019 $20.00    $812    1   
July 1, 2019 May 15, 2019 $20.00    $828    1   
October 1, 2019 August 15, 2019 $20.00    $845    1   
On November 3, 2019, we announced a $20.00 per share dividend on our Series A Preferred Stock to be paid in additional shares of Series A Preferred Stock on January 1, 2020 to holders of record on November 15, 2019. As of December 31, 2019, we have recorded the 860 additional Series A Preferred Stock shares declared for the dividend of $0.9 million within preferred stock in the consolidated balance sheets.
Seasonality and Working Capital
We use 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. We define this metric as the sum of trade accounts receivable and inventories less trade accounts payable as a percentage of net sales. NOWC as a percentage of trailing twelve month net sales was 17.8% as of December 31, 2019 and 15.0% as of December 31, 2018, an increase of 2.8%. The increase in NOWC as a percentage of net sales is primarily due to a $7.4 million decrease in accounts payable as a result of the timing of cash payments to vendors and higher inventory levels as a percentage of net sales, as inventory levels remained consistent with the prior year despite the sales volume decline experienced in 2019. NOWC as a percentage of trailing twelve month net sales was unfavorably impacted by approximately 0.2% as of December 31, 2019 related to the April 1, 2019 acquisition of Schaffner.
The table below summarizes NOWC as of December 31, 2019 and 2018:
(in thousands) December 31, 2019 December 31, 2018
Accounts receivable—net 33,085    36,213   
Inventories 49,943    49,475   
Accounts payable (22,914)   (30,421)  
NOWC $ 60,114    $ 55,267   
The table below reconciles our NOWC from our working capital:
(in thousands) December 31, 2019 December 31, 2018
Working Capital $ 119,585    $ 110,276   
Less: Cash and cash equivalents (84,526)   (46,698)  
Less: Other current assets (7,433)   (5,582)  
Less: Current assets held for sale —    (58,171)  
Add: Current portion long-term debt 5,800    5,687   
Add: Current portion operating lease liabilities 4,275    —   
Add: Accrued compensation and employee benefits 8,551    11,954   
Add: Accrued interest 79    89   
Add: Other current liabilities 13,783    13,161   
Add: Current liabilities held for sale —    24,551   
NOWC $ 60,114    $ 55,267   
In overall dollar terms, our 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 we experience high seasonal demand from certain customers, particularly those serving the power sports 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. We historically generate approximately 51%-56% of our annual net sales in the first half of the year.

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Short-Term and Long-Term Liquidity Requirements
Our ability to make principal and interest payments on borrowings under our U.S. and foreign credit facilities and our ability to fund planned capital expenditures will depend on our 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 our current level of operations, we believe that our existing cash balances and expected cash flows from operations will be sufficient to meet our operating requirements for at least the next 12 months.
Capital expenditures during the year ended December 31, 2019 were $9.6 million, or 2.8% of net sales. Capital expenditures for 2020 are expected to be approximately 6.0% to 6.5% 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. We finance our annual capital requirements with existing cash balances and funds generated from operations.
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, December 31, 2018, and December 31, 2017
Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
Includes cash flow activities from both continuing and discontinued operations
(in thousands)
Cash flows (used in) provided by operating activities $ (20,800)   $ 29,757    $ 30,091   
Cash flows provided by (used in) investing activities 59,086    (10,374)   715   
Cash flows used in financing activities (11,822)   (9,266)   (24,278)  
Effect of exchange rate changes on cash and cash equivalents (107)   (835)   1,498   
Net increase in cash and cash equivalents 26,357    9,282    8,026   
Cash and cash equivalents, beginning of period 58,169    48,887    40,861   
Cash and cash equivalents, end of period $ 84,526    $ 58,169    $ 48,887   
Depreciation and amortization $ 35,461    $ 42,604    $ 38,934   
Capital expenditures $ 11,785    $ 13,753    $ 15,873   
Cash paid during the year for interest $ 30,121    $ 30,687    $ 30,242   
Cash paid during the year for income taxes, net of refunds $ 3,440    $ 6,480    $ 6,843   

Year Ended December 31, 2019 and the Year Ended December 31, 2018
Cash Flows (Used in) Provided by Operating Activities
For the year ended December 31, 2019, cash flows used in operating activities were $20.8 million compared to $29.8 million of cash flows provided by operating activities for the year ended December 31, 2018, a decrease of $50.6 million. The decrease was primarily driven by lower operating profit across all segments, which includes the former Metalex business, principally as a result of lower sales volume for the year ended December 31, 2019 as compared to the year ended December 31, 2018. In addition, the decrease resulted from acquisition and divestiture related transaction costs of $4.5 million, unfavorable changes in operating working capital of $7.2 million 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 related to dividends received from our joint venture during the year ended December 31, 2019 and a lower incentive compensation accrual as a result of lower projected attainment percentages. Cash flows (used in) provided by operating activities were also impacted by the sale of the North American fiber solutions business, which provided twelve months of cash flows from operating activities in 2018 compared to eight months of cash flows from operating activities in 2019.
Cash Flows Provided by (Used in) Investing Activities
Cash flows provided by investing activities were $59.1 million for the year ended December 31, 2019 compared to cash flows used in investing activities of $10.4 million for the year ended December 31, 2018. The increase in cash flows provided by investing activities was primarily the result of $79.8 million received from the sale of the North American fiber solutions business and the sale of the Metalex business (before transaction costs, income taxes and certain retained liabilities), lower capital expenditures of $2.0 million, partially offset by cash used for the acquisition of Schaffner of $11.0 million, net of cash acquired and lower proceeds from disposals of property, plant and equipment of $1.4 million. The proceeds from disposals of property, plant and equipment for the year ended December 31, 2018 were primarily due to the proceeds received from the building sale related to the closure of the engineered component’s U.K. facility in December 2018.

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Cash Flows Used in Financing Activities
Cash flows used in financing activities were $11.8 million for the year ended December 31, 2019 compared with $9.3 million for the year ended December 31, 2018. The increase in cash flows used in financing activities was driven by higher payments of $2.5 million on First and Second Lien term loans.
Depreciation and Amortization
Depreciation and amortization totaled $35.5 million for the year ended December 31, 2019, compared with $42.6 million for the year ended December 31, 2018. Depreciation and amortization for the year ended December 31, 2019 was lower than incurred by the Company in the prior year primarily due to the sale of the North American fiber solutions business on August 30, 2019, $2.3 million of accelerated intangible amortization expense recorded for a customer relationship intangible asset related to non-core smart utility meter product lines in the engineered components segment during 2018 and $1.4 million of accelerated depreciation expense related to the closure of the Richmond, Indiana facility in the fiber solutions segment in 2018, partially offset by $2.5 million of accelerated depreciation expense recorded in the engineered components segment during 2019.
Capital Expenditures
Capital expenditures totaled $11.8 million for the year ended December 31, 2019, compared with $13.8 million for the year ended December 31, 2018. The lower capital expenditures were primarily driven by a lower level of project activity in 2019 compared with 2018 and the sale of the North American fiber solutions business on August 30, 2019.
Cash Paid for Interest
Cash paid for interest totaled $30.1 million for the year ended December 31, 2019 and $30.7 million for the year ended December 31, 2018. The decrease in cash paid for interest primarily related to a decrease in outstanding long-term debt balances, partially offset by higher variable interest rates for 2019 as compared to 2018.
Cash Paid for Income Taxes
Cash paid for income taxes net of refunds totaled $3.4 million for the year ended December 31, 2019 and $6.5 million for the year ended December 31, 2018.
Year Ended December 31, 2018 and the Year Ended December 31, 2017
Cash Flows Provided by Operating Activities
Cash flows provided by operating activities were $29.8 million for the year ended December 31, 2018 compared to $30.1 million for the year ended December 31, 2017, a decrease of $0.3 million. For the year ended December 31, 2018, net income exclusive of non-cash items, net operating working capital and dividends from joint ventures provided $24.9 million, $7.2 million and $0.8 million, respectively, and changes in other assets and liability balances used $3.2 million of operating cash flow. For the year ended December 31, 2017, net income exclusive of non-cash items, changes in other assets and liability balances and net operating working capital provided $26.0 million, $2.1 million and $2.9 million of operating cash flow, respectively, and transaction fees on divestiture used $0.9 million of operating cash flows.
Cash Flows (Used in) Provided by Investing Activities
Cash flows used in investing activities were $10.4 million for the year ended December 31, 2018 compared to cash flows provided by investing activities of $0.7 million for the year ended December 31, 2017. The increase in cash flows used in investing activities was primarily the result of lower proceeds from disposals of property, plant and equipment of $5.3 million and lower proceeds from divestitures of $7.9 million. The proceeds from disposals of property, plant and equipment for the year ended December 31, 2018 were primarily due to the proceeds received from the building sale related to the closure of the engineered components segments’ U.K. facility in December 2018 and for the year ended December 31, 2017 were primarily due to the proceeds received from the building sale executed in connection with the sale leaseback of our Libertyville, Illinois facility in April 2017 and the sale of a building related to the closure of the industrial segment’s Richmond, Virginia facility in 2017. Lower capital expenditures of $2.1 million partially offset the increase in cash used in investing activities.
Cash Flows Used in Financing Activities
Cash flows used in financing activities were $9.3 million for the year ended December 31, 2018 compared with $24.3 million for the year ended December 31, 2017. The decrease in cash flows used in financing activities was driven by lower payments of $16.2 million on First and Second Lien term loans. This was offset by net payments of other long-term debt of $3.7 million for the year ended December 31, 2018 as compared to $2.2 million for the year ended December 31, 2017, a net increase of $1.5 million. In addition, cash flows used in financing activities decreased for value added taxes received on the U.K. building sale of $0.7 million, which will be paid out in 2019, offset by an increase from deferred financing costs of $0.6 million incurred in connection with the amendment to our Revolving Credit Facility.

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Depreciation and Amortization
Depreciation and amortization totaled $42.6 million for the year ended December 31, 2018, compared with $38.9 million for the year ended December 31, 2017. Depreciation and amortization for the year ended December 31, 2018 was higher 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 related to non-core smart utility meter product lines in the Metalex business and $1.4 million of accelerated depreciation expense related to the closure of the Richmond, Indiana facility in the North American fiber solutions business.
Capital Expenditures
Capital expenditures totaled $13.8 million for the year ended December 31, 2018, compared with $15.9 million for the year ended December 31, 2017. The lower capital expenditures were primarily driven by a lower level of project activity in 2018 compared with 2017.
Cash Paid for Interest
Cash paid for interest totaled $30.7 million for the year ended December 31, 2018 and $30.2 million for the year ended December 31, 2017. The increase in cash paid for interest primarily related to higher interest rates for 2018 as compared to 2017, partially offset by a decrease in outstanding long-term debt balances.
Cash Paid for Income Taxes
Cash paid for income taxes net of refunds totaled $6.5 million for the year ended December 31, 2018 and $6.8 million for the year ended December 31, 2017.
Off-Balance Sheet Arrangements
The Company had outstanding letters of credit totaling $3.6 million, $4.9 million, and $6.1 million as of December 31, 2019, 2018 and 2017, respectively, the majority of which secure self-insured workers compensation liabilities.
Commitments and Contractual Obligations
The following table presents the Company’s commitments and contractual obligations as of December 31, 2019:
Payments Due by Period
(in thousands) Total 2020 2021-2022 2023-2024 Thereafter
Long-term debt obligations under U.S. credit agreement (1)
$ 374,327    $ 3,100    $ 371,227    $ —    $ —   
Other long-term debt obligations (1)
13,942    2,284    4,779    6,177    702   
Finance lease obligations (1)
742    416    220    106    —   
Interest payments on long-term debt obligations (2)
52,057    28,267    23,636    152    2   
Operating lease obligations (3)
30,178    5,730    8,318    5,476    10,654   
Multiemployer and UK pension obligations (4)
2,998    839    757    757    645   
Total $ 474,244    $ 40,636    $ 408,937    $ 12,668    $ 12,003   
(1)Amounts represent the principal payments due under the long-term debt obligations. Foreign debt balances are based on exchange rates as of December 31, 2019.
(2)Amounts represent the expected cash payments of interest expense on long-term debt obligations, including finance lease obligations, and were calculated using interest rates in place as of December 31, 2019 and assuming that the underlying debt obligations will be repaid in accordance with their terms. These amounts also include projected payments related to the interest rate swaps.
(3)Operating lease obligations represent the undiscounted minimum rental commitments under non-cancelable operating leases, including renewal options which are deemed reasonably certain to be exercised. The imputed interest on operating lease obligations as of December 31, 2019 is $6.8 million. Refer to Note 10, “Leases” for additional information.
(4)Represents contributions required with respect to the former Morton multiemployer pension plan as a result of the withdrawal from the plan, and required contributions to certain pension plans in the U.S. and U.K. We are unable to determine the ultimate timing of all other pension payments, and therefore, no other payment amounts were included in the table.

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Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The following policies are considered by management to be the most critical in understanding the judgments that are involved in the preparation of our consolidated financial statements and the uncertainties that could impact our results of operations, financial position and cash flows. Application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Although we have listed a number of accounting policies below which we believe to be the most critical, we also believe that all of our accounting policies are important to the reader. Therefore, see Note 1, “Summary of Significant Accounting Policies,” of the accompanying consolidated financial statements of the Company appearing elsewhere in this Annual Report.
Goodwill, Other Intangible Assets and Other Long-Lived Assets: Our goodwill, other intangible assets and tangible fixed assets are held at historical cost, net of depreciation and amortization, less any provision for impairment. Our right-of-use operating lease assets are recorded at the present value of future minimum lease payments, net of amortization, less any provision for impairment. Intangible and tangible assets with determinable lives are amortized or depreciated on a straight line basis over estimated useful lives as follows:
Intangible Assets
Goodwill No amortization
Patents Amortized over 7 years
Customer relationships Amortized over 10 to 15 years
Trademarks and other intangible assets Amortized over 1 to 18 years
Right-of-use operating lease assets Amortized over the term of the lease
Tangible Assets
Land No depreciation
Buildings and improvements Depreciated over 2 to 40 years
Machinery and equipment Depreciated over 2 to 10 years
Goodwill reflects the cost of an acquisition in excess of the aggregate fair value assigned to identifiable net assets acquired. As of December 31, 2019, the Company has $45.7 million of goodwill, all of which is within the industrial segment. Goodwill is assessed for impairment at least annually and as triggering events or indicators of potential impairment occur. We perform our annual impairment test in the fourth quarter of our fiscal year. Goodwill has been assigned to reporting units for purposes of impairment testing based upon the relative fair value of the asset to each reporting unit.
Impairment of goodwill is measured by comparing the fair value of a reporting unit to the carrying value of the reporting unit, including goodwill. The estimated fair value represents the amount at which a reporting unit could be bought or sold in a current transaction between willing parties on an arms-length basis. In estimating the fair value, we use a discounted cash flow model, which is dependent on a number of assumptions including estimated future revenues and expenses, weighted average cost of capital, capital expenditures and other variables. We also use a market approach, in which the fair values of comparable public companies and fair values based on recent comparable transactions (when available) are used in determining an estimated fair value for each reporting unit.
If the carrying amount of the reporting unit exceeds the estimated fair value of the reporting unit, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of the goodwill.
We performed our annual goodwill impairment test in the fourth quarter of 2019 and determined that the fair value of the industrial reporting unit, the only reporting unit with a recorded goodwill balance, exceeded the carrying value of the reporting unit by over 15%. In connection with the goodwill impairment test, we engaged a third-party valuation firm to assist management with determining the fair value estimate for the reporting unit. The fair value of the reporting unit is determined using a weighted average of an income approach primarily based on our long-term strategic plan, a market approach based on implied valuation multiples of public company peer groups for the reporting unit and a market approach based on recent comparable transactions. Each approach was generally deemed equally relevant in determining reporting unit enterprise value, and as a result, weightings of 35 percent, 30 percent and 35 percent, respectively, were used for each. This fair value determination was categorized as Level 3 in the fair value hierarchy.
In connection with obtaining an independent third-party valuation, management provided certain information and assumptions that were utilized in the fair value calculation. Significant assumptions used in determining reporting unit fair

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value include forecasted cash flows, revenue growth rates, adjusted EBITDA margins, weighted average cost of capital (discount rate), assumed tax treatment of a future sale of the reporting unit, terminal growth rates, capital expenditures, sales and EBITDA multiples used in the market approach, and the weighting of the income and market approaches. A change in any of these assumptions, individually or in the aggregate, or future financial performance that is below management expectations may result in the carrying value of this reporting unit exceeding its fair value, and goodwill and amortizable intangible assets could be impaired. See Note 8, “Goodwill and Other Intangible Assets,” of the accompanying consolidated financial statements for further discussion.
We also review other intangible assets and tangible fixed assets for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. If such indicators are present, we perform undiscounted cash flow analyses to determine if an impairment exists. If an impairment is determined to exist, any related impairment loss is calculated based on fair value.
During the third quarter of 2019, a triggering event was identified due to sustained sales and profitability declines within the Metalex business in the engineered components segment, which resulted in the Company performing an analysis to assess long-lived assets of the asset group for impairment. The estimated fair value of the long-lived assets was determined using a probability weighted approach using both discounted cash flow projections based on future financial performance and a market approach. As a result of this analysis, non-cash impairment charges of $14.9 million and $5.7 million were recorded for customer relationship and trademark intangible assets, respectively, during the third quarter of 2019. These intangible asset impairment charges are recorded as impairment charges within net loss (income) from discontinued operations, net of tax in the consolidated statements of operations.
A considerable amount of management judgment and assumptions is required in performing the impairment tests, principally in determining the fair value of each reporting unit and the specifically identifiable intangible and tangible assets. While we believe our judgments and assumptions are reasonable, different assumptions could change the estimated fair values and, therefore, additional impairment charges could be required.
Employee Benefit Plans: We provide a range of benefits to employees and certain former employees, including in some cases pensions and postretirement health care, though the plans are frozen to new participation. We recognize pension and post-retirement benefit income and expense and assets and obligations that are based on actuarial valuations using a December 31 measurement date and that include key assumptions regarding discount rates, expected returns on plan assets, retirement and mortality rates, future compensation increases, and health care cost trend rates. The approach we use to determine the annual assumptions is as follows:
•Discount Rate: Our discount rate assumptions are based on the interest rate of high-quality corporate bonds, with appropriate consideration of our plans’ participants’ demographics and benefit payment terms.
•Expected Return on Plan Assets: Our expected return on plan assets assumptions are based on our expectation of the long-term average rate of return on assets in the pension funds, which is reflective of the current and projected asset mix of the funds and considers the historical returns earned on the funds.
•Compensation Increase: Our compensation increase assumptions reflect our long-term actual experience, the near-term outlook and assumed inflation.
•Retirement and Mortality Rates: Our retirement and mortality rate assumptions are based primarily on actual plan experience and mortality tables.
•Health Care Cost Trend Rates: Our health care cost trend rate assumptions are based primarily on actual plan experience and mortality inflation.
The key assumptions utilized in the accounting for employee benefit plans require a considerable amount of management judgement. We review actuarial assumptions on an annual basis and make modifications based on current rates and trends when appropriate. As required by GAAP, the effects of the modifications are recorded as a component of other comprehensive income and are amortized over future periods. Based on information provided by independent actuaries and other relevant sources, we believe that the assumptions used are reasonable; however, changes in these assumptions could impact our financial position, results of operations or cash flows. See Note 15, “Employee Benefit Plans,” of the accompanying consolidated financial statements for further discussion.
Income Taxes: We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining both our key assumptions utilized in the accounting for income taxes and the recording of the worldwide provision for income taxes and the related deferred tax assets and liabilities. We assess our income tax positions and record tax liabilities for all years subject to examination based upon management’s evaluation of the facts and circumstances and information available at the reporting dates. For those income tax positions where it is more-likely-than-not that a tax benefit will be sustained upon the conclusion of an examination, we have recorded the largest amount of tax benefit

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having a cumulatively greater than 50% likelihood of being realized upon ultimate settlement with the applicable taxing authority assuming that it has full knowledge of all relevant information. For those tax positions that do not meet the more-likely-than-not threshold regarding the ultimate realization of the related tax benefit, no tax benefit has been recorded in the financial statements. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases, net operating losses, tax credits and other carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based on historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. As a result of this review, we have established valuation allowances against certain of our deferred tax assets relating to foreign and state net operating loss and credit carryforwards. Future tax authority rulings and changes in tax laws, changes in projected levels of taxable income and future tax planning strategies could affect the actual effective tax rate and tax balances recorded.
On December 22, 2017, the President of the United States signed into law the Tax Reform Act. The legislation significantly changed U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act also added many new provisions including changes to bonus depreciation and the deductions for executive compensation and interest expense, and the requirement to include in our U.S. federal income tax return foreign subsidiary earnings in excess of an allowable return of the foreign subsidiary’s tangible assets, among others. The Tax Reform Act permanently reduced the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. See further discussion of the Tax Reform Act within “Consolidated Results of Operations” above and Note 14, “Income Taxes,” of the accompanying consolidated financial statements for further discussion.
Revenue Recognition: Net sales are recognized when control of a performance obligation is transferred to the customer in an amount that reflects the consideration expected to be received in exchange for the transferred good or service. We typically satisfy our performance obligations in contracts with customers upon shipment of the goods or delivery of the services. Amounts invoiced to customers related to shipping and handling are classified as net sales, while expenses for transportation of products to customers are recorded as a component of cost of goods sold on the consolidated statement of operations. Sales, value add, and other taxes collected concurrent with revenue-producing activities are excluded from net sales. As of the contract inception date, the expected time between the completion of the performance obligation and the payment from the customer is less than a year, and as such there are no significant financing components in the consideration recognized and disclosures around unsatisfied performance obligations have been omitted.
We estimate whether we will be subject to variable consideration under the terms of the contract and include our estimate of variable consideration in the transaction price based on the expected value method when it is deemed probable of being realized based on historical experience and trends. A significant amount of management judgement is required to develop the assumptions that we use to estimate the variable consideration of certain contracts. Types of variable consideration may include rebates, discounts, and product returns, among others, which are recorded as a deduction to net sales at the time when control of a performance obligation is transferred to the customer.
The majority of our contracts are for the sale of goods that qualify as separate performance obligations that are distinct from other goods or services provided in the same contract. Transaction price inclusive of estimated variable consideration is allocated to separate performance obligations based on their relative standalone selling prices using observable inputs. When observable inputs are not available, we estimate stand alone selling price using cost plus a reasonable margin approach. Contracts entered into with the same customer at or near the same time are combined into a single contract if they represent a single commercial objective, if payment of consideration in one contract is dependent on performance of the other contract, or if promises in different contracts constitute a single performance obligation. For the limited contracts with multiple performance obligations, the contract’s transaction price is allocated to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract.
Performance obligations are satisfied at a point in time or over time as work progresses. Revenue from products transferred to customers at a point in time accounted for more than 99% of net sales for the year ended December 31, 2019. We recognize revenue over time for certain production parts in the industrial business that are highly customized with no alternative use and for which we have an enforceable right to payment with a reasonable margin under the terms of the contract based on the output method of goods produced. Revenue from products transferred to customers over time accounted for less than 1% of net sales for the year ended December 31, 2019.
We provide industry standard assurance-type warranties which ensure that the manufactured products comply with agreed upon specifications with the customers and do not represent a separate performance obligation with the customer. Warranty based accruals are established under Accounting Standards Codification 460, “Guarantees,” based on an evaluation of historical warranty experience and management’s estimate of the level of future claims.

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New Accounting Pronouncements
See Note 1, “Summary of Significant Accounting Policies,” under the heading “Recently issued accounting standards,” of the accompanying consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in foreign currency exchange rates and interest rates and, to a lesser extent, commodities. To reduce such risks, we selectively use 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: We have 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 $116.2 million, or 34%, of our sales from continuing operations originated in a currency other than the U.S. dollar for the year ended December 31, 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 year ended December 31, 2019, sales denominated in Euros approximated $93 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 $9.3 million, respectively, and the change in our net (loss) income would increase or decrease by approximately $1.2 million. The net assets and liabilities of our non-U.S. dollar denominated subsidiaries, which totaled approximately $152.6 million as of December 31, 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’ equity as cumulative translation adjustments. The cumulative translation adjustments recorded in accumulated other comprehensive loss at December 31, 2019 resulted in a decrease to shareholders’ equity of $26.2 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. We periodically identify areas where we do not have naturally offsetting currency positions and then may purchase hedging instruments to protect against potential currency exposures. As of December 31, 2019, we did not have any significant foreign currency hedging instruments in place nor did we have any significant sales or purchase commitments in currencies outside of the functional currencies of the operations responsible for satisfying such commitments. All long-term debt is held in the functional currencies of the operations that are responsible for the repayment of such obligations. As of December 31, 2019, long-term debt denominated in currencies other than the USD totaled approximately $14.7 million.
Interest Rate Risk: We utilize a combination of short-term and long-term debt to finance our operations and are 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 the second quarter of 2018, applicable interest rates were lower than the designated floor in our Senior Secured Credit Facilities; therefore, until that point, interest rates were not 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 $0.9 million, net of the impact of interest rate swaps discussed in the paragraph below.
As of December 31, 2019, we have entered into various interest rate swaps in order to mitigate a portion of the variable rate interest exposure. We are 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, we 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 December 31, 2019, LIBOR was lower than 2.08%. However, if interest rates were to exceed 2.08%, a 25 basis point increase or decrease in interest rates would increase or decrease annual interest expense by $0.4 million on the unhedged portion of our Senior Secured Credit Facilities.
Commodity risk: We source 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, foam chemicals, plastic resin, vinyl and cotton sheeting are subject to price fluctuations, which could have a negative impact on our results. We strive to pass along such commodity price increases to customers to avoid profit margin erosion and utilize 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 December 31, 2019, we did not have any commodity hedging instruments in place.

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Quarterly Results of Operations (unaudited)
The following tables presenting our quarterly results of operations should be read in conjunction with the consolidated financial statements and related notes included in this Annual Report on Form 10-K. We have prepared the unaudited information on the same basis as our audited consolidated financial statements. Our operating results for any quarter are not necessarily indicative of results for any future quarters or for a full year.
The following table presents our unaudited quarterly results of operations for the eight quarters in fiscal 2019 and fiscal 2018. This table includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary for fair statement of our consolidated financial position and operating results for the quarters presented.
1Q 2Q 3Q 4Q Full Year
(in thousands, except percentages) 2019 2019 2019 2019 2019
Net sales $ 92,916    $ 92,475    $ 76,150    $ 76,356    $ 337,897   
Gross profit 23,596    20,666    15,755    14,589    74,606   
Net loss from continuing operations (5,253)   (9,734)   (11,576)   (16,868)   (43,431)  
Net loss from discontinued operations, net of tax (1,803)   (3,382)   (21,591)   (11,401)   (38,177)  
Net loss attributable to Jason Industries (7,056)   (13,116)   (33,167)   (28,269)   (81,608)  
Accretion of preferred stock dividends 812    828    845    862    3,347   
Net loss allocable to common shareholders of Jason Industries $ (7,868)   $ (13,944)   $ (34,012)   $ (29,131)   $ (84,955)  
Basic and diluted net loss per share allocable to common share holders of Jason Industries:
Net loss per share from continuing operations $ (0.22)   $ (0.37)   $ (0.44)   $ (0.61)   $ (1.64)  
Net loss per share from discontinued operations $ (0.06)   $ (0.12)   $ (0.76)   $ (0.40)   $ (1.34)  
Basic and diluted net loss per share $ (0.28)   $ (0.49)   $ (1.20)   $ (1.01)   $ (2.98)  
Weighted average number of common shares outstanding:
Basic and diluted 27,962    28,439    28,632    28,838    28,484   
1Q 2Q 3Q 4Q Full Year
(in thousands, except percentages) 2018 2018 2018 2018 2018
Net sales $ 101,013    $ 100,446    $ 85,625    $ 80,875    $ 367,959   
Gross profit 24,799    25,193    19,951    20,164    90,107   
Net loss from continuing operations (2,322)   (2,145)   (5,365)   (4,821)   (14,653)  
Net income (loss) from discontinued operations, net of tax 1,684    1,790    907    (2,888)   1,493   
Net loss attributable to Jason Industries (638)   (355)   (4,458)   (7,709)   (13,160)  
Accretion of preferred stock dividends and redemption premium 1,727    765    782    796    4,070   
Net loss allocable to common shareholders of Jason Industries $ (2,365)   $ (1,120)   $ (5,240)   $ (8,505)   $ (17,230)  
Basic and diluted net loss per share allocable to common shareholders of Jason Industries:
Net loss per share from continuing operations $ (0.15)   $ (0.11)   $ (0.22)   $ (0.20)   $ (0.68)  
Net loss per share from discontinued operations $ 0.06    $ 0.06    $ 0.03    $ (0.11)   $ 0.06   
Basic and diluted net loss per share $ (0.09)   $ (0.04)   $ (0.19)   $ (0.31)   $ (0.62)  
Weighted average number of common shares outstanding:
Basic and diluted 27,329    27,677    27,683    27,683    27,595   



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Index to Consolidated Financial Statements
As of December 31, 2019 and 2018, for the years ended December 31, 2019, December 31, 2018, and December 31, 2017 Page
61
63
64
65
66
67
69
Index to Financial Statement Schedules
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Report of Independent Registered Public Accounting Firm

To the shareholders and the Board of Directors of Jason Industries, Inc.

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Jason Industries, Inc. and its subsidiaries (the “Company”) as of December 31, 2019, and the related consolidated statements of operations, comprehensive (loss) income, shareholders’ (deficit) equity and cash flows for the year ended December 31, 2019, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.
Change in Accounting Principle
As discussed in Note 10 to the financial statements, the Company changed its method of accounting for leases in the year ended December 31, 2019 due to the adoption of Accounting Standard Update No. 2016-02, Leases (Topic 842) under the modified retrospective adoption method.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.


/s/ Deloitte & Touche LLP

Milwaukee, Wisconsin
March 2, 2020

We have served as the Company’s auditor since 2019.


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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Jason Industries, Inc.

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Jason Industries, Inc. and its subsidiaries (the “Company”) as of December 31, 2018, and the related consolidated statements of operations, comprehensive (loss) income, shareholders’ (deficit) equity and cash flows for each of the two years in the period ended December 31, 2018, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
March 5, 2019, except for the effects of the restatement discussed in Note 2 (not presented herein) to the consolidated financial statements appearing under Item 8 of the Company’s 2018 annual report on Form 10-K/A and Note 2 (not presented herein) to the financial statement schedule appearing under Schedule II of the Company’s 2018 annual report on Form 10-K/A, as to which the date is May 13, 2019, and except for the effects of discontinued operations discussed in Note 2 and the change in composition of reportable segments discussed in Note 16 to the consolidated financial statements, as to which the date is March 2, 2020

We have served as the Company’s or its predecessors’ auditor from 1985 to 2019.


62


Jason Industries, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)

  Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
 
Net sales $ 337,897    $ 367,959    $ 382,096   
Cost of goods sold 263,291    277,852    295,076   
Gross profit 74,606    90,107    87,020   
Selling and administrative expenses 78,200    78,752    77,611   
Loss (gain) on disposals of property, plant and equipment-net 303    (1,318)   (320)  
Restructuring    3,954    877    2,475   
Operating (loss) income (7,851)   11,796    7,254   
Interest expense-net (32,978)   (33,277)   (32,951)  
Gain on extinguishment of debt —    —    2,201   
Equity income 316    1,024    952   
Loss on divestiture    —    —    (8,730)  
Other income-net 1,098    758    258   
Loss from continuing operations before income taxes (39,415)   (19,699)   (31,016)  
Tax provision (benefit) 4,016    (5,046)   (15,614)  
Net loss from continuing operations $ (43,431)   $ (14,653)   $ (15,402)  
Net (loss) income from discontinued operations, net of tax (38,177)   1,493    10,929   
Net loss (81,608)   (13,160)   (4,473)  
Less net gain (loss) attributable to noncontrolling interests —    —    5   
Net loss attributable to Jason Industries $ (81,608)   $ (13,160)   $ (4,478)  
Accretion of preferred stock dividends and redemption premium 3,347    4,070    3,783   
Net loss allocable to common shareholders of Jason Industries $ (84,955)   $ (17,230)   $ (8,261)  
Basic and diluted net (loss) income per share allocable to common shareholders of Jason Industries:
Net loss per share from continuing operations $ (1.64)   $ (0.68)   $ (0.74)  
Net (loss) income per share from discontinued operations (1.34)   0.06    0.42   
Basic and diluted net loss per share $ (2.98)   $ (0.62)   $ (0.32)  
Weighted average number of common shares outstanding:
Basic and diluted 28,484    27,595    26,082   
The accompanying notes are an integral part of these consolidated financial statements.

63


Jason Industries, Inc.
Consolidated Statements of Comprehensive (Loss) Income
(In thousands)

  Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
 
Net loss $ (81,608)   $ (13,160)   $ (4,473)  
Other comprehensive (loss) income:
Employee retirement plan adjustments, net of tax (benefit) expense of ($230), ($66), and $73, respectively
(401)   (177)   373   
Foreign currency translation adjustments (3,062)   (4,555)   10,542   
Net change in unrealized (losses) gains on cash flow hedges, net of tax (benefit) expense of ($518), $436, and $814, respectively
(1,609)   1,349    1,317   
Total other comprehensive (loss) income (5,072)   (3,383)   12,232   
Comprehensive (loss) income (86,680)   (16,543)   7,759   
Less: Comprehensive income attributable to noncontrolling interests —    —    43   
Comprehensive (loss) income attributable to Jason Industries $ (86,680)   $ (16,543)   $ 7,716   
The accompanying notes are an integral part of these consolidated financial statements.

64


Jason Industries, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)

December 31, 2019 December 31, 2018
Assets
Current assets
Cash and cash equivalents $ 84,526    $ 46,698   
Accounts receivable - net of allowances for doubtful accounts of $1,106 and $1,073 at 2019 and 2018, respectively
33,085    36,213   
Inventories - net    49,943    49,475   
Other current assets 7,433    5,582   
Current assets held for sale —    58,171   
Total current assets 174,987    196,139   
Property, plant and equipment - net    70,276    75,166   
Right-of-use operating lease assets 20,910    —   
Goodwill 45,684    44,065   
Other intangible assets - net 64,590    69,700   
Other assets - net 10,654    11,287   
Noncurrent assets held for sale —    107,240   
Total assets $ 387,101    $ 503,597   
Liabilities and Shareholders’ (Deficit) Equity
Current liabilities
Current portion of long-term debt $ 5,800    $ 5,687   
Current portion of operating lease liabilities 4,275    —   
Accounts payable 22,914    30,421   
Accrued compensation and employee benefits 8,551    11,954   
Accrued interest 79    89   
Other current liabilities 13,783    13,161   
Current liabilities held for sale —    24,551   
Total current liabilities 55,402    85,863   
Long-term debt 378,950    386,101   
Long-term operating lease liabilities 19,136    —   
Deferred income taxes 7,534    17,613   
Other long-term liabilities 16,938    18,436   
Noncurrent liabilities held for sale —    3,367   
Total liabilities 477,960    511,380   
Commitments and Contingencies (Note 17)
Shareholders’ (Deficit) Equity
Preferred stock, $0.0001 par value (5,000,000 shares authorized, 43,950 shares issued and outstanding at December 31, 2019, including 860 shares declared on November 3, 2019 and issued on January 1, 2020, 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)
$ 43,950    $ 40,612   
Common stock, $0.0001 par value (120,000,000 shares authorized, 28,508,977 shares issued and outstanding at December 31, 2019 and 27,394,978 shares issued and outstanding at December 31, 2018)
3    3   
Additional paid-in capital 155,023    155,533   
Retained deficit (261,192)   (180,360)  
Accumulated other comprehensive loss (28,643)   (23,571)  
Total shareholders’ (deficit) equity (90,859)   (7,783)  
Total liabilities and shareholders’ (deficit) equity $ 387,101    $ 503,597   
The accompanying notes are an integral part of these consolidated financial statements.


