THIRD QUARTER 2016 EARNINGS CALL //// NOVEMBER 4, 2016

Transcription

1 SEATING FINISHING ACOUSTICS COMPONENTS THIRD QUARTER 2016 EARNINGS CALL //// NOVEMBER 4, 2016 Jeffry Quinn, Chairman & Chief Executive Officer Sarah Lauber, Senior Vice President & Chief Financial Officer Brian Koby Kobylinski, President & Chief Operating Officer Chad Paris, Vice President, Investor Relations

2 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 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 March 8, 2016, 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 these measures may differ from similar measures used by other companies, you should be careful when comparing the Company s non-gaap financial measures to those of other companies. A reconciliation of non-gaap financial measures to GAAP financial measures is included in an appendix to this presentation. JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 2

3 AGENDA OPENING COMMENTS OPERATIONAL UPDATE THIRD QUARTER RESULTS & GUIDANCE CLOSING COMMENTS JEFFRY QUINN BRIAN KOBYLINSKI SARAH LAUBER JEFFRY QUINN Q&A JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 3

4 OPENING COMMENTS PROGRESS UPDATE Third Quarter Specific Challenged End Markets Motorcycle & Rail General Industrial Markets Took Step Down Operational Improvement Slower Than Expected Strategic & Cost Reduction Actions Sale and Exit of Two Non-Core Markets Footprint Optimization in Components Ongoing Portfolio Review MANAGING THE PORTFOLIO TO FOCUS ON THE CORE AND RESPONDING TO CHANGING END MARKETS JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 4

5 OPERATIONAL UPDATE

6 END MARKET DEMAND & ORGANIC GROWTH Key End Markets General Industrial Heavy Fabrication Oil & Gas Construction Auto Heavy Industry Equipment Rail Turfcare Motorcycle & Powersports Finishing Components Seating Acoustics Organic Growth % Q1 Q2 Q3 Q4 FY 2015 Q1 Q2 Q3 YTD Finishing 2.1% (2.1)% 1.2% (3.9)% (0.7)% (1.8)% (1.5)% (5.1)% (3.1)% Components (10.2) (2.9) (1.7) (13.7) (25.3) (16.8) (18.7) Seating (1.9) (0.6) (13.7) (12.5) (7.6) Acoustics (1.1) 1.2 (1.9) Jason (2.2)% 0.7% 3.0% 3.1% 1.0% 4.1% (4.9)% (0.2)% (0.4)% *Organic sales refers to year over year change in net sales from existing operations excluding acquisitions and the impact of foreign currency translation. JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 6

7 OPERATIONS UPDATE Finishing Simplifying and growing core in sluggish markets Seating Securing core business and penetrating new markets 80/20 drive Top customer growth New focus markets (wheel & tire) Improving operations to support core Preparing for turf care seasonal build Adding content to new platforms Components Reducing cost structure diversifying markets and Acoustics Continued market share gain, improving operations Buffalo Grove closure completion in Q4 Initiated Libertyville consolidation Working on speaker grills and large equipment New platform opportunities Investments in people and equipment JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 7

8 ACTIONS WE ARE TAKING ACOUSTICS SALE OF EUROPEAN OPERATIONS o Historically Dilutive To Margins o Non-Strategic To Growth Plans, Focus Segment On Growth In Core North American Market o Redeploy Capital To Invest In Other Businesses & Restructuring o Expect To Close Transaction In Next Two Quarters FINISHING EXITING BRAZIL o Dilutive To Margins, Break-Even Business o Challenging Macro Environment o Simplify Business, Focus Resources On Growing Core o Shutdown Operations By End Of 2016, $2M - $3M Of Restructuring Costs COMPONENTS FACILITY CLOSURE o Consolidate Two Plants In Libertyville, IL o Optimizing Footprint And Capacity In Response To Markets o Annual Cost Savings Of $1.3M o Complete Consolidation By Q4 2017, ~$1.5M Of Restructuring Costs FACILITY SALE LEASEBACK o Evaluating Monetizing Certain Real Estate Assets To Accelerate Net Debt Reduction JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 8

9 COST REDUCTION AND MARGIN EXPANSION PROGRAM SELF HELP PROGRAMS SG&A RESTRUCTURING Continuation Of Restructuring Efforts Announced In January Actions Will Exceed Target 2016 EBITDA Impact Annual Savings Achieved Annual Savings Target Over 3 yrs $8M $11M $10M OPERATIONS OPTIMIZATION Supply Chain Project Footprint Rationalization Buffalo Grove Facility Closes In Q4 Consolidation of Libertyville Facilities $2M $11M $20M PORTFOLIO OPTIMIZATION OPTIMIZE PRODUCT LINES, CUSTOMERS & LOCATIONS ACOUSTICS SALE OF EUROPEAN OPERATIONS $30M Of Revenue, Historically Dilutive Margins FINISHING EXITING BRAZIL $6M Of Revenue, Break-Even Business JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 9

