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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September~~ March 27, ~~2019~~2020

☐ 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

JASON INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)


Delaware						46-2888322
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

833 East Michigan Street, Suite 900 Milwaukee, Wisconsin						53202
(Address of principal executive offices)						(Zip Code)

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

Not Applicable

(Former name or former address, if changed since last report)

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

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock, $0.0001 par value per share			JASN			The NASDAQ Stock Market LLC

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 ☒

As of ~~November~~June 15, ~~2019~~2020, there were 2829,~~413~~250,~~351~~911 shares of common stock of the Company issued and outstanding.

EXPLANATORY NOTE

As previously disclosed in the Current Report on Form 8-K filed by Jason Industries Inc. (the “Company”) with the Securities and Exchange Commission on May 11, 2020, the filing of the Company’s Quarterly Report on Form 10-Q for the period ending March 27, 2020 (the “Quarterly Report”) was delayed due to the ongoing COVID-19 pandemic. The Company is relying on an extension granted by the Securities and Exchange Commission’s Order under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions From the Reporting and Proxy Delivery Requirements for Public Companies dated March 25, 2020 (Release No. 34-88465). Specifically, the Company disclosed that it would be unable to file the Quarterly Report by its original due date and expected to file the Quarterly Report by no later than June 25, 2020.

The Company’s operations and business have experienced significant disruptions due to the unprecedented conditions surrounding the ongoing COVID-19 pandemic together with the various measures that federal, state, and local jurisdictions have taken in response to the crisis. In response to these measures, the Company has implemented work-from-home arrangements for the Company’s headquarters and other offices globally. The work to adapt the Company’s operating practices to protect the safety of its employees, business partners and the community has been substantial. In connection with the preparation of the Quarterly Report, the Company experienced disruptions in its normal processes and interactions with its accounting personnel and others involved in the preparation of the Quarterly Report.

JASON INDUSTRIES, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		2	3
ITEM 1. FINANCIAL STATEMENTS		2
Item 1.	Financial Statements	3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		34
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		52
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
ITEM 4. CONTROLS AND PROCEDURES		53
Item 4.	Controls and Procedures	51
PART II. OTHER INFORMATION		54	52
ITEM 1A. RISK FACTORS		54
Item 1A.	Risk Factors	52
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		54
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
ITEM 6. EXHIBITS		55
Item 6.	Exhibits	55

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Jason Industries, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts) (Unaudited)

	~~Three Months Ended~~				Three Months Ended		~~Nine Months Ended~~
	September 27, 2019		September 28, 2018		September 27, 2019		September 28, 2018
					March 27, 2020		March 29, 2019
Net sales	$	~~85,610~~	$	~~107,029~~	$	~~296~~84,~~654~~032	$	~~355~~92,~~440~~916
Cost of goods sold	~~70,840~~		~~84,562~~		~~239~~65,~~218~~857		~~275~~69,~~495~~320
Gross profit	~~14,770~~		~~22,467~~		5718,~~436~~175		7923,~~945~~596
Selling and administrative expenses	~~20,416~~		~~20,169~~		6324,~~699~~470		6719,~~717~~069
Impairment charges	20,597		—		20,597		—
Loss on disposals of property, plant and equipment-net					21		8
Loss (gain) on disposals of property, plant and equipment - net	14		(88)		18		94
Restructuring					754		1,366
Restructuring	1,277		298		3,795		1,245
Operating (loss) income					(7,070)		3,153
Operating (loss) income	(27,534)		2,088		(30,673)		10,889
Interest expense-net					(7,455)		(8,205)
Interest expense	(8,180)		(8,326)		(24,738)		(24,709)
Equity income					25		84
Equity income	45		468		167		903
Other income-net					253		64
Other income - net	932		51		611		606
Loss from continuing operations before income taxes					(14,247)		(4,904)
Loss from continuing operations before income taxes	(34,737)		(5,719)		(54,633)		(12,311)
Tax (benefit) provision					(557)		349
Tax benefit	(4,691)		(1,435)		(5,424)		(2,773)
Net loss from continuing operations					(13,690)		(5,253)
Net loss from continuing operations	(30,046)		(4,284)		(49,209)		(9,538)
Net loss from discontinued operations, net of tax					(910)		(1,803)
Net (loss) income from discontinued operations, net of tax	(3,121)		(174)		(4,130)		4,087
Net loss					(14,600)		(7,056)
Net loss	(33,167)		(4,458)		(53,339)		(5,451)
Accretion of dividends on preferred stock					879		812
Accretion of dividends on preferred stock and redemption premium	845		781		2,485		3,274
Net loss allocable to common shareholders of Jason Industries					$	(15,479)	$	(7,868)
Net loss allocable to common shareholders of Jason Industries	$	(34,012)	$	(5,239)	$	(55,824)	$	(8,725)
Basic and diluted net loss per share allocable to common shareholders of Jason Industries:
Basic and diluted net (loss) income per share allocable to common shareholders of Jason Industries:
Net loss per share from continuing operations					$	(0.50)	$	(0.22)
Net loss per share from continuing operations	$	(1.08)	$	(0.18)	$	(1.82)	$	(0.46)
Net loss per share from discontinued operations					(0.03)		(0.06)
Net (loss) income per share from discontinued operations	(0.11)		(0.01)		(0.15)		0.15
Basic and diluted net loss per share					$	(0.53)	$	(0.28)
Basic and diluted net loss per share	$	(1.19)	$	(0.19)	$	(1.97)	$	(0.32)
Weighted average number of common shares outstanding:
Basic and diluted	~~28,632~~		~~27,683~~		28,~~348~~896		27,~~565~~962

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

Jason Industries, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(In thousands) (Unaudited)

~~Three Months Ended~~

Three Months Ended

~~Nine Months Ended~~

September 27, 2019

September 28, 2018

September 27, 2019

September 28, 2018

Includes activities from both continuing and discontinued operations

March 27, 2020

March 29, 2019

Net loss

~~(33,167)~~

~~(4,458)~~

(5314,~~339~~600)

(57,~~451~~056)

Other comprehensive income (loss):

Other comprehensive loss:

Employee retirement plan adjustments, net of tax

4585

1315

Foreign currency translation adjustments

~~(4,556)~~

~~(879)~~

(52,~~170~~164)

(31,~~473~~566)

Net change in unrealized gains (losses) on cash flow hedges, net of tax (expense) benefit of ($10), ($60), $490, ($716), respectively

185

(1,519)

2,195

Net change in unrealized (losses) gains on cash flow hedges, net of tax benefit of $34 and $205, respectively

(109)

(637)

Total other comprehensive loss

~~(4,510)~~

~~(690)~~

(62,~~644~~188)

(12,~~265~~188)

Comprehensive loss

~~(37,677)~~

~~(5,148)~~

(5916,~~983~~788)

(69,~~716~~244)

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

Jason Industries, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts) (Unaudited)