65


Jason Industries, Inc.
Consolidated Statements of Shareholders’ (Deficit) Equity
(In thousands,except per share amounts)
Preferred Stock    Common Stock    Additional Paid-In Capital    Retained Deficit    Accumulated Other Comprehensive Loss    Shareholders’
(Deficit) Equity Attributable to Jason Industries, Inc. 		  Noncontrolling Interests    Total Shareholders’
(Deficit) Equity 		 
Shares    Amount    Shares    Amount   
Balance at December 31, 2016 46    $ 45,899    24,802    $ 2    $ 144,666    $ (163,232)   $ (30,372)   $ (3,037)   $ (105)   $ (3,142)  
Dividends declared 4    3,766    —    —    (3,783)   —    —    (17)   —    (17)  
Share-based compensation —    —    106    —    1,119    —    —    1,119    —    1,119   
Tax withholding related to vesting of restricted stock units —    —    (26)   —    (35)   —    —    (35)   —    (35)  
Net loss —    —    —    —    —    (4,478)   —    (4,478)   5    (4,473)  
Employee retirement plan adjustments, net of tax —    —    —    —    —    —    373    373    —    373   
Foreign currency translation adjustments —    —    —    —    —    —    10,506    10,506    36    10,542   
Net changes in unrealized gain on cash flow hedges, net of tax —    —    —    —    —    —    1,315    1,315    2    1,317   
Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc. —    —    1,084    1    1,821    —    (1,884)   (62)   62    —   
Balance at December 31, 2017 50    49,665    25,966    3    143,788    (167,710)   (20,062)   5,684    —    5,684   
Cumulative impact of accounting changes —    —    —    —    —    510    (126)   384    —    384   
Dividends declared 3    3,083    —    —    (3,093)   —    —    (10)   —    (10)  
Share-based compensation —    —    36    —    2,709    —    —    2,709    —    2,709   
Tax withholding related to vesting of restricted stock units —    —    (3)   —    (7)   —    —    (7)   —    (7)  
Net loss —    —    —    —    —    (13,160)   (13,160)   —    (13,160)  
Employee retirement plan adjustments, net of tax —    —    —    —    —    —    (177)   (177)   —    (177)  
Foreign currency translation adjustments —    —    —    —    —    —    (4,555)   (4,555)   —    (4,555)  
Net changes in unrealized gains on cash flow hedges, net of tax —    —    —    —    —    —    1,349    1,349    —    1,349   
Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc. (12)   (12,136)   1,396    —    12,136    —    —    —    —    —   
Balance at December 31, 2018 41    40,612    27,395    3    155,533    (180,360)   (23,571)   (7,783)   —    (7,783)  
Cumulative impact of accounting changes —    —    —    —    —    776    —    776    —    776   
Dividends declared 3    3,338    —    —    (3,347)   —    —    (9)   —    (9)  
Share-based compensation —    —    1,530    —    3,354    —    —    3,354    —    3,354   
Tax withholding related to vesting of restricted stock units —    —    (416)   —    (517)   —    —    (517)   —    (517)  
Net loss —    —    —    —    —    (81,608)   —    (81,608)   —    (81,608)  
Employee retirement plan adjustments, net of tax —    —    —    —    —    —    (401)   (401)   —    (401)  
Foreign currency translation adjustments —    —    —    —    —    —    (3,062)   (3,062)   —    (3,062)  
Net changes in unrealized losses on cash flow hedges, net of tax —    —    —    —    —    —    (1,609)   (1,609)   —    (1,609)  
Balance at December 31, 2019 44    $ 43,950    28,509    $ 3    $ 155,023    $ (261,192)   $ (28,643)   $ (90,859)   $ —    $ (90,859)  
The accompanying notes are an integral part of these consolidated financial statements.


66


Jason Industries, Inc.
Consolidated Statements of Cash Flows
(In thousands, except share and per share amounts)
Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
Includes cash flow activities from both continuing and discontinued operations
Cash flows from operating activities
Net loss $ (81,608)   $ (13,160)   $ (4,473)  
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation 24,606    28,356    26,260   
Amortization of intangible assets 10,855    14,248    12,674   
Amortization of deferred financing costs and debt discount 2,994    2,937    2,943   
Non-cash operating lease expense 8,024    —    —   
Non-cash impairment charges 20,597    —    —   
Equity income (316)   (1,024)   (952)  
Deferred income taxes (9,013)   (7,995)   (17,345)  
Loss (gain) on disposals of property, plant and equipment - net 448    (1,142)   (759)  
Gain on extinguishment of debt    —    —    (2,201)  
Non-cash impact of business divestitures and dissolutions 12,858    —    7,798   
Dividends from joint ventures 728    833    —   
Share-based compensation 3,354    2,709    1,119   
Net increase (decrease) in cash, net of acquisitions and dispositions, due to changes in:
Accounts receivable 7,239    7,454    6,997   
Inventories 4,109    5,750    3,804   
Other current assets (648)   2,819    1,464   
Accounts payable (11,375)   (6,015)   (7,897)  
Accrued compensation and employee benefits (4,409)   (2,710)   5,946   
Accrued interest (9)   (187)   98   
Accrued income taxes 312    (1,221)   473   
Operating lease liabilities, net (7,221)   —    —   
Other - net (2,325)   (1,895)   (5,858)  
Total adjustments 60,808    42,917    34,564   
Net cash (used in) provided by operating activities (20,800)   29,757    30,091   
Cash flows from investing activities
Proceeds from disposals of property, plant and equipment 2,117    3,531    8,809   
Payments for property, plant and equipment (11,785)   (13,753)   (15,873)  
Proceeds from divestitures, net of cash divested and liabilities assumed by buyer 79,796    —    7,883   
Acquisitions of business, net of cash acquired (11,000)   —    —   
Acquisitions of patents (42)   (152)   (104)  
Net cash provided by (used in) investing activities 59,086    (10,374)   715   
Cash flows from financing activities
Payments of deferred financing costs (331)   (649)   —   
Payments of First and Second Lien term loans (8,100)   (5,600)   (21,826)  
Proceeds from other long-term debt 4,645    3,387    8,596   
Payments of other long-term debt (6,362)   (7,076)   (10,816)  
Payments of finance lease obligation    (340)   —    —   
Value added tax (paid from) collected on building sale   (707)   694    —   
Other financing activities - net (627)   (22)   (232)  
Net cash used in financing activities (11,822)   (9,266)   (24,278)  
Effect of exchange rate changes on cash and cash equivalents (107)   (835)   1,498   
Net increase in cash and cash equivalents 26,357    9,282    8,026   
Cash and cash equivalents, beginning of period 58,169    48,887    40,861   
Cash and cash equivalents, end of period $ 84,526    $ 58,169    $ 48,887   
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest $ 30,121    $ 30,687    $ 30,242   
Income taxes, net of refunds $ 3,440    $ 6,480    $ 6,843   
Acquisition-related transaction costs used in operating activities $ 384    $ —    $ —   
Divestiture-related transaction costs used in operating activities $ 4,091    $ —    $ 932   
Non-cash lease activities:
Right-of-use operating assets obtained in exchange for operating lease obligations $ 3,341    $ —    $ —   
Right-of-use finance assets obtained in exchange for finance lease obligations $ 536    $ —    $ —   
Non-cash investing activities
Property, plant and equipment acquired through additional liabilities $ 618    $ 1,451    $ 1,179   
Non-cash financing activities:
Accretion of preferred stock dividends $ 2    $ 2    $ 6   
Non-cash preferred stock created from dividends declared $ 3    $ 3    $ 4   
Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc. $ —    $ —    $ 62   
Exchange of preferred stock for common stock of Jason Industries, Inc. $ —    $ 12,136    $ —   
Debt and pension liability assumed by buyer with divestitures $ 2,206    $ —    $ 2,950   
The accompanying notes are an integral part of these consolidated financial statements.


67

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

1. Summary of Significant Accounting Policies
Description of business: Jason Industries, Inc. and its subsidiaries (collectively, the “Company”) is a global industrial manufacturing company with significant market share positions in each of its two segments: industrial and engineered components. The Company provides critical components and manufacturing solutions to customers across a wide range of end markets, industries and geographies through its global network of 23 manufacturing facilities and nine sales, administrative and/or warehouse facilities throughout the United States and 13 foreign countries. 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 of the evaluation, the Company reduced the number of operating and reportable segments from four to three: industrial, engineered components and fiber solutions. The prior year segment disclosures have been updated to conform with current year presentation.
On August 12, 2019, we announced that our Board of Directors had engaged financial advisors to advise us as we conduct a process to evaluate strategic alternatives. This evaluation includes, but is not limited to, a potential sale, strategic merger, consolidation or business combination, acquisition, recapitalization, financing consisting of equity and/or debt securities, and/or a restructuring of the Company’s debt, focused on maximizing the value of the Company for its stakeholders.
Discontinued operations: The Company presents discontinued operations when there is a disposal of a component group that is considered by the Company to be a strategic shift that has a major effect on operations and financial results. The results of operations for discontinued operations are aggregated into a single line in the consolidated statements of operations for all periods presented.
During 2019, the Company determined that both the North American fiber solutions business and the Metalex business within the engineered components segment met the criteria to be classified as discontinued operations. As a result, the Company’s prior period results of operations, financial position and notes to the financial statements have been recast to be presented on a continuing operations basis, except where noted. The assets and liabilities of the North American fiber solutions business and the Metalex business have been presented as held for sale for the periods prior to the sale. On August 30, 2019 and on December 13, 2019, the Company completed the divestitures of our North American fiber solutions business and our Metalex business, respectively. Previously, on August 30, 2017, the Company completed the sale of the European fiber solutions business, which did not meet the criteria for discontinued operations presentation at the time of the divestiture. As such, the results of the European fiber solutions business are presented within continuing operations through the date of the sale.
Basis of presentation: The Company’s fiscal year ends on December 31. Throughout the year, the Company reports its results using a fiscal calendar whereby each three month quarterly reporting period is approximately thirteen weeks in length 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 were 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.
Principles of consolidation: The consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of all wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated. Investments in partially owned affiliates are accounted for using the equity method when the Company’s interest is between 20% and 50% and the Company does not have a controlling interest, yet maintains significant influence.
Cash and cash equivalents: The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents.
Accounts receivable: The Company evaluates collectability of its receivables and establishes the allowance for doubtful accounts based on a combination of specific customer circumstances and historical write-off experience. Credit is extended to customers based upon an evaluation of their financial position. Generally, advance payment is not required. Credit losses are provided for in the consolidated financial statements and consistently have been within management’s expectations.
Inventories: Inventories are comprised of material, direct labor and manufacturing overhead, and are valued at the lower of cost or net realizable value and adjusted for the value of inventory that is estimated to be excess, obsolete or otherwise

69

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
unmarketable. The estimation of excess, obsolete and unmarketable inventory is based on a variety of factors, including material or product age, estimated usage and estimated market demand. The first-in, first-out (“FIFO”) method is used to determine cost for all of the Company’s inventories.
Property, plant and equipment: Property, plant and equipment are stated at cost. Depreciation generally occurs using the straight-line method over 2 to 40 years for buildings and improvements and 2 to 10 years for machinery and equipment.
Leasehold improvements are amortized over the lesser of the term of the respective leases and the useful life of the related improvement using the straight-line method. The Company uses accelerated depreciation methods for income tax purposes. Expenditures which substantially increase value or extend useful lives are capitalized. Expenditures for maintenance and repairs are charged to operations as incurred. The Company records gains and losses on the disposition or retirement of property, plant and equipment based on the net book value and any proceeds received.
Long-lived assets: Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable based upon an estimate of the related future undiscounted cash flows. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset as compared to its carrying value. Long-lived assets to be disposed of by sale are reported at the lower of carrying amount or fair value less cost to sell. The Company conducts its long-lived asset impairment reviews at the lowest level in which identifiable cash flows are largely independent of cash flows of other assets and liabilities.
Amortization is recorded for other intangible assets with determinable lives. Patents, customer relationships, and trademarks and other intangible assets are amortized on a straight-line basis over their estimated useful lives of 7 years, 10 to 15 years, and 1 to 18 years, respectively.
Goodwill: Goodwill reflects the cost of an acquisition in excess of the aggregate fair value assigned to identifiable net assets acquired. Goodwill is assessed for impairment at least annually and as triggering events or indicators of potential impairment occur. The Company performs its annual impairment test in the fourth quarter of its fiscal year. Goodwill has been assigned to reporting units for purposes of impairment testing based upon the relative fair value of the asset to each reporting unit.
Impairment of goodwill is measured by comparing the fair value of a reporting unit to the carrying value of the reporting unit, including goodwill. The estimated fair value represents the amount at which a reporting unit could be bought or sold in a current transaction between willing parties on an arms-length basis. In estimating the fair value, the Company uses a discounted cash flow model, which is dependent on a number of assumptions including estimated future revenues and expenses, weighted average cost of capital, capital expenditures and other variables. The Company also uses a market approach, in which the fair values of comparable public companies and fair values based on recent comparable transactions (when available) are used in determining an estimated fair value for each reporting unit.
If the carrying amount of the reporting unit exceeds the estimated fair value of the reporting unit, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of the goodwill. See Note 8, “Goodwill and Other Intangible Assets” for further discussion regarding the results of the Company’s goodwill impairment testing.
Investments in partially-owned affiliates: The Company has investments in joint ventures located in Asia. These joint ventures are part of the industrial segment and are accounted for using the equity method of accounting. As of December 31, 2019 and 2018, the Company’s investment in these joint ventures was $5.8 million and $6.3 million, respectively, and is included in other assets-net in the consolidated balance sheets. Equity income is presented separately on the consolidated statements of operations.
Income taxes: The provision for income taxes includes federal, state, local and foreign taxes on income. Deferred taxes are recorded for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities, and net operating loss and credit carryforwards available to offset future taxable income. Future tax benefits are recognized to the extent that realization of those benefits is considered to be more likely than not. A valuation allowance is provided for net deferred tax assets when it is more likely than not that the Company will not realize the benefit of such net assets. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense.
Share-based payments: The Company recognizes expense related to share-based payment transactions in which it receives employee services in exchange for equity instruments of the Company that may be settled by the issuance of such equity instruments. Share-based compensation cost for restricted stock units (“RSUs”) is measured based on the closing fair market value of the Company’s common stock on the date of grant. The Company recognizes share-based compensation cost over the award’s requisite service period on a straight-line basis for time-based RSUs and on a graded basis for RSUs that are

70

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
contingent on the achievement of performance conditions. Forfeitures are recognized within compensation expense in the period the forfeitures are incurred. The Company recognizes a tax (provision)/benefit from share-based compensation (income)/expense in the consolidated statements of operations in the period the share-based compensation (income)/expense is incurred. See Note 12, “Share-Based Compensation” for further information regarding share-based compensation.
Fair value of financial instruments: Current accounting guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. It also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with the guidance, fair value measurements are classified under the following hierarchy:
•Level 1 — Quoted prices for identical instruments in active markets.
•Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.
•Level 3 — Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.
Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.
The carrying amounts within the accompanying consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments. The Company assessed the amounts recorded under revolving loans, if any, and long-term debt and determined that the fair value of total debt was approximately $297.3 million and $387.4 million as of December 31, 2019 and 2018, respectively. The Company considers the inputs related to these estimations to be Level 2 fair value measurements as they are primarily based on quoted prices for the Company’s Senior Secured Credit Facility.
The valuation of the Company’s derivative financial instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy and therefore the Company’s derivatives are classified within Level 2. See Note 9, “Debt and Hedging Instruments” for further information regarding derivatives held by the Company.
Employee Benefit Plans: The Company recognizes pension and post-retirement benefit income and expense and assets and obligations that are based on actuarial valuations using a December 31 measurement date and that include key assumptions regarding discount rates, expected returns on plan assets, retirement and mortality rates, future compensation increases, and health care cost trend rates. The Company reviews actuarial assumptions on an annual basis and makes modifications based on current rates and trends when appropriate. As required by GAAP, the effects of the modifications are recorded as a component of other comprehensive income and are amortized over future periods.
Derivative financial instruments: The Company recognizes all derivative financial instruments in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. Changes in the fair value of derivative financial instruments are either recognized periodically in income or in equity as a component of comprehensive income (loss) depending on whether the derivative financial instrument qualifies for hedge accounting, and if so, whether it qualifies as a fair value hedge or cash flow hedge. Generally, changes in fair values of derivatives accounted for as fair value hedges are recorded in income along with the portions of the changes in the fair values of the hedged items that relate to the hedged risks. Changes in fair values of derivatives accounted for as cash flow hedges, to the extent they are effective as hedges, are recorded in other comprehensive (loss) income, net of deferred income taxes. Changes in fair value of derivatives not qualifying as hedges are reported in income. Cash flows from derivatives that are accounted for as cash flow or fair value hedges are included in the consolidated statements of cash flows in the same category as the item being hedged. The Company’s policy is to enter into derivatives with creditworthy institutions and not to enter into such derivatives for speculative purposes. See Note 9, “Debt and Hedging Instruments” for further information regarding derivatives held by the Company.
Foreign currency translation: Assets and liabilities of the Company’s foreign subsidiaries, whose respective functional currencies are other than the U.S. dollar, are translated at year-end exchange rates while revenues and expenses are

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Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
translated at average exchange rates. Resultant gains and losses are reflected within accumulated other comprehensive loss within the accompanying consolidated statements of shareholders’ (deficit) equity.
Other comprehensive (loss) income: Other comprehensive (loss) income includes disclosure of financial information that historically has not been recognized in the calculation of net (loss) income. The Company’s other comprehensive (loss) income includes the change in unrecognized prior service costs on pension and other postretirement obligations, foreign currency translation, and fair value adjustments related to derivative instruments.
Pre-production costs related to long-term supply arrangements: The Company’s policy for engineering, research and development, and other design and development costs related to products that will be sold under long-term supply arrangements requires such costs to be expensed as incurred. Costs for molds, dies, and other tools used to manufacture products that will be sold under long-term supply arrangements are capitalized if the Company has title to the assets or when customer reimbursement is assured.
Revenue recognition: Net sales are recognized when control of a performance obligation is transferred to the customer in an amount that reflects the consideration expected to be received in exchange for the transferred good or service. The Company typically satisfies its performance obligations in contracts with customers upon shipment of the goods or delivery of the services. Amounts invoiced to customers related to shipping and handling are classified as net sales, while expenses for transportation of products to customers are recorded as a component of cost of goods sold on the consolidated statement of operations. Sales, value add, and other taxes collected concurrent with revenue-producing activities are excluded from net sales. As of the contract inception date, the expected time between the completion of the performance obligation and the payment from the customer is less than a year, and as such there are no significant financing components in the consideration recognized and disclosures around unsatisfied performance obligations have been omitted.
The Company estimates whether it will be subject to variable consideration under the terms of the contract and includes its estimate of variable consideration in the transaction price based on the expected value method when it is deemed probable of being realized based on historical experience and trends. Types of variable consideration may include rebates, discounts, and product returns, among others, which are recorded as a deduction to net sales at the time when control of a performance obligation is transferred to the customer.
The majority of the Company’s contracts are for the sale of goods that qualify as separate performance obligations that are distinct from other goods or services provided in the same contract. Transaction price inclusive of estimated variable consideration is allocated to separate performance obligations based on their relative standalone selling prices using observable inputs. When observable inputs are not available, the Company estimates standalone selling price using cost plus a reasonable margin approach. Contracts entered into with the same customer at or near the same time are combined into a single contract if they represent a single commercial objective, if payment of consideration in one contract is dependent on performance of the other contract, or if promises in different contracts constitute a single performance obligation. For the limited contracts with multiple performance obligations, the contract’s transaction price is allocated to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract.
Performance obligations are satisfied at a point in time or over time as work progresses. Revenue from products transferred to customers at a point in time accounted for more than 99% of net sales for the year ended December 31, 2019. The Company recognizes revenue over time for certain production parts in the industrial business that are highly customized with no alternative use and for which the Company has an enforceable right to payment with a reasonable margin under the terms of the contract based on the output method of goods produced. Revenue from products transferred to customers over time accounted for less than 1% of net sales for the year ended December 31, 2019.
The Company provides industry standard assurance-type warranties which ensure that the manufactured products comply with agreed upon specifications with the customers and do not represent a separate performance obligation with the customer. Warranty based accruals are established under Accounting Standards Codification (“ASC”) 460, “Guarantees”, based on an evaluation of historical warranty experience and management’s estimate of the level of future claims.
Insurance proceeds: The Company maintains property and business interruption insurance coverage to mitigate the risk of incremental costs and/or lost revenues or profit margins resulting from disruption of business activities, whether at our own facility or that of a supplier. The Company records the incremental costs associated with such events as incurred and the related insurance recovery proceeds when deemed probable and collectible in the case of claims for direct cost recovery and when earned and realizable in the case of claims for business interruption related to lost revenues or profit margins. The incremental costs incurred as well as any associated insurance recoveries for covered events are recorded within operating income in the consolidated statements of operations.

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Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
During 2018, the Company experienced a force majeure incident at a supplier in the engineered components segment that resulted in incremental costs to maintain production and lost revenues during the disruption period. As a result of this event, the Company received $2.2 million of insurance claims proceeds which were recorded as a component of cost of goods sold within the consolidated statement of operations.
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 one year to ten 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 right-of-use (“ROU”) asset and lease liability. Operating lease ROU assets and lease liabilities are recorded on the balance sheet on the date the Company takes possession of the leased assets 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 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.
Research and development costs: Research and development costs consist of engineering and development resources and are expensed as incurred. Such costs incurred in the development of new products or significant improvements to existing products were $4.8 million in the year ended December 31, 2019, $2.4 million in the year ended December 31, 2018, and $3.3 million in the year ended December 31, 2017.
Advertising costs: Advertising costs are charged to selling and administrative expenses as incurred and were $1.1 million in the year ended December 31, 2019, $1.4 million in the year ended December 31, 2018, and $1.6 million in the year ended December 31, 2017.
Use of estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Concentration risks: The Company’s operations are geographically dispersed and it has a diverse customer base. Management believes bad debt losses resulting from default by a single customer, or defaults by customers in any depressed region or business sector, would not have a material effect on the Company’s financial position, results of operations or cash flows.
During the years ended December 31, 2019, 2018, and 2017 the Company had no individual customers at or above 10% of consolidated net sales. At December 31, 2019 and 2018, no single customer accounted for greater than 10% of the Company’s consolidated accounts receivable balance.
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 above for discussion of the Company’s finance and operating lease obligation policy and Note 10, “Leases” for further discussion regarding the adoption of this standard effective January 1, 2019.
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

73

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
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 a material impact on the Company’s consolidated financial statements or the related disclosures within the accompanying notes.
Accounting standards to be adopted in future fiscal periods
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 requires the use of an "expected loss" model on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. For trade receivables, loans, and held-to-maturity debt securities, entities will be required to estimate lifetime expected credit losses. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction to the carrying value of the asset. The standard is effective for interim and annual reporting periods beginning after December 15, 2022, with early adoption permitted. The Company is currently assessing the impact that ASU 2016-13 will have on the consolidated financial statements and related disclosures, as well as the planned timing of adoption.
In August 2018, the FASB issued ASU 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans” (“ASU 2018-14”). ASU 2018-14 modifies certain disclosure requirements for pension and other postretirement plans, such as eliminating requirements to disclose the amounts in accumulated other comprehensive loss expected to be recognized as a component of net periodic benefit cost over the next fiscal year and the impact that a 1% increase or decrease in the medical trend rate would have on the accumulated postretirement benefit obligation. The standard is effective for interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted. As the scope of ASU 2018-14 is limited to only financial disclosure requirements, the standard will not have an impact on the Company’s 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 consolidated financial statements, as well as the planned timing of adoption.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and improves application of and simplifies other areas of Topic 740 by clarifying and amending existing guidance. The amendment is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company is currently assessing the impact that these amendments will have on the consolidated financial statements and related disclosures, as well as the planned timing of adoption.

2. Discontinued Operations and Divestitures
North American Fiber Solutions Sale
On August 30, 2019, the Company completed the sale of its North American fiber solutions business to ACR II Motus Integrated Technologies Cooperatief U.A., Motus Pivot MX Holding B.V, Motus Pivot Holding B.V. and Motus Pivot Inc. (collectively, the “Motus Group”), pursuant to an agreement dated as of August 11, 2019, by and between two subsidiaries of the Company and the Motus Group (the “Fiber Sale Agreement”), for a purchase price of $85.0 million, subject to certain adjustments as set forth in the Fiber Sale Agreement. The purchase price was reduced by $5.0 million due to the outcome of certain commercial activities for which the measurement period ended on October 31, 2019. The purchase price is also subject to a net working capital adjustment as defined by the Sale Agreement, which is currently in dispute between the Company and the Motus Group. The Motus Group has proposed a working capital adjustment that results in a further purchase price reduction of $5.2 million. The Company believes this claim lacks merit and a loss for the amount subject to dispute is not probable as of December 31, 2019.

74

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
The following table summarizes the cash received from the sale of the North American fiber solutions business before transaction costs, income taxes and certain retained liabilities:
Base purchase price $ 85,000   
Less: contingent purchase price not earned (5,000)
Less: debt and pension liabilities assumed by the Motus Group (2,206)
Less: income tax allocation due to buyer (560)
Plus: preliminary working capital surplus 5
Plus: excess cash at closing 1,394
Adjusted purchase price 78,633
Less: cash divested (3,894)
Less: consideration held in escrow and closing balance sheet adjustments 282
Sale proceeds from divestiture, net of cash divested and liabilities assumed by buyer $ 75,021   
Total divestiture-related costs for the sale of the North American fiber solutions business were $5.3 million, of which $0.5 million is non-cash share-based compensation expense. Of the remaining cash transaction expenses, $3.9 million had been paid as of December 31, 2019. Of the divestiture-related costs, $3.0 million were deemed to be direct costs of the sale and were included as a component of the loss on divestiture within net loss from discontinued operations. The remaining costs related to retention agreements with key personnel and other professional services related costs which are included within selling and administrative expenses and termination benefits with the former general manager of the business which are included within restructuring, both within net loss from discontinued operations.
Metalex Sale
On December 13, 2019, the Company completed the sale of its Metalex business to Morton Global, LLC and MHIG LLC (collectively, “Morton Global”), pursuant to an agreement dated as of December 13, 2019, by and between two subsidiaries of the Company and Morton Global (the “Metalex Sale Agreement”), for a purchase price of $5.0 million, subject to certain adjustments as set forth in the Metalex Sale Agreement. The final purchase price is subject to a net working capital adjustment to be settled within 90 days of the closing date, which is currently in dispute between the Company and Morton Global. The Company believes this claim lacks merit and a loss for the amount subject to dispute is not probable as of December 31, 2019. Pursuant to the Metalex Sale Agreement, Morton Global is also required to cause the Company to be released from certain real property leases for which the Company is a guarantor within 90 days following the sale closing, which has not yet occurred.
The following table summarizes the cash received from the sale of the Metalex business before transaction costs, income taxes and certain retained liabilities:
Base purchase price $ 5,000   
Plus: preliminary working capital surplus 570
Plus: cash at closing 229
Plus: income tax allocation due from buyer 139
Adjusted purchase price 5,938
Less: cash divested (229)  
Less: consideration held in escrow and closing balance sheet adjustments (934)  
Proceeds from divestiture, net of cash divested $ 4,775   
Total divestiture-related costs for the sale of the Metalex business were $0.8 million, of which $0.1 million was non-cash share-based compensation expense. Of the remaining cash transaction expenses, $0.2 million had been paid as of December 31, 2019. Of the divestiture-related costs, $0.5 million were deemed to be direct costs of the sale and were included as a component of the loss on divestiture within net loss from discontinued operations. The remaining costs related to other professional services related costs which are included within selling and administrative expenses within net loss from discontinued operations.
The divestitures reduced the Company’s automotive and rail market exposures, increased its liquidity and simplified its portfolio of businesses. In addition, the simplified portfolio will allow the Company to invest in and focus on margin expansion and growth in the industrial and engineered components segments.
The Company determined that both the North American fiber solutions and Metalex businesses met the criteria to be classified as discontinued operations. As a result, the historical results of the North American fiber solutions and Metalex

75

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
businesses are reflected in the Company’s consolidated financial statements as discontinued operations and assets and liabilities of the North American Fiber Solutions and Metalex businesses have been retrospectively reclassified as assets and liabilities held for sale.
The following table summarizes the results of the North American fiber solutions business and the Metalex business and other costs associated with the divestitures reclassified as discontinued operations for the years ended December 31, 2019, 2018 and 2017.
North American Fiber Solutions Metalex
For the Years Ended For the Years Ended
December 31, 2019 December 31, 2018 December 31, 2017 December 31, 2019 December 31, 2018 December 31, 2017
Net sales $ 90,516    $ 161,961    $ 183,900    $ 42,801    $ 83,028    $ 82,621   
Cost of goods sold 77,495    136,461    151,596    44,945    72,355    71,096   
Gross profit (loss) 13,021    25,500    32,304    (2,144)   10,673    11,525   
Selling and administrative expenses 10,934    16,640    16,717    7,731    11,078    9,526   
Impairment charges —    —    —    20,597    —    —   
(Gain) loss on disposals of property, plant and equipment - net (4)   72    17    150    104    (455)  
Restructuring 1,002    2,659    457    445    922    1,334   
Operating income (loss) 1,089    6,129    15,113    (31,067)   (1,431)   1,120   
Interest expense-net (47)   (94)   (76)   (78)   (66)   (61)  
Loss on divestiture (3,060)   —    —    (13,783)   —    —   
Other income (loss) - net (10)   (40)   —    (108)   (64)   63   
(Loss) income before income taxes (2,028)   5,995    15,037    (45,036)   (1,561)   1,122   
Tax provision (benefit) 1,337    3,453    4,927    (10,224)   (512)   303   
Net (loss) income from discontinued operations $ (3,365)   $ 2,542    $ 10,110    $ (34,812)   $ (1,049)   $ 819   

76

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
The following table summarizes the major classes of assets and liabilities of the North American fiber solutions business and the Metalex business classified as held for sale as of December 31, 2018.
North American Fiber Solutions Metalex Total
Assets
Current assets
Cash and cash equivalents $ 11,712    $ (241)   $ 11,471   
Accounts receivable - net 19,234    5,112    24,346   
Inventories - net 8,120    6,152    14,272   
Other current assets 6,615    1,467    8,082   
Total current assets held for sale 45,681    12,490    58,171   
Property, plant and equipment - net 43,960    15,743    59,703   
Other intangible assets - net 20,083    26,746    46,829   
Other assets - net 316    392    708   
Total noncurrent assets held for sale 64,359    42,881    107,240   
Total assets held for sale $ 110,040    $ 55,371    $ 165,411   
Liabilities
Current liabilities
Current portion of long-term debt $ 857    $ —    $ 857   
Accounts payable 12,199    4,877    17,076   
Accrued compensation and employee benefits 2,087    411    2,498   
Other current liabilities 3,358    762    4,120   
Total current liabilities held for sale 18,501    6,050    24,551   
Long-term debt 1,143    —    1,143   
Deferred income taxes 112    —    112   
Other long-term liabilities 1,022    1,090    2,112   
Total noncurrent liabilities held for sale 2,277    1,090    3,367   
Total liabilities held for sale $ 20,778    $ 7,140    $ 27,918   
The current portion of long-term debt and long-term debt which were assumed by the Motus Group with the North American fiber solutions business divestiture relates to foreign debt previously held in Mexico.
The following table summarizes significant cash flow disclosures for the North American fiber solutions business and the Metalex business for the years ended December 31, 2019, 2018 and 2017.
For the Years Ended
December 31, 2019 December 31, 2018 December 31, 2017
Depreciation $ 9,798    $ 14,035    $ 11,721   
Amortization of intangible assets $ 3,428    $ 7,432    $ 5,627   
Non-cash operating lease expense $ 2,964    $ —    $ —   
Non-cash impairment charges $ 20,597    $ —    $ —   
Share-based compensation $ 986    $ 414    $ 140   
Payments for property, plant and equipment $ (2,190)   $ (5,346)   $ (7,512)  
Non-cash impact of business divestitures and dissolutions $ 13,716    $ —    $ —   
Debt and pension liability assumed by buyer with divestiture $ 2,206    $ —    $ —   
Acoustics Europe Divestiture
On August 30, 2017, the Company completed the divestiture of its European operations within the fiber solutions segment located in Germany (“Acoustics Europe”) for a net purchase price of $8.1 million, which included cash of $0.2 million, long-term debt assumed by the buyer of $3.0 million and other purchase price adjustments. The divestiture resulted in an $8.7 million pre-tax loss.

77

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
Acoustics Europe had net sales of $22.9 million for the eight months ended August 30, 2017, the date of closing. The Company determined at the time of the sale that the divestiture did not represent a strategic shift that would have a major effect on the Company’s operations and financial results and as such, has continued to report the results of Acoustics Europe within continuing operations in the consolidated statements of operations.

3. Acquisition
On April 1, 2019, the Company acquired all of the outstanding shares of Schaffner Manufacturing Company, Inc. (“Schaffner”). Schaffner is a North American manufacturer of high-quality polishing and finishing products. These products are now being manufactured and distributed by the industrial segment. Through the acquisition of Schaffner, the Company expanded its polishing product line offerings within North America. Upon finalization of working capital adjustments and other settlement items, the purchase price was $11.0 million, net of $0.2 million of cash acquired, all of which had been paid as of December 31, 2019. The related purchase agreement includes customary representations, warranties and covenants between the named parties.
The acquisition was accounted for as a business combination. The operating results and cash flows of Schaffner are included in the Company’s consolidated financial statements from April 1, 2019, the date of the acquisition.
The Company has recorded the allocation of the purchase price for tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the April 1, 2019 acquisition date. The purchase price allocation is as follows:
Purchase Price Allocation   
Accounts receivable $ 2,415   
Inventories 3,334   
Other current assets 18   
Property, plant and equipment 2,299   
Right-of-use operating lease assets 222   
Goodwill 2,078   
Other intangible assets 2,670   
Current liabilities (1,911)  
Other long-term liabilities (125)  
Total purchase price $ 11,000   
The purchase price allocation resulted in goodwill of $2.1 million in the industrial segment, all of which is deductible for tax purposes. Goodwill generated from Schaffner is primarily attributable to expected synergies from leveraging the industrial segment’s global distribution and sales network and cross-selling of Schaffner’s product portfolio to the industrial segment’s customer base. The allocation of the purchase price is based on the valuations performed to determine the fair value of the net assets as of the acquisition date. The amounts allocated to goodwill and intangible assets reflect the final valuations.
The values allocated to other intangible assets - net and the weighted average useful lives are as follows:
Gross Carrying Amount Weighted Average Useful Life (years)
Customer relationships $ 1,750    10
Trademarks 400    1
Non-compete agreements 520    5
$ 2,670   
The Company recognized $0.4 million of acquisition-related costs that were expensed in the year ended December 31, 2019. These costs are included as selling and administrative expenses in the consolidated statements of operations.
During the year ended December 31, 2019, $14.4 million of net sales from Schaffner were included in the Company’s consolidated statements of operations. Pro forma historical results of operations related to the acquisition of Schaffner have not been presented as they are not material to the Company’s consolidated statements of operations.


