Fourth Quarter 2019 Earnings Call

March 3, 2020

Brian Kobylinski, Chief Executive Officer

Chad Paris, Chief Financial Officer

Rachel Zabkowicz, Vice President, Investor Relations

Disclaimer

FORWARD LOOKING STATEMENTS

This presentation includes "forward looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "anticipate," "believe," "expect," "estimate," "plan," "outlook," and "project" and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Such forward looking statements with respect to revenues, earnings, financial information, performance, strategies, prospects and other aspects of the businesses of Jason Industries, Inc. (the "Company") are based on current expectations that are subject to risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward looking statements.

The forward‐looking statements contained in this presentation are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. The forward-looking statements are not guarantees of performance or results, as they involve risks, uncertainties (some of which are beyond our control) and assumptions. Although we believe that these forward‐looking statements are based on reasonable assumptions, many factors could affect our actual results and cause them to differ materially from those anticipated in the forward-looking statements.

More information on potential factors that could affect the Company's financial condition and operating results is included in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K filed on February 28, 2020, and in the Company's other filings with the Securities and Exchange Commission. Any forward‐looking statement made by the Company in this presentation speaks only as of the date on which we make it. We undertake no obligation to publicly update any forward‐looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

NON-GAAP AND OTHER COMPANY INFORMATION

Included in this presentation are certain non-GAAP financial measures designed to complement the financial information presented in accordance with generally accepted accounting principles in the United States of America because management believes such measures are useful to investors. Because the Company's calculations of th ese measures may differ from similar measures used by other companies, you should be careful when comparing the Company's non-GAAP financial measures to those of other companies. A reconciliation of non-GAAP financial measures to GAAP financial measures is included in an appendix to this presentation.

2

Q4 Highlights

  • Divested Metalex, focus on two core businesses: Osborn and Milsco
  • Osborn NPD Polymaxx flap disc, TufBrush™ long-life brush launch
  • Milsco diversification efforts ramping up
  • Three plant consolidation projects in process
  • Tuck-inM&A activity resulted in Matchless acquisition, subsequent to the quarter
  • Operational execution remains strong

3

Full Year 2019 Results

Revenue*

Adj. EBITDA*

Free Cash Flow

Net Leverage

$337.9M

$24.8M, 7.3%

$(32.6M)

12.0x

10.2% organic

270 bps contraction

$(48.6M) y-o-y

1.0x vs Q3 19

decline

6.9x vs Q4 18

  • Improved operational performance and enhanced customer relationships
  • Experienced weakening demand in industrial and served markets throughout the year
  • Altered the portfolio to reduce cyclicality by divesting automotive-focused Fiber Solutions and rail-focused Metalex
  • Commenced strategic alternatives process to directly address the balance sheet

*Results shown on a continuing operations basis

4

Fourth Quarter Results - Total Company

Consolidated Financial Results Summary

($Ms)

Q4 2019

Q4 2018

Change

Net Sales

$

76.4

$

80.9

$

(4.5)

(5.6)%

Operating (Loss) Income

$

(7.0)

$

0.9

$

(7.9)

% of net sales

(9.2)%

1.1%

(1,030) bps

Adjusted EBITDA

$

2.6

$

5.8

$

(3.2)

% of net sales

3.4%

7.2%

(380) bps

Net sales of $76.4 million, decreased 5.6%

  • Organic sales decline of 10.4%
  • Acquisition impact positive 5.9% from Schaffner acquisition within Industrial
  • Foreign currency translation negatively impacted sales 1.1%

Operating loss of $7.0 million increased $7.9 million

Adjusted EBITDA margin of 3.4%, decreased 380 bps

  • Lower sales volumes and unfavorable product mix negatively impacted margins
  • Price, continuous improvement project savings, and cost reductions positively contributed

5

Fourth Quarter Results - Industrial

Business Conditions

General Industrial

Heavy

North America EMEA/APAC

Fabrication

Automotive

Q4 2019

Q4 2018

Change

FY2019

Change

Net Sales

$47.9

$47.2

1.6%

$201.5

(2.9)%

Growth from:

Organic sales growth

(7.1)%

(6.6)%

Currency impact

(1.8)%

(3.4)%

Acquisitions

10.5%

7.1%

Divestiture & Non-Core exit

---%

---%

Adjusted EBITDA

$3.2

$5.2

$(2.0)

$20.9

$(8.0)

% of Sales

6.6%

10.9%

(430) bps

10.4%

(360) bps

  • Organic sales decline of 7.1% driven by weaker industrial markets in both North America and Europe
  • Schaffner Manufacturing acquisition growth
  • Adjusted EBITDA decline on lower volumes and unfavorable product mix, partially offset by pricing actions and cost controls

6

Fourth Quarter Results - Engineered Components

Business Conditions

Construction &

Agriculture Material Handling

Turf Care Power Sports

Q4 2019

Q4 2018

Change

FY2019

Change

• Lower demand and inventory destocking from OEM

Net Sales

$28.4

$33.7

(15.6)%

$136.4

(14.9)%

customers in heavy industry, turf care, and

powersports

Growth from:

Organic sales growth

(15.6)%

(14.9)%

• Adjusted EBITDA decline on lower volumes and

Currency impact

---%

---%

unfavorable product mix

Acquisitions

---%

---%

Divestiture & Non-Core exit

---%

---%

Adjusted EBITDA

$2.5

$3.4

$(0.9)

$15.1

$(4.6)

% of Sales

8.7%

10.0%

(130) bps

11.1%

(120) bps

7

Financial Position

Liquidity, Debt & Leverage

(in millions)

Cash

Revolver Availability

Debt

$120

$450

$100

$440

$430

$80

Liquidity

$420

$60

$410

$40

$400

$20

$390

$0

$380

Net Debt

to Adj. 6.2x 6.2x 5.7x 5.7x 5.5x 5.3x 5.2x 5.1x 5.1x 5.7x 7.0x 11.0x 12.0x

EBITDA

Total Liquidity of $102.0M Following Fiber Solutions Sale

  • Includes $84.5M of cash and $17.5M of availability on revolving loan facilities globally
  • Metalex sale proceeds used for $5.0M voluntary term loan prepayment
  • Fiber Solutions sale proceeds available for reinvestment in the

business and acquisitions through 3Q20

Debt

Free Cash Flow - Continuing and Discontinued Operations

2019

2018

Variance

Adjusted EBITDA - Con Ops

$

24.8

$

36.7

$

(11.8)

Adjusted EBITDA - Disc Ops

7.8

30.5

(22.8)

Cash Interest

(30.1)

(30.7)

0.6

Cash Taxes

(3.6)

(6.8)

3.2

Cash Restructuring & Integration- Net

(8.1)

(6.1)

(2.0)

Transaction Costs

(4.5)

-

(4.5)

Changes In Working Capital

(6.9)

6.2

(13.1)

Operating Cash Flow

$

(20.8)

$

29.8

$

(50.6)

Less: Capital Expenditures

$

(11.8)

(13.8)

2.0

Free Cash Flow

$

(32.6)

$

16.0

$

(48.6)

Free Cash Flow:

  • Lower adjusted EBITDA from continuing and discontinued operations
  • Unfavorable changes in working capital
  • $4.5M transaction costs related to Fiber Solutions and Metalex divestitures and Schaffner acquisition

*See Appendix for calculation of Net Debt to Adjusted EBITDA.

8

Market Conditions

Manufacturing PMI

US Active Rig Count

Industrial Production

Residential Riding Mower Unit Build

TTM Rate of Change

Federal Statistics

9

*Source: OPEI

Milsco Innovation In Practice

New Platform Example

Conceptual

Incubator Line of Business

Progressing from in-house concepts to innovative in-production solutions to business incubator concepts