	September 27, 2019		December 31, 2018
	March 27, 2020		December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	9271,~~695~~964	$	4684,~~457~~526
Accounts receivable - net of allowances for doubtful accounts of $1,329 at September 27, 2019 and $1,519 at December 31, 2018	41,641		41,325
Accounts receivable-net of allowances for doubtful accounts of $1,257 at March 27, 2020 and $1,106 at December 31, 2019	44,823		33,085
Inventories	55,435		55,627
Inventories-net	51,319		49,943
Other current assets	8,~~039~~363		7,~~049~~433
Current assets held for sale	—		45,681
Total current assets	176,469		174,987
Total current assets	197,810		196,139
Property, plant and equipment-net of accumulated depreciation of $78,660 at March 27, 2020 and $75,925 at December 31, 2019	68,809		70,276
Property, plant and equipment - net of accumulated depreciation of $89,370 at September 27, 2019 and $77,490 at December 31, 2018	82,048		90,909
Right-of-use operating lease assets	20,013		20,910
Right-of-use operating lease assets	28,585		—
Goodwill	46,809		45,684
Goodwill	45,111		44,065
Other intangible assets-net	64,894		64,590
Other intangible assets - net	70,004		96,446
Other assets-net	10,541		10,654
Other assets - net	10,132		11,679
Total assets	$	387,535	$	387,101
Noncurrent assets held for sale	—		64,359
Liabilities and Shareholders’ Deficit
Total assets	$	433,690	$	503,597
Liabilities and Shareholders’ (Deficit) Equity
Current liabilities
Current portion of long-term debt	$	5373,~~769~~259	$	5,~~687~~800
Current portion of operating lease liabilities	54,~~469~~385		—4,275
Accounts payable	2730,~~578~~241		3522,~~331~~914
Accrued compensation and employee benefits	108,~~325~~642		128,~~154~~551
Accrued interest	16,723		8979
Other current liabilities	1416,~~307~~305		13,~~923~~783
Current liabilities held for sale	—		18,679
Total current liabilities	439,555		55,402
Total current liabilities	63,449		85,863
Long-term debt	14,263		378,950
Long-term debt	384,170		386,101
Long-term operating lease liabilities	18,159		19,136
Long-term operating lease liabilities	25,567		—
Deferred income taxes	5,756		7,534
Deferred income taxes	10,002		17,613
Other long-term liabilities	16,966		16,938
Other long-term liabilities	15,409		19,506
Total liabilities	494,699		477,960
Noncurrent liabilities held for sale	—		2,297
Total liabilities	498,597		511,380
Commitments and contingencies (Note 17)
Shareholders’ (Deficit) Equity
Shareholders’ Deficit
Preferred stock, $0.0001 par value (5,000,000 shares authorized, 43,090 shares issued and outstanding at September 27, 2019, including 843 shares declared on August 1, 2019 and issued on October 1, 2019, and 40,612 shares issued and outstanding at December 31, 2018, including 794 shares declared on November 1, 2018 and issued on January 1, 2019)	43,090		40,612
Preferred stock, $0.0001 par value (5,000,000 shares authorized, 44,827 shares issued and outstanding at March 27, 2020, including 877 shares declared on February 4, 2020 and issued on April 1, 2020, and 43,950 shares issued and outstanding at December 31, 2019, including 860 shares declared on November 3, 2019 and issued on January 1, 2020)	44,827		43,950
Jason Industries common stock, $0.0001 par value (120,000,000 shares authorized; issued and outstanding: 28,413,351 shares at September 27, 2019 and 27,394,978 shares at December 31, 2018)	3		3
Jason Industries common stock, $0.0001 par value (120,000,000 shares authorized; issued and outstanding: 28,858,910 shares at March 27, 2020 and 28,508,977 shares at December 31, 2019)	3		3
Additional paid-in capital	~~155~~154,~~138~~629		155,~~533~~023
Retained deficit	(~~232~~275,~~923~~792)		(~~180~~261,~~360~~192)
Accumulated other comprehensive loss	(30,~~215~~831)		(2328,~~571~~643)
Total shareholders’ (deficit) equity	(64,907)		(7,783)
Total shareholders’ deficit	(107,164)		(90,859)
Total liabilities and shareholders’ (deficit) equity	$	433,690	$	503,597
Total liabilities and shareholders’ deficit	$	387,535	$	387,101

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

Jason Industries, Inc. Condensed Consolidated Statements of Cash Flows(In thousands) (Unaudited)
	Nine Months Ended
Includes cash flow activities from both continuing and discontinued operations	September 27, 2019		September 28, 2018
Cash flows from operating activities
Net loss	$	(53,339)	$	(5,451)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation	19,996		20,415
Amortization of intangible assets	8,787		11,242
Amortization of deferred financing costs and debt discount	2,211		2,199
Non-cash operating lease expense	6,193		—
Equity income	(167)		(903)
Deferred income taxes	(6,684)		(2,580)
Loss on disposals of property, plant and equipment - net	14		154
Non-cash impact of business divestitures and dissolutions	(1,050)		—
Non-cash impairment charge	20,597		—
Dividends from joint venture	728		—
Share-based compensation	2,609		1,728
Net increase (decrease) in cash, net of acquisitions and dispositions, due to changes in:
Accounts receivable	1,919		(5,155)
Inventories	2,686		4,368
Other current assets	(1,029)		811
Accounts payable	(9,462)		(506)
Accrued compensation and employee benefits	(2,702)		(689)
Accrued interest	(88)		(194)
Accrued income taxes	(115)		(3,548)
Operating lease liabilities, net	(5,923)		—
Other - net	(996)		(1,876)
Total adjustments	37,524		25,466
Net cash (used in) provided by operating activities	(15,815)		20,015
Cash flows from investing activities
Proceeds from disposals of property, plant and equipment	1,145		202
Payments for property, plant and equipment	(8,743)		(9,636)
Proceeds from divestiture, net of cash divested and liabilities assumed by buyer	75,021		—
Acquisition of business, net of cash acquired	(11,000)		—
Acquisitions of patents	(32)		(44)
Net cash provided by (used in) investing activities	56,391		(9,478)
The accompanying notes are an integral part of these condensed consolidated financial statements.

Jason Industries, Inc. Condensed Consolidated Statements of Cash Flows(In thousands) (Unaudited)
Jason Industries, Inc.Condensed Consolidated Statements of Cash Flows(In thousands) (Unaudited)
	Nine Months Ended
	Three Months Ended
Includes cash flow activities from both continuing and discontinued operations	~~September~~March 27, ~~2019~~2020		~~September~~March 2829, ~~2018~~2019
Cash flows from operating activities
Net loss	$	(14,600)	$	(7,056)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation	3,514		6,460
Amortization of intangible assets	1,976		2,901
Amortization of deferred financing costs and debt discount	729		737
Non-cash operating lease expense	1,261		2,043
Equity income	(25)		(84)
Deferred income taxes	(1,534)		(885)
Loss on disposals of property, plant and equipment-net	21		8
Loss on divestitures	835		—
Dividends from joint venture	—		728
Share-based compensation	527		876
Net increase (decrease) in cash, net of acquisitions and dispositions, due to changes in:
Accounts receivable	(12,436)		(14,806)
Inventories	(1,703)		(3,338)
Other current assets	(1,107)		65
Accounts payable	6,913		8,882
Accrued compensation and employee benefits	200		1,263
Accrued interest	6,644		(3)
Accrued income taxes	721		321
Operating lease liabilities, net	(1,233)		(2,126)
Other-net	763		(3,235)
Total adjustments	6,066		(193)
Net cash used in operating activities	(8,534)		(7,249)
Cash flows from investing activities
Proceeds from disposals of property, plant and equipment	70		189
Payments for property, plant and equipment	(1,970)		(3,468)
Acquisition of business, net of cash acquired	(3,965)		—
Acquisitions of patents	(1)		(5)
Net cash used in investing activities	(5,866)		(3,284)
The accompanying notes are an integral part of these condensed consolidated financial statements.
Cash flows from financing activities
Payments of deferred financing costs	(331)		(609)
Payments of First and Second Lien term loans	—		(775)
Payments of First and Second Lien term loans	(2,325)		(4,825)
Proceeds from other long-term debt	3,878		1,641
Proceeds from other long-term debt	3,298		3,314
Payments of other long-term debt	(1,371)		(1,992)
Payments of other long-term debt	(4,585)		(5,358)
Payments of finance lease obligation	(90)		(89)
Payments of finance lease obligation	(246)		—
Value added tax paid from building sale	—		(707)
Value added tax paid from building sale	(707)		—
Other financing activities-net	(44)		(396)
Other financing activities - net	(627)		(14)
Net cash provided by (used in) financing activities	2,373		(2,318)
Net cash used in financing activities	(5,523)		(7,492)
Effect of exchange rate changes on cash and cash equivalents	(535)		(165)
Effect of exchange rate changes on cash and cash equivalents	(527)		(562)
Net decrease in cash and cash equivalents	(12,562)		(13,016)
Net increase in cash and cash equivalents	34,526		2,483
Cash and cash equivalents, beginning of period	84,526		58,169
Cash and cash equivalents, beginning of period	58,169		48,887
Cash and cash equivalents, end of period	$	71,964	$	45,153
Cash and cash equivalents, end of period	$	92,695	$	51,370
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest	$	~~22,664~~82	$	227,~~772~~496
Income taxes, net of refunds	$	~~3,040~~977	$	31,~~454~~595
Acquisition-related transaction costs used in operating activities	$	~~373~~62	$	—240
Divestiture-related transaction costs used in operating activities	$	~~3,380~~451	$	—
Other strategic alternatives costs used in operating activities	$	3,602	$	—
Non-cash lease activities:
Right-of-use operating assets obtained in exchange for operating lease obligations	$	~~3,113~~422	$	—410
Right-of-use finance assets obtained in exchange for finance lease obligations	$	~~442~~—	$	—65
Non-cash investing activities:
Property, plant and equipment acquired through additional liabilities	$	~~423~~1,363	$	1,~~005~~634
Non-cash financing activities:
Non-cash preferred stock created from dividends declared	$	~~2,478~~877	$	~~2,289~~809
Exchange of preferred stock for common stock of Jason Industries, Inc.	$	—	$	12,136
Debt and pension liability assumed by buyer with divestiture	$	2,206	$	—

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

Jason Industries, Inc.