78

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
4. Net Sales
Adoption of ASU 2014-09, “Revenue From Contracts With Customers”
On January 1, 2018, the Company adopted ASU 2014-09, “Revenue From Contracts with Customers” and all related amendments using the modified retrospective method. Subsequent to the date of adoption, the Company recognizes revenue in accordance with ASC 606, “Revenue From Contracts With Customers.” Prior to January 1, 2018, the Company recognized revenue in accordance with ASC 605, “Revenue Recognition” and prior period results continue to be reported under the accounting standards in effect for those periods. The cumulative impact of adopting the new standard on the consolidated financial statements was recorded as a decrease to the opening retained deficit of $0.1 million as of January 1, 2018. Refer to Note 1, “Summary of Significant Accounting Policies” for a description of the Company’s revenue recognition accounting policy.
Revenue Disaggregation
The industrial segment operates principally as a provider of industrial brushes, polishing buffs and compounds, abrasives and roller technology products that are used in a broad range of industrial and infrastructure applications. The Company typically sells products within this business under purchase orders through both direct to customer and distribution sales channels. The Company generally transfers control and recognizes net sales when the product is shipped to the customer. Within the industrial segment, there are certain custom products for customers for which the Company recognizes net sales over time. For these sales, the Company has an enforceable right to payment with a reasonable margin under the terms of the agreement. Revenue from products transferred to customers over time accounted for approximately 1% of industrial net sales for the years ended December 31, 2019 and 2018.
The engineered components segment operates principally as a supplier to Original Equipment Manufacturers (“OEM”) within the lawn and turf care, agriculture, construction, material handling, power sports, rail and general industrial markets. The Company sells products within this business under both purchase orders and contracts for custom products primarily through the direct to customer sales channel. The Company transfers control and recognizes net sales at a point in time upon shipment to the customer for these contracts.
The Company disaggregates net sales by geography based on the country of origin of the final sale with the external customer. In certain cases the products may be manufactured in other countries at facilities within the Company’s global network. The following table summarizes net sales disaggregated by geography and reportable segment:
For the Year Ended December 31, 2019
Industrial Engineered Components Total
United States $ 77,529    $ 136,072    $ 213,601   
Germany 76,273    —    76,273   
Rest of Europe 34,535    —    34,535   
Mexico 9,074    11    9,085   
Other 4,106    297    4,403   
Total $ 201,517    $ 136,380    $ 337,897   
For the Year Ended December 31, 2018
Industrial Engineered Components Total
United States $ 68,384    $ 154,223    $ 222,607   
Germany 89,247    —    89,247   
Rest of Europe 37,317    6,099    43,416   
Mexico 8,762    —    8,762   
Other 3,927    —    3,927   
Total $ 207,637    $ 160,322    $ 367,959   
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

79

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
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:
For the Year Ended December 31, 2019
Industrial Engineered Components Total
Direct $ 108,918    $ 131,802    $ 240,720   
Distribution 92,599    4,578    97,177   
Total $ 201,517    $ 136,380    $ 337,897   
For the Year Ended December 31, 2018
Industrial Engineered Components Total
Direct $ 112,047    $ 156,311    $ 268,358   
Distribution 95,590    4,011    99,601   
Total $ 207,637    $ 160,322    $ 367,959   


5. Restructuring Costs
On March 1, 2016, as part of a strategic review of organizational structure and operations, the Company announced a global cost reduction and restructuring program (the “2016 program”). The 2016 program, as used herein, refers to costs related to various restructuring activities across business segments. This includes entering into severance and termination agreements with employees and footprint rationalization activities, including exit and relocation costs for the consolidation and closure of plant facilities and lease termination costs. These activities were ongoing throughout the years ended December 31, 2017, 2018 and the six months ended June 28, 2019 and were considered substantially complete as of June 28, 2019. As the 2016 program was deemed to be complete for identification of new actions as of December 31, 2018, all costs incurred during 2019 under the program related to completion of actions previously identified prior to closure of the program.
In 2019, restructuring costs primarily include activities which align with our strategic initiatives of continued footprint rationalization and margin expansion. Such activities are typically identified by management as part of the annual strategic planning process, with priority assigned to those that maximize the financial return for the Company. In the first quarter of 2019, additional restructuring activities resulting in one-time employee termination benefits were identified upon a review of the Company’s organizational structure resulting in certain strategic leadership changes as well as in response to end market decline in the industrial segment. Additionally, with the acquisition of Schaffner Manufacturing Company, Inc. on April 1, 2019, further footprint rationalization activities were identified during the due diligence process which were executed upon throughout the remainder of 2019. 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 consolidated statements of operations.

80

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
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 year ended December 31, 2019 primarily include charges related to the closure of a U.K. plant within the engineered components segment. The other costs incurred under the 2016 program for the year ended December 31, 2018 primarily include charges related to the closure of the U.K. plant within the engineered components segment, partially offset by a reduction in expense as a result of the statute of limitations expiring on unasserted employment matter claims in Brazil within the industrial segment. The other costs incurred under the 2016 program for the year ended December 31, 2017 primarily include charges related to the exit costs for the wind down of the industrial segment’s facility in Brazil and the consolidation of two U.S. plants within the industrial segment. The 2016 Program is considered complete and no additional costs are expected to be incurred as part of the program.
2016 Program Industrial Engineered Components Corporate Total
Restructuring charges - year ended December 31, 2019:
Severance costs $ (35)   $ 31    $ 164    $ 160   
Lease termination costs (1)
—    —    —    —   
Other costs 40    1,356    —    1,396   
Total $ 5    $ 1,387    $ 164    $ 1,556   
Restructuring charges - year ended December 31, 2018:
Severance costs $ 314    $ 235    $ —    $ 549   
Lease termination costs (1)
(4)   —    —    (4)  
Other costs 165    167    —    332   
Total $ 475    $ 402    $ —    $ 877   
Restructuring charges - year ended December 31, 2017:
Severance costs $ 1,178    $ (17)   $ (9)   $ 1,152   
Lease termination costs (1)
88    —    —    88   
Other costs 1,235    —    —    1,235   
Total $ 2,501    $ (17)   $ (9)   $ 2,475   
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 completion in June 2019.
Industrial Engineered Components Corporate Total
Cumulative restructuring charges - 2016 Program:
Severance costs $ 4,744    $ 325    $ 752    $ 5,821   
Lease termination costs (1)
428    —    —    428   
Other costs 2,443    1,523    —    3,966   
Total $ 7,615    $ 1,848    $ 752    $ 10,215   


81

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
The following table represents the restructuring liabilities for the 2016 program:
Severance
costs
Lease
termination
costs (1)
Other costs Total
Balance - December 31, 2017 $ 901    $ 76    $ 763    $ 1,740   
Current period restructuring charges 549    (4)   332    877   
Cash payments (954)   (70)   (1,031)   (2,055)  
Foreign currency impact (39)   (2)   (40)   (81)  
Balance - December 31, 2018 $ 457    $ —    $ 24    $ 481   
Current period restructuring charges 160    —    1,396    1,556   
Cash payments (615)   —    (1,416)   (2,031)  
Foreign currency impact (2)   —    (4)   (6)  
Balance - December 31, 2019 $ —    $ —    $ —    $ —   
(1) Commencing on January 1, 2019, the Company recognizes lease termination costs in accordance with ASC 842 which addresses termination costs related to both finance 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 December 31, 2018, the restructuring liabilities related to the 2016 program severance costs were classified as accrued compensation and employee benefits and the other costs were classified as other current liabilities on the consolidated balance sheets.
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 in the future. During the year ended December 31, 2019, other costs included costs to consolidate a Schaffner facility in the industrial segment and costs to vacate a facility in the engineered components segment.
Other Restructuring Actions Industrial Engineered Components Corporate Total
Restructuring charges - year ended December 31, 2019:   
Severance costs $ 1,550    $ 31    $ (2)   $ 1,579   
Other costs 446    373    —    819   
Total $ 1,996    $ 404    $ (2)   $ 2,398   
The following table represents the restructuring liabilities for other restructuring actions:
Severance
costs 		Other costs Total
Balance - December 31, 2018 $ —    $ —    $ —   
Current period restructuring charges 1,579    819    2,398   
Cash payments (858)   (775)   (1,633)  
Foreign currency translation adjustments (4)   —    (4)  
Balance - December 31, 2019 $ 717    $ 44    $ 761   
At December 31, 2019, the restructuring liabilities related to other restructuring severance costs were classified as accrued compensation and employee benefits and the other costs were classified as other current liabilities on the consolidated balance sheets.


82

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
6. Inventories
Inventories at December 31, 2019 and December 31, 2018 consisted of the following:
December 31, 2019 December 31, 2018
Raw material $ 23,533    $ 24,315   
Work-in-process 1,864    1,918   
Finished goods 24,546    23,242   
Total inventories $ 49,943    $ 49,475   


7. Property, Plant and Equipment
Property, plant and equipment at December 31, 2019 and December 31, 2018 consisted of the following:
December 31, 2019 December 31, 2018
Right-of-use finance lease assets (1)
$ 506    $ —   
Land and improvements 5,407    5,457   
Buildings and improvements 27,600    26,254   
Machinery and equipment 108,474    101,492   
Construction-in-progress 4,214    3,802   
146,201    137,005   
Less: Accumulated depreciation (75,925)   (61,839)  
Property, plant and equipment, net $ 70,276    $ 75,166   
(1) Commencing on January 1, 2019, the Company recognizes right-of-use finance lease assets in accordance with ASC 842. Prior to January 1, 2019, the Company recognized such assets in accordance with ASC 840. As such, the assets were recorded in buildings and improvements and machinery and equipment based on the asset’s classification. Prior period results continue to be reported under the accounting standards in effect for those periods.
For the year ended December 31, 2018, the Company recorded a $1.3 million gain on disposal of property, plant and equipment - net for the sale of a building related to the closure of the engineered components segment’s U.K. facility. In connection with the sale, the Company collected $0.7 million of value-added tax which was remitted to the relevant tax authorities in the first quarter of 2019 and is included within cash flows used in financing activities within the consolidated statement of cash flows.
Property, plant and equipment, net are evaluated for potential impairment whenever events or circumstances indicate that the carrying value may not be recoverable. There were no impairment charges recorded in continuing operations related to property, plant and equipment, net during the years ended December 31, 2019, 2018 and 2017. Depreciation of property, plant and equipment, net from continuing operations was $14.8 million, $14.3 million, and $14.5 million for the years ended December 31, 2019, 2018 and 2017, respectively.

8. Goodwill and Other Intangible Assets
Goodwill
Changes in the carrying amount of goodwill, all of which is within the Company’s industrial segment, were as follows:
Balance as of December 31, 2017 $ 45,142   
Foreign currency impact (1,077)  
Balance as of December 31, 2018 $ 44,065   
Acquisitions (1)
2,078   
Foreign currency impact (459)  
Balance as of December 31, 2019 $ 45,684   
(1) Refer to Note 3, “Acquisition” for further discussion on the acquisition completed in the second quarter of 2019.

83

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
At December 31, 2019 and December 31, 2018, accumulated goodwill impairment losses from continuing operations were $59.1 million, primarily due to $58.8 million related to the Milsco reporting unit.
Fiscal 2019, 2018 and 2017 Impairment Assessments
The Company performed its annual goodwill impairment tests in the fourth quarters of 2019, 2018 and 2017 and determined that the fair value of the industrial reporting unit, the only reporting unit with a recorded goodwill balance, exceeded the carrying value of the reporting unit by over 15% in each year. In connection with the goodwill impairment test, the Company engaged a third-party valuation firm to assist management with determining the fair value estimate for the reporting unit. The fair value of the reporting unit is determined using a weighted average of an income approach primarily based on the Company’s three year strategic plan, a market approach based on implied valuation multiples of public company peer groups for the reporting unit and a market approach based on recent comparable transactions (when available). Each approach was generally deemed equally relevant in determining reporting unit enterprise value, and as a result, weightings of 35 percent, 30 percent and 35 percent, respectively, were used for each. This fair value determination was categorized as Level 3 in the fair value hierarchy.
In connection with obtaining an independent third-party valuation, management provided certain information and assumptions that were utilized in the fair value calculation. Significant assumptions used in determining reporting unit fair value include forecasted cash flows, revenue growth rates, adjusted EBITDA margins, weighted average cost of capital (discount rate), assumed tax treatment of a future sale of the reporting unit, terminal growth rates, capital expenditures, sales and EBITDA multiples used in the market approach, and the weighting of the income and market approaches. A change in any of these assumptions, individually or in the aggregate, or future financial performance that is below management expectations may result in the carrying value of this reporting unit exceeding its fair value, and goodwill and amortizable intangible assets could be impaired.
Other Intangible Assets
The Company’s other amortizable intangible assets - net consisted of the following:
  December 31, 2019 December 31, 2018
Gross
Carrying
Amount 		Accumulated
Amortization 		Net Gross
Carrying
Amount 		Accumulated
Amortization 		Net
Patents $ 2,075    $ (1,368)   $ 707    $ 2,038    $ (1,018)   $ 1,020   
Customer relationships 62,490    (20,205)   42,285    61,075    (15,922)   45,153   
Trademarks and other intangibles 32,833    (11,235)   21,598    32,124    (8,597)   23,527   
Total amortized other intangible assets $ 97,398    $ (32,808)   $ 64,590    $ 95,237    $ (25,537)   $ 69,700   
Other amortizable intangible assets are evaluated for potential impairment whenever events or circumstances indicate that the carrying value may not be recoverable. There were no impairment charges recorded in continuing operations related to tangible or intangible assets during 2019, 2018 and 2017.
The approximate weighted average remaining useful lives of the Company’s intangible assets at December 31, 2019 are as follows: patents - 5.9 years; customer relationships - 9.2 years; and trademarks and other intangibles - 8.8 years.
Amortization of intangible assets from continuing operations was $7.4 million, $6.8 million, and $7.0 million for the years ended December 31, 2019, 2018 and 2017, respectively. The Company anticipates the annual amortization for each of the next five years and in aggregate thereafter to be the following:
2020 $ 7,765   
2021 7,523   
2022 7,350   
2023 7,341   
2024 6,779   
Thereafter 27,832   
$ 64,590   



84

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
9. Debt and Hedging Instruments
The Company’s debt consisted of the following:
December 31, 2019 December 31, 2018
First Lien Term Loans $ 284,440    $ 292,540   
Second Lien Term Loans 89,887    89,887   
Foreign debt 13,929    15,469   
Finance lease obligations and other debt (1)
755    613   
Total gross debt 389,011    398,509   
Debt discount on Term Loans (1,739)   (2,669)  
Deferred issuance costs on Term Loans (2,522)   (4,052)  
Total debt 384,750    391,788   
Less: Current portion (5,800)   (5,687)  
Total long-term debt $ 378,950    $ 386,101   
(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 10, “Leases” for further information.
Future annual maturities of long-term debt outstanding at December 31, 2019 are as follows:
2020 $ 5,800   
2021 284,051   
2022 92,175   
2023 2,270   
2024 4,013   
Thereafter 702   
Total future annual maturities of long term debt outstanding 389,011   
Less: Debt discounts on Term Loans (1,739)  
Less: Deferred issuance costs on Term Loans (2,522)  
Total debt $ 384,750   
Senior Secured Credit Facilities
As of December 31, 2019, the Company’s U.S. credit facilities (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 $284.4 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 $25.5 million (“Revolving Credit Facility”) maturing December 31, 2020. During 2019, the Company amended its Revolving Credit Facility to extend the maturity date to December 31, 2020. The amendment reduced the borrowing capacity from $30.0 million to $25.5 million. In connection with the amendment, the Company paid deferred financing costs of $0.3 million which have been recorded within other assets - net within the consolidated balance sheets. The unamortized amount of debt issuance costs as of December 31, 2019 were $2.5 million related to the First Lien Term Loans and Second Lien Term Loans and $0.5 million related to the Revolving Credit Facility. Debt issuance costs related to the First Lien Term Loans and Second Lien Term Loans are recorded in total long-term debt, and debt issuance costs related to the Revolving Credit Facility are recorded in other assets - net. These costs are amortized into interest expense over the life of the respective borrowings on a straight-line basis.
The principal amount of the First Lien Term Loans amortizes in quarterly installments 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 London Interbank Offered Rate (“LIBOR”),

85

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
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 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. At December 31, 2019, the interest rates on the outstanding balances of the First Lien Term Loans and Second Lien Term Loans were 6.4% and 9.9%, respectively.
Under the Revolving Credit Facility, if the aggregate outstanding amount of all Revolving Loans, swingline loans and certain letter of credit obligations (letters of credit in excess of $5.0 million) exceeds $10.0 million at the end of any fiscal quarter, Jason Incorporated and its Restricted Subsidiaries (as defined in the Senior Secured Credit Facilities) will be required to not exceed a consolidated first lien net leverage ratio of 4.25 to 1.00 as of December 31, 2019 (which will decrease to 4.00 to 1.00 on June 26, 2020 and thereafter). If such outstanding amounts do not exceed $10.0 million at the end of any fiscal quarter, no financial covenants are applicable. The consolidated first lien net leverage ratio at December 31, 2019 was 7.52 to 1.00; therefore, borrowings under the Revolving Credit Facility are limited to a total of $10.0 million, which includes letters of credit in excess of $5.0 million. At December 31, 2019, the Company had letters of credit outstanding of $3.6 million and had no outstanding borrowings under the Revolving Credit Facility.
Under the Senior Secured Credit Facilities, the Company is subject to mandatory excess cash flow prepayments if certain requirements are met. At December 31, 2019 and December 31, 2018, there was no required mandatory excess cash flow prepayment required under the Senior Secured Credit Facilities. Additionally, the Company is required to make mandatory prepayments resulting from non-ordinary course sales or other dispositions of assets, subject to certain exceptions and subject to customary reinvestment provisions. In connection with the August 30, 2019 sale of the North American fiber solutions business, the Company received net cash proceeds, as defined by the Senior Secured Credit Facilities, of $62.6 million, of which $57.6 million was remaining after permitted reinvestments as of December 31, 2019. The Company intends to continue to reinvest these net proceeds as permitted under the terms of the Senior Secured Credit Facilities. Permitted reinvestments include capital expenditures, repairs and maintenance and permitted acquisitions, if such reinvestments occur within twelve months following receipt of such net cash proceeds or within 180 days of a contractual commitment if such a commitment is made during the twelve month period. To the extent there are net cash proceeds that are not reinvested during the aforementioned period, a mandatory prepayment of debt is required.
In December 2019, the Company made a voluntary prepayment of $5.0 million on the First Lien Term Loans, utilizing the proceeds from the sale of the Metalex business and from the sale of a facility within the industrial segment. In connection with the payment, the Company wrote off immaterial amounts of previously unamortized debt discount and deferred financing costs, which were recorded as additional interest expense.
During 2017, the Company repurchased $20.0 million of Second Lien Term Loans for $16.8 million. In connection with the repurchase, the Company wrote off $0.4 million of previously unamortized debt discount and $0.4 million of previously unamortized deferred financing costs, which were recorded as a reduction to the gain on extinguishment of debt. The transactions resulted in a net gain of $2.4 million, which has been recorded within the consolidated statements of operations.
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. To comply with these covenants, Jason Incorporated and its Restricted Subsidiaries are limited in the amount of cash that can be distributed to Jason Industries, Inc. in the form of dividends, loans or other distributions. These restrictions are triggered if Jason Incorporated and its Restricted Subsidiaries do not achieve a consolidated net leverage ratio that is equal to or less than 5.25 to 1.00 on a trailing twelve-month basis calculated in accordance with the provisions of the Credit Agreements. As of December 31, 2019, the consolidated net leverage ratio for Jason Incorporated and its Restricted Subsidiaries exceeded 5.25 to 1.00; therefore, it is not currently able to distribute cash to Jason Industries, Inc.

86

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
Foreign Debt
The Company has the following foreign debt obligations, including various overdraft facilities and term loans:
December 31, 2019 December 31, 2018
Germany $ 13,413    $ 15,002   
India 516    467   
Total foreign debt $ 13,929    $ 15,469   
These various foreign loans are comprised of individual outstanding obligations ranging from approximately $0.2 million to $7.7 million and $0.1 million to $9.3 million as of December 31, 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 December 31, 2019.
The foreign debt obligations in Germany primarily relate to term loans of $12.5 million at December 31, 2019 and $15.0 million at December 31, 2018. The German borrowings bear interest at fixed and variable rates ranging from 1.8% to 4.7% and are subject to repayment in varying amounts through 2025.
In the fourth quarter of 2017, the Company utilized $2.4 million of cash received from the sale of Acoustics Europe to retire foreign debt in Germany and incurred a $0.2 million prepayment fee, which was recorded as an offset to the gain on extinguishment of debt.
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 December 31, 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 years ended December 31, 2019, 2018, and 2017 the Company recognized $0.9 million of interest income, $0.2 million of interest income, and $1.9 million of interest expense, respectively, related to the Swaps. Based on current interest rates, the Company expects to recognize interest expense of $0.3 million related to the Swaps in 2020.
The fair values of the Company’s Swaps are recorded on the consolidated balance sheets with the corresponding offset recorded as a component of accumulated other comprehensive loss. The fair value of the Swaps was a net liability of $0.3 million at December 31, 2019 and a net asset of $1.9 million at December 31, 2018. See the amounts recorded on the consolidated balance sheets within the table below:
December 31, 2019 December 31, 2018
Interest rate swaps:
Recorded in other current assets $ —    $ 1,325   
Recorded in other assets - net —    542   
Recorded in other current liabilities (260)   —   
Total net asset derivatives designated as hedging instruments $ (260)   $ 1,867   


10. 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

87

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
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 ROU asset of $20.9 million and a lease liability of $23.2 million within the 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 $2.1 million of certain previously recorded deferred rent balances 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 consolidated financial statements in which the Company reclassified a deferred gain from other long-term liabilities of $1.0 million, $0.8 million net of tax, to retained deficit related to a previous sale leaseback of the former Metalex Libertyville, Illinois facility.
Finance and Operating Lease Obligations
The Company’s components of lease expense was as follows:
For the Year Ended December 31, 2019
Finance lease expense:
Depreciation of right-of-use assets $ 145   
Interest on lease liabilities 42   
Operating lease expense (1)
6,586   
Other lease expense (32)  
Total $ 6,741   
(1) Operating lease expense includes $0.6 million of accelerated lease expense related to the planned vacating of certain facilities in the industrial and engineered components segments.
Based on the nature of the ROU asset, depreciation 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 consolidated statements of operations. Other lease expense includes lease expense for leases with an estimated total term of 12 months or less and 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.
The Company’s balance sheet information related to leases was as follows:
December 31, 2019
Finance Leases
Property, plant and equipment - net $ 506   
Current portion of long-term debt $ 417   
Long-term debt 325   
Total finance lease liabilities $ 742   
Operating Leases
Right-of-use operating lease assets $ 20,910   
Current portion of operating lease liabilities $ 4,275   
Long-term operating lease liabilities 19,136   
Total operating lease liabilities $ 23,411   

88

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
Other information related to the Company’s leases was as follows:
December 31, 2019
Weighted-average remaining lease term (in years)
Finance leases 2.59
Operating leases 7.19
Weighted-average discount rate
Finance leases 6.7  %
Operating leases 6.9  %
Cash paid for amounts included in the measurement of lease liabilities for the year ended December 31, 2019 are as follows:
Continuing Operations Discontinued Operations Total
Operating cash flows from finance leases $ 47    $ 3    $ 50   
Operating cash flows from operating leases $ 6,262    $ 4,023    $ 10,285   
Financing cash flows from finance leases $ 332    $ 8    $ 340   
Future minimum lease payments required under finance and operating leases for each of the next five years and thereafter are as follows:
Finance Leases Operating Leases
2020 $ 450    $ 5,730   
2021 136    4,790   
2022 107    3,528   
2023 79    2,946   
2024 31    2,530   
Thereafter —    10,654   
Total future undiscounted lease payments 803    30,178   
Less: imputed interest (61)   (6,767)  
Total lease obligations $ 742    $ 23,411   
As of December 31, 2019, the company had additional operating leases for vehicles that were signed and had not yet commenced with future minimum lease payments of $0.3 million. These operating leases are expected to commence in 2020 with lease terms between two to four years.
Future minimum lease payments required under long-term operating leases in effect at December 31, 2018 were as follows:
2019 $ 5,768   
2020 4,418   
2021 3,823   
2022 2,877   
2023 2,362   
Thereafter 10,307   
$ 29,555   
Total rental expense under operating leases was $6.5 million and $6.1 million for the years end December 31, 2018 and December 31, 2017, respectively.

11. Shareholders’ (Deficit) Equity
At December 31, 2019, the Company had authorized for issuance 120,000,000 shares of $0.0001 par value common stock, of which 28,508,977 shares were issued and outstanding, and had authorized for issuance 5,000,000 shares of $0.0001 par value preferred stock, of which 43,950 shares were issued and outstanding, including 860 shares declared as a dividend on November 3, 2019 and issued on January 1, 2020.

89

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
Series A Preferred Stock
On June 30, 2014, the Company issued 45,000 shares of Series A Preferred Stock with offering proceeds of $45.0 million and offering costs of $2.5 million. Holders of the Series A Preferred Stock are entitled to cumulative dividends at an 8.0% dividend rate per annum payable quarterly on January 1, April 1, July 1, and October 1 of each year in cash or by delivery of Series A Preferred Stock shares. Holders of the Series A Preferred Stock have the option to convert each share of Series A Preferred Stock into approximately 81.18 shares of the Company’s common stock, subject to certain adjustments in the conversion rate.
The Company paid the following dividends on the Series A Preferred Stock in additional shares of Series A Preferred Stock during the years ended December 31, 2019, 2018 and 2017.
Payment Date Record Date Amount Per Share Total Dividends Paid Preferred Shares Issued
January 1, 2017 November 15, 2016 $20.00    $900    899   
April 1, 2017 February 15, 2017 $20.00    $918    915   
July 1, 2017 May 15, 2017 $20.00    $936    931   
October 1, 2017 August 15, 2017 $20.00    $955    952   
January 1, 2018 November 15, 2017 $20.00    $974    968   
April 1, 2018 February 15, 2018 $20.00    $751    748   
July 1, 2018 May 15, 2018 $20.00    $766    763   
October 1, 2018 August 15, 2018 $20.00    $781    778   
January 1, 2019 November 15, 2018 $20.00    $796    794   
April 1, 2019 February 15, 2019 $20.00    $812    809   
July 1, 2019 May 15, 2019 $20.00    $828    826   
October 1, 2019 August 15, 2019 $20.00    $845    843   
On November 3, 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 January 1, 2020 to holders of record on November 15, 2019. As of December 31, 2019, the Company has recorded the 860 additional Series A Preferred Stock shares declared for the dividend of $0.9 million within preferred stock in the 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 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 consolidated statements of operations.
Shareholder Rights Agreement
On September 1, 2019, the Company’s Board of Directors adopted a Shareholder Rights Agreement (the “Rights Agreement”) between the Company and Continental Stock Transfer & Trust Company, as rights agent. Pursuant to the Rights Agreement, the Company declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock, payable to the shareholders of record on September 6, 2019. The Rights will also accompany any new shares of common stock issued after September 6, 2019. The Rights trade with and are inseparable from the Company’s common stock and will not be evidenced by separate certificates unless they become exercisable. The Rights will expire on March 1, 2021.
In general terms the Rights Agreement works by imposing a significant penalty upon any person or group which acquires 30% or more of the Company’s outstanding common stock without approval of the Company’s Board of Directors.
Each right will allow its holder to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock for $5.00, subject to adjustment as set forth in the Rights Agreement, once the Rights become exercisable. Per the Rights

90

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
Agreement, the Rights will not be exercisable until the earlier of (1) 10 days after the public announcement that a person or group has become an Acquiring Person (as defined in the Rights Agreement) by obtaining beneficial ownership of 30% or more of the Company’s outstanding common stock or (2) 10 business days (or such later date as the Company’s Board of Directors shall determine) following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person.
Warrants
The Company’s warrants expired on June 30, 2019 and as of December 31, 2019, the Company had no warrants outstanding. Each outstanding warrant entitled the registered holder to purchase one share of the Company’s common stock at a price of $12.00 per share.
Exchange of Common Stock of JPHI Holdings, Inc. for Common Stock of Jason Industries, Inc.
Following the consummation of the June 30, 2014 go public business combination, Jason became an indirect majority-owned subsidiary of the Company, with the Company then owning approximately 83.1% of JPHI Holdings Inc. (“JPHI”) and the rollover participants then owning a noncontrolling interest of approximately 16.9% of JPHI. The rollover participants received 3,485,623 shares of JPHI, which were exchangeable on a one-for-one basis for shares of common stock of the Company.
In 2016, certain rollover participants exchanged 2,401,616 shares of JPHI stock for Company common stock, which decreased the noncontrolling interest to 6.0 percent. In the first quarter of 2017, certain rollover participants exchanged the remaining 1,084,007 shares of JPHI stock for Company common stock, which decreased the noncontrolling interest to 0%, and no shares of JPHI stock remain outstanding as of December 31, 2019. The decreases to the noncontrolling interest as a result of the exchange resulted in an increase in both accumulated other comprehensive loss and additional paid-in capital to reflect the Company’s increased ownership in JPHI.
Accumulated Other Comprehensive Loss
The changes in the components of accumulated other comprehensive loss, net of taxes, were as follows:
Employee
retirement plan
adjustments
Foreign currency
translation
adjustments (1)
Net unrealized gains (losses) on cash flow hedges Total    
Balance at December 31, 2016 $ (1,777)   $ (27,404)   $ (1,191)   $ (30,372)  
Other comprehensive income before reclassifications 365    11,394    156    11,915   
Amounts reclassified from accumulated other comprehensive loss 8    (888)   1,159    279   
Exchange of common stock of JPHI Holdings, Inc. for common stock of Jason Industries, Inc. (113)   (1,698)   (73)   (1,884)  
Balance at December 31, 2017 (1,517)   (18,596)   51    (20,062)  
Cumulative impact of accounting changes (137)   —    11    (126)  
Other comprehensive (loss) income before reclassifications (223)   (4,555)   1,467    (3,311)  
Amounts reclassified from accumulated other comprehensive loss 46    —    (118)   (72)  
Balance at December 31, 2018 (1,831)   (23,151)   1,411    (23,571)  
Other comprehensive loss before reclassifications (526)   (1,950)   (947)   (3,423)  
Amounts reclassified from accumulated other comprehensive loss 125    (1,112)   (662)   (1,649)  
Balance at December 31, 2019 $ (2,232)   $ (26,213)   $ (198)   $ (28,643)  
(1) Amounts reclassified from accumulated other comprehensive loss and included in loss on divestiture in the consolidated statement of operations for the year ended December 31, 2017 includes the reclassification to earnings of a foreign currency translation gain of $0.9 million from the sale of the European fiber solutions business.
Amounts reclassified from accumulated other comprehensive loss and included in other income - net in the consolidated statement of operations for the year ended December 31, 2019 includes the reclassification to earnings of a foreign currency translation gain of $0.8 million for the wind down and substantial dissolution of certain U.K. entities. Amounts reclassified from accumulated other comprehensive loss and included in net loss (income) from discontinued operations, net of tax for the year ended December 31, 2019 includes the reclassification to earnings of a foreign currency translation gain of $0.3 million from the sale of the North American fiber solutions business.


91

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
12. Share-Based Compensation
The Company recognizes compensation expense based on estimated grant date fair values for all share-based awards issued to employees and directors, including RSUs and performance share units, which are restricted stock units with vesting conditions contingent upon achieving certain performance goals. The Company estimates the fair value of share-based awards based on assumptions as of the grant date. The Company recognizes these compensation costs for only those awards expected to vest, on a straight-line basis over the requisite service period of the award, which is generally the vesting term of three years for restricted stock awards and the performance period for performance share units. Forfeitures are recognized within compensation expense in the period the forfeitures are incurred. Share based compensation expense is reported in selling and administrative expenses in the Company’s consolidated statements of operations.
2014 Omnibus Incentive Plan
In 2014, the Company’s Board of Directors and shareholders 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, which the Company’s shareholders approved on May 16, 2018. Awards under the 2014 Plan are generally not restricted to any specific form or structure and could include, without limitation, stock options, stock appreciation rights, restricted stock awards and RSUs, performance awards, other stock-based awards, and other cash-based awards. At December 31, 2019, there were 1,252,915 shares of common stock that remained authorized and available for future grants.
Share-Based Compensation Expense
The Company recognized the following share-based compensation expense:
Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
Restricted stock units $ 2,171    $ 1,896    $ 792   
Adjusted EBITDA vesting awards 197    399    178   
Stock Price vesting awards —    —    9   
Share-based compensation expense from continuing operations 2,368    2,295    979   
Share-based compensation expense from discontinued operations 986    414    140   
Total share-based compensation expense $ 3,354    $ 2,709    $ 1,119   
Total income tax benefit recognized from continuing and discontinued operations $ 633    $ 667    $ 276   
Share-based compensation expense from discontinued operations during the year ended December 31, 2019 includes $0.5 million of accelerated expense for 303,030 restricted and performance share units that vested upon the sale of the North American fiber solutions business, and $0.1 million of accelerated expense for 60,018 restricted and performance share units that vested upon the sale of the Metalex business.
As of December 31, 2019, $2.7 million of total unrecognized compensation expense related to share-based compensation plans is expected to be recognized over a weighted-average period of 1.4 years. The total unrecognized share-based compensation expense to be recognized in future periods as of December 31, 2019 does not consider the effect of share-based awards that may be issued in subsequent periods.
General Terms of Awards
The Compensation Committee of the Board of Directors has discretion to establish the terms and conditions for grants, including the number of shares, vesting and required service or other performance criteria. RSU and performance share unit awards are subject to forfeiture upon termination of employment prior to vesting, subject in some cases to early vesting, or continued eligibility for vesting, upon specified events, including death or permanent disability of the grantee, termination of the grantee’s employment under certain circumstances or a change in control of the Company. Dividend equivalents on common stock, if any, are accrued for RSUs and performance share units granted to employees and paid in the form of cash or stock depending on the form of the dividend, at the same time that the shares of common stock underlying the unit are delivered to the employee. All RSUs and performance share units granted to employees are payable in shares of common stock and are classified as equity awards.

92

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
The rights granted to the recipient of employee RSU awards generally vest annually in equal installments on the anniversary of the grant date or in two equal installments over the restriction or vesting period, which is generally three years. Vested RSUs are payable in common stock within a thirty day period following the vesting date. The Company records compensation expense of RSU awards based on the fair value of the awards at the date of grant ratably over the period during which the restrictions lapse.
Performance share unit awards based on cumulative and average performance metrics (i.e. Adjusted EBITDA) are payable at the end of their respective performance period in common stock. The number of share units awarded can range from zero to 150% for those awards granted from 2014 through 2016 and from zero to 100% for those awards granted in 2017 and 2019, depending on achievement of a targeted performance metric, and are payable in common stock within a thirty day period following the end of the performance period. The Company expenses the cost of the performance-based share unit awards based on the fair value of the awards at the date of grant and the estimated achievement of the performance metric, ratably over the performance period of three years.
Performance share unit awards based on achievement of certain established stock price targets are payable in common stock if the last sales price of the Company’s common stock equals or exceeds established stock price targets in any twenty trading days within a thirty trading day period during the performance period. The Company expenses the cost of the stock price-based performance share unit awards based on the fair value of the awards at the date of grant ratably over the derived service period of the award.
The Company also issues RSUs as share-based compensation for members of the Board of Directors. Director RSUs vest one year from the date of grant. In the event of termination of a member’s service on the Board of Directors prior to a vesting date, all unvested RSUs of such holder will be forfeited. Vested RSUs are deferred and then delivered to members of the Board of Directors within six months following the termination of their directorship. All awards granted are payable in shares of common stock or cash payment equal to the fair market value of the shares at the discretion of our Compensation Committee, and are classified as equity awards due to their expected settlement in common stock. Compensation expense for these awards is measured based upon the fair value of the awards at the date of grant. Dividend equivalents on common stock are accrued for RSUs awarded to the Board of Directors and paid in the form of cash or stock depending on the form of the dividend, at the same time that the shares of common stock underlying the RSU are delivered to a member of the Board of Directors following the termination of their directorship.
Restricted Stock Units
The following table summarizes the restricted stock unit activity:
For the Year Ended
December 31, 2019 		For the Year Ended
December 31, 2018 		For the Year Ended
December 31, 2017
  Units
(Thousands) 		Weighted-Average Grant-Date Fair Value Units
(Thousands) 		Weighted-Average Grant-Date Fair Value Units
(Thousands) 		Weighted-Average Grant-Date Fair Value
Outstanding at beginning of period 3,150    $ 2.89    1,033    $ 2.84    554    $ 5.22   
Granted 985    1.36    2,166    2.94    745    1.32   
Issued (1,543)   2.60    (36)   3.72    (265)   4.84   
Deferred 75    1.30    —    —    159    3.69   
Forfeited (255)   2.77    (13)   3.02    (160)   1.53   
Outstanding at end of period 2,412    $ 2.34    3,150    $ 2.89    1,033    $ 2.84   
As of December 31, 2019, there was $2.6 million of unrecognized share-based compensation expense related to 2,047,594 RSU awards, with a weighted-average grant date fair value of $2.04, that are expected to vest over a weighted-average period of 1.5 years. Included within the total 2,411,502 RSU awards outstanding as of December 31, 2019 are 363,908 RSU awards for members of the Company’s Board of Directors which have vested and issuance of the shares has been deferred, with a weighted-average grant date fair value of $4.02. The total fair values of shares vested during the years ended December 31, 2019, 2018 and 2017 were $4.2 million, $0.1 million and $0.3 million, respectively. The fair values of these awards were determined based on the Company’s stock price on the grant date.
In connection with the vesting of RSUs previously issued by the Company, a number of shares sufficient to fund statutory minimum tax withholding requirements was withheld from the total shares issued or released to the award holder (under the terms of the 2014 Plan, the shares are considered to have been issued and are not added back to the pool of shares available for grant). During the years ended December 31, 2019, 2018 and 2017, the Company withheld 415,723 shares, 2,837

93

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
shares and 25,532 shares, respectively, to satisfy the requirement. The withholding is treated as a reduction in additional paid-in capital in the accompanying consolidated statements of shareholders’ (deficit) equity.
Performance Share Units
Adjusted EBITDA Vesting Awards
The following table summarizes Adjusted EBITDA vesting award activity:
For the Year Ended
December 31, 2019 		For the Year Ended
December 31, 2018 		For the Year Ended
December 31, 2017
  Units
(thousands) 		Weighted-Average Grant-Date Fair Value Units
(thousands) 		Weighted-Average Grant-Date Fair Value Units
(thousands) 		Weighted-Average Grant Date-Fair Value
Outstanding at beginning of period 908    $ 1.30    908    $ 1.30    723    $ 9.67   
Granted 705    1.64    —    —    1,058    1.30   
Adjustment for performance results achieved (1)
—    —    —    —    (708)   9.65   
Vested (62)   1.64    —    —    —    —   
Forfeited (78)   1.52    —    —    (165)   2.11   
Outstanding at end of period 1,473    $ 1.44    908    $ 1.30    908    $ 1.30   
(1) Adjustment for Adjusted EBITDA awards originally granted in 2014 and 2015 was due to the number of shares vested at the end of the three-year performance period ended June 30, 2017 being lower than the maximum achievement of the targeted Adjusted EBITDA performance metric.
Adjusted EBITDA Vesting Awards - 2019 Grant
During the year ended December 31, 2019, the Company granted 704,500 performance share unit awards to certain executive officers and senior management employees, which are payable based on achievement of a cumulative Adjusted EBITDA performance target over a three year performance period ending on December 31, 2021. Distributions under these awards are payable at the end of the performance period in common stock. As of December 31, 2019, the total potential payouts for awards granted during the year ended December 31, 2019 ranged from zero to 601,000 shares, should certain performance targets be achieved.
During 2019, the Company lowered its estimated vesting of the performance share unit awards from 100% of target, or 601,000 shares, to an estimated vesting payout of 0%, or 0 shares, resulting in $0.1 million of share-based compensation income due to declines in projected profitability. As of December 31, 2019, there was no unrecognized share-based compensation expense related to the Adjusted EBITDA based vesting performance share unit awards expected to be recognized in subsequent periods.
Adjusted EBITDA Vesting Awards - 2017 Grant
During the year ended December 31, 2017, the Company granted 1,057,505 performance share unit awards to certain executive officers and senior management employees, which are payable based on achievement of a cumulative Adjusted EBITDA performance target over a three year performance period ending on March 30, 2020. Distributions under these awards are payable at the end of the performance period in common stock. The total potential payouts for awards granted during the year ended December 31, 2017 ranged from zero to 872,180 shares, should certain performance targets be achieved.
During 2019, the Company lowered its estimated vesting of the performance share unit awards from 100% of target, or 872,180 shares, to an estimated payout of 80%, or 697,744 shares, resulting in $0.1 million of share-based compensation income due to declines in profitability. As of December 31, 2019, there was $0.1 million of unrecognized share-based compensation expense related to Adjusted EBITDA based vesting performance share unit awards, which is expected to be recognized over a weighted average period of 0.3 years.
Adjusted EBITDA Vesting Awards - 2014 and 2015 Grant
During 2014 and 2015, 1,357,942 performance share unit awards were granted to certain executive officers and senior management employees. The awards were payable upon the achievement of certain established cumulative Adjusted EBITDA performance targets over a three year performance period of July 1, 2014 through June 30, 2017. The award period expired on June 30, 2017 with no awards vesting.