10 MY TAKE ASSESSMENT ACTION INCONSISTENT CUSTOMER RELATIONS ENERGIZING CORE CUSTOMER ACTIVITY ABUNDANT PRESENCE OF WASTE FUNDAMENTAL LEAN TRANSFORMATION CORE OF GOOD PEOPLE AUGMENTING WITH TARGETED ADDITIONS FOCUS ON POSITIONING FOR LONG-TERM ENHANCING MARGINS AND MAXIMIZING FREE CASH FLOW JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 10

11 THIRD QUARTER 2016 FINANCIAL RESULTS & GUIDANCE

12 THIRD QUARTER RESULTS FINANCIAL RESULTS SUMMARY (in millions) 3Q Q Q YoY Net sales $170.1 $171.2 (0.6)% Adjusted EBITDA $16.5 $18.6 $(2.1) Margin 9.7% 10.9% (120) bps NET SALES OF $170.1 MILLION, DECREASED 0.6% Foreign Currency Translation Negatively Impacted Sales 0.4% Organic Sales Decreased 0.2% ADJUSTED EBITDA MARGINS OF 9.7%, DECREASED 120 BPS Lower Volumes In Seating, Components And Finishing Operational Inefficiencies in Acoustics Realized $2.4M Cost Reduction Savings Offset By $1.2M Of Supply Chain Consulting $1.4M Lower Incentive Compensation Expense JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 12

13 THIRD QUARTER SALES RESULTS SALES (in millions) 3 rd Quarter Y-O-Y FX Change Impact Seating $32.3 $37.2 $(4.9) $(0.2) Finishing $49.2 $52.3 $(3.1) $(0.6) Acoustics $63.7 $51.8 $ Components $24.9 $29.9 $(5.0) - Total $170.1 $171.2 $(1.1) $(0.8) Seating Organic Sales Decline of 12.5% Decline In Motorcycles, Heavy Industry, and Turf Care Volumes Finishing Organic Sales Decline of 5.1% 1.0% Negative Impact Due To Foreign Currency Translation Lower Global Industrial Demand Acoustics Organic Sales Growth of 23.2% New Platform Launches Drove Growth Interim Business Due To Competitor Bankruptcy Components Sales Decline of 16.8% Further Declines In Railcar Products Softer Industrial Demand Smart Meter Volume Growth JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 13

14 THIRD QUARTER ADJUSTED EBITDA RESULTS (in millions) ADJUSTED EBITDA rd Quarter % of Sales 2015 % of Sales Y-O-Y Change Bps Change Seating Adjusted EBITDA Margin of 7.8% Unfavorable Mix Due To Reduced Motorcycle Volumes Margins Flat Due To Savings From Cost Reduction Program Seating $ % $ % $(0.4) - Finishing $ % $ % $(0.2) +50 Finishing Adjusted EBITDA Margin of 14.3% Cost Reduction Savings Realized of $1.1M Acoustics $ % $ % $ Components $ % $ % $(1.5) -270 Acoustics Adjusted EBITDA Margin of 11.6% Higher Operational Expenses Related To Scrap and Material Usage Corporate $(4.1) $(3.8) $(0.3) - Total $ % $ % $(2.1) -120 Components Adjusted EBITDA Margin of 14.7% Lower EBITDA on Rail And Industrial Metal Volume Decreases Corporate Expenses Increase $0.3M Includes $1.2M Of Supply Chain Consulting Costs Lower Incentive Compensation JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 14

15 FINANCIAL POSITION LIQUIDITY & DEBT FREE CASH FLOW (in millions) (in millions) L i q u i d i t y $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 3Q15 4Q15 1Q16 2Q16 3Q16 $455 $450 $445 $440 $435 $430 $425 $420 D e b t Cash Revolver Availability Debt 3Q16 YTD Free Cash Flow Impacted By $6.6M Higher Interest Payments Than Prior Year Due To Timing Net Debt To Adj. EBITDA 5.8X As Of 3Q16 Managing Non-Essential Capital Expenditures To Mitigate Lower Adjusted EBITDA FOCUS ON DEBT REDUCTION & FREE CASH FLOW GENERATION *See Appendix for calculation of Net Debt to Adjusted EBITDA. YTD16 YTD15 Adjusted EBITDA $ 53.6 $ 64.5 Cash Interest/Taxes (25.3) (17.0) Cash Restructuring (8.6) (6.2) Changes In Working Capital 3.2 (8.3) Operating Cash Flow $ 22.9 $ 33.0 Less: Capital Expenditures $ (16.1) $ (23.8) Less: Preferred Stock Dividends (2.7) (2.7) Free Cash Flow After Dividends $ 4.1 $ 6.5 JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 15