Condensed Consolidated Statements of Shareholders’ (Deficit~~) Equity~~

(In thousands) (Unaudited)

For the three months ended September 27, 2019:	Preferred Stock		Common Stock		AdditionalPaid-InCapital		RetainedDeficit		AccumulatedOtherComprehensiveLoss		TotalShareholders'(Deficit) Equity
For the three months ended March 27, 2020:	Preferred Stock		Common Stock		AdditionalPaid-InCapital		RetainedDeficit		AccumulatedOtherComprehensiveLoss		TotalShareholders’Deficit
Balance at June 28, 2019	$	42,247	$	3	$	155,096	$	(199,756)	$	(25,705)	$	(28,115)
Balance at December 31, 2019	$	43,950	$	3	$	155,023	$	(261,192)	$	(28,643)	$	(90,859)
Dividends declared	~~843~~877		—		(~~845~~879)		—		—		(2)
Share-based compensation	—		—		~~939~~527		—		—		~~939~~527
Tax withholding related to vesting of restricted stock units	—		—		(5242)		—		—		(5242)
Net loss	—		—		—		(3314,~~167~~600)		—		(3314,~~167~~600)
Employee retirement plan adjustments, net of tax	—		—		—		—		85		85
Foreign currency translation adjustments	—		—		—		—		(2,164)		(2,164)
Net changes in unrealized losses on cash flow hedges, net of tax	—		—		—		—		(109)		(109)
Balance at March 27, 2020	$	44,827	$	3	$	154,629	$	(275,792)	$	(30,831)	$	(107,164)
For the three months ended March 29, 2019:	Preferred Stock		Common Stock		AdditionalPaid-InCapital		RetainedDeficit		AccumulatedOtherComprehensiveLoss		TotalShareholders’Deficit
Balance at December 31, 2018	$	40,612	$	3	$	155,533	$	(180,360)	$	(23,571)	$	(7,783)
Cumulative impact of accounting changes	—		—		—		776		—		776
Dividends declared	809		—		(812)		—		—		(3)
Share-based compensation	—		—		876		—		—		876
Tax withholding related to vesting of restricted stock units	—		—		(394)		—		—		(394)
Net loss	—		—		—		(7,056)		—		(7,056)
Employee retirement plan adjustments, net of tax	—		—		—		—		15		15
Foreign currency translation adjustments	—		—		—		—		(41,~~556~~566)		(41,~~556~~566)
Net changes in unrealized gains on cash flow hedges, net of tax	—		—		—		—		31(637)		31(637)
Balance at September 27, 2019	$	43,090	$	3	$	155,138	$	(232,923)	$	(30,215)	$	(64,907)
Balance at March 29, 2019	$	41,421	$	3	$	155,203	$	(186,640)	$	(25,759)	$	(15,772)
For the three months ended September 28, 2018:	Preferred Stock		Common Stock		AdditionalPaid-InCapital		RetainedDeficit		AccumulatedOtherComprehensiveLoss		TotalShareholders'(Deficit) Equity
Balance at June 29, 2018	$	39,040	$	3	$	155,185	$	(168,193)	$	(20,763)	$	5,272
Dividends declared	778		—		(781)		—		—		(3)
Share-based compensation	—		—		944		—		—		944
Net loss	—		—		—		(4,458)		—		(4,458)
Employee retirement plan adjustments, net of tax	—		—		—		—		4		4
Foreign currency translation adjustments	—		—		—		—		(879)		(879)
Net changes in unrealized gains on cash flow hedges, net of tax	—		—		—		—		185		185
Balance at September 28, 2018	$	39,818	$	3	$	155,348	$	(172,651)	$	(21,453)	$	1,065

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

Jason Industries, Inc.

Condensed Consolidated Statements of Shareholders’ (Deficit) Equity

(In thousands) (Unaudited)

For the nine months ended September 27, 2019:	Preferred Stock		Common Stock		AdditionalPaid-InCapital		RetainedDeficit		AccumulatedOtherComprehensiveLoss		TotalShareholders’(Deficit) Equity
Balance at December 31, 2018	$	40,612	$	3	$	155,533	$	(180,360)	$	(23,571)	$	(7,783)
Cumulative impact of accounting changes	—		—		—		776		—		776
Dividends declared	2,478		—		(2,485)		—		—		(7)
Share-based compensation	—		—		2,609		—		—		2,609
Tax withholding related to vesting of restricted stock units	—		—		(519)		—		—		(519)
Net loss	—		—		—		(53,339)		—		(53,339)
Employee retirement plan adjustments, net of tax	—		—		—		—		45		45
Foreign currency translation adjustments	—		—		—		—		(5,170)		(5,170)
Net changes in unrealized losses on cash flow hedges, net of tax	—		—		—		—		(1,519)		(1,519)
Balance at September 27, 2019	$	43,090	$	3	$	155,138	$	(232,923)	$	(30,215)	$	(64,907)
For the nine months ended September 28, 2018:	Preferred Stock		Common Stock		AdditionalPaid-InCapital		RetainedDeficit		AccumulatedOtherComprehensiveLoss		TotalShareholders’(Deficit) Equity
Balance at December 31, 2017	$	49,665	$	3	$	143,788	$	(167,710)	$	(20,062)	$	5,684
Cumulative impact of accounting changes	—		—		—		510		(126)		384
Dividends declared	2,289		—		(2,297)		—		—		(8)
Share-based compensation	—		—		1,728		—		—		1,728
Tax withholding related to vesting of restricted stock units	—		—		(7)		—		—		(7)
Net loss	—		—		—		(5,451)		—		(5,451)
Employee retirement plan adjustments, net of tax	—		—		—		—		13		13
Foreign currency translation adjustments	—		—		—		—		(3,473)		(3,473)
Net changes in unrealized gains on cash flow hedges, net of tax	—		—		—		—		2,195		2,195
Exchange of preferred stock for common stock of Jason Industries, Inc.	(12,136)		—		12,136		—		—		—
Balance at September 28, 2018	$	39,818	$	3	$	155,348	$	(172,651)	$	(21,453)	$	1,065

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

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)


1.			Description of Business and Basis of Presentation

Description of Business

Jason Industries, Inc. (“Jason Industries”), ~~including~~and its subsidiaries (collectively, the “Company”), is a global industrial manufacturing company. Inwith ~~the~~significant ~~first~~market ~~quarter~~share ofpositions ~~2019,~~in aseach ~~part~~ of aits ~~review~~two ofsegments: ~~the~~industrial ~~Company’s~~and ~~organizational~~engineered ~~structure,~~components. ~~the~~The Company ~~made~~provides ~~certain~~critical ~~strategic~~components ~~leadership~~and ~~changes~~manufacturing ~~which~~solutions ~~required~~to acustomers ~~reassessment~~across ofa ~~reportable~~wide ~~segments.~~range ~~Based on this evaluation, the Company changed how it makes operating decisions, assesses performance~~ of ~~the~~end ~~business~~markets, industries and ~~allocates~~geographies ~~resources.~~through Asits aglobal ~~result~~network of ~~the~~22 ~~evaluation,~~manufacturing ~~the~~facilities ~~Company reduced the number of operating~~ and ~~reportable~~nine ~~segments from four to three: industrial~~sales, ~~engineered~~administrative ~~components,~~ and/or ~~fiber~~warehouse ~~solutions.~~facilities ~~The~~throughout ~~prior~~the ~~year~~United ~~segment~~States ~~disclosures~~and ~~have~~13 ~~been~~foreign ~~updated to conform with current year presentation~~countries.

The Company ~~operates in the United States and 13 foreign countries. The Company~~’s industrial segment, ~~formerly the finishing segment,~~ focuses on the production of industrial brushes, polishing buffs and compounds, abrasives, and roller technology products that are used in a broad range of industrial and infrastructure applications. The engineered components segment, ~~the combined former seating and components segments,~~ designs, engineers, and manufactures seating, ~~safety and filtration~~ products used in heavy industry (construction, agriculture, and material handling), turf care, and power sports, ~~rail and general industrial~~ applications. ~~The fiber solutions segment, formerly the acoustics segment, manufactured technical, non-woven fiber-based acoustical, thermal, and structural products serving automotive and other end markets.~~

During the third quarter of 2019, the Company determined that the North American fiber solutions business met the criteria to be classified as a discontinued operation. As a result, the Company's prior period 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 business have been presented as held for sale for periods prior to the sale. On August 30, 2019, the Company completed the divestiture of its North American fiber solutions business.

On August 12, 2019, the Company announced that its Board of Directors has engaged an advisor to explore strategic alternatives, including a potential sale of the Company.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial reporting and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. For additional information, including the Company’s significant accounting policies, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, ~~2018~~2019 and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q).

The Company’s fiscal year ends on December 31. Throughout the year, the Company reports its results using a fiscal calendar whereby each three month quarterly reporting period is approximately thirteen weeks in length, ending on a Friday. The exceptions are the first quarter, which begins on January 1, and the fourth quarter, which ends on December 31. For ~~2019~~2020, the Company’s fiscal quarters are comprised of the three months ending March 2927, June 2826, September 2725 and December 31. In ~~2018~~2019, the Company’s fiscal quarters were comprised of the three months ended March 3029, June 2928, September 2827 and December 31.