94

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
Stock Price Vesting Awards
As of December 31, 2019, the stock price vesting awards are no longer outstanding as the award period expired on June 30, 2017 with no awards vesting.
ROIC Vesting Awards
As of December 31, 2019, the Average Return on Invested Capital vesting awards are no longer outstanding as the award period expired on December 31, 2018 with no awards vesting.

13. Earnings per Share
Basic income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. In computing dilutive income (loss) per share, basic income (loss) per share is adjusted for the assumed issuance of all potentially dilutive share-based awards, including public warrants, RSUs, performance share units, convertible preferred stock, and certain rollover shares of JPHI convertible into shares of Jason Industries.
The reconciliation of the numerator and denominator of the basic and diluted loss per share calculation and the anti-dilutive shares is as follows:
Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
(share amounts in thousands)
Basic and diluted net (loss) income per share
Net loss per share from continuing operations $ (1.64)   $ (0.68)   $ (0.74)  
Net (loss) income per share from discontinued operations (1.34)   0.06    0.42   
Basic and diluted net loss per share $ (2.98)   $ (0.62)   $ (0.32)  
Numerator:
Net loss from continuing operations $ (43,431)   $ (14,653)   $ (15,402)  
Less: net gain attributable to noncontrolling interests — — 5
Less: Accretion of dividends on preferred stock and redemption premium 3,347    4,070    3,783   
Total net loss from continuing operations less accretion of dividends on preferred stock and redemption premium (46,778)   (18,723)   (19,190)  
Net (loss) income from discontinued operations, net of tax (38,177)   1,493    10,929   
Net loss allocable to common shareholders of Jason Industries $ (84,955)   $ (17,230)   $ (8,261)  
Denominator:
Basic and diluted weighted-average shares outstanding 28,484    27,595    26,082   
Weighted average number of anti-dilutive shares excluded from denominator:
Warrants to purchase Jason Industries common stock (1)
6,901    13,994    13,994   
Conversion of Series A 8% Perpetual Convertible Preferred (2)
3,442    3,235    3,858   
Conversion of JPHI rollover shares convertible to Jason Industries common stock (3)
—    —    59   
Restricted stock units 2,702    2,331    796   
Performance share units 1,402    1,307    1,379   
Total 14,447    20,867    20,086   
(1) Public warrants (“warrants”) consisted of warrants to purchase shares of Jason Industries common stock which were previously quoted on Nasdaq under the symbol “JASNW” until their expiration on June 30, 2019. Each outstanding warrant entitled the holder to purchase one share of the Company’s common stock at a price of $12.00 per share.
(2)  Includes the impact of 860 additional Series A Preferred Stock shares from a stock dividend declared on November 3, 2019 to be paid in additional shares of Series A Preferred Stock on January 1, 2020. The Company included the preferred stock within the consolidated balance sheets as of the declaration date. Conversion is presented at the voluntary conversion ratio of approximately 81.18 common shares for each one preferred share.

95

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
(3) Includes the impact of the exchange by certain rollover participants of their JPHI stock for Company common stock in the first quarter of 2017. Such rollover shares were contributed by former owners and management of Jason Partners Holdings Inc. prior to the Company’s acquisition of JPHI.
Warrants are considered anti-dilutive and excluded when the exercise price exceeds the average market value of the Company’s common stock price during the applicable period. Performance share units are considered anti-dilutive if the performance targets upon which the issuance of the shares is contingent have not been achieved and the respective performance period has not been completed as of the end of the current period. Due to losses allocable 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 260.

14. Income Taxes
On December 22, 2017, the President of the United States signed into law the Tax Reform Act. The legislation significantly changed U.S. tax law by lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries, among others. The Tax Reform Act also added many new provisions including changes to bonus depreciation and the deductions for executive compensation and interest expense. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018.
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act, the Company revalued its ending net deferred tax liabilities at December 31, 2017 and recognized a provisional $11.1 million tax benefit in the Company’s consolidated statements of operations for the year ended December 31, 2017.
The Tax Reform Act provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits through the year ended December 31, 2017. The Company had an estimated $54.5 million of undistributed foreign earnings and profits subject to the deemed mandatory repatriation and recognized a provisional $5.3 million of income tax expense in the Company’s consolidated statements of operations for the year ended December 31, 2017. After the utilization of existing net operating loss carryforwards, the Company did not incur any U.S. federal cash taxes resulting from the deemed mandatory repatriation.
While the Tax Reform Act provides for a territorial tax system, beginning in 2018, it includes the global intangible low-taxed income (“GILTI”) provisions that require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. GAAP allows companies to make an accounting election to either treat taxes due on future GILTI inclusions in U.S. taxable income as current period expense when incurred (“period cost method”) or factor such amounts into the measurement of its deferred taxes (“deferred method”). The Company has elected to use the period cost method.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. The Company recognized the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets and liabilities and included those estimated amounts in its consolidated financial statements for the year ended December 31, 2017. During the year ended December 31, 2018, the Company finalized the accounting for these items and recorded an adjustment to reduce the amount of income tax expense attributable to the deemed mandatory repatriation of foreign subsidiary earnings and profits by $0.5 million. The final adjustment required to revalue net deferred tax liabilities was immaterial.
The consolidated loss from continuing operations before income taxes consisted of the following:
Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
Domestic $ (40,169)   $ (28,793)   $ (31,880)  
Foreign 754    9,094    864   
Loss from continuing operations before income taxes $ (39,415)   $ (19,699)   $ (31,016)  

96

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
The tax provision (benefit) from continuing operations included within the consolidated statements of operations consisted of the following:
Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
Current
Federal $ 106    $ 53    $ 208   
State 75    53    (125)  
Foreign 2,008    2,527    3,405   
Total current income tax provision 2,189    2,633    3,488   
Deferred
Federal 581    (6,112)   (16,916)  
State 2,428    (597)   (1,142)  
Foreign (1,182)   (970)   (1,044)  
Total deferred income tax provision (benefit) 1,827    (7,679)   (19,102)  
Total income tax provision (benefit) $ 4,016    $ (5,046)   $ (15,614)  
The tax provision (benefit) from continuing operations included within the consolidated statements of operations differs from the amounts computed by applying the Federal income tax rate to loss before income taxes. A reconciliation of income taxes at the Federal statutory rate to the effective tax rate is summarized as follows:
Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
Tax at Federal statutory rate 21.0  % 21.0  % 35.0  %
State taxes - net of Federal benefit 1.8    6.5    3.3   
Research and development incentives 1.2    2.1    0.6   
Foreign rate differential 0.8    (1.7)   0.6   
Valuation allowances(1)
(33.7)   (1.8)   1.5   
Change in foreign tax rates —    —    (0.6)  
Increase in tax reserves (0.8)   (1.3)   (0.2)  
Stock compensation expense 0.2    (1.7)   (1.7)  
U.S. taxation of foreign earnings(2)
0.4    (2.4)   (4.4)  
Non-deductible meals and entertainment (0.2)   (0.1)   (0.1)  
Change in U.S. tax rate(3)
—    —    34.8   
Transition tax on unremitted foreign earnings(4)
—    2.6    (17.1)  
Other (0.9)   2.4    (1.4)  
Effective tax rate (10.2) % 25.6  % 50.3  %
(1) During the year ended December 31, 2019, the Company recorded a valuation allowance of $13.3 million for federal and state deferred tax assets primarily related to the U.S. interest deduction limitation carryforward.
(2) During the year ended December 31, 2018, the U.S. taxation of foreign earnings includes the recognition of GILTI and the U.S. taxation of other foreign income. During the year ended December 31, 2017, the amount includes the recording of a deferred tax liability for foreign earnings of the Company’s wholly-owned U.S. subsidiaries that are no longer considered indefinitely reinvested.
(3)  During the year ended December 31, 2017, the change in U.S. tax rate represents the impact of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act.
(4) During the years ended December 31, 2018 and 2017, the transition tax on unremitted foreign earnings represents the impact of the deemed mandatory repatriation provisions under the Tax Reform Act.

97

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
The Company’s temporary differences which gave rise to deferred tax assets and liabilities were as follows:
December 31, 2019 December 31, 2018
Deferred tax assets
Accrued expenses and reserves $ 1,475    $ 2,035   
Postretirement and postemployment benefits 800    924   
Employee benefits 2,691    2,838   
Operating lease liabilities 5,269    —   
Inventories 1,410    1,261   
Other assets 1,128    1,285   
Interest disallowance 11,686    6,157   
Operating loss and credit carryforwards 12,806    14,782   
Gross deferred tax assets 37,265    29,282   
Less valuation allowance (16,553)   (3,828)  
Deferred tax assets 20,712    25,454   
Deferred tax liabilities
Property, plant and equipment (6,530)   (14,941)  
Right-of-use operating lease assets (4,619)   —   
Intangible assets and other liabilities (14,790)   (25,801)  
Foreign investments (1,026)   (1,261)  
Deferred tax liabilities (26,965)   (42,003)  
Net deferred tax liability $ (6,253)   $ (16,549)  
Amounts recognized in the statement of financial position consist of:
Other assets - net $ 1,281    $ 1,064   
Deferred income taxes (7,534)   (17,613)  
Net amount recognized $ (6,253)   $ (16,549)  
At December 31, 2019, the Company has U.S. federal and state net operating loss carryforwards, which expire at various dates through 2039, approximating $12.8 million and $110.3 million, respectively. In addition, the Company has U.S. federal research and development credit carryforwards of $2.4 million which expire between 2034 and 2039 and state tax credit carryforwards and other tax attributes of $1.1 million which expire between 2019 and 2034. The Company’s foreign net operating loss carryforwards total approximately $15.0 million (at December 31, 2019 exchange rates). The majority of these foreign net operating loss carryforwards are available for an indefinite period.
Valuation allowances totaling $16.6 million and $3.8 million as of December 31, 2019 and 2018, respectively, have been established for deferred income tax assets primarily related to U.S. interest expense carryforwards, state net operating loss and credit carryforwards and certain foreign subsidiary net operating loss carryforwards that may not be realized. Realization of the net deferred income tax assets is dependent on generating sufficient taxable income prior to their expiration. Although realization is not assured, management believes it is more-likely-than-not that the net deferred income tax assets will be realized. The amount of the net deferred income tax assets considered realizable, however, could change in the near term if future taxable income during the carryforward period fluctuates.
Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, are as follows for the years ended December 31, 2019, 2018 and 2017:
Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017
Balance at beginning of period $ 2,084    $ 1,916    $ 1,881   
Additions (reductions) based on tax positions related to current year 209    168    267   
Reductions related to lapses of statute of limitations —    —    (232)  
Balance at end of period $ 2,293    $ 2,084    $ 1,916   
Of the $2.3 million, $2.1 million, and $1.9 million of unrecognized tax benefits as of December 31, 2019, 2018 and 2017, respectively, approximately $2.3 million, $2.1 million, and $1.9 million, respectively, would impact the effective income tax rate if recognized. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as part of its

98

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
income tax provision. During the years ended December 31, 2019, 2018 and 2017, the Company had an immaterial amount of interest and penalties that were recognized as a component of the income tax provision.
At December 31, 2019 and 2018, the Company has an immaterial amount of accrued interest and penalties related to taxes included within the consolidated balance sheet. During the next twelve months, as a result of the completion of tax audits that are currently in process and anticipated changes in the status of certain foreign subsidiaries, the Company believes it is reasonably possible the total amount of unrecognized tax benefits will change.
The Company, along with its subsidiaries, files returns in the U.S. Federal and various state and foreign jurisdictions. With certain exceptions, the Company is subject to examination by U.S. Federal and state taxing authorities for the taxable years in the following table. The Company does not expect the results of these examinations to have a material impact on the Company.
Tax Jurisdiction Open Tax Years
France 2017 - 2019   
Germany 2012 - 2019   
Mexico 2015 - 2019   
Portugal 2016 - 2019   
Spain 2016 - 2019   
Sweden 2014 - 2019   
United Kingdom 2017 - 2019   
United States (federal) 2014 - 2019   
United States (state and local) 2014 - 2019   
During the fourth quarter of 2017, the Company changed its assertion regarding the indefinite reinvestment of earnings of its wholly-owned non U.S. subsidiaries. This change in assertion was triggered by the anticipated future impact of changes arising from the enactment of the Tax Reform Act, including the interest expense deduction limitation and significant reduction in the U.S. taxation of earnings repatriated from the Company’s foreign subsidiaries. As a result, during the year ended December 31, 2017, the Company recognized a deferred tax liability of $1.7 million on the undistributed earnings of its wholly-owned foreign subsidiaries. As of the years ended December 31, 2019 and 2018, the Company has recognized deferred tax liabilities on the undistributed earnings of its wholly-owned foreign subsidiaries of $1.0 million and $1.3 million, respectively.

15. Employee Benefit Plans
Defined Contribution Plans
The Company maintains a 401(k) Plan for substantially all full time U.S. employees (the “401(k) Plan”). Company contributions are allocated to accounts set aside for each employee’s retirement. Employees generally may contribute up to 50% of their compensation to individual accounts within the 401(k) Plan subject to Internal Revenue Service limitations. Employer contributions are equal to 50% of the first 6% of employee’s eligible annual cash compensation, also subject to Internal Revenue Service limitations. Expense recognized related to the 401(k) Plan totaled approximately $1.0 million, $1.0 million and $0.9 million, for the years ended December 31, 2019, 2018 and 2017, respectively.
Defined Benefit Pension Plans
The Company maintains defined benefit pension plans covering union and certain other employees. These plans are frozen to new participation. 

99

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
The table that follows contains the accumulated benefit obligation and reconciliations of the changes in projected benefit obligation, the changes in plan assets and funded status:
U.S. Plans Non-U.S. Plans
Year Ended
December 31, 2019 		Year Ended
December 31, 2018 		Year Ended
December 31, 2019 		Year Ended
December 31, 2018
Accumulated benefit obligation $ 10,093    $ 9,661    $ 13,761    $ 12,240   
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 9,661    $ 10,605    $ 12,617    $ 14,904   
Service cost —    —    92    92   
Interest cost 376    350    291    293   
Actuarial (gain) loss 728    (602)   1,635    (386)  
Benefits paid (672)   (692)   (525)   (1,621)  
Other —    —    (51)   17   
Currency translation adjustment —    —    97    (682)  
Projected benefit obligation at end of year $ 10,093    $ 9,661    $ 14,156    $ 12,617   
 
Change in plan assets
Fair value of plan assets at beginning of year $ 9,179    $ 10,055    $ 5,671    $ 7,322   
Actual return on plan assets 1,370    (452)   831    (207)  
Employer and employee contributions 323    307    521    525   
Benefits paid (672)   (692)   (525)   (1,621)  
Other —    (39)   —    —   
Currency translation adjustment —    —    214    (348)  
Fair value of plan assets at end of year $ 10,200    $ 9,179    $ 6,712    $ 5,671   
Funded status $ 107    $ (482)   $ (7,444)   $ (6,946)  
 
Weighted-average assumptions
Discount rates
3.25%-3.35%
4.02%-4.08%
0.90%-1.95%
2.00%-2.80%
Rate of compensation increase
N/A
N/A
2.00%-3.50%
2.00%-3.70%
Amounts recognized in the statement of financial position consist of:
Non-current assets $ 2,420    $ 1,830    $ —    $ —   
Other current liabilities —    —    (77)   (83)  
Other long-term liabilities (2,313)   (2,312)   (7,367)   (6,863)  
Net amount recognized $ 107    $ (482)   $ (7,444)   $ (6,946)  

100

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
The following table contains the components of net periodic benefit cost:
U.S. Plans Non-U.S. Plans
  Year Ended
December 31, 2019 		Year Ended
December 31, 2018 		Year Ended
December 31, 2017 		Year Ended
December 31, 2019 		Year Ended
December 31, 2018 		Year Ended
December 31, 2017
Components of Net Periodic Benefit Cost
Service cost $ —    $ —    $ —    $ 92    $ 92    $ 98   
Interest cost 376    350    393    291    293    286   
Expected return on plan assets (412)   (477)   (467)   (199)   (222)   (226)  
Amortization of actuarial loss 29    14    14    178    77    35   
Net periodic (benefit) cost $ (7)   $ (113)   $ (60)   $ 362    $ 240    $ 193   
 
Weighted-average assumptions
Discount rates
4.02%-4.08%
3.33%-3.45%
3.71%-3.90%
2.00%-2.80%
1.80%-2.40%
1.70%-2.60%
Rate of compensation increase
N/A
N/A
N/A
2.00%-3.70%
2.00%-3.70%
2.00%-3.90%
Expected long-term rates or return
5.00%-6.00%
4.75%-6.50%
4.75%-6.50%
3.50%-4.00%
3.30%-4.00%
3.50%-4.00%
The expected return on plan assets is based on the Company’s expectation of the long-term average rate of return of the capital markets in which the plans invest. The expected return reflects the target asset allocations and considers the historical returns earned for each asset category. The Company determines the discount rate assumptions by referencing high-quality long-term bond rates that are matched to the duration of our benefit obligations, with appropriate consideration of local market factors, participant demographics and benefit payment terms.
The net amounts recognized in accumulated other comprehensive loss related to the Company’s defined benefit pension plans consisted of the following:
  Year Ended
December 31, 2019 		Year Ended
December 31, 2018 		Year Ended
December 31, 2017
 
Unrecognized loss $ 2,719    $ 2,371    $ 2,052   
In the next fiscal year, $0.4 million of unrecognized loss within accumulated other comprehensive loss is expected to be recognized as a component of net periodic benefit cost.
The Company’s investment policies employ an approach whereby a mix of equities and fixed income investments are used to maximize the long-term return on plan assets for a prudent level of risk. The investment portfolio primarily contains a diversified blend of equity and fixed income investments. Equity investments are diversified across domestic and non-domestic stocks, and investment and market risk are measured and monitored on an ongoing basis. The Company’s actual asset allocations are in line with target allocations and the Company does not have concentration within individual or similar investments that would pose a significant concentration risk to the Company.
The Company’s pension plan asset allocations by asset category at December 31, 2019 and 2018 are as follows:
U.S. Plans Non-U.S. Plans
2019 2018 2019 2018
Equity securities 52.7  % 47.6  % 39.3  % 37.8  %
Debt securities 36.2  % 42.3  % 56.6  % 57.9  %
Other 11.1  % 10.1  % 4.1  % 4.3  %


101

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
The fair values of pension plan assets by asset category at December 31, 2019 and 2018 are as follows:
Total as of December 31, 2019 Level 1 Level 2 Level 3
Cash and cash equivalents $ 1,163    $ 1,163    $ —    $ —   
Accrued dividends 5    5    —    —   
Global equities 8,017    8,017    —    —   
Fixed income securities 7,494    —    7,494    —   
Group annuity/insurance contracts 233    —    —    233   
Total $ 16,912    $ 9,185    $ 7,494    $ 233   
Total as of December 31, 2018 Level 1 Level 2 Level 3
Cash and cash equivalents $ 923    $ 923    $ —    $ —   
Accrued dividends 4    4    —    —   
Global equities 6,515    6,515    —    —   
Fixed income securities 7,169    —    7,169    —   
Group annuity/insurance contracts 239    —    —    239   
Total $ 14,850    $ 7,442    $ 7,169    $ 239   
The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed during 2019 due to the following:
Beginning balance, December 31, 2018 $ 239   
Actual return on assets related to assets still held 9   
Purchases, sales and settlements (15)  
Ending balance, December 31, 2019 $ 233   
No assets were transferred between levels of the fair value hierarchy during the years ended December 31, 2019 and December 31, 2018.
Quoted market prices are used to value investments when available. Investments in securities traded on exchanges are valued at the last reported sale prices on the last business day of the year or, if not available, the last reported bid prices.
The Company’s cash contributions to its defined benefit pension plans in 2020 are estimated to be approximately $0.7 million. Estimated projected benefit payments from the plans as of December 31, 2019 are as follows:
2020 $ 1,194   
2021 1,219   
2022 1,178   
2023 1,243   
2024 1,216   
2025 and thereafter 6,131   
Multiemployer Plan
Hourly union employees of the Morton business within the former Metalex business were covered under the National Shopmen Pension Fund (EIN 52-6122274, plan number 001), a union-sponsored and trusteed multiemployer plan which required the Company to contribute a negotiated amount per hour worked by the employees covered by the plan. The Company made the decision to withdraw from this plan in August 2012. The withdrawal amount was finalized during 2013. The Company retained the withdrawal liability related to the mutliemployer plan following the sale of Metalex. As of December 31, 2019, a liability of $1.1 million is recorded within other long-term liabilities and a liability of $0.2 million is recorded within other current liabilities on the consolidated balance sheets. As of December 31, 2018, $1.3 million is recorded within other long-term liabilities and $0.2 million is recorded within other current liabilities on the consolidated balance sheets. The total liability will be paid in equal monthly installments through April 2026, and interest expense will be incurred associated with the discounting of this liability through that date.

102

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
Postretirement Health Care and Life Insurance Plans
The Company also provides postretirement health care benefits and life insurance coverage to certain eligible former employees at one of its segments. The costs of retiree health care benefits and life insurance coverage are accrued over the employee benefit period.
The table that follows contains the accumulated benefit obligation and reconciliations of the changes in projected benefit obligation, the changes in plan assets and funded status:
Year Ended
December 31, 2019 		Year Ended
December 31, 2018
Accumulated benefit obligation $ 1,287    $ 1,344   
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 1,344    $ 1,423   
Interest cost 50    44   
Actuarial loss 11    37   
Benefits paid (118)   (160)  
Projected benefit obligation at end of year $ 1,287    $ 1,344   
Change in plan assets
Employer contributions $ 118    $ 160   
Benefits paid (118)   (160)  
Fair value of plan assets at end of year $ —    $ —   
Funded status $ (1,287)   $ (1,344)  
 
Weighted-average assumptions
Discount rates 3.20  % 3.96  %
Amounts recognized in the statement of financial position consist of:
Other current liabilities $ (132)   $ (147)  
Other long-term liabilities (1,155)   (1,197)  
Net amount recognized $ (1,287)   $ (1,344)  
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was a blended rate of 6.00% and 6.40% at December 31, 2019 and December 31, 2018, respectively. It was assumed that these rates will decline by 1.5% over the next seven years. An increase or decrease in the medical trend rate of 1% would increase or decrease the accumulated postretirement benefit obligation by approximately $0.1 million and $0.1 million, respectively.

103

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
The table that follows contains the components of net periodic benefit costs:
Year Ended
December 31, 2019 		Year Ended
December 31, 2018 		Year Ended
December 31, 2017
Components of net periodic benefit cost
Interest cost $ 50    $ 44    $ 68   
Amortization of the net gain from earlier periods (68)   (77)   (18)  
Net periodic (benefit) cost $ (18)   $ (33)   $ 50   
 
Weighted-average assumptions
Discount rates 3.96  % 3.26  % 3.64  %
The net amounts recognized in accumulated other comprehensive loss related to the Company’s other postretirement healthcare and life insurance plans consisted of the following:
Year Ended
December 31, 2019 		Year Ended
December 31, 2018 		Year Ended
December 31, 2017
Unrecognized gain $ (490)   $ (548)   $ (582)  
In the next fiscal year, $0.1 million of unrecognized gain within accumulated other comprehensive loss is expected to be recognized as a component of net periodic benefit cost.
The Company’s cash contributions to its postretirement benefit plan in 2020 are not yet determined but are expected to equal the projected benefits from the plan. Estimated projected benefit payments from the plan at December 31, 2019 are as follows:
2020 $ 133   
2021 129   
2022 121   
2023 113   
2024 106   
2025-2029 436   


16. 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 of the evaluation, 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.

104

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
Net sales from continuing operations relating to the Company’s reportable segments are as follows:
Year Ended
December 31, 2019 December 31, 2018 December 31, 2017
Industrial $ 201,517    $ 207,637    $ 200,284   
Engineered Components 136,380    160,322    159,129   
Fiber Solutions —    —    22,683   
Net sales $ 337,897    $ 367,959    $ 382,096   
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) from continuing operations 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 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 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.

105

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
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 taxes:
Year Ended
December 31, 2019 December 31, 2018 December 31, 2017
Segment Adjusted EBITDA
Industrial $ 20,945    $ 28,979    $ 27,661   
Engineered Components 15,098    19,747    16,348   
Fiber Solutions —    —    2,059   
$ 36,043    $ 48,726    $ 46,068   
Interest expense-net (769)   (793)   (1,232)  
Loss on debt extinguishment —    —    (182)  
Depreciation and amortization (21,615)   (20,684)   (21,229)  
Loss (gain) on disposal of property, plant and equipment - net (303)   1,318    320   
Loss on divestiture —    —    (8,730)  
Restructuring (3,791)   (877)   (2,484)  
Integration and other restructuring costs (1,259)   (128)   —   
Total segment income (loss) before income taxes 8,306    27,562    12,531   
Corporate general and administrative expenses (11,225)   (12,065)   (13,453)  
Corporate interest expense-net (32,209)   (32,484)   (31,719)  
Corporate gain on debt extinguishment —    —    2,383   
Corporate depreciation (620)   (453)   (357)  
Corporate restructuring (163)   —    9   
Corporate transaction-related expenses (1,005)   —    —   
Corporate integration and other restructuring (131)   36    569   
Corporate loss on disposal of property, plant and equipment —    —    —   
Corporate share based compensation (2,368)   (2,295)   (979)  
Loss from continuing operations before income taxes $ (39,415)   $ (19,699)   $ (31,016)  
Other financial information from continuing operations relating to the Company’s reportable segments is as follows at December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017:
Year Ended
December 31, 2019 December 31, 2018 December 31, 2017
Depreciation and amortization
Industrial $ 12,952    $ 12,196    $ 12,198   
Engineered Components 8,663    8,488    8,435   
Fiber Solutions —    —    596   
Corporate 620    453    357   
$ 22,235    $ 21,137    $ 21,586   

Year Ended
December 31, 2019 December 31, 2018 December 31, 2017
Capital expenditures
Industrial $ 6,650    $ 4,365    $ 5,247   
Engineered Components 2,448    3,207    2,709   
Fiber Solutions —    —    534   
Corporate 490    823    557   
$ 9,588    $ 8,395    $ 9,047   


106

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
December 31, 2019 December 31, 2018
Assets
Industrial $ 235,726    $ 230,185   
Engineered Components 82,197    90,175   
Assets Held for Sale —    165,411   
Total segments 317,923    485,771   
Corporate and eliminations 69,178    17,826   
Consolidated $ 387,101    $ 503,597   
Net sales and long-lived asset information by geographic area from continuing operations are as follows at December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017:
Year Ended
December 31, 2019 December 31, 2018 December 31, 2017
Net sales by region
United States $ 213,601    $ 222,607    $ 216,886   
Germany 76,273    89,247    107,137   
Rest of Europe 34,535    43,416    44,491   
Mexico 9,085    8,762    8,365   
Other 4,403    3,927    5,217   
$ 337,897    $ 367,959    $ 382,096   

December 31, 2019 December 31, 2018
Long-lived assets
United States $ 91,144    $ 79,410   
Germany 48,492    52,264   
Rest of Europe 9,378    7,876   
Mexico 3,435    1,830   
Other 3,327    3,486   
$ 155,776    $ 144,866   
Net sales attributed to geographic locations are 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. Long-lived assets by geographic location consist of the net book values of property, plant and equipment, ROU lease assets and amortizable intangible assets.

17. Commitments and Contingencies
Litigation Matters
In 2016, the Company received notification of certain employment matter claims filed in Brazil related to hiring practices within the Company’s industrial segment. As of December 31, 2019, the Company has successfully investigated and defended all filed claims and the potential for future losses is deemed remote. In the opinion of management, the resolution of this contingency did not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.
In addition to the matters noted above, the Company is a party to various legal proceedings that have arisen in the normal course of its business. These legal proceedings typically include product liability, labor, and employment claims. The Company has recorded reserves for loss contingencies based on the specific circumstances of each case. Such reserves are recorded when it is probable that a loss has been incurred as of the balance sheet date and can be reasonably estimated. In the opinion of management, the resolution of these contingencies will not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.
Environmental Matters
At December 31, 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

107

Jason Industries, Inc.
Notes to Consolidated Financial Statements
(In thousands, except share and per share amounts)
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.
Other Contingencies
In connection with the sale of the North American fiber solutions business on August 30, 2019, the purchase price (subject to a net working capital adjustment as defined by the Sale Agreement), is currently in dispute between the Company and the Motus Group. The Motus Group has proposed a working capital adjustment that results in a purchase price reduction of $5.2 million. The Company believes this claim lacks merit and a loss for the amount subject to dispute is not probable as of December 31, 2019. See Note 2, “Discontinued Operations and Divestitures” for additional information relating to the Transaction.

18. Subsequent Events
On February 27, 2020, the Company acquired selected assets of Matchless Metal Polishing (“Matchless”), a North American manufacturer of high-quality polishing buffs, compounds, and chemicals with annual sales of approximately $8 million, for a preliminary cash purchase price of $5 million which was funded with cash on hand. The purchase price includes $1 million that is contingent upon certain performance conditions. Through the acquisition of Matchless, the Company expanded its product line offerings within North America. The business will be integrated into the Company’s industrial segment. The acquisition includes the purchase of product lines, customers and selected assets and does not include manufacturing operations, with Matchless production transitioning to existing industrial facilities The preliminary purchase price allocation is not disclosed as the initial accounting is incomplete as of the filing date.


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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
ITEM 9A. 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 December 31, 2019. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2019, our disclosure controls and procedures were effective at a reasonable level of assurance.
Management’s Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial statements in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this Annual Report on Form 10-K. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). Based on management’s assessment and those criteria, management concluded that our internal control over financial reporting was effective at a reasonable assurance level as of December 31, 2019.
Remediation of Previously Identified Material Weakness
During the first quarter of 2019, it was identified that 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. Additionally, this control deficiency could result in additional misstatements of the aforementioned balances or disclosures that would result in a material misstatement to our annual or interim consolidated financial statements that would not be prevented or detected.
During the second, third and fourth quarters of 2019, in conjunction with the preparation of the interim and year-end tax provisions, the Company has enhanced the control activities related to the analysis of the recoverability of our deferred tax assets. The enhancements include (1) expanded consultation with third party specialists on complex income tax accounting matters, (2) enhanced documentation regarding the considerations and accounting guidance evaluated as part of the analysis supporting the recoverability of our deferred tax assets to allow for a more precise review process, and (3) enhanced monitoring of the review process. We believe these enhanced processes have effectively remediated the material weakness, and the revised controls have operated for a sufficient period of time in order for management to conclude, through testing, that these controls

109


are designed and operating effectively. As of December 31, 2019, we have remediated our previously reported material weakness in our internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
During the most recent completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.

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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information regarding our executive officers is included in Part I of this Annual Report on Form 10-K as permitted by SEC rules.
The information required by this Item is set forth under the headings “Questions and Answers about the Company,” “Proposals to be Voted On–Proposal 1: Election of Directors,” “Corporate Governance Principles and Board Matters–Board Committees” and “Delinquent Section 16(a) Reports” in the Company’s 2020 Proxy Statement to be filed with the SEC within 120 days after December 31, 2019 in connection with the solicitation of proxies for the Company’s 2020 annual meeting of shareholders (“Proxy Statement”) and is incorporated herein by reference.
The Company has adopted a code of ethics that applies to its senior executive team, including but not limited to, the Company’s Chief Executive Officer, Chief Financial Officer, General Counsel, Vice President of Finance and Treasurer, Corporate Controller, and the Senior Vice Presidents and General Managers, Vice Presidents of Finance, and Controllers of the Company’s business units, and other persons holdings positions with similar responsibilities at business units. The code of ethics is posted on the Company’s website and is available free of charge at www.jasoninc.com. The Company intends to satisfy the requirements under Item 5.05 of Form 8-K regarding disclosure of amendments to, or waivers from, previsions of its code of ethics that apply to senior executives by posting such information on the Company’s website.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth under the headings “Corporate Governance Principles and Board Matters–Board Committees–Compensation Committee Interlocks and Insider Participation,” “Executive Compensation” and “Compensation Committee Report” in the Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item is set forth under the heading “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement and is incorporated herein by reference.
Equity Compensation Plan Information
The following table gives information about the Company’s common stock authorized for issuance under the Company’s equity compensation plans as of December 31, 2019.
Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)
Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan category (a) (b) (c)
Equity compensation plans approved by security holders 3,884,682    $ —    1,252,915   
(2)
Equity compensation plans not approved by security holders —    $ —    —   
Total 3,884,682    —    1,252,915   
(1) Column (a) of the table above includes 3,884,682 unvested restricted stock units outstanding under the Jason Industries, Inc. 2014 Omnibus Incentive Plan.
(2) Represents shares available for future issuance under the Jason Industries, Inc. 2014 Omnibus Incentive Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is set forth under the headings “Questions and Answers about the Company,” “Proposals to be Voted On–Proposal 1: Election of Directors,” “Corporate Governance Principles and Board Matters-Independent Directors” and “Certain Relationships and Related Transactions” in the Proxy Statement and is incorporated herein by reference.