16 DEBT SUMMARY (in millions) Non-U.S. Debt $31 DEBT STRUCTURE Maturity COVENANTS Springing First Lien Leverage Ratio Covenant Only Applicable When $10m Borrowings On U.S. Revolver At Quarter End Second Lien Term Loan $ % Variable Zero Borrowings Outstanding U.S. Revolver, Strong Liquidity With No Expectation To Use Revolver First Lien Term Loan $304 3Q % Fixed Effective Interest Rate 7.7% First Lien Leverage Ratio of 3.75x As Of 3Q16 Covenant (if applicable): 3Q x 4Q x 4Q x LONG-TERM MATURITIES WITH COVENANT-LITE TERMS *Note the consolidated first lien net leverage ratio under the Company s senior secured credit facilities was 3.75x as of September 30, 2016, and excludes second lien term loan borrowings from net debt. See Form 10-Q for further discussion of the Company s senior secured credit facilities. JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 16

17 FISCAL 2016 GUIDANCE PREVIOUS GUIDANCE 2016 CURRENT GUIDANCE Revenue (in millions): $708.4 $715 - $730 $695 - $705 Adjusted EBITDA (in millions): $81.2 $73 - $76 $62 - $65 Cap Ex (% of Sales): 4.6% ~3.0% ~3.0% Free Cash Flow (in millions): $1.5 $15 - $25 $2 - $7 Net Debt to Adjusted EBITDA: 5.0X 5.2X-4.8X 6.5X-6.1X* *Does not include a reduction in net debt resulting from monetizing certain real estate assets through a sale leaseback transaction. JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 17

18 FISCAL 2016 GUIDANCE BRIDGE (in millions) Sales Adj. EBITDA Previous Guidance $715 - $730 $73 - $76 Volumes Finishing - Industrial Demand $ (9) $ (3) Components - Rail & Industrial (6) (2) Seating - Motorcycle & Heavy Industry (5) (1) Operational Performance - (9) Lower Incentive Compensation - 4 Net Change $ (20) $ (11) Current Guidance $695 - $705 $62 - $65 JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 18

19 CLOSING COMMENTS & Q&A

20 CLOSING COMMENTS ORGANIZATIONAL PRIORITIES Operational Consistency and Reliability Invest In Our People Operate As One Jason Reduce Cost Structure And Expand Margins Optimize Our Portfolio Of Businesses Cash Flow Management INCREASE THE PACE OF CHANGE JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 20

21 APPENDIX

22 ADJUSTED EBITDA RECONCILIATION (in millions) Net Loss $(2.5) $(3.2) Tax provision (0.6) (1.8) Interest expense Depreciation and amortization EBITDA Adjustments: Restructuring Transaction-related expenses - - Integration and other restructuring costs (0.4) 1.5 Share-based compensation Loss (gain) on disposals of fixed assets-net Total adjustments Adjusted EBITDA $16.5 $18.6 3Q16 3Q15 JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 22

23 ADJUSTED NET INCOME & ADJUSTED EARNINGS PER SHARE (in millions, except per share amounts) GAAP Net Loss $(2.5) $(3.2) Adjustments: Restructuring Transaction-related expenses - - Integration and other restructuring costs (0.4) 1.5 Share-based compensation Loss (gain) on disposal of fixed assets-net Tax effect on adjustments (0.1) (1.2) Adjusted Net Loss $(1.8) $(0.5) 3Q16 3Q15 Diluted weighted average number of common shares outstanding (non-gaap) GAAP Net Loss per share available to Common shareholders of Jason Industries $(0.13) $(0.16) Adjustments net of income taxes: Restructuring Transaction-related expenses - - Integration and other restructuring costs (0.01) 0.04 Share-based compensation Loss (gain) on disposal of fixed assets-net - - GAAP to non-gaap impact per share Adjusted loss per share $(0.06) $(0.02) JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 23

24 NET DEBT TO ADJUSTED EBITDA September 30, 2016 (in millions) Current and long-term debt $ Add: Debt discounts 13.1 Less: Cash and cash equivalents (39.5) Net Debt $ Adjusted EBITDA 4Q15 $ Q Q Q TTM Adjusted EBITDA 70.3 Net Debt to Adjusted EBITDA 5.8x JASON INDUSTRIES THIRD QUARTER 2016 EARNINGS CALL //// PAGE 24

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