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 and notes to the financial statements have been recast to be presented on a continuing operations basis, except where noted. 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.

In the opinion of management, all adjustments considered necessary for a fair statement of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Interim results are not necessarily indicative of the results that may be expected for the entire fiscal year.

Impact of COVID-19

A novel strain of coronavirus (“COVID-19”) was first identified in late 2019, continued to spread throughout the world in early 2020 and was eventually declared a pandemic by the World Health Organization by the end of the first quarter of 2020. The COVID-19 pandemic has resulted in national, state and local government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, border closings, restrictions on public gatherings, quarantining of people who may have been exposed to the virus, shelter-in-place restrictions, and limitations or shutdowns of business operations. The Company has significant operations worldwide, including in the United States, Mexico and Germany, and each of these countries has been affected by the outbreak and taken measures to try to contain it, resulting in disruptions and closures at some of our manufacturing facilities and support operations. These measures have impacted and may further impact our workforce and operations, the operations of our customers and distributors, and those of our vendors and suppliers. There is considerable uncertainty regarding the impact, and expected duration, of such measures and potential future measures, and restrictions on our access to our facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers.

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

The Company continues to monitor and respond to the COVID-19 pandemic closely and the top priority remains the health, safety and well-being of our employees, their families and the communities in which we operate. As a result of the significant decline in demand for the Company’s products as well as disruptions resulting from restrictions imposed by local governments to contain the virus, we have experienced periodic and in some cases extended closures of our manufacturing facilities primarily during the second quarter. Within the industrial and engineered components segments, some of the markets and customers the Company serves are considered essential businesses and therefore some of our plants remained open in those jurisdictions with such essential designations. As of the date of this filing, the Company’s manufacturing operations have generally resumed production at levels supporting current market demand as local restrictions have been lifted. As the Company navigates through operating during the COVID-19 pandemic, it has modified business practices where practicable to ensure the safety of our employees such as but not limited to, developing social distancing plans for employees, expanding the number of work from home employees for roles that can work remotely and restricting employee travel.

The Company’s financial results began to be impacted by COVID-19 late in the first quarter of 2020, and COVID-19 has created significant uncertainty in the future economic outlook of the Company's businesses. While the Company's expectations for operating results in 2020 have been lowered to reflect the new economic environment, the Company's businesses are taking cost countermeasures, such as reductions in executive and salaried compensation, travel restrictions and employee furloughs, to manage operating expenses and preserve liquidity. The Company also began deferring certain lease payments for real property leases in the second quarter.

In the first quarter of 2020, changes in facts and circumstances and general market declines from COVID-19, as discussed above, have reduced the Company's expectations of near term future operating results. The Company considered these circumstances and the potential long-term impact on revenues and cash flows associated with reporting units and asset groups and determined that more likely than not an indicator of goodwill, intangible assets-net or other long-lived assets impairment did not exist. While management concluded that a triggering event did not occur during the three months ended March 27, 2020, an extended COVID-19 pandemic would further impact the expectations of future operating results and assumptions that are significant enough that an interim impairment of goodwill, intangible assets-net or other long-lived assets could be required in future periods.

Recently issued accounting standards

Accounting standards adopted in the current fiscal year

In ~~February~~March ~~2016~~2020, the Financial Accounting Standards Board (“"FASB”") issued Accounting Standards Update (“"ASU”") ~~2016~~2020-0204, “~~Leases~~Reference Rate Reform (Topic ~~842~~848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU ~~2016~~2020-0204”). ASU ~~2016~~2020-0204 ~~establishes~~provides ~~new~~optional expedients and exceptions for applying generally accepted accounting principles to contract modifications, hedging relationships and ~~disclosure~~other ~~requirements~~transactions ~~for~~that ~~leases.~~reference ~~See~~LIBOR ~~Note~~or 8another reference rate, ~~“Leases”~~which ~~for~~is ~~further~~expected ~~discussion~~to ~~regarding~~be ~~the~~discontinued if certain criteria are met. The Company adopted ASU 2020-04 effective March 12, 2020. The adoption of this ~~standard~~guidance did not have any impact on the Company's condensed 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 condensed 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 condensed consolidated

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

Infinancial ~~August~~statements. ~~2017,~~The ~~the~~Company ~~FASB~~is ~~issued~~currently ~~ASU~~assessing ~~2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”). ASU 2017-12 broadens~~ the ~~scope~~impact ofthat ~~financial~~this ~~and~~standard ~~nonfinancial~~will ~~strategies~~have ~~eligible~~on ~~for hedge accounting and makes certain targeted improvements to simplify~~ the ~~application~~employee ofbenefit ~~hedge~~plan ~~accounting~~disclosures ~~guidance.~~within ~~In addition,~~ the ~~standard~~notes ~~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 any impact on the Company’s condensed consolidated financial statements, oras ~~the~~well ~~related~~as ~~disclosures~~the ~~within~~planned ~~the~~timing ~~accompanying~~of ~~notes~~adoption.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting ~~standards~~for Income Taxes” (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to bethe ~~adopted~~general principles in ~~future~~Topic ~~fiscal~~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 condensed 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”)2. ~~ASU~~Going 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 condensed consolidated financial statements. The Company is currently assessing the impact that this standard will have on the employee benefit plan disclosures within the notes to the annual consolidated financial statements, as well as the planned timing of adoption.Concern

2The condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. ~~Revision~~The Company faces significant challenges and uncertainties related to the COVID-19 pandemic. As a result, the Company’s available capital resources are expected to be consumed more rapidly than previously forecasted due to (a) significantly increased economic and demand uncertainty that has resulted in decreases in actual and expected future sales of ~~Previously~~the ~~Reported~~Company’s ~~Financial~~products; ~~Information~~(b) significant disruptions to the Company’s ability to operate its manufacturing facilities due to restrictions placed on business operations, which has resulted in decreases in actual and future expected sales of the Company’s products; (c) the effect of the COVID-19 pandemic on the Company's ability to obtain parts and materials from the Company's suppliers, which has resulted in decreases in actual and expected future sales of the Company’s products; (d) the costs of continuing to staff critical production and fulfillment functions despite the significant declines in sales; (e) restructuring actions which are increasing operating expenses; (f) costs related to the strategic alternatives process, including executive and salaried retention agreements; and (g) other items affecting the Company’s forecasted level of expenditures and use of cash resources. These factors will adversely impact the Company’s ability to make a mandatory prepayment in August 2020 on its First Lien Term Loans (as defined in Note 10, “Debt and Hedging Instruments”) of the net proceeds from the 2019 sale of the Fiber Solutions business, of which $48.4 million was remaining after permitted reinvestments as of March 27, 2020. At March 27, 2020 the Company had $76.1 million of total liquidity, including $72.0 million of available cash (including $48.4 million of net proceeds from the 2019 sale of the Fiber Solutions business and $12.5 million held at our non-U.S. operations), and $4.1 million available under revolving loan facilities outside the U.S. See Note 10, “Debt and Hedging Instruments” for further discussion of mandatory prepayments of debt.

~~During~~On March 31, 2020, Jason Incorporated (the ~~first~~“Borrower”), ~~quarter~~a subsidiary of ~~2019~~the Company, elected to defer making the ~~Company~~interest ~~identified~~payment anof ~~error~~approximately in$2.3 million due on March 31, 2020 to lenders under the ~~income~~Second ~~tax~~Lien ~~provision~~Credit Agreement (as defined in Note 10, “Debt and ~~deferred~~Hedging ~~income~~Instruments”). ~~taxes~~This asresulted in an event of ~~and~~default ~~for~~under the ~~year~~Second ~~ended~~Lien ~~December~~Credit 31Agreement, ~~2018~~with a cross-default under the First Lien Credit Agreement (as defined in Note 10, “Debt and Hedging Instruments”). Under the Intercreditor Agreement, the lenders under the Second Lien Credit Agreement are not able to exercise their rights and remedies in connection with such default for 180 days. As aof ~~result~~March 27, 2020, $89.9 million of ~~this~~principal ~~error~~amount of loans was outstanding under the Second Lien Credit Agreement. On March 31, 2020, the Company ~~restated~~made its ~~consolidated~~quarterly ~~financial~~interest ~~statements~~and asamortization ofpayments ~~and~~to ~~for~~the lenders under the ~~year~~First ~~ended~~Lien ~~December~~Credit ~~31,~~Agreement ~~2018~~and onfollowing ~~Form~~these ~~10-K/A~~payments $283.7 ~~See~~million of principal amount of loans was outstanding under the ~~Form~~First ~~10-K/A~~Lien ~~for~~Credit ~~additional~~Agreement ~~details~~as ~~regarding~~of such date. As a result of the ~~error~~event of default, the Company is not able to draw on its Revolving Credit Facility (as defined in Note 10, “Debt and Hedging Instruments”).