111


ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item is set forth under the heading “Proposals to be Voted On–Proposal 3: Ratification of Selection of Independent Registered Public Accounting Firm–Principal Accountant Fees and Services” in the Proxy Statement and is incorporated herein by reference.

112


PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
(a) Documents filed as part of this report
(1) All financial statements
Index to Consolidated Financial Statements
As of December 31, 2019 and 2018, for the years ended December 31, 2019, December 31, 2018 and December 31, 2017 Page
61
63
64
65
66
67
69
(2) Financial Statement schedules
Index to Financial Statement schedules
For the years ended December 31, 2019, December 31, 2018 and December 31, 2017 Page
113
All other financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto included in this Form 10-K.
(3) Exhibits required by Item 601 of Regulation S-K
The information required by this Section (a)(3) of Item 15 is set forth on the exhibit index that precedes the signature page of this Form 10-K.
ITEM 16. FORM 10-K SUMMARY
None.
SCHEDULE II. CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(in thousands) Balance at beginning of year Charge to Costs and Expenses Utilization of Reserves
Other (1)
Balance at end of year
Year Ended December 31, 2019
Allowance for doubtful accounts $ 1,073    $ 161    $ (115)   $ (13)   $ 1,106   
Deferred tax valuation allowances $ 3,828    $ 13,338    $ (10)   $ (603)   $ 16,553   
Year Ended December 31, 2018
Allowance for doubtful accounts $ 1,508    $ 32    $ (417)   $ (50)   $ 1,073   
Deferred tax valuation allowances $ 4,220    $ 561    $ (602)   $ (351)   $ 3,828   
Year Ended December 31, 2017
Allowance for doubtful accounts $ 1,749    $ (60)   $ (300)   $ 119    $ 1,508   
Deferred tax valuation allowances $ 4,879    $ 283    $ (1,164)   $ 222    $ 4,220   
(1) The amounts included in the “other” column primarily relate to the impact of foreign currency exchange rates.


113


EXHIBIT INDEX
Exhibit Number Description
3.1
3.2
3.3
3.4
4.1
4.2
4.3
4.4
4.5
4.6

114


Exhibit Number Description
21

115


Exhibit Number Description
23.2
   
   
   
   
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

** Represents a management contract or compensatory plan, contract or arrangement.


116


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  JASON INDUSTRIES, INC.
Dated: February 28, 2020 /s/ Brian K. Kobylinski
  Brian K. Kobylinski
President, Chief Executive Officer and Chairman of the Board of Directors
(Principal Executive Officer)  

Dated: February 28, 2020 /s/ Chad M. Paris
  Chad M. Paris
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ Brian K. Kobylinski President, Chief Executive Officer and Chairman of the Board of Directors Dated: February 28, 2020
Brian K. Kobylinski (Principal Executive Officer)
/s/ Chad M. Paris Senior Vice President and Chief Financial Officer Dated: February 28, 2020
Chad M. Paris (Principal Financial and Accounting Officer)
/s/ Jeffry N. Quinn Director Dated: February 28, 2020
Jeffry N. Quinn
/s/ James P. Heffernan Director Dated: February 28, 2020
James P. Heffernan
/s/ James E. Hyman Director Dated: February 28, 2020
James E. Hyman
/s/ Mitchell I. Quain Director Dated: February 28, 2020
Mitchell I. Quain
/s/ James M. Sullivan Director Dated: February 28, 2020
James M. Sullivan
/s/ Nelson Obus Director Dated: February 28, 2020
Nelson Obus
/s/ Andrew G. Lampereur Director Dated: February 28, 2020
Andrew G. Lampereur


117

Exhibit 4.7
Jason Industries, Inc.
DESCRIPTION OF SECURITIES
The following description summarizes the material terms and provisions of our common stock and preferred stock. For the complete terms of our common stock and preferred stock, please refer to our second amended and restated certificate of incorporation (“certificate of incorporation”), certificate of designations, preferences and limitations for our 8.0% series A convertible perpetual preferred stock (“certificate of designations”) and bylaws. The terms of these securities may also be affected by the Delaware General Corporation Law (the “DGCL”). The summary below is qualified in its entirety by reference to our certificate of incorporation, certificate of designations and bylaws, as such may be amended from time to time.
General
Our authorized capital stock consists of 120,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share, of which 100,000 have been designated as 8.0% Series A Convertible Perpetual Preferred Stock (the “series A preferred stock”).
Common Stock
Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of common stock possess all voting power for the election of our directors and all other matters requiring stockholder action. Holders of common stock are entitled to one vote per share on matters to be voted on by stockholders. Our board of directors is currently divided into three separate classes with each class serving a three-year term. There is no cumulative voting with respect to the election of directors. Our common stockholders have no preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to our common stock.
Subject to the rights, if any, of the holders of any outstanding series of preferred stock, holders of common stock are entitled to receive such dividends, if any, as may be declared from time to time by our board of directors in its discretion out of funds legally available therefor. In no event will any stock dividends or stock splits or combinations of stock be declared or made on common stock unless the shares of common stock at the time outstanding are treated equally and identically. In the event of our voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up, the holders of the common stock will be entitled to receive an equal amount per share of all of our assets of whatever kind available for distribution to stockholders, after the rights of the holders of the preferred stock have been satisfied. The shares of common stock presently outstanding are duly authorized, validly issued, fully paid and non-assessable.
Included in the number of shares of common stock currently outstanding are 4,906,666 “founder shares” that were issued to our initial public offering sponsor, Quinpario Partners I LLC (the “sponsor”), prior to our August 2013 initial public offering. The founder shares are identical to the other shares of our common stock, and holders of founder shares have the same stockholder rights as all other public stockholders, except that the founder shares are subject to certain transfer restrictions, pursuant to lockup provisions in the letter agreements with us and our initial stockholders and our initial holder. Those lockup provisions currently provide that the founder shares are not transferable or salable until the date (1) with respect to one-fourth of such shares, when the closing price of our common stock exceeds $12.00 for any 20 trading days within a 30-trading day period following June 30, 2014; (2) with respect to one-fourth of such shares, when the closing price of our common stock exceeds $13.50 for any 20 trading days within a 30-trading day period following June 30, 2014; (3) with respect to one-fourth of such shares, when the closing price of our common stock exceeds $15.00 for any 20 trading days within a 30-trading day period following June 30, 2014; and (4) with respect to one-fourth of such shares, when the closing price of our common stock exceeds $17.00 for any 20 trading days within a 30-trading day period following June 30, 2014; or earlier, in any case, if we engage in a transaction after June 30, 2014 (a) resulting in our stockholders having the right to exchange their shares for cash or other securities or (b) involving a consolidation, merger or other change in the majority of our board of directors or management team in which the company is the surviving entity. Notwithstanding the foregoing, the founder shares may be transferred (i) to our officers or directors or other initial stockholders, any affiliates or family members of any of our officers or directors or other initial stockholders, any members of the sponsor, or partners, affiliates or employees of the members of the sponsor, (ii) by gift to a member of the sponsor, partners, affiliates or employees of the members of the sponsor, one of our initial stockholders, an


immediate family member of one of the members of the sponsor, to a trust, the beneficiary of which is a family member of a member of the sponsor or partners, affiliates or employees of the members of the sponsor or one of our initial stockholders, or to a charitable organization, (iii) by virtue of laws of descent and distribution upon death of an officer or director or one of our initial stockholders, (iv) pursuant to a qualified domestic relations order, (v) by private sales at prices no greater than the price at which the securities were originally purchased, (vi) by virtue of the laws of Delaware or the sponsor’s limited liability company agreement upon dissolution of the sponsor or (vii) in the event of our consummation of a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property subsequent to June 30, 2014; provided, however, that in the case of clauses (i) through (v) these permitted transferees must enter into a written agreement agreeing to be bound by these transfer restrictions. The sponsor distributed certain of its founder shares in 2013 and distributed the rest of its founder shares to its members in late 2014/early 2015.
Warrants
Prior to June 30, 2019, we also had warrants outstanding that entitled the registered holder to purchase one share of our common stock at a price of $12.00 per share, subject to adjustment. These warrants expired on June 30, 2019.
Preferred Stock
Our certificate of incorporation provides that shares of our preferred stock may be issued from time to time in one or more series. Our board of directors is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. Our board of directors is able to, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects.
On June 30, 2014, we issued 45,000 shares of series A preferred stock. Holders of the series A preferred stock are entitled to cumulative dividends at an 8.0% dividend rate per annum payable quarterly on January 1, April 1, July 1, and October 1 of each year in cash and/or by delivery of additional shares of series A preferred stock. The Company has paid such quarterly dividends by delivery of additional shares of series A preferred stock since January 1, 2017. The series A preferred stock has no maturity date, is not redeemable by us at any time and will remain outstanding unless converted by the holders or mandatorily converted by us as described below. 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 our common stock (which is equivalent to an initial conversion price of approximately $12.32 per share), subject to certain adjustments in the conversion rate.
On January 22, 2018, certain holders of series A preferred stock exchanged 12,136 shares of series A preferred stock for 1,395,640 shares of common stock, a conversion rate of 115 shares of common stock for each share of series A preferred stock.
On or after June 30, 2016, we have the right, at our option, to cause all outstanding shares of the series A preferred stock to be automatically converted into shares of our common stock, at the then effective conversion rate, if the closing sale price of our common stock equals or exceeds 125% of the conversion price for at least 20 trading days in a period of 30 consecutive trading days.
If we undergo certain fundamental changes (as defined in the certificate of designations) the series A preferred stock will automatically be converted into our common stock on the effective date of such fundamental change at a conversion rate (subject to specified adjustments) equal to the greater of (x) the then effective conversion rate (without giving effect to such fundamental change adjustment) and (y) the quotient of (i) the sum of the $1,000 liquidation preference plus all accumulated and unpaid dividends to, but excluding, the settlement date for such conversion, divided by (ii) the volume weighted average of the closing sale prices of our common stock for the five consecutive trading days ending on the third business day prior to such settlement date; provided that, in the case of clause (y), the prevailing conversion rate as adjusted will not exceed the conversion rate obtained by dividing the $1,000 liquidation preference by 66 2/3% of the closing sale price of our common stock on June 30, 2014, the date of the initial issuance of the series A preferred stock (the closing sales price of our common stock on June 30, 2014 was $10.49).
2

The series A preferred stock also contains limitations that prevent the holders thereof from acquiring shares of common stock upon conversion that would result in the number of shares beneficially owned by such holder and its affiliates exceeding 9.99% of the total number of shares of our common stock then outstanding.
Except with respect to certain material and adverse changes to the series A preferred stock as described in the certificate of designations, holders of series A preferred stock do not have voting rights and will have no right to vote for any members of our board of directors, except as may be required by the DGCL.
Neither our certificate of incorporation nor the certificate of designations prohibits us from issuing additional series of preferred stock that would rank equally to the series A preferred stock as to dividend payments and liquidation preference. The issuances of other series of preferred stock could have the effect of reducing the amounts available to the series A preferred stock in the event of our liquidation, winding-up or dissolution. It may also reduce cash dividend payments on the series A preferred stock if we do not have sufficient funds to pay dividends on all series A preferred stock outstanding and outstanding parity preferred stock.
Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws
Our certificate of incorporation and bylaws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our board of directors. These provisions include:
•no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
•our directors serve staggered three-year terms;
•the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
•the ability of our board of directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
•a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
•the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer, or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;
•limiting the liability of, and providing indemnification to, our directors and officers;
•controlling the procedures for the conduct and scheduling of stockholder meetings;
•providing that directors may be removed prior to the expiration of their terms by stockholders only for cause; and
•advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the DGCL, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock.
3

Shareholder Rights Agreement
On September 1, 2019, our board of directors adopted a shareholder rights agreement (the “rights agreement”) between us and Continental Stock Transfer & Trust Company, as rights agent. Pursuant to the rights agreement, we declared a dividend of one preferred share purchase right (a “right”) for each outstanding share of our common stock, payable to the shareholders of record on September 6, 2019. New rights will accompany any new shares of common stock issued after September 6, 2019. The rights trade with and are inseparable from our common stock and will not be evidenced by separate certificates unless they become exercisable. The rights will expire on March 1, 2021.
In general terms, the rights agreement works by imposing a significant penalty upon any person or group which acquires 30% or more of our outstanding common stock without the approval of our board of directors.
Each right will allow its holder to purchase from us one one-thousandth of a share of Series A Junior Participating Preferred Stock for $5.00, subject to adjustment as set forth in the rights agreement, once the rights become exercisable. Per the rights agreement, the rights will not be exercisable until the earlier of (1) 10 days after the public announcement that a person or group has become an Acquiring Person (as defined in the rights agreement) by obtaining beneficial ownership of 30% or more of our outstanding common stock or (2) 10 business days (or such later date as our board of directors shall determine) following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person.
4
Execution Version
PURCHASE AGREEMENT
dated as of December 13, 2019
by and among
Jason Incorporated,
Jason International Holdings, Inc.,
Morton Global LLC,
and
MHIG LLC


PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made and entered into as of this 13th day of December, 2019, by and among: (i) Morton Global LLC, a Delaware limited liability company (“Morton Global”); (ii) MHIG LLC, a Delaware limited liability company ( “MHIG”, and together with Morton Global, collectively, on a joint and several basis, the “Buyer”); (iii) Jason Incorporated, a Wisconsin corporation (“JI”), and (iv) Jason International Holdings, Inc., a Nevada corporation (“JIH”, and together with JI shall be referred to herein as a “Seller”, and collectively, as the “Sellers”). All capitalized terms used herein but not otherwise defined herein shall have the meanings assigned to such terms in Article XII, below.
R E C I T A L S:
WHEREAS, as of the date of this Agreement: (i) JI owns all of the issued and outstanding Capital Stock of Metalex, LLC, a Delaware limited liability company (“Metalex”), consisting of one hundred (100) issued and outstanding units (the “Metalex Securities”); (ii) JHDM, S. de R.L. de C.V., a limited liability company (sociedad de responsabilidad limitada de capital variable) established under the laws of Mexico (“JHDM”) owns approximately ninety-nine point nine percent (99.9%) of the issued and outstanding Capital Stock of Jason DM, S. de R.L. de C.V., a limited liability company (sociedad de responsabilidad limitada de capital variable) established under the laws of Mexico (“Jason DM”), consisting of one equity interest with a total value of MX$46,625,209.00 (forty six million six hundred twenty five thousand two hundred nine pesos 00/100) (the “Majority Jason DM Securities”); (iii) JIH owns approximately zero point one percent (0.1%) of the issued and outstanding Capital Stock of Jason DM, consisting of one equity interest with a value of MX$30.00 (thirty pesos 00/100) (the “Minority Jason DM Securities”, and together with the Majority Jason DM Securities, collectively, the “Jason DM Securities”); (iv) JI owns approximately ninety nine point nine percent (99.9%) of the issued and outstanding Capital Stock of JHDM, consisting of one equity interest with a total value of MX$46,645,956.00 (forty six million six hundred forty five thousand nine hundred fifty six pesos 00/100) (the “Majority JHDM Securities”); and (v) JIH owns approximately zero point one percent (0.1%) of the issued and outstanding Capital Stock of JHDM, consisting of one equity interest with a total value of MX$30.00 (thirty pesos 00/100) (the “Minority JHDM Securities” and together with the Majority JHDM Securities, collectively, the “JHDM Securities”);
WHEREAS, as of the date hereof, JI (doing business as Metalex and Morton) and certain of its Affiliates have operated the business of manufacturing expanded and perforated metal components for use in filtration, safety grating, rail and similar applications for purchase by rail and heavy equipment commercial manufacturers in the United States of America, Mexico and Canada (the “Business”), and prior to the date hereof, JI (and/or certain Affiliates thereof) has contributed to Metalex (and/or, to the extent necessary, to Jason DM and/or JHDM) certain assets and liabilities of the Business; and
WHEREAS, (i) JI desires to sell to Morton Global, and the Morton Global desires to purchase from JI, the Metalex Securities; (ii) JI desires to sell to Morton Global, and Morton Global desires to purchase from JI, the Majority JHDM Securities; (iii) JIH desires to sell to MHIG, and MHIG desires to purchase from JIH, the Minority Jason DM Securities; and (iv) JIH

        
desires to sell to MHIG and MHIG desires to purchase from JIH, the Minority JHDM Securities, in each case, upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the recitals set forth above, the representations, warranties, covenants and agreements of the parties set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby promise and agree as follows:
Article I
Securities To Be Purchased
Subject to the terms and conditions set forth in this Agreement, at the Closing, (i) JI shall sell and transfer to Morton Global, and Morton Global shall purchase from JI, the Metalex Securities; (ii) JI shall sell and transfer to Morton Global, and Morton Global shall purchase from JI, the Majority JHDM Securities; (iii) JIH shall sell and transfer to MHIG, and MHIG shall purchase from JIH, the Minority Jason DM Securities; and (iv) JIH shall sell and transfer to MHIG, and MHIG shall purchase from JIH, the Minority JHDM Securities.
Article II
Purchase Price
2.1 Purchase Price. The aggregate purchase price for: (i) the Minority Jason DM Securities shall be an amount equal to One Thousand U.S. Dollars ($1,000 USD) (the “Minority Jason DM Purchase Price”); and (ii) the Majority JHDM Securities shall be an amount equal to Nine Hundred Ninety Eight Thousand U.S. Dollars ($998,000 USD) (the “Majority JHDM Purchase Price”). The aggregate purchase price for the Minority JHDM Securities shall be an amount equal to One Thousand US Dollars ($1,000 USD) (the “Minority JHDM Purchase Price”, and together with the Majority JHDM Purchase Price and the Minority Jason DM Purchase Price, the “Jason DM Purchase Price”). The aggregate purchase price for the Metalex Securities shall be an amount equal to Four Million U.S. Dollars ($4,000,000 USD) (the “Base Purchase Price”), as adjusted by the Purchase Price Adjustment calculated pursuant to Section 2.2, below, plus (a) the Closing Cash, minus (b) the Closing Indebtedness, minus (c) the Transaction Expenses (such adjusted Base Purchase Price shall be defined herein as the “Metalex Purchase Price”). The Purchase Price shall be paid by the Buyer to the Sellers as provided in Section 2.3 and Section 2.4, below. Notwithstanding any provision contained herein to the contrary (including Section 2.2 and Section 2.4), and for the avoidance of doubt, the Jason DM Purchase Price shall not be subject to adjustment after the Closing.
2.2 Adjustments to the Base Purchase Price. The Base Purchase Price shall be subject to adjustment as follows (the “Purchase Price Adjustment”):
(a) The Base Purchase Price shall be increased by the amount by which the Working Capital Amount exceeds the Working Capital Target by more than One Hundred Thousand U.S. Dollars ($100,000 USD); and
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(b) The Base Purchase Price shall be decreased by the amount by which the Working Capital Amount is less than the Working Capital Target by more than One Hundred Thousand U.S. Dollars ($100,000 USD).
For purposes hereof, the “Working Capital Amount” shall equal the difference between: (i) the amount of the Current Assets as of 11:59 p.m. local time in Milwaukee, Wisconsin on the Closing Date (the “Effective Time”), and (ii) the amount of the Current Liabilities as of the Effective Time, which Current Assets and Current Liabilities shall be determined in accordance and in a manner consistent with the accounting and financial principles, practices, methodologies and policies historically used by the Sellers (and/or their Affiliates) with respect to the Target Companies and used in the preparation of the example calculation of the “Adjusted Net Working Capital” attached hereto as Exhibit 2.2. For the avoidance of doubt, the Working Capital Amount shall not include (i) any portion of the Excluded Assets, (ii) any portion of the Excluded Liabilities, (iii) any portion of the Pension Plan Liabilities, (iv) any Closing Cash, or (v) any purchase accounting adjustments for transactions occurring on the Closing Date. The Current Assets and Current Liabilities included in the Working Capital Amount shall be calculated without regard to any changes to the Target Companies or the Business after the Effective Time, including with respect to accounting, Records, policies and/or procedures. Any changes in the Current Assets and the Current Liabilities included in the Working Capital Amount (including any reserves, judgments or estimates) may only be based on facts and circumstances occurring prior to the Effective Time.
2.3 Closing Payments.
(a) On or prior to the date hereof, the Sellers shall have prepared and delivered to the Buyer a statement (the “Closing Statement”) containing an estimate of the Purchase Price as of the Effective Time (the “Estimated Purchase Price”), which Closing Statement shall include schedules setting forth estimates of the Working Capital Amount, the Purchase Price Adjustment, the Closing Cash, the Closing Indebtedness and the Transaction Expenses, in each case, as of the Effective Time.
(b) At the Closing, the following payments shall be made:
(i) The Buyer shall deliver to the Sellers, by wire transfer of immediately available funds to the bank account or accounts as shall be designated in writing by the Sellers, an amount equal to the Estimated Purchase Price, less the Indemnification Escrow Amount (the Estimated Purchase Price, less the Indemnification Escrow Amount shall be referred to herein as the “Sellers’ Closing Payment”), which amount shall be allocated among the Sellers in the manner set forth in Exhibit 2.3 attached hereto, with the understanding that the corresponding allocated portions of the Minority Jason DM Purchase Price, the Majority JHDM Purchase Price and the Minority JHDM Purchase Price shall be paid directly by the Buyer to JI (for the benefit of each of JI and JIH, as applicable).
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(ii) The Buyer shall deliver the Indemnification Escrow Amount to the Escrow Agent for deposit into an escrow account in accordance with the terms and conditions of the Indemnification Escrow Agreement.
(iii) The Buyer shall, on behalf of the Target Companies, deliver to each holder of Closing Indebtedness identified on the Closing Statement, by wire transfer of immediately available funds to such bank account as shall be designated in the payoff letter for each such holder as described in Section 3.2(k), below, the amount reflected in such payoff letter.
(iv) The Buyer shall, on behalf of the Sellers and the Target Companies, deliver to each party owed Transaction Expenses identified on the Closing Statement, by wire transfer of immediately available funds to such bank account as shall be designated in writing by such party, the amount set forth opposite such party’s name on the Closing Statement.
2.4  Determination of the Final Purchase Price
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(a) Within forty five (45) calendar days after the Closing, the Buyer shall prepare and deliver to the Sellers a final determination of the Purchase Price, including a final determination of the Working Capital Amount, the Purchase Price Adjustment, the Closing Cash, the Closing Indebtedness and the Transaction Expenses (the “Final Statement”), and further including such schedules and data as may be appropriate to support such determinations. When making such determinations, the Buyer shall use the accounting and financial principles, practices, methodologies and policies historically used by the Sellers (and/or their Affiliates) with respect to the Target Companies and used in the preparation of the example calculation of the “Adjusted Net Working Capital” attached hereto as Exhibit 2.2. The Sellers shall be entitled to review any working papers, trial balances and similar materials relating to the Final Statement prepared by the Buyer, and the Buyer shall make any Representatives of the Buyer available to the Sellers to provide assistance to the Sellers as may be reasonably requested in connection with the Sellers’ review of the Final Statement.
(b) Within forty-five (45) calendar days after receipt of the Final Statement from the Buyer, the Sellers must notify the Buyer of any objections to the Buyer’s determination of the final Purchase Price, including the final determinations of the Working Capital Amount, the Purchase Price Adjustment, the Closing Cash, the Closing Indebtedness and/or the Transaction Expenses, and the basis for such disagreements. In the event that the Sellers do not notify the Buyer, within forty-five (45) calendar days after receipt of the Final Statement, that the Sellers have any objections to such Final Statement or the Buyer’s determination of the final Purchase Price, including the final determinations of the Working Capital Amount, the Purchase Price Adjustment, the Closing Cash, the Closing Indebtedness and/or the Transaction Expenses, then the final Purchase Price, including the Working Capital Amount, the Purchase Price Adjustment, the Closing Cash,
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the Closing Indebtedness and the Transaction Expenses as set forth in the Final Statement shall be final hereunder. In the event that the Sellers notify the Buyer, within forty-five (45) calendar days after receipt of the Final Statement, that the Sellers have any such objection, then the Buyer and the Sellers shall use their good faith efforts to attempt to resolve such disputed items. In the event the Buyer and the Sellers are unable to resolve such disputed items within thirty (30) calendar days after receipt by the Buyer of the Sellers’ notice of dispute, such disputed items shall be referred to a regionally or nationally recognized independent accounting firm, mutually determined by JI and the Buyer (the “Independent Accounting Firm”) to resolve finally such disputed items; provided, however, that the scope of the Independent Accounting Firm’s engagement shall be limited to the resolution of the disputed items described in the Sellers’ notice of dispute and the redetermination, if any, of the Working Capital Amount, the Purchase Price Adjustment, the Closing Cash, the Closing Indebtedness and the Transaction Expenses in light of such resolution (and corresponding redeterminations of the final Purchase Price). When making such determinations, the Independent Accounting Firm shall use the accounting and financial principles, practices, methodologies and policies historically used by the Sellers (and/or their Affiliates) with respect to the Target Companies and used in the preparation of the example calculation of the “Adjusted Net Working Capital” attached hereto as Exhibit 2.2. The determination of the Independent Accounting Firm shall be made as promptly as possible and shall be final and binding upon the parties (absent manifest error). Each party hereto shall be permitted to submit such data and information to the Independent Accounting Firm as such party deems appropriate. The expenses and fees of the Independent Accounting Firm shall be allocated between the Buyer and the Sellers as follows: (i) the Buyer’s share shall equal the product of the aggregate amount of such fees and expenses multiplied by a fraction, the numerator of which shall be the aggregate amount of the disputed items not determined in favor of the Buyer and the denominator of which shall be the aggregate amount of all disputed items, and (ii) the balance shall be paid by the Sellers.
(c) In the event the Buyer fails to deliver to the Sellers the Final Statement within forty five (45) calendar days after the Closing Date in accordance with Section 2.4(a), above, at the Sellers’ election, the amounts set forth on the Closing Statement shall either be deemed final for all purposes of this Agreement (absent manifest error) or the Sellers’ may unilaterally engage the Independent Accounting Firm to determine the final Working Capital Amount, the Purchase Price Adjustment, the Closing Cash, the Closing Indebtedness and the Transaction Expenses (and corresponding determination of the final Purchase Price). When making such determinations, the Independent Accounting Firm shall use the accounting and financial principles, practices, methodologies and policies historically used by the Sellers (and/or their Affiliates) with respect to the Target Companies and used in the preparation of the example calculation of the “Adjusted Net Working Capital” attached hereto as Exhibit 2.2. The determinations of the Independent Accounting Firm shall be made as promptly as possible and shall be final and binding upon the parties (absent manifest error). Each party hereto shall be permitted to submit such data and information to the Independent Accounting Firm as
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such party deems appropriate. The expenses and fees of the Independent Accounting Firm shall be paid by the Buyer.
(d) The final Purchase Price, including the Working Capital Amount, the Purchase Price Adjustment, the Closing Cash, the Closing Indebtedness and the Transaction Expenses as finally agreed by the parties or as determined by the Independent Accounting Firm as described in this Section 2.4 shall be final for all purposes of this Agreement (absent manifest error).
(e) Once the final Purchase Price is determined in accordance with this Section 2.4, the following shall occur:
(i)  If the final Purchase Price determined in accordance with this Section 2.4 exceeds the Estimated Purchase Price, then, within five (5) Business Days following the final determination of the final Purchase Price, the Buyer shall pay the amount of such excess to the Sellers, by wire transfer of immediately available funds to such bank account or accounts as shall be designated in writing by the Sellers, which amount shall be allocated among the Sellers in the manner set forth in Exhibit 2.3 attached hereto.
(ii) If the Estimated Purchase Price exceeds the final Purchase Price determined in accordance with this Section 2.4, then, within five (5) Business Days following the final determination of the final Purchase Price, the Sellers and the Buyer shall, pursuant to the terms and conditions of the Indemnification Escrow Agreement, jointly instruct the Escrow Agent to pay the amount of such excess to the Buyer from the Escrowed Sellers’ Funds in accordance with the Indemnification Escrow Agreement. If the amount to be paid to the Buyer under this Section 2.4(e)(ii) exceeds the amount of the Escrowed Sellers’ Funds (the amount of such excess, the “Shortfall”), the Sellers shall be required to pay to the Buyer the Shortfall by wire transfer of immediately available funds to a bank account designated in writing by the Buyer to the Sellers not later than five (5) calendar days prior to the date of payment.
If any amount owed by a party pursuant to this Section 2.4(e) remains unpaid after such five (5) Business Day period, interest shall accrue on the unpaid amount from the date due to the payment date at a rate per annum equal to eight percent (8%).
2.5 Excluded Assets Notwithstanding anything to the contrary herein, the Sellers shall cause the Target Companies to distribute or otherwise transfer all of the Target Companies’ right, title and interest in and to the Excluded Assets to the Sellers or their designees on or prior to the Closing Date. In addition, the Sellers shall have the right to cause the Target Companies to distribute the Cash of the Target Companies to the Sellers or their designees on or prior to the Closing Date.