10

Osborn Integrated Commercial Activity

Industry-specific Exhibitions

Targeted Vertical Markets

Channel Partnerships

End-user Intimacy

Distributor

Brand

Brand

Brand

Brand

Brand

Brand

Brand

Brand

Brand

11

Product and Solution Vitality

Tuck-in Acquisition Execution

Osborn Strategy

Matchless Acquisition

• $8M revenue, $5M purchase price

• 135-year history

• True tuck-in acquisition

Matchless

• 80% of product line direct cross-over to existing Osborn items

• Chemical product line extension for Osborn

• New customers and vertical markets for Osborn

Funnel of active prospects and ability to continue to execute one to two per year

12

Osborn Polishing

  • Consolidating three leading North American polishing companies
  • One brand: Osborn
  • Standardized product portfolio, single broad-line of SKUs
  • New customers and new vertical markets
  • Expanded offering into flap wheels and chemicals
  • Bundled material spend
  • Reduced aggregate combined facilities from 14 down to 8

Buffs

Compounds

Flap Wheels and Discs

Chemicals

Establishing a global leadership position in the Industrial Polishing market

13

Cost Reduction Activity Update

•

Jackson, Mississippi

•

Milsco UK

•

Northville, Michigan

•

Redgranite Quarryside

  • Pittsburgh, Pennsylvania (Q2 2020)
  • Livonia, Michigan (Q2 2020)
    • Shared services
    • Labor flexing

$5 million of cost reductions underway through facility consolidations and other efforts

14

Closing Comments

15

Appendix

Debt Summary

Debt Structure

(in millions)

Maturity

$389

Non-U.S. Debt

$15

2022

Second Lien

$90

45% Variable

Term Loan

First Lien

$284

2021

Term Loan

55% Fixed

Effective Interest

Rate ~ 7.0%

4Q19

Covenants

  • Springing first lien leverage ratio covenant only applicable when ≥$10M borrowings on U.S. Revolver at quarter end
  • Zero borrowings outstanding on U.S. revolver, strong liquidity with no expectation to use revolver
  • First lien leverage ratio of 7.52x as of 4Q19
  • Current covenant 4.25x (if applicable)

*Note the consolidated First lien net leverage ratio under the Company's senior secured credit facilities was 7.52x as of December 31, 2019, and excludes second lien term loan borrowings from net debt. See Form 10-K for further discussion of the Company's senior secured credit facilities.

17

Adjusted EBITDA Reconciliation

4Q19

4Q18

FY2019

FY2018

(in millions)

Net loss from continuing operations

$(16.9)

$(4.8)

($43.4)

($14.7)

Interest expense

8.3

8.6

33.0

33.2

Tax provision (benefit)

2.1

(2.7)

4.0

(5.0)

Depreciation and amortization

6.0

5.5

22.2

21.1

EBITDA

(0.5)

6.7

15.8

34.7

Adjustments:

Restructuring

0.5

0.6

4.0

0.9

Transaction-related expenses

0.3

-

1.0

-

Integration and other restructuring costs

1.3

(1.0)

1.4

0.1

Share-based compensation

0.6

0.8

2.4

2.3

Loss (gain) on disposals of fixed assets - net

0.3

(1.3)

0.3

(1.3)

Total adjustments

3.1

(0.9)

9.0

1.9

Adjusted EBITDA

$2.6

$5.8

$24.8

$36.7

18

Net Debt to Adjusted EBITDA

December 31, 2019

(in millions)

Current and long-term debt

$

384.8

Add: Debt discounts and deferred financing costs

4.3

Less: Cash and cash equivalents

(84.5)

Net Debt

$

304.5

Adjusted EBITDA

1Q19

$

10.8

2Q19

7.6

3Q19

3.9

4Q19

2.6

TTM Adjusted EBITDA

24.8

Acquisitions TTM Adjusted EBITDA*

0.5

Pro Forma TTM Adjusted EBITDA

$

25.3

Net Debt to Adjusted EBITDA

12.0x

*Acquisitions TTM Adjusted EBITDA includes Adjusted EBITDA prior to the date of the acquisition during the trailing twelve months

19

Attachments

  • Original document
  • Permalink

Disclaimer

Jason Industries Inc. published this content on 03 March 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 March 2020 16:18:04 UTC