AsAlso aon ~~result~~March of31, ~~this error~~2020, the Borrower and certain of the Company’s ~~previously~~other ~~reported~~subsidiaries ~~tax~~entered ~~provision~~into ~~for~~a ~~the~~forbearance ~~three~~agreement ~~and~~with ~~nine~~certain ~~months~~lenders ~~ended~~under ~~September~~the 28Borrower’s First Lien Credit Agreement, ~~2018~~which was ~~overstated~~subsequently byamended ~~$1.1~~and ~~million~~restated ~~and~~on ~~$1.5~~April ~~million~~30, ~~respectively~~2020, ~~within~~May ~~the~~14, ~~condensed~~2020, ~~consolidated~~June ~~statement~~2, of2020, ~~operations.~~and ~~While~~June ~~the~~3, ~~impact~~2020 of(as ~~this~~amended ~~error~~and isrestated, ~~not~~the ~~material~~“Amended and Restated Forbearance Agreement”). Pursuant to the ~~previously~~Amended ~~reported~~and ~~quarterly~~Restated ~~interim~~Forbearance ~~periods~~Agreement, the ~~Company~~Forbearing ~~has~~Lenders ~~revised~~agreed ~~its~~to ~~condensed~~forbear ~~consolidated~~from ~~financial~~exercising ~~statements~~their ~~for~~rights and remedies during the ~~three~~Amended and ~~nine~~Restated ~~months~~Forbearance ~~ended~~Period ~~September~~(as ~~28,~~described ~~2018~~below) ~~included~~as ~~herein~~a toresult ~~reflect~~of the ~~correction~~failure ofby ~~this~~the ~~error.~~Borrower ~~Amounts~~to ~~throughout~~make the ~~condensed~~interest ~~consolidated~~payment ~~financial~~due ~~statements~~on ~~and~~March ~~notes~~31, ~~thereto~~2020 ~~have~~to ~~been~~lenders ~~adjusted~~under tothe ~~incorporate~~Second ~~the~~Lien ~~revised~~Credit ~~amounts,~~Agreement. ~~where~~The ~~applicable~~Amended and Restated Forbearance Period terminated on June 5, 2020.

On June 5, 2020 the Company entered into a Restructuring Support Agreement (the “Restructuring Support Agreement”) with certain creditors representing more than 75% of its outstanding indebtedness under its First Lien Credit Agreement. The Restructuring Support Agreement contemplates agreed-upon terms for a pre-packaged financial restructuring plan to be filed in cases commenced under chapter 11 of title 11 of the United States Code. See Note 18, “Subsequent Events” for further discussion of the terms of the Restructuring Support Agreement.

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

~~The~~to ~~impact~~continue ofas a going concern for the ~~required~~one-year ~~correction~~period tofrom the ~~condensed~~date ~~consolidated~~of ~~statement~~issuance of ~~operations~~these ~~and~~financial ~~comprehensive~~statements. ~~(loss)~~The ~~income~~financial ~~were~~statements asdo ~~follows:~~not include any adjustments that might result from the outcome of this uncertainty.

	Three Months Ended September 28, 2018
	As Reported (1)		Adjustments		As Revised
Tax benefit	$	(381)	$	(1,054)	$	(1,435)
Net loss from continuing operations	$	(5,338)	$	1,054	$	(4,284)
Net loss	$	(5,512)	$	1,054	$	(4,458)
Net loss allocable to common shareholders of Jason Industries	$	(6,293)	$	1,054	$	(5,239)
Net loss per share allocable to common shareholders of Jason Industries:
Basic and diluted from continuing operations	$	(0.22)	$	0.04	$	(0.18)
Comprehensive loss	$	(6,202)	1,054		$	(5,148)
	Nine Months Ended September 28, 2018
	As Reported (1)		Adjustments		As Revised
Tax benefit	$	(1,306)	$	(1,467)	$	(2,773)
Net loss from continuing operations	$	(11,005)	$	1,467	$	(9,538)
Net loss	$	(6,918)	$	1,467	$	(5,451)
Net loss allocable to common shareholders of Jason Industries	$	(10,192)	$	1,467	$	(8,725)
Net loss per share allocable to common shareholders of Jason Industries:
Basic and diluted from continuing operations	$	(0.52)	$	0.06	(0.46)
Comprehensive loss	$	(8,183)	1,467		$	(6,716)

(1)The previously reported balances have been adjusted to conform to results from continuing operations due to the sale of the former North American fiber solutions business. Refer to Note 3, “Discontinued Operations” for further discussion on the transaction completed in the third quarter of 2019.

The above corrections did not impact total net cash provided by (used in) operating, investing or financing activities within the condensed consolidated statements of cash flows for any previous period. Other than the adjustments to net loss for the three and nine months ended September 28, 2018, as described above, which impacted recorded retained deficit and total shareholders’ deficit, there were no other impacts to the condensed consolidated statement of shareholders’ (deficit) equity. There was no impact to the Company’s previously reported “segment” Adjusted EBITDA for the three and nine months ended September 28, 2018.


3.			Discontinued Operations

~~On August 30, 2019, the Company completed the sale of its~~ North American ~~fiber~~Fiber ~~solutions~~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 “Sale Agreement”), for a purchase price of $85.0 million, subject to certain adjustments as set forth in the Sale Agreement (the “Transaction”). The purchase price was reduced by $5 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 to be settled within 110 days of the closing date.

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 was also subject to a net working capital adjustment as defined by the Fiber Sale Agreement, which was settled between the Motus Group and the Company subsequent to period end on June 2, 2020, primarily resulting in a $1.0 million reduction in the purchase price.

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 as defined by the Metalex Sale Agreement, which is currently in dispute between the Company and Morton Global. Morton Global has proposed a working capital adjustment that results in a further purchase price reduction of $0.6 million. The Company believes this claim lacks merit and a loss for the amount subject to dispute is not probable as of March 27, 2020. 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 divestitures reduced the Company’s automotive and rail market exposures 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 businesses are reflected in the Company’s condensed consolidated financial statements as discontinued operations.

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 three months ended March 29, 2019.


For the Three Months Ended March 29, 2019:
	North American Fiber Solutions		Metalex


Net sales	$	35,653	$	13,410
Cost of goods sold	30,848		13,231
Gross profit	4,805		179
Selling and administrative expenses	3,931		2,123

Restructuring	207		—
(Loss) income from operations	667		(1,944)
Interest expense	(12)		(13)
Gain (loss) on divestiture	—		—
Other income (loss) - net	(113)		(27)
Income (loss) before income taxes	542		(1,984)
Tax (benefit) provision	(135)		496
Net income (loss) from discontinued operations, net of tax	$	677	$	(2,480)

~~The~~Jason ~~following table summarizes the cash received from the sale of the North American fiber solutions business before transaction costs~~Industries, ~~income taxes and certain retained liabilities:~~Inc.

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)
Plus: preliminary working capital surplus	5
Plus: excess cash at closing	1,394
Adjusted purchase price	79,193
Less: cash divested	(3,894)
Less: consideration held in escrow and closing balance sheet adjustments	(278)
Sale proceeds from divestiture, net of cash divested and liabilities assumed by buyer	$	75,021

Notes to Condensed Consolidated Financial Statements

(In ~~Total divestiture-related costs for the sale of the North American fiber solutions business were $5.2 million~~thousands, ofexcept ~~which $0.5 million is non-cash~~ share~~-based~~ compensation expense. Of the remaining cash transaction expenses, $3.4 million has been paid as of September 27, 2019. Of the divestiture-related costs, $3.0 million were deemed to be direct costs of the sale and ~~were~~per ~~included~~share asamounts) 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 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.(Unaudited)

~~The~~For ~~divestiture~~the ~~reduced~~three ~~the~~months ~~Company’s~~ended ~~automotive~~March ~~market~~27, ~~exposure~~2020, ~~increased~~net ~~its~~loss ~~liquidity,~~from ~~and~~discontinued ~~simplified~~operations ~~its~~was ~~portfolio~~$0.9 million, ofwhich ~~businesses.~~was Incomprised ~~addition,~~of ~~the~~a ~~simplified~~net ~~portfolio~~loss ~~will~~on ~~allow~~divestiture ~~the~~of ~~Company~~$1.0 million related to ~~invest~~the infinalization ~~and~~of ~~focus~~the onworking ~~margin~~capital ~~expansion~~adjustment ~~and~~related ~~growth~~to inthe sale of the ~~engineered~~North ~~components~~American ~~and~~fiber ~~industrial~~solutions ~~segments~~business.