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Article III
Closing
3.1 Closing
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(a) The Closing shall be conducted on the date of this Agreement (the “Closing Date”) telephonically and through the mutual exchange via electronic means of executed copies of this Agreement and the Ancillary Agreements to be delivered at the Closing. The Closing of the transactions contemplated by this Agreement shall be deemed effective as of the Effective Time.
(b) The transfer of the Minority Jason DM Securities, the Minority JHDM Securities and Majority JHDM Securities will be effectuated pursuant to individual short-form purchase and sale agreements (each, a “Foreign Transfer Agreement”, and collectively, the “Foreign Transfer Agreements”). In the event of any conflicts between any Foreign Transfer Agreement and this Agreement, the terms of this Agreement shall control in all respects. The Sellers and the Buyer shall not, and shall cause their respective Affiliates not to, bring any claim for any cause of action or any other claim whatsoever under any Foreign Transfer Agreement. Each Seller (on behalf of itself and each of its Affiliates) irrevocably releases the Buyer (and each of its Affiliates) from any breach under any Foreign Transfer Agreement and hereby waives the right to bring any Proceeding against Buyer (and/or any Affiliate thereof) in connection with any breach thereunder, and each of Morton Global and the MHIG (on behalf of itself and each of its Affiliates) irrevocably releases each Seller (and each of its Affiliates) from any breach under any Foreign Transfer Agreement and hereby waives any right to bring any Proceeding against any Seller (and/or any Affiliate thereof) in connection with any breach thereunder.
3.2 Seller Closing Deliverables. At the Closing, the Sellers shall deliver to the Buyer each of the following:
(a) duly executed resignations of all officers, managers and directors of Metalex, JHDM and Jason DM as requested by the Buyer to the Sellers prior to the Closing;
(b) constructive possession of the Records of JHDM and Jason DM and actual possession of the records of Metalex other than the records of Metalex that are not located at the Metalex facility which Sellers or Sellers’ counsel shall deliver to Buyer or Buyer’s counsel after the Closing;
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(c) a copy of: (i) the entry of the partners’ registry book (Libro de Registro de Socios) of Jason DM evidencing the sale of the Minority Jason DM Securities to MHIG pursuant to the terms and conditions hereof; and (ii) the partners’ meeting resolutions of Jason DM dated prior to the Closing unanimously approving the transfer of the Minority Jason DM Securities and admitting MHIG as a partner of Jason DM; and to waive their rights of first refusal to acquire the Minority Jason DM Securities, as applicable;
(d)  a copy of: (i) the entry of the partners’ registry book (Libro de Registro de Socios) of JHDM evidencing the sale of the Majority JHDM Securities to Morton Global and the Minority JHDM Securities to MHIG pursuant to the terms and conditions hereof; and (ii) the partners’ meeting resolutions of JHDM dated prior to the Closing unanimously approving the transfer of the JHDM Securities and admitting Morton Global and MHIG as partners of JHDM; and to waive their rights of first refusal to acquire JHDM Securities, as applicable;
(e) original corporate books of Jason DM;
(f) original corporate books of JHDM;
(g) a certificate of status or good standing for Metalex issued by the appropriate Governmental Body;
(h) a certificate from an officer of each Seller, in a form reasonably satisfactory to the Buyer, setting forth the resolutions of the board of directors or other governing body, as applicable, of each Seller authorizing the execution of this Agreement and all Ancillary Agreements to which each Seller is a party and taking of all actions deemed necessary or advisable to consummate the transactions contemplated herein and therein;
(i) a certificate from an officer or attorney-in-fact of each Target Company, in a form reasonably satisfactory to the Buyer, attaching and certifying as to the Organizational Documents of each Target Company, as appropriate, and setting forth the resolutions of the manager, board of directors or other governing body, as applicable, of each Target Company authorizing the execution of all Ancillary Agreements to which each Target Company is a party and the taking of all actions deemed necessary or advisable to consummate the transactions contemplated therein;
(j) an escrow agreement, (the “Indemnification Escrow Agreement”), duly executed by JI;
(k) a duly executed payoff letter from each holder of Closing Indebtedness identified on the Closing Statement with an asterisk (*) evidencing that, upon receipt of a specified amount, such Closing Indebtedness shall be satisfied in full and committing to provide appropriate termination statements or other documents to release any Satisfied Liens held by such holder;
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(l) a transition services agreement by and between Morton Global and JI to be dated as of the Closing Date (the “TSA”), duly executed by JI;
(m) the Foreign Transfer Agreements, duly executed by JI and JIH, as applicable;
(n) an assignment of units with respect to the Metalex Securities, duly executed by JI, in form and substance reasonably satisfactory to the Buyer;
(o) certificates of non-foreign status of JI and JIH complying with the Treasury Regulations promulgated under Section 1445 of the Code; and
(p) the Indemnification Agreement (the “Indemnification Agreement”), duly executed by Jason Industries, Inc., a Delaware corporation (“JII”).
3.3 Buyer Closing Deliverables. At the Closing, the Buyer shall deliver to the Sellers each of the following:
(a) the payments required to be made by the Buyer pursuant Section 2.3(b), above; 
(b) a certificate from an officer or manager of each of Morton Global and MHIG, in a form reasonably satisfactory to the Sellers, setting forth the resolutions of the holders of Capital Stock of Morton Global and MHIG, as applicable, and of the manager, board of directors or other governing body, as applicable, of each of Morton Global and MHIG, as applicable, authorizing the execution of this Agreement and all Ancillary Agreements to which Morton Global and MHIG, as applicable, are a party and the taking of all actions deemed necessary or advisable to consummate the transactions contemplated herein and therein;
(c) the Indemnification Escrow Agreement, duly executed by the Buyer and the Escrow Agent;
(d) the Foreign Transfer Agreements, duly executed by Morton Global and MHIG, as applicable;
(e) the TSA, duly executed by Morton Global; and
(f) the Indemnification Agreement, duly executed by the Buyer.
ARTICLE IV
Warranties and Representations of the Sellers
The Sellers hereby warrant and represent to the Buyer, which warranties and representations shall survive the Closing for the periods, and subject to the limitations, set forth in Article X, below, that, except as set forth in the Disclosure Schedules, the following statements are
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true and correct as of the date hereof (except those representations and warranties which address matters as of or for a particular date or time period, which statements shall be true and correct only as of such date or for such time period):
4.1 Authority. The Sellers have the power and authority to enter into this Agreement and the Ancillary Agreements to which any Seller is a party, and to consummate the transactions contemplated hereby and thereby. This Agreement has been, and the Ancillary Agreements to which any Seller is a party will be, duly and validly executed and delivered by such Seller, and this Agreement and such Ancillary Agreements are and shall constitute the legal, valid and binding obligations of such Seller enforceable against such Seller in accordance with their respective terms, subject in each case, to bankruptcy, reorganization, insolvency and other similar Legal Requirements affecting the enforcement of creditors’ rights in general and to general principles of equity (regardless of whether considered in a Proceeding in equity or an action at law).
4.2 No Conflict. Neither the execution and delivery of this Agreement or the Ancillary Agreements to which any Seller is a party nor the consummation or performance of any of the transactions contemplated hereby or thereby by the Sellers will: (a) contravene, conflict with or result in a violation of or default under any provision of the Organizational Documents of any Target Company or any Seller, (b) materially contravene, conflict with or result in a material violation of or default under any Legal Requirement or any Order to which the Sellers, the Subject Securities or any Target Company is subject, (c) assuming all Consents are obtained, materially violate or conflict with, or result in a material default under, or give any Person the right to exercise any material remedy under, to accelerate the maturity or performance of, or to cancel, terminate or materially modify, any Material Contract, or (d) result in the imposition or creation of any material Lien upon, or with respect to, the Subject Securities or any of the assets owned, leased or licensed by any Target Company. All authorizations of any Governmental Body that are necessary for the performance of the Sellers’ obligations under this Agreement have been obtained. No action, consent, approval, Order or authorization of, or registration, declaration or filing with, any Governmental Body which has not been obtained or made prior to the Closing, is required to be obtained or made by the Sellers or any Target Company in connection with the execution and delivery of this Agreement and the Ancillary Agreements to which any Seller is a party or the consummation by the Sellers of any of the transactions contemplated hereby or thereby, except where the failure to obtain such action, consent, approval, Order, authorization, registration, declaration or filing would not have a Material Adverse Effect.
4.3 Restrictions on Transfer. There are no voting trust agreements, powers of attorney, shareholder agreements, proxies or any other Contracts to which any Target Company is a party or by which any Target Company or any Seller is bound relating to the sale, transfer, voting, registration, acquisition, distribution rights or disposition of any of the Subject Securities or otherwise granting any Person any right in respect of the Subject Securities, and there are no existing restrictions on the transfer of Subject Securities, other than restrictions imposed by applicable Organizational Documents and applicable Legal Requirements, none of which will be violated as a result of the transfers contemplated by this Agreement.
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4.4 Corporate Matters
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(a) Metalex is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has the power and authority to own or lease its properties and assets as and where currently located and to carry on all of its business activities currently conducted. Metalex is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its assets makes such qualification necessary, except where the lack of such qualification or good standing would not have a Material Adverse Effect.
(b) Jason DM is a limited liability company (sociedad de responsabilidad limitada de capital variable) established under the laws of Mexico, existing under the laws of Mexico and has the power and authority to own or lease its properties and assets as and where currently located and to carry on all of its business activities currently conducted. Jason DM is duly qualified to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its assets makes such qualification necessary, except where the lack of such qualification would not have a Material Adverse Effect.
(c) JHDM is a limited liability company (sociedad de responsabilidad limitada de capital variable) established under the laws of Mexico, existing under the laws of Mexico and has the power and authority to own or lease its properties and assets as and where currently located and to carry on all of its business activities currently conducted. JHDM is duly qualified to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its assets makes such qualification necessary, except where the lack of such qualification would not have a Material Adverse Effect.
4.5 Documentation. The stock register or partners’ registry book (Libro de Registro de Socios) of the Target Companies, as applicable (copies of which have been made available for inspection by the Buyer and its Representatives), is true, correct and complete in all material respects.
4.6 Capitalization; Title to Subject Securities
(a) The authorized Capital Stock of Metalex consists of the Metalex Securities, all of which are issued and outstanding and owned beneficially and of record by JI, and, at the Closing, JI will deliver to Morton Global good and marketable title to the Metalex Securities, free and clear of all Liens other than transfer restrictions under applicable Legal Requirements. The Metalex Securities constitute all of the issued and outstanding Capital Stock of Metalex. All of the issued and outstanding Capital Stock of Metalex was duly authorized and validly issued and is fully paid and non-assessable. None of the issued and outstanding Capital Stock of Metalex was issued in violation of the Organizational Documents of Metalex, any Legal Requirement, any Order or any Contract or in violation of the preemptive rights of any Person. There are no outstanding or authorized warrants, options, subscriptions, convertible or exchangeable securities or other agreements
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pursuant to which Metalex is or may become obligated to issue or sell any Capital Stock of Metalex. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to Metalex.
(b) The authorized Capital Stock of Jason DM consists of the Jason DM Securities, all of which are issued and outstanding and owned beneficially and of record by JHDM and JIH. At the Closing, JIH will deliver to MHIG good and marketable title to the Minority Jason DM Securities, free and clear of all Liens other than transfer restrictions under applicable Legal Requirements. As of the date hereof, the Majority Jason DM Securities are owned by JHDM and the Jason DM Securities constitute all of the issued and outstanding Capital Stock of Jason DM. All of the issued and outstanding Capital Stock of Jason DM was duly authorized and issued and is fully paid and non-assessable. None of the issued and outstanding Capital Stock of Jason DM was issued in violation of the Organizational Documents of Jason DM, any Legal Requirement, any Order or any Contract or in violation of the preemptive rights of any Person. There are no outstanding or authorized warrants, options, subscriptions, convertible or exchangeable securities or other agreements pursuant to which Jason DM is or may become obligated to issue or sell any Capital Stock of Jason DM. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to Jason DM.
(c) The authorized Capital Stock of JHDM consists of the JHDM Securities, all of which are issued and outstanding and owned beneficially and of record by JI and JIH. At the Closing, JI will deliver to Morton Global good and marketable title to the Majority JHDM Securities, free and clear of all Liens other than transfer restrictions under applicable Legal Requirements. At the Closing, JIH will deliver to MHIG good and marketable title to the Minority JHDM Securities, free and clear of all Liens other than transfer restrictions under applicable Legal Requirements. The JHDM Securities constitute all of the issued and outstanding Capital Stock of JHDM. All of the issued and outstanding Capital Stock of JHDM was duly authorized and issued and is fully paid and non-assessable. None of the issued and outstanding Capital Stock of JHDM was issued in violation of the Organizational Documents of JHDM, any Legal Requirement, any Order or any Contract or in violation of the preemptive rights of any Person. There are no outstanding or authorized warrants, options, subscriptions, convertible or exchangeable securities or other agreements pursuant to which JHDM is or may become obligated to issue or sell any Capital Stock of JHDM. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to JHDM.
4.7 Subsidiaries. Other than JHDM owning the Majority Jason DM Securities, no Target Company has a Subsidiary.
4.8 Title to Assets. The Target Companies have good and marketable title to, a valid leasehold interest in, or have the valid and enforceable rights to use, all tangible personal property and assets used by the Target Company in connection with the conduct of the Business as presently conducted by the Target Companies, free and clear of all Liens, other than Permitted Liens and Satisfied Liens. The tangible personal property of the Target Companies is, taken as a
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whole, in good operating condition and repair, ordinary wear and tear excepted, to operate the Business in the manner conducted by the Sellers immediately prior to the Closing.
4.9 Real Property. No Target Company owns any real property. Schedule 4.9 lists each Real Property Lease. Metalex has never held any ownership interest in any Leased Real Property except as set forth on Schedule 4.9. Each Real Property Lease is in full force and effect against the applicable Target Company, and, to the Knowledge of the Sellers, each other party thereto. Each Real Property Lease is the valid and legally binding obligation of the applicable Target Company. No Target Company, or, to the Knowledge of the Sellers, any other party to a Real Property Lease, is in material default under any Real Property Lease. No written notice of default under any Real Property Lease has been sent or received by any Target Company that is not currently resolved. No condition exists which, but for the giving of notice or the passage of time, or both, would constitute a default by any Target Company, or, to the Knowledge of the Sellers, any other party pursuant to any Real Property Lease. No pending Proceeding or Order exists against any Target Company, or, to the Knowledge of the Sellers, any other Person, which would require the repair, alteration or correction of any existing condition of any portion of any Leased Real Property. No Target Company has received any written notice from any Governmental Body that any of the improvements on the Leased Real Property or any Target Company’s use of the Leased Real Property violates any use or occupancy restrictions, any covenant of record or any zoning or building Legal Requirement (except that, notwithstanding the foregoing, all representations and warranties regarding compliance with Environmental Laws shall be governed solely by Section 4.18, below). All of the Leased Real Property has access to a public road and to all utilities necessary for the operation of the Business as currently conducted.
4.10 Proceedings; Orders
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(a) There is no Proceeding pending or, to the Knowledge of the Sellers, threatened in a writing delivered to any Target Company against any Target Company. No Target Company is subject to any Order materially affecting the properties, assets, personnel or business activities of any Target Company.
(b) There is no Proceeding pending or, to the Knowledge of the Sellers, threatened in writing against the Sellers which would impair the ability of the Sellers to consummate the sale of the Metalex Securities, the Minority Jason DM Securities, the Minority JHDM Securities or the other transactions contemplated by this Agreement or the Ancillary Agreements to which any Seller is a party. The Sellers are not subject to any Order that is material and relates to the Subject Securities.
4.11 Intellectual Property
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(a) Schedule 4.11(a) lists all of the following Owned Intellectual Property: (i) all United States and foreign issued design patents and utility patents and all pending
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applications therefor, (ii) all registered trademarks, registered service marks and trademark and pending service mark registration applications, (iii) all registered copyrights and pending copyright registration applications and all renewals and extensions, and (iv) all domain name registrations.
(b) Schedule 4.11(b) lists all Licenses (excluding shrink-wrap, click-wrap, click-through or other similar licenses with respect to off-the-shelf or generally available personal computer software) under which any of the Target Companies are subject to receive, or obligated to pay, as the case may be, fees (including support and maintenance fees) of more than One Hundred Thousand U.S. Dollars ($100,000 USD) per year following the Closing.
(c) The Target Companies own all Owned Intellectual Property, and have the right to use all other Intellectual Property used by the Target Companies that is necessary for the Target Companies to conduct the Business as presently conducted.
(d) During the three (3) year period immediately preceding the Closing Date, (i) no Target Company has infringed upon, misappropriated or violated any Intellectual Property rights of any third party, and (ii) no Target Company has received any written charge, complaint, claim or notice (including an offer to license) alleging any such infringement, misappropriation or violation.
4.12 Financial Statements
(a) Attached to Schedule 4.12(a) are correct and complete copies of the following financial statements (collectively, the “Consolidated Financial Statements”): (a) the consolidated unaudited balance sheet and profit and loss statement of the Business, as of, and for each of the fiscal years ended, December 31, 2017 and December 31, 2018; and (b) the consolidated unaudited balance sheet and profit and loss statement of the Business, as of, and for the eleven (11) month period ended on November 29, 2019. The Consolidated Financial Statements: (i) present fairly the financial position and results of operations of the Business as of and for the periods ended on the dates designated therein, in accordance with U.S. GAAP; and (ii) are prepared from, and are materially consistent with, such financial statements as have been prepared and used by the Business (and/or the Sellers and/or their Affiliates) in the ordinary course of business of managing the Business and measuring and reporting the Business’ operating results.
4.13 Taxes
.
(a) All material Returns with respect to the Target Companies due prior to the date hereof have been timely and properly filed. All such material Returns were true, correct and complete in all material respects. All material Taxes due and payable by the Target Companies prior to the Closing have been, or will have been, paid in full prior to the Closing or accrued as a Current Liability on the Closing Statement.
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(b) No Return or liability for Taxes of the Target Companies is currently the subject of an audit or other Proceeding by any Tax authority.
(c) No Tax Liens have been filed against the assets of any Target Company, other than Permitted Liens. No Target Company is currently the beneficiary of any extension of time within which to file any material Return.
(d) No Target Company is participating or has participated in a “reportable transaction” within the meaning of Section 6707A(c)(1) of the Code and Treasury Regulation Section 1.6011-4(b).
(e) No Target Company has waived any statute of limitation in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency which extension is still in effect.
(f) All material Taxes required to be withheld, collected or deposited by or with respect to each Target Company has been timely withheld, collected or deposited, as the case may be, and to the extent required, have been paid to the relevant Tax authority.
(g) No Target Company is a party to, or bound by, or has any obligation under, any Tax allocation, Tax indemnity or Tax sharing agreement or similar contract or arrangement or any agreement (other than pursuant to customary commercial Contracts not primarily related to Taxes and entered into in the ordinary course).
(h) Metalex is classified as a disregarded entity for U.S. federal income tax purposes and has been a disregarded entity since March 29, 2019. Immediately prior to that date, Metalex was classified as a C corporation for U.S. federal income tax purposes. Each of JHDM and Jason DM is classified as a controlled foreign corporation for U.S. federal income tax purposes.
(i) Notwithstanding the representations or warranties in any other section in this Agreement, this Section 4.13 constitutes the Sellers’ sole and exclusive representations and warranties with respect to any Tax matters.
4.14 Material Contracts.
(a) Schedule 4.14(a) lists all Material Contracts, and Schedule 4.14(a)(i) identifies any Consents required pursuant to the Material Contracts. For purposes of this Agreement, “Material Contract” means any Contract:
(i) under which any Target Company has received more than Two Hundred Fifty Thousand U.S. Dollars ($250,000 USD) in revenue within the twelve (12) month period prior to the date hereof (excluding purchase orders, statements of work and other similar instruments, in each case, entered into in the ordinary course of business);
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(ii) not identified in Sections 4.14(a)(iii)-(viii), below, and under which any Target Company is obligated to pay a liability of more than Two Hundred Fifty Thousand U.S. Dollars ($250,000 USD) in any calendar year following the Closing (excluding the following entered into in the ordinary course of business consistent with past practices: purchase orders, statements of work and other similar instruments, Employee Plans and related service and administrative documents, and insurance policies);
(iii) which constitutes a License and appears on Schedule 4.11(b);
(iv) involving any joint venture, partnership or similar agreement with a Target Company;
(v) governing the borrowing of money or the repayment of Indebtedness by any Target Company or any Guarantee by any Target Company;
(vi) involving a distributor, sales representative, consultant or broker arrangement under which any Target Company is obligated to pay more than Two Hundred Fifty Thousand U.S. Dollars ($250,000 USD) per year and which by its express terms is not terminable by such Target Company at will or by giving notice of sixty (60) days or less, without liability other than payment for services rendered through the termination date;
(vii) involving the acquisition by any Target Company of any business enterprise outside of the ordinary course of business during the last three (3) years;
(viii) which creates a Lien on any of the Subject Securities or any material property or asset of any Target Company;
(ix) between any Target Company, on the one hand, and the Sellers or any Affiliate of the Sellers, on the other hand;
(x) containing covenants that limit the freedom of any Target Company to engage in any line of business or to compete with any Person (excluding confidentiality agreements and nondisclosure agreements entered into in the ordinary course of business consistent with past practices);
(xi) granting to any Person a first refusal, a first offer or similar preferential right to purchase or acquire any material right, asset or property of any Target Company or the Subject Securities; and
(xii) entered into by any Target Company outside the ordinary course of business and not otherwise identified Sections 4.14(a)(i)-(xi), above, but specifically excluding any and all Employee Plans.
(b) A complete copy of each of the Material Contracts, and each of the amendments thereto, has been provided to the Buyer. Each Material Contract is legal,
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valid, binding, enforceable and in full force and effect against the applicable Target Company, and, to, the Knowledge of the Sellers, the other parties thereto. No Target Company, or to the Knowledge of the Sellers, any other Person who is a party to any Material Contract, is materially in breach or default under any Material Contract (with or without the lapse of time, or the giving of notice, or both). No Target Company has sent or received any written notice of breach, termination or cure with respect to any Material Contract that is not currently resolved.
4.15 Personnel Matters; Labor Practices
(a) Schedule 4.15 lists all management Business Employees of Metalex and Jason DM as of Balance Sheet Date. Start dates and current rates of salary, wages or commissions for such personnel have been made available to the Buyer. The Sellers have made available to the Buyer a list of the payroll for the employees of Metalex and Jason DM as of November 27, 2019, specifying the name, rate of salary or hourly pay and commissions or bonus entitlements for each employee of Metalex and Jason DM.
(b) The Target Companies are in compliance in all material respects with all applicable Legal Requirements relating to the employment of labor.
(c) With respect to the employees of Jason DM: (i) Jason DM is in compliance in all material respects with all laws respecting employment and employment practices, terms and conditions of employment, social security, housing and wages and working shifts, and (ii) there is no pending audit, claim, litigation or procedure initiated by the Mexico Institute of Social Security, Instituto Mexicano del Seguro Social (“IMSS”) or the National Institute for the Promotion of Employee Housing, Instituto del Fondo Nacional de la Vivienda de los Trabajadores (“INFONAVIT”).
(d) JHDM has no employees and acts solely as a holding company.
(e) No Target Company is a party to any Contract with any union, trade union, labor organization, employee group or similar entity which affects the employment of employees of any Target Company.
(f) Jason DM has deducted and remitted to IMSS, INFONAVIT and any other applicable Governmental Body, on a timely basis and in material compliance with the respective and applicable laws, all social security dues and contributions, including housing allowance and retirement fund quotas, and all Taxes or other amounts due which it is required by law to deduct and to remit to any Governmental Body in connection with the employees of Jason DM.
(g) Notwithstanding the representations or warranties in any other section in this Agreement, this Section 4.15 constitutes the Sellers’ sole and exclusive representations and warranties with respect to any personnel and/or labor and employment matters.
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4.16 Employee Plans
(a) Schedule 4.16 lists each Employee Plan, including all benefits provided by Jason DM to the employees of Jason DM, with an annual cost in excess of One Hundred Thousand U.S. Dollars ($100,000 USD) in the aggregate, whether according to the provisions of the Mexican Federal Labor Law, Ley Federal del Trabajo (“FLL”) and its regulations or in excess of the minimums mandated by the FLL or its regulations, including any pension or savings fund, profit sharing plan, incentive compensation plan, severance pay or termination pay, vacation pay, housing assistance, educational assistance, welfare of other employee benefits or fringe benefits.
(b) No Target Company or any of their respective ERISA Affiliates has ever maintained, sponsored, participated in or contributed to, or has any liability with respect to, any plan or arrangement which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code. No Target Company or any of their respective ERISA Affiliates has ever contributed to, or has any liability with respect to, any pension plan that is a “multiemployer plan” as defined in Section 3(37) of ERISA.
(c) Except as set forth on Schedule 4.16, the consummation of the transactions contemplated by this Agreement will not (i) entitle any Business Employee to severance pay or any other payment or form of compensation or benefit upon termination of services, except with respect to any Business Employees in Mexico, who are entitled to severance if terminated without Just Cause (as defined by the FLL), or (ii) accelerate the time of payment or vesting or increase the amount of compensation due to any such Business Employee.
(d) Jason DM contributes to savings plans for the employees of Jason DM (the “Employee Savings Plan”). The Employee Savings Plan funds are property of the employees of Jason DM and will not be removed from Jason DM by the Sellers prior to the Closing.
(e) All benefits that have accrued under the Account Manager Sales Incentive Program on or before March 31, 2019 have been paid in full and no other benefits under such Employee Plan have accrued since that date.
(f) No equity interest in any Target Company has been granted to any participant under the Jason Industries, Inc. 2014 Omnibus Incentive Plan, as amended (the “Incentive Plan”) and no Change in Control (as defined in the Incentive Plan) will occur as a result of the Closing or has occurred that gives any participant the right to receive any payments on or after the Closing from a Target Company.
(g) Notwithstanding the representations or warranties in any other section in this Agreement, this Section 4.16 constitutes the Sellers’ sole and exclusive representations and warranties with respect to any benefits matters.
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4.17 Events Since Balance Sheet Date. Since the Balance Sheet Date, the Business has not suffered any Material Adverse Effect.
4.18 Compliance with Environmental Laws. Except as set forth on Schedule 4.18 and in any environmental reports prepared for the Buyer in connection with the transactions contemplated by this Agreement:
(a) No Target Company has received written notice from any Governmental Body in the past five (5) years of (i) any Hazardous Substances which have been generated, treated, stored, handled or removed from or disposed of on the Real Property by any Target Company in violation of any Environmental Law, (ii) any Hazardous Substances which have migrated onto the Real Property from any adjacent property or which have migrated, emanated or originated from the Real Property onto any other property, or (iii) any actual or alleged material violation of any Environmental Law by any Target Company, or otherwise with regard to the Real Property.
(b) The Target Companies have obtained and are in compliance in all material respects with all material Governmental Authorizations required for the operation of the Business as currently conducted and the use of the Real Property by the Target Companies as required by any applicable Environmental Law.
(c) The Target Companies are in compliance in all material respects with all applicable Environmental Laws.
(d) There exists no pending Environmental Claim against the Target Companies, or, to the Knowledge of the Sellers, against any owner of Leased Real Property, with respect to any Leased Real Property owned by such party.
(e) To the Knowledge of the Sellers, the Sellers have made available to the Buyer copies of all material environmental reports in the possession or control of the Sellers or the Target Companies with respect to the Real Property.
(f) Notwithstanding the representations or warranties in any other section in this Agreement, this Section 4.18 constitutes the Sellers’ sole and exclusive representations and warranties with respect to any environmental matters.
4.19 Insurance. Schedule 4.19 lists all insurance, bonds and self-insurance arrangements currently maintained by the Target Companies or any Seller (or any Affiliate thereof) for the benefit of any Target Company. Each such insurance policy and bond is in full force and effect, and no Target Company, or any Seller (or any Affiliate thereof) with respect to any such insurance policy or bond maintained for the benefit of any Target Company, has received written notice of any cancellation or threat of cancellation of such insurance or bond.
4.20 Compliance with Legal Requirements; Governmental Authorizations. Except with respect to (a) Tax matters (for which representations and warranties are addressed exclusively in Section 4.13, above), (b) personnel and/or labor and employment matters (for which
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representations and warranties are addressed exclusively in Section 4.15, above), (c) employee benefit matters (for which representations and warranties are addressed exclusively in Section 4.16, above), and (d) environmental matters (for which representations and warranties are addressed exclusively in Section 4.18, above), (i) the Target Companies are in compliance in all material respects with all Legal Requirements applicable to the Target Companies, (ii) no written notice has been issued and no Proceeding is pending, or, to the Knowledge of the Sellers, threatened against any Target Company with respect to any alleged violation by any Target Company of any Legal Requirement applicable to any Target Company, (iii) the Target Companies have all material Governmental Authorizations required by any Legal Requirements applicable to the Target Companies in the operation of the Business as currently conducted, and (iv) the Governmental Authorizations issued to the Target Companies are in full force and effect, and the Target Companies are in compliance in all material respects with such Governmental Authorizations.
4.21 Customers and Suppliers. Schedule 4.21 lists the ten (10) largest customers (based on aggregate gross receipts from such customers) and the five (5) largest suppliers (based on aggregate gross payments to such suppliers) of the Business, on a consolidated basis, for the fiscal year ended December 31, 2018 and for the eight month period ended August 31, 2019.
4.22 Accounts; Safe Deposit Boxes. Schedule 4.22 lists all bank and savings accounts and safe deposit boxes of the Target Companies and all persons authorized to sign thereon.
4.23 Brokers; Agents. As of the date hereof, there are no fees and expenses due to BMO Capital Markets (or an Affiliate thereof), or any other broker, by any Seller (or any Affiliate thereof, including any Target Company) in connection with the transactions contemplated by this Agreement, and none of the Sellers (or any Affiliate thereof, including any Target Company) has dealt with any agent, finder, broker or other Representative in any manner which could result in the Buyer or any Target Company being liable on or after the date hereof for any fee or commission in the nature of a finder’s fee or originator’s fee in connection with the subject matter of this Agreement.
4.24 Affiliate Transactions. Except as set forth on Schedule 4.24, neither the Sellers nor any of their respective Affiliates own any material property or asset used by any Target Company and are not a party to any Material Contract with any Target Company.
4.25 Disclaimer of Other Representations and Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS Article IV, AS QUALIFIED BY THE DISCLOSURE SCHEDULES, NO SELLER, ANY AFFILIATE OF ANY SELLER, NOR ANY OTHER PERSON, INCLUDING ANY REPRESENTATIVE OF ANY SELLER, ON BEHALF OF ANY SELLER, MAKES ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, WITH RESPECT TO (A) ANY SELLER, ANY TARGET COMPANY OR ANY SELLERS’ OR ANY TARGET COMPANIES’ RESPECTIVE AFFILIATES, (B) THE BUSINESS OR THE OPERATIONS, ASSETS, PROSPECTS OR FINANCIAL CONDITION OF ANY TARGET COMPANY, (C) THE INCOME POTENTIALLY TO BE DERIVED FROM THE BUSINESS OR ANY TARGET COMPANY
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OR THE VALUE OF THE BUSINESS OR ANY TARGET COMPANY, (D) THE SUBJECT SECURITIES, (E) THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY ANCILLARY AGREEMENT, OR (F) ANY OTHER MATTER WHATSOEVER.
ARTICLE V
Warranties and Representations of the Buyer
The Buyer hereby warrants and represents to the Sellers, which warranties and representations shall survive the Closing for the periods, and subject to the limitations, set forth in Article X, below, that the following statements are true and correct as of the date hereof (except those representations and warranties which address matters as of or for a particular date or time period, which statements shall be true and correct only as of such date or for such time period):
5.1 Corporate Matters. Morton Global is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has the power and authority to own or lease its properties and assets as and where currently located and to carry on all of its business activities currently conducted. MHIG is a limited liability company, validly existing and in good standing under the laws of the State of Delaware and has the power and authority to own or lease its properties and assets as and where currently located and to carry on all of its business activities currently conducted.
5.2 Authority. The Buyer has the power and authority to enter into this Agreement and the Ancillary Agreements to which the Buyer is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement has been, and the execution and delivery of each Ancillary Agreement to which the Buyer is a party will be, duly and validly authorized by all necessary limited liability company action on the part of the Buyer. This Agreement has been, and each Ancillary Agreement to which the Buyer is a party will be, duly and validly executed and delivered by the Buyer, and this Agreement and such Ancillary Agreements to which the Buyer is a party are and shall constitute legal, valid and binding obligations of the Buyer enforceable against the Buyer in accordance with their respective terms, subject in each case to bankruptcy, reorganization, insolvency and other similar laws affecting the enforcement of creditors’ rights in general and to general principles of equity (regardless of whether considered in a Proceeding in equity or an action at law).
5.3 No Conflict. Neither the execution and delivery of this Agreement or any of the Ancillary Agreements to which the Buyer is a party nor the consummation or performance of any of the transactions contemplated hereunder or thereunder by the Buyer will (a) contravene, conflict with, or result in a violation of or default under, any provision of the Organizational Documents of the Buyer, (b) contravene, conflict with, or result in, a violation of, or default under, any Legal Requirement or any Order to which the Buyer is subject, including any applicable anti-money laundering (or similar) Legal Requirements, or (c) violate or conflict with, result in a default under, or give any Person the right to exercise any remedy under, to accelerate the maturity or performance of, or to cancel, terminate or modify, any material Contract to which the Buyer is subject. No action, consent, approval, Order or authorization of, or registration, declaration or filing with, any Governmental Body is required to be obtained or made by the
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Buyer in connection with the execution and delivery of this Agreement and the Ancillary Agreements to which the Buyer is a party, or the consummation by the Buyer of any of the transactions contemplated hereby or thereby.
5.4 Proceedings. There is no Proceeding pending, or, to the Knowledge of the Buyer, threatened, against the Buyer which would impair the ability of the Buyer to consummate the purchase of the Subject Securities or the other transactions contemplated by this Agreement or the Ancillary Agreements.
5.5 Diligence; Securities Law Compliance. The Buyer has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its purchase of the Subject Securities. The Buyer confirms that (a) the Buyer has conducted such investigations of each Target Company as the Buyer deems necessary in connection with the execution of this Agreement and the Ancillary Agreements to which the Buyer is a party and the consummation of the transactions contemplated hereby and thereby, (b) the Buyer and its Representatives have been permitted access to the Records, facilities, Returns, Contracts and other properties and assets of each Target Company which the Buyer and its Representatives have desired and requested to see or review, and (c) the Sellers have caused each Target Company to make available to the Buyer the opportunity to ask questions of each Target Company and the respective officers and management employees of each Target Company and to acquire additional information about the Business and financial condition of each Target Company. In connection with such investigation, the Buyer and its Representatives may have received from or on behalf of the Target Companies certain estimates, budgets, forecasts, plans and financial projections (“Forward-Looking Statements”), and the Buyer hereby acknowledges and agrees that there are uncertainties inherent in making Forward-Looking Statements, and that the Buyer is familiar with such uncertainties and is taking full responsibility for making its own evaluation of the adequacy and accuracy of all Forward-Looking Statements so furnished to it and its Representatives (including the reasonableness of the assumptions underlying such Forward-Looking Statements where such assumptions are disclosed). The Buyer further acknowledges and agrees that no Target Company, Seller or any other Person has made or is making any representation or warranty with respect to, or is or will be subject to any liability to the Buyer or any other Person resulting from, the distribution to the Buyer or its Representatives, or its or their use of, any Forward-Looking Statements, and that the Buyer is not relying on any Forward-Looking Statements in determining whether to consummate the transactions contemplated hereunder. The Buyer is acquiring the Subject Securities for its own account and not with a view to the distribution or resale thereof within the meaning of Section 2(11) of the Securities Act. The Buyer acknowledges and agrees that the Subject Securities may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of without registration or qualification under the Securities Act and any applicable state securities Legal Requirements or pursuant to an exemption from such registration or qualification.
5.6 Brokers; Agents. The Buyer has not dealt with any agent, finder, broker or other representative in any manner which could result in any Seller (or any Affiliate thereof) or any Target Company being liable for any fee or commission in the nature of a finder’s or originator’s fee in connection with the subject matter of this Agreement.
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5.7 Financial Ability. The Buyer will have on the Closing Date sufficient cash and financial ability and resources to consummate the transactions contemplated by this Agreement and the Ancillary Agreements and to perform its obligations hereunder and thereunder
5.8 Solvency. As of immediately following the Closing, the Buyer is, and immediately after giving effect to the transactions contemplated by this Agreement the Target Companies will be, able to pay their respective debts (excluding the Pension Plan Liabilities which Seller has retained and assumes full liability). As of immediately following the Closing, the Buyer has, and immediately after giving effect to the transactions contemplated by this Agreement the Target Companies will have, adequate capital to carry on their respective businesses as of the Closing Date. No transfer of property is being made, and no obligation is being incurred, in connection with the transactions contemplated by this Agreement with the intent to hinder, delay or defraud either present or future creditors of the Buyer or any Target Company.
ARTICLE VI
INTENTIONALLY LEFT BLANK
ARTICLE VII
Post-Closing Covenants
7.1 Cooperation. The Buyer and the Sellers shall cooperate (to a reasonable extent) with each other and shall cause their respective Representatives and Affiliates to cooperate (to a reasonable extent) with each other after the Closing to ensure the orderly transition of the ownership of the Target Companies and control of the Business to the Buyer and to minimize any disruption to the Business that might result from the transactions contemplated hereby.
7,2 Records/Personnel.
(a) The Sellers (and/or their respective Affiliates) may, after the Closing, retain copies of the Records, including Records stored on computer disks, hard drives, servers or any other storage medium, as the Sellers (and/or their respective Affiliates) are reasonably likely to need to meet accounting, auditing and Tax requirements or any Legal Requirement (or professional standards of conduct or requirements under applicable document retention policies) or as are related to the Excluded Assets and/or the Excluded Liabilities and/or Pension Plan Liabilities. The Buyer will retain (or cause the Target Companies to retain) the Records as of the Closing for a period of at least seven (7) years after the Closing. Following the expiration of such seven (7) year period, the Buyer may dispose of such Records; provided that if requested by the Sellers prior to such expiration, the Buyer shall deliver to the Sellers (or cause the Target Companies to deliver), at the Sellers’ expense, any of such Records as the Sellers may reasonably request. During the period in which the Buyer maintains such Records, upon reasonable notice and request by the Sellers, the Buyer, during normal business hours, shall permit any Representative of the Sellers (and/or any Affiliate thereof) to examine, copy and make extracts from all
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Records, all without cost, surcharge or expense to the Sellers (or their Affiliates) other than reasonable copy charges, as the Sellers (and/or their respective Affiliates) are reasonably likely to need in connection with any accounting, auditing or Tax requirements or any Legal Requirement or in connection with any claims or Proceedings, including any financial reporting obligation and in connection with any other such matter as may be reasonably requested by the Sellers (and/or their respective Affiliates).
(b) The Buyer shall also make (and shall cause its Affiliates (including the Target Companies) to make) the Business Employees available to the Sellers (and/or their respective Affiliates) and their respective Representatives at such Business Employees’ normal business location(s) and during such Business Employees’ normal business hours to provide such assistance to the Sellers (and/or their respective Affiliates) as may be reasonably requested by the Sellers (and/or their Affiliates) from time to time in connection with the Sellers’ involvement in the Target Companies, as follows:
(i) to assist, as requested, in responding to inquiries from or audits by or required by any Governmental Body or to assist, as requested, in connection with any Legal Requirement, including preparation of responses and other required documents;
(ii) to provide support and information necessary for preparing Returns for periods prior to and including the years ending on or prior to the Closing Date;
(iii) to provide support and information to respond to any Tax inquiries, audits or other Proceedings for any period or partial period prior to the Closing Date; and/or
(iv) to provide other assistance of a similar nature as may be reasonably required by the Sellers (and/or their Affiliates).
(c) From the Closing Date until the date that is six (6) months after the Closing Date, the Buyer will, or will cause one of its Affiliates (including the Target Companies) to, continue to employ the Business Employees and provide the Business Employees with (i) total cash compensation, including base salary or wages and bonus opportunity, that is no less favorable in the aggregate than total cash compensation immediately prior to the Closing Date, and (ii) employee benefits that are no less favorable in the aggregate than those employee benefits provided by the Employee Plans immediately prior to the Closing Date, but only to the extent that such employee benefits are available to the Business Employees under the Buyer’s employee benefit plans, or required by applicable Legal Requirements, after the Closing Date. Nothing in this Section 7.2(c), whether express or implied, will create any third party beneficiary or other rights in any present or former Business Employees (including any beneficiary or dependent thereof), any other participant in any Employee Plan or other employee benefit plan or any other Person, create any rights to continued employment, or constitute or be deemed to constitute an amendment to any Employee Plan or other employee benefit plan.
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Further, the Buyer understands and agrees that any changes to wages, salary, benefits or other labor related item could be viewed as a change of work conditions in Mexico and could trigger a claim for constructive termination, so any such changes will be at the Buyer’s sole risk and expense.
7.3 Publicity. Following the Closing, any party hereto may disclose the general terms of the transactions contemplated hereby for reasonable business purposes; provided, however, that in no case shall such disclosure include the Purchase Price or other economic terms; provided, further, however, that any Seller (and/or any Affiliate thereof) shall have the right to issue a release or other announcement concerning the transactions contemplated hereby, and thereafter, any Seller (or any Affiliate thereof) may make any other releases, announcements or disclosures consistent therewith or as may be required by applicable Legal Requirements (or by the requirements of any securities exchange to which any Seller (or any Affiliate thereof) is subject).
7.4 Execution of Additional Documents. From time to time after the Closing, as and when requested by a party hereto, each party hereto shall execute and deliver, or cause to be executed and delivered, all such documents and instruments, and shall take, or cause to be taken, all such further or other actions as such other party may reasonably deem necessary to consummate the transactions contemplated by this Agreement and the Ancillary Agreements.
7.5 Officer and Director Indemnification. The Buyer shall, and shall cause the Target Companies to, for a period of six (6) years after the Closing Date, unless otherwise required by applicable Legal Requirements, indemnify, defend and hold harmless against any and all losses, claims, damages, expenses and liabilities, and provide advancement of expenses in advance of the final disposition of any such claim or proceeding to, all past and present directors, officers and managers of any Target Company (in all their capacities as such) to the extent required by the Organizational Documents if permitted by Legal Requirements for acts or omissions occurring at or prior to the Closing Date; provided that in the event any claim is asserted or made within such six (6) year period, all rights hereunder in respect of such claim shall continue until disposition thereof. This Section 7.5 shall survive the Closing Date, is intended to benefit and may be enforced by any past and present Business Employees and any past or present directors, officers, managers or other personnel of any Target Company, and shall be binding on all successors and assigns of the Buyer and the Target Companies.
7.6 Restrictive Covenants.
(a) Non-Competition. In consideration of the mutual covenants provided for herein and the compensation to be paid to the Sellers at the Closing, for a period of three (3) years from the Closing Date, the Sellers and their respective Affiliates shall not engage, directly or indirectly, in the Business anywhere in the United States and/or Mexico; provided, however, that the Sellers and/or any of their respective Affiliates may acquire or otherwise own, solely as an investment, less than a five percent (5%) equity interest in a Person engaged in the Business.
(b) Non-Solicitation. As a material inducement to the Buyer to enter into this Agreement (without such inducement the Buyer would not enter into this Agreement), the
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Sellers shall not, directly or indirectly, for a period of three (3) years from the Closing Date, (i) solicit, entice, encourage or intentionally influence, or attempt to solicit, entice, encourage or influence any employee of a Target Company as of the Closing Date to resign or leave the employ or service of such Target Company or interfere in any manner with the employment relationship between such Target Company and any such employee of such Target Company in a manner that would be adverse to such Target Company or (ii) solicit, entice, encourage or intentionally influence, or attempt to solicit, entice, encourage or influence, any supplier or customer of either Target Company as of the Closing Date to cease transacting business with such Target Company or interfere in any manner with the business relationship between such Target Company and any such supplier or customer of such Target Company in a manner that would be adverse to such Target Company.
(c) Non-Disclosure of Confidential Information. Each Seller (on behalf of itself and each of its Affiliates) acknowledges that it shall not, at any time during the three (3) year period following the Closing Date, disclose any Confidential Information to anyone other than to the Buyer or its Affiliates or Representatives (except for any such Confidential Information which is required to be disclosed by such Seller (or any Affiliate thereof) in connection with any Proceeding or pursuant to any Legal Requirement (or by the requirements of any securities exchange to which a party hereto (or any Affiliate thereof) is subject).
(d) Enforcement. In addition to all other legal remedies available to the Buyer and the Seller for the enforcement of the covenants set forth in this Section 7.6, the Buyer and the Sellers acknowledge and agree that the Buyer may seek temporary and permanent injunctive relief by any court of competent jurisdiction to prevent or restrain any breach or threatened breach hereof by the Sellers or any Affiliate thereof.
7.7 Real Property Leases. After the Closing, the Buyer will use commercially reasonable efforts to cause each landlord under each Real Property Lease for each Real Property located in the United States of America or Mexico, as applicable, to release JI and its Affiliates from all obligations (as guarantors or otherwise) relating to each such Real Property Lease on or before the ninetieth (90th) calendar day after the Closing Date.
7.8 Trademark Registration. After the Closing, the Sellers shall submit all applications and other documents necessary to have the names and addresses of the applicable Target Company reflected in all applicable records pertaining to the Mexican Trademark registration for OPEN-GRIP (Reg. No. 261479) and the Canadian Trademark Registrations for OPEN-GRIP (Reg. No. TMA315665) and TREAD GRIP (Reg. No. TMA315666).
ARTICLE VIII
Disclosure Schedules; Absence of Other Warranties or Representations
8.1 Disclosure Schedules. The schedules and information set forth in the Disclosure Schedules refer to the section or paragraph of this Agreement to which such schedule
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and information is responsive, and each such schedule and information shall be deemed to have been disclosed with respect to all other sections and paragraphs of this Agreement for which the same is reasonably apparent on its face. All capitalized terms used in the Disclosure Schedules and not otherwise defined therein shall have the same meanings as are ascribed to such terms in this Agreement. The Disclosure Schedules shall not vary, change or alter the literal meaning of the warranties and representations of the Sellers contained in this Agreement, other than creating exceptions thereto which are responsive to the language of the warranties and representations contained in this Agreement.
8.2 No Additional Warranties or Representations. THE BUYER ACKNOWLEDGES THAT THE SELLERS (AND THE TARGET COMPANIES AND ANY OTHER AFFILIATE THEREOF) HAVE NOT MADE, AND NO OTHER PERSON HAS MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, AS TO THE SELLERS, THE TARGET COMPANIES, ANY OF THE SELLERS’ OR THE TARGET COMPANIES’ RESPECTIVE AFFILIATES, THE SUBJECT SECURITIES, OR THE BUSINESS, OR THE ACCURACY OR COMPLETENESS OF ANY INFORMATION REGARDING THE SELLERS, THE TARGET COMPANIES, ANY OF THE SELLERS’ OR THE TARGET COMPANIES’ RESPECTIVE AFFILIATES, THE SUBJECT SECURITIES OR THE BUSINESS, WHICH HAS BEEN FURNISHED OR MADE AVAILABLE TO THE BUYER OR ITS AFFILIATES AND/OR REPRESENTATIVES, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT (AS QUALIFIED BY THE DISCLOSURE SCHEDULES) OR THE ANCILLARY AGREEMENTS. THE SELLERS (AND THEIR RESPECTIVE AFFILIATES) SHALL NOT HAVE, OR BE SUBJECT TO, AND NO OTHER PERSON SHALL HAVE, OR BE SUBJECT TO, ANY LIABILITY TO THE BUYER OR ANY OTHER PERSON RESULTING FROM THE DISTRIBUTION TO THE BUYER OR ANY OF ITS REPRESENTATIVES OR AFFILIATES, OR THE BUYER’S OR ANY OF ITS REPRESENTATIVES’ OR AFFILIATES’ USE OF, ANY SUCH INFORMATION, DOCUMENTS OR MATERIALS MADE AVAILABLE TO THE BUYER OR ANY OF ITS AFFILIATES AND/OR REPRESENTATIVES IN RECORDS STORED ON COMPUTER DISKS, IN CERTAIN “DATA SITES”, PROVIDED DURING MANAGEMENT PRESENTATIONS OR IN ANY OTHER FORM IN EXPECTATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT (AS QUALIFIED BY THE DISCLOSURE SCHEDULES) OR THE ANCILLARY AGREEMENTS. THE BUYER ACKNOWLEDGES AND AGREES THAT NEITHER THE BUYER NOR ANY OF ITS AFFILIATES OR REPRESENTATIVES HAS RELIED, AND NONE OF SUCH PERSONS IS RELYING, OR WILL ASSERT THAT IT IS RELYING, UPON ANY STATEMENT, WARRANTY OR REPRESENTATION (WHETHER WRITTEN OR ORAL) NOT EXPRESSLY MADE IN THIS AGREEMENT (AS QUALIFIED BY THE DISCLOSURE SCHEDULES) OR THE ANCILLARY AGREEMENTS.
ARTICLE IX
INTENTIONALLY LEFT BLANK