The ~~Company~~following ~~determined~~table ~~that~~summarizes ~~the~~significant ~~North~~cash ~~American~~flow ~~fiber~~disclosures ~~solutions~~for ~~business met~~ the ~~criteria to be classified as a discontinued operation. As a result, the historical results of the~~ North American fiber solutions business ~~are reflected in the Company’s condensed consolidated financial statements as a discontinued operation~~ and the ~~assets~~Metalex ~~and~~business ~~liabilities~~for of the ~~North~~three ~~American~~months ~~fiber~~ended ~~solutions~~March ~~business~~29, ~~have been retrospectively reclassified as assets and liabilities held for sale~~2019.

The following table summarizes the results of the North American fiber solutions business reclassified as discontinued operations for both the three and nine months ended September 27, 2019 and September 28, 2018. As the North American fiber solutions business sale occurred on August 30, 2019, there are only two months of North American fiber solutions business results included in the three months ended September 27, 2019 and only eight months of North American fiber solutions business results included in the nine months ended September 27, 2019.


	Three Months Ended
		March 29, 2019
Depreciation		$	2,982
Amortization of intangible assets		$	1,199


Share-based compensation		$	153
Payments for property, plant and equipment		$	1,010

	Three Months Ended						Nine Months Ended
	September 27, 2019		September 28, 2018		September 27, 2019		September 28, 2018
Net sales	$	21,280	$	38,266	$	90,516	$	125,533
Cost of goods sold	18,456		32,256		77,781		104,207
Gross profit	2,824		6,010		12,735		21,326
Selling and administrative expenses	3,781		4,345		11,538		13,209
(Gain) loss on disposals of property, plant and equipment - net	(8)		(3)		(4)		60
Restructuring	735		887		1,003		2,006
(Loss) income from operations	(1,684)		781		198		6,051
Interest expense	(12)		(22)		(47)		(69)
Loss on divestiture	(1,912)		—		(2,492)		—
Other income (loss) - net	16		—		(10)		—
(Loss) income before income taxes	(3,592)		759		(2,351)		5,982
Tax (benefit) provision	(471)		933		1,779		1,895
Net (loss) income from discontinued operations, net of tax	$	(3,121)	$	(174)	$	(4,130)	$	4,087


4.			Acquisitions

Matchless Metal Polishing

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 for a preliminary cash purchase price of $5.0 million. The purchase price includes $1.0 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 has been integrated into the Company’s industrial segment. The acquisition included the purchase of product lines, customers and selected assets and did not include manufacturing operations, with Matchless production transitioning to existing industrial facilities.

The aggregate acquisition-date fair value of the consideration transferred totaled $4.9 million, which consisted of the following:


Fair Value of Consideration Transferred	Fair Value
Cash	$	3,965
Contingent consideration	893
Total	$	4,858

The contingent consideration arrangement requires the Company to make periodic payments to the former owners of the business upon achievement of certain sales levels through March 31, 2024, up to a maximum amount of $1.0 million (undiscounted). The Company determined the acquisition-date fair value of the contingent consideration liability to be $0.9 million by discounting the $1.0 million using a risk adjusted rate over 3.4 years, which is based on the anticipated timeframe for the Company to achieve the necessary sales levels for the maximum earn-out payments. The Company has determined that the inputs used to value the contingent consideration liability falls within Level 3 of the fair value hierarchy as the valuation includes estimates of future sales that are considered unobservable.

The acquisition was accounted for as a business combination. The operating results and cash flows of Matchless are included in the Company's condensed consolidated financial statements from February 27, 2020, the date of the acquisition.

The following table summarizes the major classes of assets and liabilities of the North American fiber solutions business classified as held for sale as of December 31, 2018.

	December 31, 2018
Assets
Current assets
Cash and cash equivalents	$	11,712
Accounts receivable - net	19,234
Inventories - net	8,120
Other current assets	6,615
Total current assets held for sale	45,681
Property, plant and equipment - net	43,960
Other intangible assets - net	20,083
Other assets - net	316
Total noncurrent assets held for sale	64,359
Total assets held for sale	$	110,040
Liabilities
Current liabilities
Current portion of long-term debt	$	857
Accounts payable	12,166
Accrued compensation and employee benefits	2,298
Other current liabilities	3,358
Total current liabilities held for sale	18,679
Long-term debt	1,143
Deferred income taxes	112
Other long-term liabilities	1,042
Total noncurrent liabilities held for sale	2,297
Total liabilities held for sale	$	20,976

The current portion of long-term debt and long-term debt which were assumed by the Buyer with the divestiture relates to foreign debt previously held in Mexico.

The following table summarizes significant cash flow disclosures for the North American fiber solutions business for the nine months ended September 27, 2019 and September 28, 2018.

	Nine Months Ended
	September 27, 2019		September 28, 2018
Depreciation	$	5,123	$	6,544
Amortization of intangible assets	$	1,094	$	1,415
Non-cash operating lease expense	$	1,577	$	—
Payments for property, plant and equipment	$	(1,547)	$	(3,265)
Non-cash impact of business divestitures and dissolutions	$	(192)	$	—
Debt and pension liability assumed by buyer with divestiture	$	2,206	$	—

4. Acquisition

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

~~polishing~~The ~~product~~Company ~~line~~has ~~offerings~~recorded ~~within~~a ~~North~~preliminary ~~America.~~allocation ~~Upon finalization~~ of ~~working capital adjustments and other settlement items,~~ the purchase price ~~was~~for ~~$11.0~~the ~~million,~~tangible ~~net~~and ofidentifiable ~~$0.2~~intangible ~~million~~assets ofacquired ~~cash~~and ~~acquired,~~liabilities ~~all~~assumed ofbased ~~which~~on ~~has~~their ~~been~~fair ~~paid~~values as of ~~September~~the February 27, ~~2019~~2020 acquisition date. The ~~related~~preliminary purchase ~~agreement~~price ~~includes~~allocation ~~customary~~was ~~representations,~~as ~~warranties and covenants between the named parties.~~follows:


	Preliminary Purchase Price Allocation
Inventories-net	$	500
Property, plant, and equipment-net	429
Goodwill	1,435
Other intangible assets-net	2,530
Other current liabilities	(36)
Total purchase price	$	4,858

The preliminary purchase price resulted in goodwill of $1.4 million in the industrial segment, all of which is deductible for tax purposes. Included within the $1.4 million of goodwill is $0.9 million of goodwill generated from contingent consideration which becomes deductible for tax purposes as the consideration is paid. Goodwill generated from Matchless is primarily attributable to expansion of polishing product line offerings within North America and leveraging current plant capacity to produce Matchless products. The preliminary allocation of the purchase price is based on the preliminary valuations performed to determine the fair value of the net assets as of the acquisition date. The amounts allocated to goodwill and intangible assets are based on preliminary valuations and are subject to adjustments to reflect the final valuations.

The preliminary values allocated to other intangible assets - net and the weighted average useful lives was as follows:


	Gross Carrying Amount		Weighted Average Useful Life (years)
Customer relationships	$	2,200	9.8
Trademarks	200		1.8
Non-compete agreements	130		4.8
	$	2,530

The Company recognized $0.1 million of acquisition-related transaction costs that were expensed in the three months ended March 27, 2020. These costs are included in the condensed consolidated statements of operations as “Selling and administrative expenses.”

During the three months ended March 27, 2020, $0.6 million of net sales from Matchless were included in the Company's condensed consolidated statements of operations. Pro forma historical results of operations related to the acquisition of Matchless have not been presented as they are not material to the Company's condensed consolidated statements of operations.

Schaffner Manufacturing Company, Inc.

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 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 has been paid as of March 27, 2020. 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 condensed consolidated financial statements from April 1, 2019, the date of the acquisition.

The Company ~~has~~recognized ~~recorded~~$0.2 amillion ~~preliminary allocation~~ of ~~the~~acquisition-related ~~purchase~~transaction ~~price~~costs ~~for~~that ~~tangible~~were ~~and~~expensed ~~identifiable~~in ~~intangible~~the ~~assets~~three ~~acquired~~months ~~and~~ended ~~liabilities~~March ~~assumed~~29, ~~based~~2019. onThese ~~their~~costs ~~fair~~are ~~values~~included asin of the ~~April~~condensed 1,consolidated ~~2019~~statements ~~acquisition~~of ~~date.~~operations ~~The~~as ~~preliminary~~“Selling ~~purchase~~and ~~price~~administrative ~~allocation is as follows:~~expenses.”

	Preliminary 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

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 condensed consolidated statements of operations.

The preliminary 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 preliminary allocation of the purchase price is based on the preliminary valuations performed to determine the fair value of the net assets as of the acquisition date. The amounts allocated to goodwill and intangible assets are based on preliminary valuations and are subject to adjustments to reflect the final valuations.13

The preliminary 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 transaction costs that were expensed in the nine months ended September 27, 2019. These costs are included in the consolidated statements of operations as “Selling and administrative expenses”.

During the three and nine months ended September 27, 2019, $4.4 million and $9.7 million of net sales from Schaffner were included in the Company’s consolidated statements of operations, respectively. 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 condensed consolidated statements of operations.

5. Net Sales

The industrial segment operates principally as a provider of industrial brushes, polishing buffs and compounds, abrasives and roller technology products that are used in a broad range of industrial and infrastructure applications. The Company typically sells products within this business under purchase orders through both direct to customer and distribution sales channels. The Company generally transfers control and recognizes net sales when the product is shipped to the customer. Within the industrial segment, there are certain custom products for customers with minimum stocking agreements for which the Company recognizes net sales over time. Revenue from products transferred to customers over time accounted for less than 1% of industrial net sales for both the three and nine months ended September 27, 2019 and September 28, 2018.

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

The engineered components segment operates principally as a seating and component supplier to Original Equipment Manufacturers (“OEM”) within the lawn and turf care, agriculture, construction, material handling, power sports, rail and general industrial markets5. ~~The~~ ~~Company~~Net 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 under these contracts.Sales

The industrial segment operates principally as a provider of industrial brushes, polishing buffs and compounds, abrasives and roller technology products that are used in a broad range of industrial and infrastructure applications. The Company typically sells products within this business under purchase orders through both direct to customer and distribution 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 both the three months ended March 27, 2020 and March 29, 2019.

The engineered components segment operates principally as a supplier to Original Equipment Manufacturers (“OEM”) within the lawn and turf care, agriculture, construction and power sports 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 under 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:

	Three Months Ended September 27, 2019												Three Months Ended September 28, 2018
	Three Months Ended March 27, 2020										Three Months Ended March 29, 2019
	Industrial		Engineered Components		Total		~~Total~~Industrial		~~Industrial~~Engineered Components		~~Engineered Components~~Total		~~Total~~
United States	$	19,~~175~~457	$	3635,~~660~~605	$	55,062	$	5516,~~835~~959	$	1643,~~868~~122	$	5460,~~899~~081	$	~~71,767~~
Europe	26,327		—				26,327		30,749		1,114		31,863
Germany	18,318		—		18,318		19,998		—		19,998
Mexico	2,315		—				2,315		2,453		—		2,453
Rest of Europe	7,695		—		7,695		9,709		—		9,709
Other	1,042		91				1,133		946		—		946
Mexico	2,007		—		2,007		2,212		—		2,212
Total	$	48,859	$	36,751			$	85,610	$	51,016	$	56,013	$	107,029
Other	912		38		950		859		57		916
Total	$	48,389	$	35,643	$	84,032	$	49,737	$	43,179	$	92,916

	Nine Months Ended September 27, 2019										Nine Months Ended September 28, 2018
	Industrial		Engineered Components		Total		Industrial		Engineered Components		Total
United States	$	58,736	$	142,801	$	201,537	$	52,649	$	190,247	$	242,896
Europe	84,744		—		84,744		98,304		4,745		103,049
Mexico	7,065		—		7,065		6,523		—		6,523
Other	3,044		264		3,308		2,972		—		2,972
Total	$	153,589	$	143,065	$	296,654	$	160,448	$	194,992	$	355,440

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 the Company's OEM customers, direct sales include certain spare parts and accessories which are intended for resale to end consumers. Distribution net sales are defined as net sales ordered by and sold to a third party that intends to resell the products to the end consumer. The following table summarizes net sales disaggregated by sales channel and reportable segment:

The Company disaggregates net sales by sales channel as either direct or distribution net sales. Direct net sales are defined as net sales ordered by and sold directly to the end customer without the involvement of a third party. For our OEM customers, direct sales include certain spare parts and accessories which are intended for resale to end consumers. Distribution net sales are defined as net sales ordered by and sold to a third party that intends to resell the products to the end consumer. The following table summarizes net sales disaggregated by sales channel and reportable segment:








	Three Months Ended March 27, 2020										Three Months Ended March 29, 2019
	Industrial		Engineered Components		Total		Industrial		Engineered Components		Total
Direct	$	26,842	$	34,500	$	61,342	$	25,704	$	41,743	$	67,447
Distribution	21,547		1,143		22,690		24,033		1,435		25,468
Total	$	48,389	$	35,643	$	84,032	$	49,737	$	43,179	$	92,916

	Three Months Ended September 27, 2019										Three Months Ended September 28, 2018
	Industrial		Engineered Components		Total		Industrial		Engineered Components		Total
Direct	$	28,312	$	35,110	$	63,422	$	27,175	$	53,762	$	80,937
Distribution	20,547		1,641		22,188		23,841		2,251		26,092
Total	$	48,859	$	36,751	$	85,610	$	51,016	$	56,013	$	107,029


6.			Restructuring Costs

	Nine Months Ended September 27, 2019										Nine Months Ended September 28, 2018
	Industrial		Engineered Components		Total		Industrial		Engineered Components		Total
Direct	$	86,071	$	137,754	$	223,825	$	87,387	$	189,416	$	276,803
Distribution	67,518		5,311		72,829		73,061		5,576		78,637
Total	$	153,589	$	143,065	$	296,654	$	160,448	$	194,992	$	355,440

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 fiscal 2016, 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.

1514

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

6In 2019 and 2020, 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 on April 1, 2019, further footprint rationalization activities were identified which were executed upon throughout the remainder of 2019 and the first quarter of 2020. 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 ~~Costs~~Actions.”

In 2019, additional restructuring initiatives were identified across the business segments, and the Company anticipates continuing to identify future actions including entering into severance and termination agreements with employees and footprint rationalization activities, including exit and relocation costs for the consolidation and closure of plant facilities. As these are not part of the 2016 program, such costs are presented separately below in “Other Restructuring Actions.”

Restructuring costs are presented separately on the condensed consolidated statements of operations.

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 ~~nine~~three months ended ~~September~~March 2729, 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 nine months ended September 28, 2018 primarily include charges related to the consolidation of two U.S. plants within the engineered components segment. The Company did not incur any costs under the 2016 program during the three months ended ~~September~~March 27, ~~2019~~2020. The 2016 program is considered complete and no additional costs are expected to be incurred ~~for~~as ~~the~~part ~~remainder~~ of ~~2019~~the program.

2016 Program	Industrial		Engineered Components		Corporate		Total
Restructuring charges - nine months ended September 27, 2019:
Restructuring charges - three months ended March 29, 2019:
Severance costs	$	(35)	$	3111	$	~~164~~173	$	~~160~~149
Lease termination costs (1)	—		—		—		—
Other costs	—		1,015		—		1,015
Other costs	40		1,356		—		1,396
Total	$	(35)	$	1,026	$	173	$	1,164
Total	$	5	$	1,387	$	164	$	1,556
Restructuring charges - three months ended September 28, 2018:
Severance costs	$	(7)	$	81	$	—	$	74
Lease termination costs (1)	(25)		—		—		(25)
Other costs	219		30		—		249
Total	$	187	$	111	$	—	$	298
Restructuring charges - nine months ended September 28, 2018:
Severance costs	$	12	$	389	$	—	$	401
Lease termination costs (1)	10		—		—		10
Other costs	94		740		—		834
Total	$	116	$	1,129	$	—	$	1,245

1615

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

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.

2016 Program	Industrial		Engineered Components		Corporate		Total
Cumulative restructuring charges - period ended September 27, 2019:
Severance costs	$	4,744	$	973	$	752	$	6,469
Lease termination costs (1)	428		—		—		428
Other costs	2,443		4,023		—		6,466
Total	$	7,615	$	4,996	$	752	$	13,363

The following table represents the restructuring liabilities under the 2016 program:

	Severancecosts		Leaseterminationcosts (1)		Other costs		Total
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 translation adjustments	(2)		—		(4)		(6)
Balance - September 27, 2019	$	—	$	—	$	—	$	—
	Severancecosts		Leaseterminationcosts (1)		Other costs		Total
Balance - December 31, 2017	$	907	$	76	$	904	$	1,887
Current period restructuring charges	401		10		834		1,245
Cash payments	(815)		(70)		(1,426)		(2,311)
Foreign currency translations adjustments	(35)		(2)		(42)		(79)
Balance - September 28, 2018	$	458	$	14	$	270	$	742

(1)Commencing on January 1, 2019, the Company recognizes lease termination costs in accordance with Accounting Standards Codification (“ASC”) 842, “Leases” (“ASC 842”) which addresses termination costs related to both financing and operating lease obligations. Prior to January 1, 2019, the Company recognized such costs in accordance with ASC 420, “Exit and Disposal Cost Obligations” related to operating leases. Prior period results continue to be reported under the accounting standards in effect for those periods.