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ARTICLE X

Indemnification
10.1 Indemnification by the Sellers. Subject to the limitations, conditions and restrictions set forth in this Agreement, the Sellers shall indemnify the Buyer and its Affiliates (including after the Closing, the Target Companies) and each of their respective Representatives, successors and assigns (collectively, the “Buyer Indemnified Parties”) and hold each of them harmless from and against any and all Losses of or against the Buyer Indemnified Parties to the extent resulting from, or arising out of:
(a) any breach of any warranty or representation made by the Sellers in Article IV;
(b) any breach or non-fulfillment of any covenant made by the Sellers in this Agreement; and/or
(c) any Excluded Liabilities.
10.2 Indemnification by the Buyer. Subject to the limitations, conditions and restrictions set forth in this Agreement, the Buyer shall indemnify the Sellers and each of their respective Affiliates (excluding, after the Closing, the Target Companies) and each of their respective Representatives, successors and assigns (collectively, the “Seller Indemnified Parties”) and hold each of them harmless from and against any and all Losses of or against the Seller Indemnified Parties to the extent resulting from, or arising out of:
(a) any breach of any warranty or representation made by the Buyer in Article V, above;
(b) any breach or non-fulfillment of any covenant made by the Buyer in this Agreement;
(c) the operation of the Business and/or the Target Companies after the Effective Time, including arising from, related to or in connection with, any labor claim filed by any Business Employee against any Seller and/or any Affiliate thereof arising from, related to or in connection with, any wrongful termination, constructive termination,
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union activity, strike notice or other cause attributable to the Buyer or the Target Companies after the Effective Time;
(d) any amounts drawn by Charter Steel Trading Co., Inc., or its Affiliates under the DB Letter of Credit on or after Closing and before January 6, 2020; and/or
(e) any Losses incurred by any Seller Indemnified Parties after the Closing in connection with any Real Property Lease for any Real Property located in Mexico or the United States of America, as applicable, pursuant to a guaranty or otherwise.
10.3 Procedure Relative to Indemnification
.
(a) In the event that any party hereto shall claim that it is entitled to be indemnified pursuant to the terms of this Article X, such party (the “Claiming Party”) shall notify the party or parties against which the claim is made (the “Indemnifying Party”) in writing of such claim (a “Claim Notice”) promptly after the Claiming Party receives notice of any action, Proceeding, demand, assessment, claim, loss, liability or damages, whether or not involving any Third Party Claim, that may reasonably be expected to result in a claim for indemnification by the Claiming Party against the Indemnifying Party. The Claim Notice shall specify in reasonable detail the breach of warranty, representation or covenant, or otherwise the right to indemnification, claimed by the Claiming Party and the Losses incurred by, or anticipated to be incurred by, the Claiming Party on account thereof. If such Losses are final and liquidated in amount, the Claim Notice shall so state, and such amount shall be deemed the amount of the claim of the Claiming Party. If such Losses are not final and liquidated, the Claim Notice shall so state, and in such event a claim shall be deemed asserted against the Indemnifying Party on behalf of the Claiming Party, but no payment shall be made on account thereof until the amount of such claim is liquidated and the Losses are finally determined.
(b) The following provisions shall apply to claims of the Claiming Party which are based upon a claim involving a third party (a “Third Party Claim”) (including any form of Proceeding filed or instituted by any Governmental Body, but excluding any Tax claim to the extent governed by Section 11.3, below):
(i) The Indemnifying Party shall have the right, upon receipt of the Claim Notice and at its expense, to defend such Third Party Claim in its own name or, if necessary, in the name of the Claiming Party. The Claiming Party shall cooperate with and make available to the Indemnifying Party such assistance (including access to employees) and materials as may be reasonably requested of the Claiming Party, and the Claiming Party shall have the right, at the Claiming Party’s expense, to participate in the defense. The Indemnifying Party shall have the right to settle and compromise such claim only with the consent of the Claiming Party (which consent shall not be unreasonably withheld, conditioned or delayed) unless the following shall apply: (A) such settlement provides the
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Claiming Party with a full release from such Third Party Claim; and (B) the sole relief provided in such settlement is monetary damages that are paid in full by the Indemnifying Party. If the Claiming Party fails to consent to any settlement or compromise offer, then the Indemnifying Party may continue to contest such claim and, in such event, the maximum liability of the Indemnifying Party for such claim will not exceed such settlement or compromise offer.
(ii) Regardless of whether the Indemnifying Party elects to defend the Third Party Claim, the Indemnifying Party shall also have the right within thirty (30) calendar days from receipt of the Claim Notice to notify the Claiming Party that the Indemnifying Party disputes the merits of the Third Party Claim or that the Third Party Claim is the subject of indemnification hereunder. Such dispute shall not affect the Indemnifying Party’s right to defend the Third Party Claim under subsection (i) of this Section 10.3(b).
(iii) In the event the Indemnifying Party shall notify the Claiming Party that the Indemnifying Party does not wish to defend the Third Party Claim, then the Claiming Party shall have the right to conduct a defense against such Third Party Claim and shall have the right to settle and compromise such Third Party Claim if it acts reasonably and in good faith upon fifteen (15) calendar days’ prior written notice to, but without having to first obtain the consent of, the Indemnifying Party.
(c) Once the amount of any claim under this Article X is liquidated and the claim is finally determined, subject to the limitations, conditions and restrictions set forth in this Article X, below, (i) the Claiming Party shall be entitled to pursue enforcement of the indemnification provisions of this Article X, and (ii) in the event it is determined, or the Indemnifying Party agrees, that the Indemnifying Party is obligated to indemnify the Claiming Party for such claim, the Indemnifying Party agrees to pay all costs, expenses and fees, including reasonable attorneys’ fees, which may be incurred by the Claiming Party in attempting to enforce its indemnification rights under this Article X, whether the same shall be enforced by suit or otherwise, which the Indemnifying Party and the Claiming Party agree are due to the Claiming Party or which a court, arbitrator or other judicial body determines are due to the Claiming Party. In the event it is determined, or the Claiming Party agrees, that the Indemnifying Party is not obligated to indemnify the Claiming Party for such claim, the Claiming Party agrees to pay all costs, expenses and fees, including reasonable attorneys’ fees, which may have been incurred by the Indemnifying Party in defending and disputing the claim for indemnification by the Claiming Party under this Article X.
10.4 Limits on Indemnification
(a) De minimis Amount and Basket Amount. Notwithstanding anything contained in this Agreement to the contrary, but subject in all respects to Section 10.4(c), below, the Sellers shall not be obligated to indemnify any Buyer Indemnified Party with respect to any Losses pursuant to Section 10.1(a), above, (i) unless and until the aggregate
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amount of Losses from a single claim of indemnification exceeds Twenty-Five Thousand U.S. Dollars ($25,000 USD) (the “De minimis Amount”), and (ii) unless and until the aggregate Losses from all claims with respect thereto in excess of the De minimis Amount exceed, in the aggregate, One Hundred Thousand U.S. Dollars ($100,000 USD) (the “Basket Amount”), and then indemnification hereunder shall be only to the extent such Losses exceed the Basket Amount and no claim hereunder shall apply to the Basket Amount unless such claim is equal to or greater than the Basket Amount. The parties agree that (A) the De minimis Amount is to serve as a “trigger” for indemnification (and not a deductible), and (B) the Basket Amount is to serve as a “deductible” for indemnification.
(b) Maximum Amount of Certain Indemnification. Notwithstanding anything contained in this Agreement to the contrary, but subject in all respects to Section 10.4(c), below, in no event shall the Sellers’ obligation to provide indemnification for Losses under Section 10.1(a), Section 10.1(b) and/or Section 10.1(c), above, exceed, in the aggregate, Two Hundred Fifty Thousand U.S. Dollars ($250,000 USD)
(c) Limitations Not Applicable to Fraud; Maximum Amount of Total Indemnification. Notwithstanding the provisions of Section 10.4(a) and Section 10.4(b), above, to the contrary, the limitations set forth in such sections shall not apply to limit the indemnification to which the Buyer Indemnified Parties may be entitled for Losses arising from any breach of the Selected Seller Representations or with respect to Fraud; provided however, that (i) the remaining limitations, restrictions, and conditions set forth in this Article X, including and Section 10.4(d), below, shall continue to apply with respect to such Losses, and (ii) in no event shall the Sellers’ obligation to provide indemnification for Losses under this Article X exceed, in the aggregate, the Purchase Price proceeds actually received by the Sellers.
(d) Satisfaction of Indemnity; Escrow Amounts; Sole Recourse. Subject to the other limitations, conditions and restrictions of this Article X, the rights of the Buyer Indemnified Parties to indemnification pursuant to Section 10.1(a), Section 10.1(b) and Section 10.1(c), above, shall (A) first, during the period during which the Indemnification Escrow Agreement remains in effect, be satisfied from the Escrowed Sellers’ Funds (if and to the extent funds are available) pursuant to the terms and conditions of the Indemnification Escrow Agreement, and (B) then second, to the extent that any such obligation is not able to be satisfied in full from the Escrowed Sellers’ Funds, be satisfied, without duplication, from the Sellers subject to the limitations set forth herein. The right to indemnification to be satisfied from the Escrowed Sellers’ Funds and the Sellers as set forth in this Section 10.4(d) shall be the sole recourse, direct or indirect, of the Buyer Indemnified Parties for indemnification pursuant to Section 10.1(a), Section 10.1(b) and Section 10.1(c), above.
(e) Survival. Each of the warranties and representations of the Sellers and the Buyer contained in this Agreement shall survive the Closing until the first anniversary of the Closing Date; provided, however, that the Selected Seller Representations and the
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Selected Buyer Representations shall survive the Closing until the three (3) year anniversary of the Closing Date. All of the covenants of the Sellers and the Buyer contained in this Agreement shall survive after the Closing in accordance with their terms. Any claim for indemnification hereunder which is made in writing prior to the expiration of the applicable survival period, and the rights of indemnity with respect thereto, shall survive such expiration until resolved or judicially determined and any claim for indemnification not submitted in writing to the Indemnifying Party prior to the expiration of the applicable survival period shall be deemed to have been waived and shall be absolutely and forever barred and unenforceable, null and void, and of no force or effect whatsoever, and the Indemnifying Party shall have no further liability with respect thereto.
(f) Losses Net of Insurance and Tax Benefits. With respect to any matter covered by this Article X, the Claiming Party shall assert all claims under all applicable insurance policies and any indemnification claim shall be net of any insurance proceeds received by the Claiming Party (net of any deductible amounts and reasonable costs of collection), and, to the extent that insurance proceeds are collected by the Claiming Party after an indemnification claim has been settled or finally determined, the Claiming Party will restore the Indemnifying Party to the same economic position as would have existed had such insurance proceeds been collected prior to the settlement or final determination of such claim. In addition, the amounts for which an Indemnifying Party shall be liable under this Article X shall be net of any Tax benefit reasonably expected to be realized by the Claiming Party as a result of the facts and circumstances giving rise to the liability of the Indemnifying Party.
(g) Assignment; Reimbursement. If any of the Losses for which an Indemnifying Party is responsible under this Article X are recoverable or reasonably likely to be recoverable against any third party, the Claiming Party shall assign any and all rights that it may have to recover such Losses to the Indemnifying Party or, if such rights are not assignable for any reason, the Claiming Party shall attempt in good faith to collect any and all such Losses on account thereof from such third party for the benefit of the Indemnifying Party. The Claiming Party shall reimburse the Indemnifying Party for any and all Losses paid by the Indemnifying Party to the Claiming Party pursuant to this Agreement to the extent such amount is subsequently paid to the Claiming Party by any Person other than the Indemnifying Party.
(h) Taxes. Notwithstanding anything contained in this Agreement to the contrary, the Buyer Indemnified Parties shall not be entitled to recover for any breach of this Agreement for any Tax accounting or filing position taken by any Target Company or the Buyer (or any Affiliate thereof) for a period (or portion thereof) beginning after the Closing.
(i) Materiality. Notwithstanding anything to the contrary contained in this Agreement, for purposes of determining the failure of any representations or warranties to be true and correct and calculating Losses under this Agreement, other than: (i) the first sentence of Section 4.17 (Events Since Balance Sheet Date), Section 4.18 (Compliance
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with Environmental Laws), Section 4.20 (Compliance with Legal Requirements; Governmental Authorizations) and Section 4.24 (Affiliate Transactions); (ii) any definition or term defined in this Agreement; and (iii) any dollar thresholds or references to U.S. GAAP or Mexico GAAP, as applicable, contained in any representations and warranties set forth in this Agreement, in each case, each representation and warranty in this Agreement shall be interpreted without giving effect to any limitations or qualifications as to “materiality” (including the word “material,” “Material Adverse Effect,” “materially,” “immaterial,” “material adverse change” or similar qualifiers) set forth therein.
10.5 No Duplication of Warranties. Notwithstanding anything contained in this Agreement to the contrary, (a) the Buyer Indemnified Parties may not assert multiple claims under Section 10.1, above, in order to recover duplicative Losses in respect of a single set of facts or circumstances under more than one warranty, representation or covenant in this Agreement whether such facts or circumstances would give rise to a breach of more than one warranty, representation or covenant in this Agreement, and (b) the Buyer Indemnified Parties may not assert any claim under Section 10.1, above, for any item of Losses in the event and to the extent the Buyer could have received recovery of such item as a result of the Purchase Price Adjustment or to the extent the Buyer could have received credit or a reserve for such item in the preparation of the Closing Statement or Final Statement.
10.6 Mitigation. No party shall be entitled to indemnification hereunder for the amount of Losses in excess of the amount of such Losses which would have been incurred but for the failure of such party to take commercially reasonable actions to mitigate such Losses upon becoming aware of any claim.
10.7 Sole Remedy. The Buyer’s and the Sellers’ sole remedy for any and all claims with respect to the transactions contemplated by this Agreement (except for any injunctive relief to which a party may be entitled pursuant to Section 7.6(d), above, or Section 13.3, below shall be the indemnity set forth in this Article X, and none of the Buyer Indemnified Parties or the Seller Indemnified Parties shall have any other entitlement, remedy or recourse, whether in contract, tort or otherwise, against the other party with respect to the transactions contemplated by this Agreement, all of such remedies, entitlements and recourse being expressly waived by the parties hereto to the fullest extent permitted by Legal Requirements.
10.8 Knowledge of Breaches. No party hereto shall have any liability hereunder for any Loss arising from, or relating to, or in connection with, any inaccuracy in a breach of any representation or warranty hereunder if the Indemnifying Party can establish that the Claiming Party had actual knowledge as of the date hereof of such breach. For purposes of this Section 10.8, actual knowledge (i) with respect to the Buyer shall mean the actual knowledge Paul Douglass and/or Christopher Hutter and shall include anything in a due diligence report prepared by the Buyer’s advisors and delivered to the Buyer and/or its Affiliates, and (ii) with respect to the Sellers, the actual knowledge of Chadwick DeLuca and Timm Fields.
10.9 Pension Plan Liabilities. The Sellers shall indemnify the Buyer Indemnified Parties and hold each of them harmless from and against any and all Losses of or against the
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Buyer Indemnified Parties to the extent resulting from, or arising out of, the Pension Plan Liabilities. Notwithstanding anything contained in this Agreement to the contrary, no limitations, qualifiers or other conditions set forth in this Article X, including without limitation Section 10.4, Section 10.5, Section 10.6, Section 10.7 and Section 10.8, shall limit the Sellers’ obligations to indemnify the Buyer Indemnified Parties under this Section 10.9. For the avoidance of doubt, the Sellers’ obligations to indemnify the Buyer Indemnified Parties shall survive the Closing until such time as the Pension Plan Liabilities have been paid in full or are otherwise fully extinguished. In the event of a Change of Control with respect to a Seller whereby the Seller sells substantially all of its assets to a purchaser, such Seller (at its sole election) either (a) shall pay all Pension Plan Liabilities in their entirety as soon as it is practicable after such Change of Control or (b) shall require such purchaser to assume the Seller’s obligations under this Agreement in connection with such Change of Control. The procedures set forth in Section 10.3 shall apply to claims for indemnification under this Section 10.9.
10.10 Specific Tax Indemnification. The Sellers shall indemnify the Buyer Indemnified Parties and hold each of them harmless from and against any and all Losses of or against the Buyer Indemnified Parties to the extent resulting from, arising out of or relating solely to (i) the sales and use tax Returns filed by Metalex with the Illinois Department of Revenue for the period January 1, 2014 through June 30, 2016 or (ii) the Notice of Determination from the Illinois Department of Employment Security dated November 19, 2019 to Metalex. Notwithstanding anything contained in this Agreement to the contrary, no limitations, qualifiers or other conditions set forth in this Article X, including Section 10.4, Section 10.5, Section 10.6, Section 10.7 and Section 10.8, shall limit the Sellers’ obligations to indemnify the Buyer Indemnified Parties under this Section 10.10.
ARTICLE XI
Tax Matters
11.1 Tax Returns.
(a) The Sellers shall prepare or cause to be prepared, and shall timely file or cause to be filed, all income Returns for the Target Companies for all Pre-Closing Tax Periods, excluding Returns for Straddle Periods. The Sellers shall prepare all such Returns on a basis consistent with past practices of the Target Companies. The Sellers shall pay the pre-Closing portion of any Taxes due in respect of any such Returns, except to the extent reflected in the Working Capital Amount, and the Buyer shall cause the Target Companies to pay the remainder of such Taxes.
(b) The Buyer shall prepare or cause to be prepared, and shall timely file or cause to be filed, (i) all non-income Tax Returns for Pre-Closing Tax Periods due after the Closing Date, (ii) all Returns for the Target Companies for any Tax period that begins on or before and ends after the Closing Date and that are due on or after the Closing Date (a “Straddle Period”), and (iii) Mexico Form 76 with respect to the direct and indirect transfers of JHDM and Jason DM hereunder (collectively, the “Buyer-Prepared Returns”). The Sellers shall pay the pre-Closing portion of any Taxes due in respect of any such
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Buyer-Prepared Returns, except to the extent reflected in the Working Capital Amount, and the Buyer shall cause the Target Companies to pay the remainder of such Taxes. The Buyer shall provide the Sellers with copies of the Buyer-Prepared Returns for its review and approval at least forty-five (45) calendar days prior to the applicable filing due date. Following receipt of its copy of each such Buyer-Prepared Return, the Sellers shall have a period of thirty (30) calendar days to provide the Buyer with a statement of any disputed items with respect to such Return. In the event that the Sellers and the Buyer are unable to reach agreement with respect to any disputed items within a period of five (5) Business Days after the Buyer’s receipt of such statement, all such disputed items shall be submitted to the Independent Accounting Firm for final resolution in accordance herewith prior to the applicable filing due date. The Buyer will prepare all Buyer-Prepared Returns on a basis consistent with past practices of the Sellers (and/or their Affiliates) with respect to the Target Companies.
(c) For purposes of this Agreement, in the case of any Taxes of the Target Companies that are allocable with respect to a Straddle Period, the portion of any such Taxes that are attributable to the pre-Closing portion of such Straddle Period shall: (i) in the case of Taxes that are based on or measured by income, receipts, employment, payroll, sales, use, or other similar Taxes, be deemed equal to the amount that would be payable if the Tax year or period ended on the end of the Closing Date; and (ii) in the case of any other Taxes not described in clause (i), be deemed the amount of such Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days in the portion of the Straddle Period ending on the Closing Date, and the denominator of which is the number of days in the entire Straddle Period. For purposes of clause (i) of the preceding sentence, any exemption, deduction, credit or other item (including the effect of any graduated rates of Tax) that is calculated on an annual basis shall be allocated to the portion of the Straddle Period ending on the Closing Date on a pro rata basis determined by multiplying the total amount of such item allocated to the Straddle Period times a fraction, the numerator of which is the number of days in the portion of the Straddle Period ending on the Closing Date and the denominator of which is the number of days in the entire Straddle Period.
11.2 Certain Taxes. The Buyer shall pay all Transfer Taxes (and shall file all Returns related thereto).
11.3 Tax Claims. In the event that after the Closing Date the Buyer, any Target Company or any of their respective Affiliates receives any oral or written communication regarding any pending or threatened examination, audit, claim, adjustment or other Proceeding for which the Sellers (or any Affiliate thereof) could have liability under this Agreement or as a matter of Legal Requirement for Taxes for any Pre-Closing Tax Period or Straddle Period (each, a “Tax Claim”), the Buyer will, within ten (10) calendar days, notify the Sellers in writing thereof. The Sellers or its designees will be entitled, at its sole expense, to control or settle the contest of any Tax Claim that could give rise to such liability. The Sellers will keep the Buyer reasonably informed with respect to the commencement, status and nature of any Tax Claim controlled by the Sellers, including the status of any settlement negotiations. The Buyer will, and will cause its
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Affiliates, as applicable, to reasonably cooperate with the Sellers or their designees in handling any such Tax Claim, including by providing, or causing to be provided, to the Sellers or their designees all necessary authorizations, including powers of attorney, to control any Tax Claim which the Sellers or their designees are entitled to control in connection with this Section 11.3.
11.4 Adjustment to Purchase Price. Except with respect to the Minority Jason DM Purchase Price, the Minority JHDM Purchase Price and the Majority JHDM Purchase Price, neither of which shall be adjusted after the Closing, each party hereto shall, including retroactively, treat payments made pursuant to this Agreement after the Closing as adjustments to the final purchase price for Tax purposes to the extent permitted by applicable Legal Requirements.
11.5 Prohibited Actions. Without the prior written consent of the Sellers, the Buyer shall not, nor shall it permit any Affiliate thereof (including any Target Company), to: (a) file, re-file, supplement, or amend any Return of any Target Company for any Pre-Closing Tax Period or Straddle Period, (b) file any voluntary disclosure agreement, participate in any arrangement similar to a voluntary disclosure agreement, or voluntarily approach any taxing authority regarding any Taxes or Returns of any Target Company for any Pre-Closing Tax Period or Straddle Period, (c) take any action relating to Taxes that could create a Tax liability for any Seller and/or any Affiliate thereof, or (d) make any election under Section 338 of the Code (or any similar provision of federal, state, local, or foreign Tax Law) with respect to the transactions contemplated hereunder.
11.6 Refunds. The Sellers shall be entitled to any refunds received for, as well as any offsets, credits or Tax reductions applicable to, federal, state, local or foreign Taxes paid for any Pre-Closing Tax Period of any Target Company (including the pre-Closing portion of any Straddle Period), along with any interest paid with respect thereto by the relevant Tax authority (any such Tax refund, a “Tax Refund”). The Buyer shall cause any such refunds (including interest) to which any Seller is entitled that are received by the Buyer, any Target Company or any of their respective Affiliates after the Closing Date, whether by offset, credit, receipt of payment or otherwise, to be paid promptly to the Sellers. In the case of any Straddle Period, the amount of Tax Refunds to which any Seller is entitled shall be determined in the same manner as if the relevant Tax period ended or began at the Closing. The Buyer shall, and shall cause its Affiliates (including the Target Companies) to, promptly execute such documents, take commercially reasonable additional actions and otherwise reasonably cooperate as may be necessary for the Buyer and its Affiliates (including the Target Companies) to perfect their rights in and obtain all Tax refunds, credits, and Tax reductions contemplated in this Section 11.6. For purposes of determining the amount and timing of any payment to which the Sellers are entitled to pursuant to this Section 11.6, the parties hereto shall treat any Tax Refunds as the first items taken into account for such purposes. The Buyer shall not, and shall not permit any Target Company or any of their respective Affiliates to, forfeit, fail to collect or otherwise minimize or delay any Tax Refund to which the Sellers (or any Affiliate thereof) would be entitled under this Agreement, whether through any election to carry forward a net operating loss, failure to carry back a net operating loss, or otherwise. The Buyer shall, and after the Closing shall cause its Affiliates (including the Target Companies) to, provide the Sellers (and their Affiliates) with such assistance
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or access to Records or information as may be reasonably requested in connection with the review of any Return, including the filing of any claim for refund for a Pre-Closing Tax Period or Straddle Period, for the purpose of determining the amounts payable pursuant to this Section 11.6. Any Tax liabilities included in the Working Capital Amount or Indebtedness, to the extent not actually paid to the relevant Tax authority, shall be treated as a Tax Refund to which this Section 11.6 applies.
11.7 Tax Treatment; Purchase Price Allocation. The Buyer and the Sellers agree that the purchase and sale of the Metalex Securities is intended for U.S. federal income tax purposes to be treated as the purchase and sale of the assets of Metalex. With respect to the purchase of the Metalex Securities, within sixty (60) days of the final determination of the Working Capital Amount pursuant to the terms and conditions hereof, the Buyer shall provide to the Sellers a schedule allocating the Base Purchase Price among the assets of Metalex for review and approval by the Sellers, which shall be prepared in accordance with the applicable provisions of the Code and the allocation methodology set forth on Exhibit 11.7. Following receipt thereof, the Sellers shall have a period of twenty (20) days to provide the Buyer with a statement of any disputed items with respect to such allocation. In the event the Sellers provide such statement and the Sellers and the Buyer are unable to reach agreement with respect to any disputed items within a period of twenty (20) days after the Buyer’s receipt of such statement, all such disputed items shall be submitted to the Independent Accounting Firm for final resolution, and the Buyer shall pay all fees in connection therewith owed to the Independent Accounting Firm. The allocation ultimately agreed upon by the Buyer and the Sellers under this Section 11.7 shall be referred to herein as the “Metalex Purchase Price Allocation Schedule”. The parties hereto shall make appropriate adjustments to the Metalex Purchase Price Allocation Schedule to reflect changes in the Base Purchase Price. The parties hereto agree for all Tax reporting purposes to report the transactions contemplated by this Agreement in accordance with the Metalex Purchase Price Allocation Schedule, as adjusted pursuant to the preceding sentence, and to not take any position during the course of any audit or other proceeding inconsistent with such allocations and schedule unless required by a determination of the applicable Governmental Body that is final.
11.8 Post-Closing Tax Filings. The Buyer acknowledges and agrees that it is responsible for making its own determinations with respect to Tax filings post-Closing and it shall not rely on the pre-Closing practices of any Seller (and/or any Affiliate thereof) or any Target Company with respect to such filings.
11.9 Transaction Deductions. The Buyer and the Sellers shall each be allocated the income Tax deduction attributable to any Transaction Expense for which each party bears the economic detriment.
ARTICLE XII
Definitions
“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common
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control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Agreement” means this Purchase Agreement (including the Disclosure Schedules and exhibits hereto), as the same may be amended or modified from time to time in accordance with the terms and conditions hereof.
“Ancillary Agreements” means, with respect to any party, the agreements, documents and instruments to be executed and delivered by such party pursuant to this Agreement.
“Balance Sheet Date” means November 29, 2019.
“Base Purchase Price” has the meaning set forth in Section 2.1, above.
“Basket Amount” has the meaning set forth in Section 10.4(a), above.
“Business” has the meaning set forth in the Recitals to this Agreement.
“Business Day” means a day other than a Saturday, Sunday or other day on which state-chartered commercial banks located in Milwaukee, Wisconsin are authorized or required by Legal Requirement to close.
“Business Employee” and “Business Employees” means the employees of the Target Companies.
“Buyer” has the meaning set forth in the preface to this Agreement.
“Buyer Indemnified Parties” has the meaning set forth in Section 10.1, above.
“Buyer-Prepared Returns” has the meaning set forth in Section 11.1(b), above.
“Capital Stock” means any and all shares, interests, participations or other equivalents (other than phantom stock), however designated, of capital stock of a corporation and any and all ownership interests in a Person (other than a corporation), including membership interests, units, partnership interests and joint venture interests, as applicable.
“Cash” means, with respect to the Target Companies, as of any date and time, the aggregate amount of cash and bank deposits as reflected in the bank and money market account statements of the Target Companies (and/or the Sellers and/or their respective Affiliates for the benefit of the Target Companies) as of such date and time, and shall include money market funds, money market instruments and any demand deposits. For the avoidance of doubt, Cash shall (i) be calculated net of issued but uncleared checks, drafts and wire transfers, (ii) include checks and drafts received by the Target Companies or cash deposits in transit to the accounts of the Target Companies (and/or the Sellers and/or their respective Affiliates for the benefit of the Target Companies), and (iii) be calculated net of overdrawn accounts.
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“Change of Control” means, with respect to a Seller:
(a) any Person or group of Persons (excluding Affiliates of the Target) acting in concert acquires or agrees to acquire, directly or indirectly, that percentage of the ownership interests of such Seller or Person directly or indirectly controlling such Seller (each, a "Target") that provides or will provide the acquirer with a sufficient number of the Target's ownership interests having general voting rights to elect a majority of its directors or corresponding governing body;
(b) any merger, consolidation or similar business combination of such Target into or with another Person (excluding Affiliates of the Target) as a result of which holders of the voting securities of such Target immediately prior to the consummation of the transaction hold, directly or indirectly, immediately following the consummation of the transaction, equity interests in the surviving entity in such transaction possessing less than a majority of the voting power of such surviving entity; or
(c) any other transaction, including the sale by such Target of new equity interests or a transfer of existing equity interests of such Target, the result of which is that any other Person or group of related Persons (excluding Affiliates of the Target), directly or indirectly, acquires (i) beneficial ownership (as defined under Section 13(d) of the Securities Exchange Act of 1934) of equity interests of such Target representing a majority of such Target's voting power or (ii) a substantially all of the assets of such Target.
“Claim Notice” has the meaning set forth in Section 10.3(a), above.
“Claiming Party” has the meaning set forth in Section 10.3(a), above.
“Closing” means the closing of the purchase and sale of the Subject Securities and the other transactions as contemplated herein.
“Closing Cash” means the aggregate amount of Cash as of the Effective Time. For the avoidance of doubt, Closing Cash shall not include any actions taken or decisions made by the Buyer (including the Buyer causing any Target Company to take actions or make decisions) outside of the ordinary course of business (for example, if the Buyer (and/or any Affiliate thereof) were to cause a dividend/distribution of Cash to the Buyer on the Closing Date, such dividend/distribution shall not affect Closing Cash notwithstanding the fact that Closing Cash is to be determined as of the Effective Time).
“Closing Date” has the meaning set forth in Section 3.1(a), above
“Closing Indebtedness” means the aggregate amount of Indebtedness of the Target Companies outstanding as of the Effective Time. For the avoidance of doubt, Closing Indebtedness shall not include any Indebtedness incurred on the Closing Date by or at the direction of the Buyer and/or any Affiliate thereof.
“Closing Statement” has the meaning set forth in Section 2.3(a), above.
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“Code” means the Internal Revenue Code of 1986, as amended, or any successor law.
“Confidential Information” shall mean all non-public and all proprietary information of the Target Companies relating to the Business, including the following: (i) all information and records concerning products or services provided to customers; (ii) all information concerning pricing and cost policies, the prices charged to customers, the volume or orders of customers and other information concerning the transactions with, customers or proposed customers; (iii) customer lists; (iv) financial information; (v) information concerning salaries or wages paid to, the work records of and other personnel information relative to, Business Employees; (vi) information concerning the marketing programs or strategies; and (vii) confidential information of other Persons which the Target Companies are required to maintain in confidence. The term “Confidential Information” shall not include information which is or becomes in the public domain without any violation by the party disclosing such information of a contractual, legal or fiduciary obligation to the Target Companies.
“Consents” means agreements from the parties to those Material Contracts which by their terms terminate, are modified, have payments or other obligations which may be accelerated or specifically require consent of another party upon a change of control of Metalex and/or Jason DM, consenting to the change of control contemplated under this Agreement.
“Consolidated Financial Statements” has the meaning set forth in Section 4.12(a), above.
“Contract” means any written agreement, contract, obligation or undertaking that is legally binding.
“Counsel” has the meaning set forth in Section 13.12, below.
“Current Assets” means the asset categories of the Target Companies listed as “Current Assets” on Exhibit 2.2 attached hereto.
“Current Liabilities” means the liability categories of the Target Companies listed as “Current Liabilities” on Exhibit 2.2 attached hereto.
“DB Letter of Credit” means that certain letter of credit issued by Deutsche Bank on behalf of JI to Charter Steel Trading Co., Inc. in the amount of Four Hundred Thousand U.S. Dollars ($400,000 USD).
“De minimis Amount” has the meaning set forth in Section 10.4(a), above.
“Disclosure Schedules”, “Schedules” and “Schedule” means the schedules delivered by the Sellers in connection with the execution and delivery of this Agreement and collectively labeled the “Disclosure Schedules,” as more fully described in Article VIII, above.
“Effective Time” shall have the meaning set forth in Section 2.2, above.
“Employee Plan” means any Retirement Plan, Welfare Plan or fringe benefit that any Target Company (and/or any Affiliate thereof) maintains for the benefit of any Business
        40

        
Employee, or to which any Seller (or any Affiliate thereof), or any Target Company, contributes, or has any obligation to contribute, for the benefit of any Business Employee or any terminated Business Employee.
“Employee Savings Plan” has the meaning set forth in Section 4.16(d), above.
“Environmental Claim” means any written notice, written demand, Proceeding or Order arising (i) pursuant to, or in connection with, the violation of any Environmental Law, or (ii) from any abatement, removal, remedial, corrective or other response action in connection with Hazardous Substances or Environmental Law.
“Environmental Law” means any applicable Legal Requirement pertaining to the manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, release of, or exposure to, Hazardous Substance, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, codified at 42 U.S.C. 9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986, the Solid Waste Disposal Act, codified at 42 U.S.C. 6901 et seq., as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendment of 1984, the Toxic Substances Control Act of 1976, codified at 15 U.S.C. 2601 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, codified at 33 U.S.C. 1251 et seq., the Clean Air Act of 1966, codified at 42 U.S.C. 741 et seq., the Hazardous Materials Transportation Act, codified at 49, U.S.C. 651 et seq., the Oil Pollution Act of 1990, codified at 33 U.S.C. 2701 et seq., the Emergency Planning and Community Right-To-Know Act of 1986, codified at 42 U.S.C. 11001, et seq., the National Environmental Policy Act of 1969, codified at 42 U.S.C. 4321, et seq., the Safe Drinking Water Act of 1974, codified at 42 U.S.C. 300(f), et seq., or any similar, implementing or successor law in effect as of the Closing Date.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any successor Legal Requirement, and the rules and regulations promulgated thereunder.
“ERISA Affiliate” means any trade or business, whether or not incorporated, which is treated as a single employer with the Target Companies pursuant to Subsections (b), (c), (m) or (o) of Section 414 of the Code.
“Escrow Agent” means JPMorgan Chase Bank, N.A.
“Escrowed Sellers’ Funds” means the funds held by the Escrow Agent from time to time pursuant to the Indemnification Escrow Agreement.
“Estimated Purchase Price” has the meaning set forth in Section 2.3(a), above.
“Excluded Assets” means the assets of the Target Companies listed on Exhibit 12(b) attached hereto.
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“Excluded Liabilities” means (i) any and all outstanding Closing Indebtedness, (ii) any and all outstanding Transaction Expenses, and (iii) those liabilities set forth on Exhibit 12(c) attached hereto.
“Final Statement” has the meaning set forth in Section 2.4(a), above.
“FLL” has the meaning set forth in Section 4.16(a), above.
“Foreign Transfer Agreement” and “Foreign Transfer Agreements” has the meaning set forth in Section 3.1(b), above.
“Forward-Looking Statements” has the meaning set forth in Section 5.5, above.
“Fraud” means an actual and intentional fraud with respect to the making of the warranties and representations by the Sellers in Article IV, above, or by the Buyer in Article V, above, as applicable; provided, that such actual and intentional fraud shall only be deemed to exist if any person identified in the definition of “Knowledge of the Sellers” or “Knowledge of the Buyer”, as applicable, had actual knowledge (as opposed to imputed or constructive knowledge) that the warranties and representations made by the Sellers or the Buyer, as applicable, were actually breached when made, with the express intention that the other party hereto rely thereon to its detriment and causing such party to suffer damage by reason of such reliance.
“Governmental Authorization” means any approval, consent, license, permit, waiver or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.
“Governmental Body” means any (i) nation, state, county, city, town, village, district or other jurisdiction of any nature, (ii) federal, state, local, municipal, foreign or other government, (iii) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal), or (iv) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature.
“Guarantee” means, with respect to any Person, (i) any guarantee of the payment or performance of, or any contingent obligation in respect of, any Indebtedness or other obligation of any other Person (except for endorsement of drafts for deposit and collection in the ordinary course of business), or (ii) any other arrangement whereby credit is extended to any other Person on the basis of any promise or undertaking of such Person (A) to pay the Indebtedness of such other Person, (B) to purchase or lease assets under circumstances that would enable such other Person to discharge one or more of its obligations, or (C) to maintain the capital, working capital, solvency or general financial condition of such other Person.
“Hazardous Substances” means any substance, chemical, compound, product, solid, gas, liquid, waste, byproduct, material, pollutant or contaminant which is regulated by an Environmental Law, including asbestos, PCB’s, radon and urea formaldehyde foam, petroleum and petroleum products.
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“IMSS” has the meaning set forth in Section 4.15(c), above.
“Incentive Plan” has the meaning set forth in Section 4.16(f).
“Indebtedness” of any Person means any liability of such Person (i) for borrowed money (excluding, for the avoidance of doubt, accounts payable incurred in the ordinary course of business), (ii) under any reimbursement obligation relating to a drawn letter of credit, banker’s acceptance or note purchase facility, (iii) evidenced by a bond, note, debenture or similar instrument (including a purchase money obligation), (iv) in respect of interest, fees or other charges in respect of any indebtedness described in the foregoing clauses (i) through (iii), and (v) all indebtedness referred to in the foregoing clauses (i) through (iii) that constitutes a Guarantee by such Person.
“Indemnification Agreement” has the meaning set forth in Section 3.2(p), above.
“Indemnification Escrow Agreement” has the meaning set forth in Section 3.2(j), above.
“Indemnification Escrow Amount” means an amount equal to Two Hundred Fifty Thousand U.S. Dollars ($250,000 USD).
“Indemnifying Party” has the meaning set forth in Section 10.3(a), above.
“Independent Accounting Firm” has the meaning set forth in Section 2.4(b), above.
“INFONAVIT” has the meaning set forth in Section 4.15(c), above.
“Intellectual Property” means, collectively, (i) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all foreign or domestic design patents, utility patents and pending applications therefor and all renewals, reissues, reexaminations, divisionals, continuations, continuations in part and extensions thereof, (ii) all trademarks, service marks, trade names, trade dress, logos and internet domain name registrations and all applications, registrations and renewals in connection therewith, (iii) all published and unpublished works of authorship, copyrights (registered or unregistered), databases, web sites, computer source code, executable code, programs and other software (including all machine readable code, printed listings of code, documentation and related property and information, whether embodied in software, firmware or otherwise) and all applications, registrations and renewals in connection therewith (if any), and (iv) all trade secrets, know how, inventions and other confidential proprietary technical, business and other information, including production processes and techniques, research and development information, technology, drawings, specifications, designs, plans, proposals, technical data, copyrightable technical data, financial, marketing and business data and customer and vendor lists and information.
“Jason DM” has the meaning set forth in the recitals to this Agreement.
“Jason DM Purchase Price” has the meaning set forth in Section 2.1, above.
“Jason DM Securities” has the meaning set forth in the recitals to this Agreement.
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“JI” has the meaning set forth in the preface to this Agreement.
“JIH” has the meaning set forth in the preface to this Agreement.
“JII” has the meaning set forth in Section 3.2(p).
“JHDM” has the meaning set forth in the recitals to this Agreement.
“JHDM Securities” has the meaning set forth in the recitals to this Agreement.
“Knowledge of the Buyer” means the actual knowledge of Paul Douglass and/or Christopher Hutter, in each case, after: (i) reasonable investigation of the Buyer’s written and electronic records readily available to such party, and (ii) reasonable inquiry of any management level employees who directly report to such individuals and would reasonably be expected to have knowledge of the event, condition, circumstance, act or other matter in question.
“Knowledge of the Sellers” means the actual knowledge of Chadwick DeLuca and Timm Fields in each case, after: (i) reasonable investigation of the applicable Target Company’s written and electronic records readily available to such party, and (ii) reasonable inquiry of any management level employees of the Target Companies who directly report to such individuals and would reasonably be expected to have knowledge of the event, condition, circumstance, act or other matter in question.
“Leased Real Property” means real property leased, used or occupied by any Target Company pursuant to a Real Property Lease.
“Legal Requirement” means any applicable federal, state, local, municipal, foreign, international, multinational or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute or treaty.
“Licenses” means all licenses, franchises and permits (i) granted to the Target Companies which create rights in the Target Companies regarding any Intellectual Property owned by third parties, or (ii) granted by the Target Companies which create rights in any third party regarding any Owned Intellectual Property.
“Lien” means any mortgage, pledge, security interest, encumbrance, title defect, title retention agreement, voting trust agreement, lien, charge or similar restriction or limitation, including a restriction on the right to vote, sell or otherwise dispose of any equity interests (other than restrictions on transfers imposed by federal, state or foreign securities Legal Requirements).
“Losses” means all losses or damages, liabilities, judgments, fines, fees, costs and expenses, but “Losses” shall not include punitive, exemplary, speculative, lost profit or lost revenue, business interruption, diminution in value, indirect, incidental, consequential or special losses or damages of any nature, including any such losses or damages using a multiple of earnings, multiple of cash flow or similar valuation methodology.
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“Majority Jason DM Securities” has the meaning set forth in the recitals to this Agreement.
“Majority JHDM Purchase Price” has the meaning set forth in Section 2.1, above.
“Majority JHDM Securities” has the meaning set forth in the recitals to this Agreement.
“Material Adverse Effect” means a violation, inaccuracy, breach, default, failure to comply, change in circumstance, loss, effect, fact, agreement, arrangement, commitment, understanding or obligation which, as a result of the occurrence or existence thereof, has a material adverse effect on the business, operations, properties, financial condition, assets and results of operations of the Target Companies taken as a whole or that has a material adverse effect on the ability of the Sellers to perform their obligations under this Agreement or to consummate the transactions contemplated hereby. However, a Material Adverse Effect, when used with respect to the Target Companies, does not include a material adverse effect or impact on the business, operations, properties, financial condition, assets or results of operations of the Target Companies that is caused by (i) one or more downturns in the economy, the securities markets, the financing markets or the credit markets in general which does not disproportionately affect the Target Companies relative to other industry participants, (ii) one or more downturns in the industries in which the Target Companies operate which does not disproportionately affect the Target Companies relative to other industry participants, (iii) geopolitical conditions, acts of war, armed hostilities, sabotage or terrorism, or any escalation or worsening of any such conditions, acts of war, armed hostilities, sabotage or terrorism threatened or underway as of the date of this Agreement, (iv) changes in applicable Legal Requirements, rules or regulations or any interpretation of the foregoing which does not disproportionately affect the Target Companies relative to other industry participants, (v) changes in U.S. GAAP and/or Mexico GAAP, as applicable, (vi) the announcement or consummation of the Closing of the transactions contemplated hereby, or (vii) the effect of any action or any failure to act taken by the Buyer (or any Affiliate thereof) contemplated by this Agreement.
“Material Contract” has the meaning set forth in Section 4.14(a), above.
“Metalex” has the meaning set forth in the recitals to this Agreement.
“Metalex Purchase Price” has the meaning set forth in Section 2.1, above.
“Metalex Purchase Price Allocation Schedule” has the meaning set forth in Section 11.7, above.
“Metalex Securities” has the meaning set forth in the recitals to this Agreement.
“Mexico GAAP” means the Mexican financial information norms known as Normas de Información Financiera (NIFs), as in effect from time to time, consistently applied.
“MHIG” has the meaning set forth in the preface to this Agreement.
“Minority Jason DM Purchase Price” has the meaning set forth in Section 2.1, above.
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“Minority Jason DM Securities” has the meaning set forth in the recitals to this Agreement.
“Minority JHDM Purchase Price” has the meaning set forth in Section 2.1.
“Minority JHDM Securities” has the meaning set forth in the recitals to this Agreement.
“Morton Global” has the meaning set forth in the preface to this Agreement.
“Non-Recourse Party” has the meaning set forth in Section 13.10, below.
“Order” means any award, injunction, judgment, order, ruling or verdict entered, issued, made or rendered by any court, administrative agency or other Governmental Body.
“Organizational Documents” means, with respect to any entity, the certificate of incorporation, articles of incorporation, bylaws, articles of organization, certificate of formation, partnership agreement, limited liability company agreement, stockholders agreement, formation agreement and other similar organizational documents of such entity (in each case, as amended through the date of this Agreement), as applicable.
“Owned Intellectual Property” means all Intellectual Property owned by the Target Companies.
“Permitted Liens” means (i) liens for Taxes, assessments or other governmental charges not yet due and payable, (ii) mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ or other like liens arising or incurred in the ordinary course of business if the underlying obligations are not past due, (iii) liens arising under workers’ compensation, unemployment insurance, social security, retirement or similar Legal Requirements or to secure statutory obligations, in each case, incurred in the ordinary course of business, (iv) any interest or title of a lessor under an operating lease or capitalized lease or of any licensor or licensee under a license, (v) liens of lessors under Real Property Leases, (vi) easements, rights of way, zoning ordinances and other similar encumbrances affecting the Real Property which are not, individually or in the aggregate, material to the business of the Target Companies, and (vii) those liens set forth on Exhibit 12(d) attached hereto.
“Pension Plans” means the Ironworkers National Pension Plan (f/k/a National Shopmen Pension Fund) and the Morton Manufacturing Company Retirement Plan for Salaried Retirees.
“Pension Plan Liabilities” means all costs, expenses or other liabilities arising from or related to the Pension Plans, including all contributions required to be made to the Pension Plans, all costs to maintain the Morton Manufacturing Company Retirement Plan for Salaried Retirees and all costs to terminate or withdraw from the Pension Plans.
“Person” means any individual, corporation, general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union or other entity or Governmental Body.
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“Pre-Closing Representation” has the meaning set forth in Section 13.12, below.
“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date and the portion through the end of the Closing Date for any Straddle Period.
“Privileged Communications” has the meaning set forth in Section 13.12, below.
“Proceeding” means any action, arbitration, hearing, investigation, litigation or suit (whether civil, criminal or administrative) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body.
“Purchase Price” means the sum of the Jason DM Purchase Price and the Metalex Purchase Price.
“Purchase Price Adjustment” has the meaning set forth in Section 2.2, above.
“Real Property” means the Leased Real Property.
“Real Property Lease” means a Contract currently in effect pursuant to which any Target Company is a party and leases real property.
“Records” means all books, records, manuals and other materials and information of the Target Companies, including customer records, personnel and payroll records, accounting records, purchase and sale records, price lists, correspondence, quality control records and all research and development files, wherever located.
“Representative” means, with respect to a particular Person, any director, manager, officer, employee, agent, consultant, advisor or other representative of such Person, including legal counsel, accountants and financial advisors.
“Retirement Plan” means any employee pension benefit plan (as defined in ERISA Section 3(2)) that any Seller (or any Affiliate thereof), or any Target Company, maintains, or to which any Seller (or any Affiliate thereof), or any Target Company, contributes, or has any obligation to contribute, for the benefit of any Business Employee or terminated Business Employee.
“Returns” means all returns, amendments, informational returns, forms, reports and statements (including elections, declarations, disclosures, schedules and estimates) filed by any Person in respect of any Taxes.
“Satisfied Liens” means the Liens on the assets of the Target Companies set forth on Exhibit 12(e) attached hereto, which Liens shall be released by the holder(s) thereof at or prior to the Closing.
“Securities Act” means the Securities Act of 1933, as amended.
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“Selected Buyer Representations” means the warranties and representations of the Buyer contained in Section 5.1 (Corporate Matters), Section 5.2 (Authority), Section 5.5 (Diligence; Securities Laws Compliance), Section 5.6 (Brokers; Agents) and Section 5.8 (Solvency), above.
“Selected Seller Representations” means the warranties and representations of the Sellers contained in Section 4.1 (Authority), Section 4.3 (Restrictions on Transfer), the first sentence of Section 4.4(a) (Corporate Matters), the first sentence of Section 4.4(b) (Corporate Matters), Section 4.6 (Capitalization; Title to Subject Securities) and Section 4.23 (Brokers; Agents), above.
“Seller” and “Sellers” has the meaning set forth in the preface to this Agreement
“Seller Indemnified Parties” has the meaning set forth in Section 10.2, above.
“Sellers’ Closing Payment” has the meaning set forth in Section 2.3(b)(i), above.
“Shortfall” has the meaning set forth in Section 2.4(e)(ii), above.
“Straddle Period” has the meaning set forth in Section 11.1(b), above.
“Subject Securities” means the Metalex Securities, the JHDM Securities and the Minority Jason DM Securities.
“Subsidiary” means, with respect to any Person, (i) any corporation more than fifty percent (50%) of whose stock is owned by such Person directly or indirectly through one or more subsidiaries, and (ii) any partnership, limited liability company, association, joint venture or other Person in which such Person directly or indirectly through one or more subsidiaries has more than a fifty percent (50%) equity interest.
“Target” has the meaning set forth in the definition of “Change of Control.”
“Target Company” and “Target Companies” means Metalex, JHDM and Jason DM.
“Tax” and “Taxes” means all federal, state, county, local, foreign and other taxes, including income, estimated income, business, occupation, franchise, property (real and personal), sales, employment, gross receipts, use, transfer, ad valorem, profits, license, capital, payroll, employee withholding, unemployment, excise, goods and services, severance and stamp, and including interest, penalties and additions in connection therewith.
“Tax Claim” has the meaning set forth in Section 11.3, above.
“Tax Refund” has the meaning set forth in Section 11.6, above.
“Third Party Claim” has the meaning set forth in Section 10.3(b), above.
“Transaction Expenses” means the sum of (i) any unpaid fees, costs and expenses incurred by the Target Companies and the Sellers (and/or their Affiliates) prior to the Closing in
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connection with the drafting, negotiation, execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby, including legal and accounting fees (but, for the avoidance of doubt, excluding any fees and expenses incurred by or on behalf of the Buyer or any of its Affiliates), and (ii) any closing or other transaction fees payable by the Target Companies or the Sellers (and/or any Affiliate thereof) at or immediately prior to the Closing as a result of the transactions contemplated hereby, including fees and expenses payable to BMO Capital Markets (or an Affiliate thereof).
“Transfer Taxes” means any sales, use, stock transfer, real estate transfer, real estate gains, transfer, stamp, registration, documentary, recording or other similar taxes or fees, including all interest, additions, surcharges, fees or penalties related thereto, arising out of or incurred in connection with the transactions contemplated by this Agreement.
“TSA” has the meaning set forth in Section 3.2(l), above.
“U.S. GAAP” means United States generally accepted accounting principles as in effect from time to time, consistently applied.
“Welfare Plan” means any employee welfare benefit plan (as defined in ERISA Section 3(1)) that any Seller (or any Affiliate thereof), or any Target Company, maintains, or to which any Seller (or any Affiliate thereof), or any Target Company, contributes or has any obligation to contribute, for the benefit of any Business Employee or terminated Business Employee.
“Working Capital Amount” has the meaning set forth in Section 2.2, above.
“Working Capital Target” means Four Million Five Hundred Seventy-eight Thousand Nine Hundred Twenty-nine U.S. Dollars ($4,578,929 USD).
ARTICLE VIII
Miscellaneous
13.1 Expenses. Except as otherwise specifically provided herein, the parties hereto shall pay their own expenses, including accountants’ and attorneys’ fees, incurred in connection with the negotiation and consummation of the transactions contemplated by this Agreement and the Ancillary Agreements.
13.2 Notices. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be considered to be given and received in all respects when hand delivered, when delivered by prepaid express or courier delivery service, when sent by e-mail of a .pdf document (with confirmation of transmission by reply e-mail) or three (3) calendar days after deposited in the United States mail, certified mail, postage prepaid, return receipt requested, in each case, addressed as follows, or to such other address as shall be designated by notice duly given:

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IF TO BUYER:
Morton Global LLC
1400 16th St., Suite 250
Oak Brook, IL 60523
Attention: Paul Douglass
E-Mail: pd@upgllc.com

MHIG LLC
1400 16th St., Suite 250
Oak Brook, IL 60523
Attention: Paul Douglass
E-Mail: pd@upgllc.com

With a copy to (which shall not constitute notice hereunder):
Stahl Cowen Crowley Addis LLC
33 W. Monroe Suite 1200
Chicago, Illinois 60603 Attention: Lauane Addis
E-Mail: laddis@stahlcowen.com

IF TO SELLERS:
Jason Industries, Inc.
833 E. Michigan Street, Suite 900
Milwaukee, Wisconsin 53202
Attention: Kevin Kuznicki, Sr. Vice President, General Counsel & Secretary
E-Mail: kkuznicki@jasoninc.com

With a copy to (which shall not constitute notice hereunder):
Godfrey & Kahn, S.C.
833 East Michigan Street, Suite 1800
Milwaukee, Wisconsin 53202
Attention: Mark Witt and Matthew Kovacich
E-Mail: mcwitt@gklaw.com and
               mkovacich@gklaw.com


13.3 Right to Specific Performance. The parties hereto agree that the Subject Securities constitute unique property, that there is no adequate remedy under Legal Requirements for the damage which any of them might sustain for the failure of the others to consummate the transactions contemplated by this Agreement, and, accordingly, that each of them is entitled to the remedy of specific performance to enforce such consummation.
13.4 Entire Agreement; Amendments. THIS AGREEMENT (INCLUDING THE DISCLOSURE SCHEDULES AND THE EXHIBITS HERETO) AND THE ANCILLARY AGREEMENTS CONSTITUTE THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO RELATING TO THE SUBJECT MATTER HEREOF, AND ALL PRIOR AGREEMENTS, CORRESPONDENCE, DISCUSSIONS AND UNDERSTANDINGS OF THE
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PARTIES (WHETHER ORAL OR WRITTEN), INCLUDING ANY PRIOR CONFIDENTIALITY AGREEMENTS, ARE MERGED HEREIN AND MADE A PART HEREOF, IT BEING THE INTENTION OF THE PARTIES HERETO THAT THIS AGREEMENT (INCLUDING THE DISCLOSURE SCHEDULES AND THE EXHIBITS HERETO) AND THE ANCILLARY AGREEMENTS SHALL SERVE AS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE TERMS OF THEIR AGREEMENT TOGETHER. THE PARTIES AGREE THAT THERE HAVE NOT BEEN AND THERE ARE NO OTHER AGREEMENTS AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF OTHER THAN THOSE SET FORTH IN THIS AGREEMENT (INCLUDING THE DISCLOSURE SCHEDULES AND THE EXHIBITS HERETO), THE ANCILLARY AGREEMENTS, AND THAT THE PARTIES ARE NOT RELYING UPON ANY AGREEMENTS THAT ARE NOT SET FORTH IN THIS AGREEMENT (INCLUDING THE DISCLOSURE SCHEDULES AND THE EXHIBITS HERETO), OR THE ANCILLARY AGREEMENTS. ANY RIGHTS THAT THE PARTIES WOULD OTHERWISE HAVE TO ASSERT CONTRACT, FRAUD (AS DEFINED IN THIS AGREEMENT OR OTHERWISE) OR OTHER TORT CLAIMS RELATING TO ANY AGREEMENTS OUTSIDE OF THIS AGREEMENT OR THE ANCILLARY AGREEMENTS OR RELATING TO ANY REPRESENTATIONS OR WARRANTIES MADE OUTSIDE THIS AGREEMENT ARE HEREBY WAIVED. NO AMENDMENT, WAIVER OR MODIFICATION HERETO OR HEREUNDER SHALL BE VALID UNLESS IN WRITING SIGNED IN PEN-AND-INK (AND NOT BY EXCHANGE OF E-MAILS OR OTHER ELECTRONIC CORRESPONDENCE) BY AN AUTHORIZED SIGNATORY OF THE PARTY OR PARTIES TO BE AFFECTED THEREBY.
13.5 Parties in Interest; Binding Effect. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors, legal representatives and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, other than the provisions of Section 7.5, above, the provisions of Article X, above, relating to the Buyer Indemnified Parties or the Seller Indemnified Parties not party to this Agreement and the provisions of Section 13.10, below (all of which are intended to be for the benefit of the Persons covered thereby and may be enforced by such Persons).
13.6 Construction. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event that an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption of burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
13.7 Assignment. This Agreement and the rights hereunder shall not be assignable or transferable by any party hereto without the prior written consent of the other party; provided, however, that the Sellers shall have the right to assign any of such Seller’s rights and/or obligations hereunder to any Affiliate thereof or to any lender to any Seller and/or any Affiliate
        51

        
thereof in connection with a general assignment of all or substantially all the assets of any Seller or any Affiliate of any Seller.
13.8 Paragraph Headings. The headings in this Agreement are for purposes of convenience and ease of reference only and shall not be construed to limit or otherwise affect the meaning of any part of this Agreement.
13.9 Severability. The parties agree that if any provision of this Agreement shall under any circumstances be deemed invalid or inoperative, this Agreement shall be construed with the invalid or inoperative provision deleted, and the rights and obligations of the parties shall be construed and enforced accordingly.
13.10 Non-Recourse Parties. This Agreement may only be enforced against the named parties hereto (subject to the terms, conditions and other limitations set forth herein). Following the Closing, (a) all claims or causes of action that may be based upon, arise out of, or relate to, this Agreement, or the negotiation, execution or performance of this Agreement, may be made only against the Persons that are expressly identified as parties hereto, and (b) except as expressly provided hereunder, no Person who is not a named party to this Agreement, including any director, officer, manager, employee, incorporator, organizer, member, partner, stockholder, Affiliate, agent, attorney or Representative of any named party to this Agreement, including any person negotiating or executing this Agreement on behalf of a party hereto (each, a “Non-Recourse Party”) shall have any liability or obligation with respect to this Agreement or any Ancillary Agreement or with respect to any claim or cause of action that may arise out of, or relate to, this Agreement or any Ancillary Agreement, or the negotiation, execution or performance of this Agreement or any Ancillary Agreement. Each Non-Recourse Party is expressly intended as a third party beneficiary of this provision of this Agreement.
13.11 Governing Law; Venue. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Wisconsin (in the United States of America) without application of choice of law or conflicts of law principles. The parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the State of Wisconsin (in the United States of America) and of the United States of America located in the City of Milwaukee in the State of Wisconsin (in the United States of America) for any actions, suits or proceedings arising out of or relating to this Agreement, the Ancillary Agreements and the transactions contemplated hereby (and agree not to commence any action, suit or proceeding relating thereto except in such courts). The parties hereby irrevocably and unconditionally waive any objection to the laying of venue on any action, suit or proceeding arising out of this Agreement, the Ancillary Agreements or the transactions contemplated hereby in the courts of the State of Wisconsin (in the United States of America) or the United States of America located in the City of Milwaukee in the State of Wisconsin (in the United States of America), and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
13.12 Attorney-Client Privilege. The parties acknowledge that Godfrey & Kahn (“Counsel”) has represented the Sellers and the Target Companies in connection with the
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transactions contemplated by and/or relating to this Agreement prior to the Closing (“Pre-Closing Representation”). Any privilege attaching as a result of Counsel’s representation of such Persons in connection with the Pre-Closing Representation shall survive the Closing and shall remain in effect; provided that such privilege from and after the Closing shall be assigned to, belong to and be controlled by, the Sellers. For clarity, such privilege (i) may be waived only by the Sellers, and not by Buyer, the Target Companies or any of their respective Affiliates, and (ii) shall not pass to or be claimed or used by Buyer, the Target Companies or any of their respective Affiliates. In furtherance of the foregoing, each of the parties to this Agreement agrees to take the steps necessary to ensure that any privilege attaching as a result of Counsel’s Pre-Closing Representation shall survive the Closing, remain in effect and be assigned to and controlled by the Sellers. As to any privileged attorney-client communications between Counsel, on the one hand, and Sellers or the Target Companies, on the other hand, prior to Closing (collectively, the “Privileged Communications”), Buyer agrees, on its own behalf and on behalf of its Affiliates (including, after the Closing, the Target Companies) and their respective successors and/or assigns, that none of Buyer, any of its Affiliates (including, after the Closing, the Target Companies) or any of their respective successors or assigns, may use or rely on any of the Privileged Communications in any action or claim against or involving any of the parties to this Agreement after the Closing. Further, the parties to this Agreement understand and agree that any failure to segregate and/or restrict Buyer’s access to any Privileged Communications shall not be considered a waiver of the privilege. None of Buyer or any of its Affiliates (including, after the Closing, the Target Companies) shall access any Privileged Communications or the files of Counsel relating to the Pre-Closing Representation after the Closing. Without limiting the generality of the foregoing, from and after the Closing (a) the Sellers and their respective Affiliates (and not the Target Companies) shall be the sole holder of the attorney-client privilege with respect to the Pre-Closing Representation, (b) to the extent that files of Counsel in respect of the Pre-Closing Representation constitute property of the client, only the Sellers and their respective Affiliates (and not the Target Companies) shall hold such property rights, and (c) Counsel shall have no duty whatsoever to reveal or disclose any Privileged Communications or files to Buyer, the Target Companies or any of their respective Affiliates by reason of any attorney-client relationship between Counsel and the Target Companies (or otherwise). Notwithstanding the foregoing, in the event a dispute arises between Buyer, and/or the Target Companies, on the one hand, and a third party (other than a party to this Agreement or any of their respective Affiliates), on the other hand, after the Closing, the Target Companies (to the extent applicable) shall assert the attorney-client privilege to prevent disclosure of confidential communications with Counsel to such third party; provided that, in such instance, neither Buyer nor the Target Companies may intentionally waive such privilege without the prior written consent of the Sellers.
13.13 Use of Terms; Currency Conversion Rate. In this Agreement (a) the words “hereof”, “herein”, “hereto”, “hereunder” and words of similar import may refer to this Agreement as a whole and not merely to a specific section, paragraph or clause in which the respective word appears, (b) words importing gender include the other genders as appropriate, and (c) any terms defined in this Agreement may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. The word “including” shall mean “including, without limitation”. To the extent references to U.S. Dollars in Article IV hereof need to be
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applied to amounts of Mexican Pesos, the MXN-USD exchange rate shall be the exchange rate as published by the Banco de Mexico in the Official Journal of the Federation (Diario Oficial de la Federación) as of the date hereof.
13.14 Counterparts; Electronic Copy. Except for the Foreign Transfer Agreements, which will need to be fully executed and originals delivered by the applicable parties hereto, this Agreement and each of the Ancillary Agreements may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. This Agreement and each of the Ancillary Agreements may be executed in facsimile copy or by other electronic means (including portable document format (.pdf)) with the same binding effect as the original.
13.15 Waiver of Jury Trial. THE BUYER AND THE SELLERS HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY OR THE ACTIONS OF THE BUYER, THE TARGET COMPANIES OR THE SELLERS IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT, THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.
[Signatures on following page]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day, month and year first above written.
MORTON GLOBAL:
MORTON GLOBAL LLC

By: UP Investment Holdings LLC, its manager

        By: UPG Enterprises LLC, its manager


         By: ______________________
          Christopher Hutter, manager

         By: ______________________
          Paul Douglass, manager
        


MHIG:
MHIG LLC
By: UP Investment Holdings LLC, its manager

        By: UPG Enterprises LLC, its manager


         By: ______________________
          Christopher Hutter, manager


         By: ______________________
          Paul Douglass, manager


21395721.12

JI:
JASON INCORPORATED
By: 
Name: 
Title: 

JIH:
JASON INTERNATIONAL HOLDINGS, INC.
By: 
Name : 
Title: 


        
21395721.12

Exhibit 21
MATERIAL SUBSIDIARIES OF THE COMPANY

Name of Subsidiary Jurisdiction of Incorporation
Jason Industries, Inc. Delaware
Jason Partners Holdings Inc. Delaware
Jason Holdings, Inc. I Delaware
Jason Incorporated Wisconsin
Osborn, LLC Delaware
Schaffner Manufacturing Co., Inc. Pennsylvania
Milsco, LLC Delaware
JacksonLea de Mexico S.A. de R.L. de C.V. Mexico
Milsco de Mexico S. de R.L. de C.V. Mexico
Jason Asia Holdings Pte. Ltd. Singapore
Osborn Singapore Pte. Ltd. Singapore
Jason Milwaukee Ireland Ltd. Ireland
Jason Holding GmbH Germany
Osborn GmbH Germany
Osborn International AB Sweden
Dronco GmbH Germany
Osborn International Srl Romania
Osborn Lippert Pvt. Ltd. India
Osborn-Unipol S.A.S. France
Osborn-Unipol Lda Portugal
Jason Holdings UK Ltd. United Kingdom
Jason UK Ltd. United Kingdom
Osborn-Unipol Ltd. United Kingdom
Osborn-International LTDA Brazil
Jason International Holdings, Inc. Nevada
Osborn-Unipol S.L. Spain
Jason Industries Ireland Ltd. Ireland
Hsin Feng Chemical Taiwan
Lea (Hong Kong) International Ltd. Hong Kong
Shanghai JacksonLea Polishing Materials Co., Ltd.
People’s Republic of China
JacksonLea (Jiangmen) Polishing Materials Co. Ltd.
People’s Republic of China




Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-229181 on Form S-3, in the Post-Effective Amendment No. 1 to Form S-1 on Form S-3 No. 333-197412, and Registration Statement Nos. 333-202664 and 333-226525 on Form S-8 of our report dated February 27, 2020, relating to the financial statements of Jason Industries, Inc. appearing in this Annual Report on Form 10-K for the year ended December 31, 2019.

/s/ Deloitte & Touche LLP

Milwaukee, WI
March 2, 2020





Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-202664 and 333-226525), in the Post-Effective Amendment No. 1 to Form S-1 on Form S-3 (No. 333-197412), and on Form S-3 (333-229181) of Jason Industries, Inc. of our report dated March 5, 2019, except for the effects of the restatement discussed in Note 2 (not presented herein) to the consolidated financial statements appearing under Item 8 of the Company’s 2018 annual report on Form 10-K/A and Note 2 (not presented herein) to the financial statement schedule appearing under Schedule II of the Company’s 2018 annual report on Form 10-K/A, as to which the date is May 13, 2019, and except for the effects of discontinued operations discussed in Note 2 and the change in composition of reportable segments discussed in Note 16 to the consolidated financial statements, as to which the date is March 2, 2020, relating to the consolidated financial statements and financial statement schedule, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Milwaukee, Wisconsin
March 2, 2020


Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian K. Kobylinski, certify that:
1.I have reviewed this annual report on Form 10-K of Jason Industries, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 28, 2020

/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 annual report on Form 10-K of Jason Industries, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 28, 2020

/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 Annual Report of Jason Industries, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2019 (the “Report”), as filed with the Securities and Exchange Commission, the undersigned, in the capacity indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: February 28, 2020
/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-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purpose of Section 18 of the Securities Exchange Act of 1934, as amended.


Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Jason Industries, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2019 (the “Report”), as filed with the Securities and Exchange Commission, the undersigned, in the capacity indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: February 28, 2020
/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-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purpose of Section 18 of the Securities Exchange Act of 1934, as amended.