At 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 condensed consolidated balance sheets. At December 31, 2018, the accrual for other costs primarily relates to the consolidation of two U.S. plants within the engineered components segment.

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

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 incremental costs for other restructuring ~~costs~~activities of approximately $13.2 million during the remainder of 2020. During the three ~~and nine~~ months ended ~~September~~March 27, ~~2019~~2020, other costs included costs to consolidate a Schaffner facility in the industrial segment and costs to vacate a distribution facility in the engineered components segment.

Other Restructuring Actions	Industrial		Engineered Components		Corporate		~~Corporate~~Total		~~Total~~
Restructuring charges - three months ended September 27, 2019:
Restructuring charges - three months ended March 27, 2020:
Severance costs	$	~~439~~446	$	25—	$	—	$	—446	$	~~464~~
Other costs	~~360~~20		~~453~~288		—		—308		~~813~~
Total	$	~~799~~466	$	~~478~~288	$	—	$	—754	$	~~1,277~~
Restructuring charges - nine months ended September 27, 2019:
Restructuring charges - three months ended March 29, 2019:
Severance costs	$	~~1,374~~199	$	25—	$	—	$	—199	$	~~1,399~~
Other costs	~~363~~3		~~477~~—		—		—3		~~840~~
Total	$	~~1,737~~202	$	~~502~~—	$	—	$	—202	$	~~2,239~~

The following table represents the restructuring liabilities:

	Severancecosts		Other costs		Total
Balance - December 31, 2018	$	—	$	—	$	—
Balance - December 31, 2019	$	717	$	44	$	761
Current period restructuring charges	~~1,399~~446		~~840~~308		~~2,239~~754
Cash payments	(~~633~~563)		(~~839~~296)		(~~1,472~~859)
Foreign currency translation adjustments	(2010)		—		(2010)
Balance - September 27, 2019	$	746	$	1	$	747
Balance - March 27, 2020	$	590	$	56	$	646

At ~~September~~March 27, ~~2019~~2020, the restructuring liabilities for severance costs were classified as accrued compensation and employee benefits and the other costs were classified as other current liabilities on the condensed consolidated balance sheet.


7.			Inventories

Inventories consisted of the following:

	September 27, 2019		December 31, 2018
	March 27, 2020		December 31, 2019
Raw material	$	2825,~~254~~755	$	2723,~~187~~533
Work-in-process	21,~~477~~695		21,~~542~~864
Finished goods	2423,~~704~~869		2524,~~898~~546
Total inventories	$	5551,~~435~~319	$	5549,~~627~~943

1816

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)


8.			Leases

Adoption of ASU 2016-02, “Leases (Topic 842)”

On January 1, 2019, the Company adopted ASU 2016-02, “Leases (Topic 842)” and all related amendments using the modified retrospective method with no adjustments to comparative prior periods. The Company also elected certain practical expedients that allowed the Company to (1) recognize a cumulative-effect adjustment to the opening balance of retained earnings; (2) forgo reassessment of its prior conclusions on (a) whether an expired or existing contract contains a lease, (b) the lease classification of expired or existing leases, and (c) whether any costs incurred for expired or existing leases qualified as initial direct costs; and (3) use an accounting policy election by class of underlying asset to choose whether or not to separate non-lease components from lease components. Subsequent to the date of adoption, the Company recognizes and measures new or modified leases in accordance with ASC 842. Prior to January 1, 2019, the Company recognized and measured leases in accordance with ASC 840, “Leases” and prior period results continue to be reported under the accounting standards in effect for those periods.

Under the modified retrospective approach for the adoption of ASC 842, the adoption resulted in the recording of a right-of-use (“ROU”) asset of $28.4 million and a lease liability of $30.9 million within the condensed consolidated balance sheet on January 1, 2019. The difference between the ROU asset and lease liability on the date of adoption relates to the reclassification of $2.3 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 condensed consolidated financial statements in which the Company recorded a deferred gain within other long-term liabilities of $1.0 million, $0.8 million net of tax, to retained deficit related to a previous sale leaseback of its Libertyville, Illinois facility.

Finance and Operating Lease Obligations

The Company’s lease portfolio includes both real estate and non-real estate type leases which are accounted for as either finance or operating leases. Real estate leases generally include office, warehouse and manufacturing facilities and non-real estate leases generally include office equipment, manufacturing machinery, vehicles and other transportation equipment. The Company’s leases have remaining lease terms of less than 1 year to 13 years. Many of the leases include provisions that enable the Company to renew the lease, and a number of leases are subject to various escalation clauses. Renewal options that are deemed reasonably certain are included as part of the lease term for purposes of calculating the ROU asset and lease liability. Operating lease ROU assets and lease liabilities are recorded on the 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.

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

The Company’s components of lease expense was as follows:

	Three Months Ended				~~Nine Months Ended~~
	September 27, 2019				September 27, 2019
	March 27, 2020		March 29, 2019
Finance lease expense:
Depreciation of right-of-use assets	$	3644	$	40	$	82
Interest on lease liabilities	11		11		32
Operating lease expense	1,~~876~~413		1,473		~~5,745~~
Other lease expense	20				(23)
Other lease expense (income)	33		(47)
Total	$	1,~~943~~501	$	1,477	$	~~5,836~~

Based on the nature of the ~~ROU~~right-of-use asset, depreciation of finance right-of-use assets, operating lease expense and other lease expense (income) are recorded within either cost of goods sold or selling and administrative expenses while interest on finance lease liabilities is recorded within interest expense on the condensed consolidated statements of operations. Other lease expense (income) includes lease expense for leases with an estimated total term of 12 months or less and variable lease expense (income) related to variations in lease payments as a result of a change in factors or circumstances occurring after the lease possession date.

~~The~~Cash ~~Company’s~~paid ~~balance~~for ~~sheet~~amounts ~~information~~included ~~related~~in tothe ~~leases~~measurement of lease liabilities for the three months ended March 27, 2020 and March 29, 2019 was as follows:

	September 27, 2019
For the three months ended March 27, 2020:	Continuing Operations		Discontinued Operations		Total
Finance Leases
Operating cash flows from finance leases	$	11	$	—	$	11
Property, plant and equipment - net	$	443
Operating cash flows from operating leases	$	1,549	$	—	$	1,549
Current portion of long-term debt	$	442
Financing cash flows from finance leases	$	90	$	—	$	90
Long-term debt	277
For the three months ended March 29, 2019:	Continuing Operations		Discontinued Operations		Total
Total finance lease liabilities	$	719
Operating cash flows from finance leases	$	11	$	—	$	11
Operating Leases
Operating cash flows from operating leases	$	1,561	$	1,201	$	2,762
Right-of-use operating lease assets	$	28,585
Financing cash flows from finance leases	$	89	$	—	$	89
Current portion of operating lease liabilities	$	5,469
Long-term operating lease liabilities	25,567
Total operating lease liabilities	$	31,036

~~Other information related to the Company’s leases was as follows:~~17

	September 27, 2019
Weighted-average remaining lease term (in years)
Finance leases	3.79
Operating leases	9.88
Weighted-average discount rate
Finance leases	6.9	%
Operating leases	7.1	%

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

Cash paid for amounts included in the measurement of lease liabilities for the nine months ended September 27, 2019 are as follows:

	Continuing Operations		Discontinued Operations		Total
Operating cash flows from finance leases	$	26	$	3	$	29
Operating cash flows from operating leases	$	5,977	$	2,310	$	8,287
Financing cash flows from finance leases	$	238	$	8	$	246

Future minimum lease payments required under finance and operating leases for each of the 12-month rolling periods below in effect at September 27, 2019 are as follows:

	Finance Leases		Operating Leases
October 2019 to September 2020	$	475	$	7,397
October 2020 to September 2021	101		5,823
October 2021 to September 2022	85		4,406
October 2022 to September 2023	71		3,637
October 2023 to September 2024	47		3,270
Thereafter	—		16,803
Total future undiscounted lease payments	779		41,336
Less: imputed interest	(60)		(10,300)
Total lease obligations	$	719	$	31,036

As of September 27, 2019, the operating leases that the Company signed but have not yet commenced are immaterial.

Future minimum lease payments required under long-term operating leases in effect at December 31, 2018 were as follows:

2019	$	7,403
2020	5,868
2021	4,519
2022	3,515
2023	3,015
Thereafter	16,324
	$	40,644

Total rental expense under operating leases was $7.6 million and $7.9 million for the years ended December 31, 2018 and December 31, 2017, respectively.

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)


9.			Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill, all of which is within the Company’s industrial segment, was as follows:

Balance as of December 31, 2018	$	44,065
Balance as of December 31, 2019	$	45,684
Foreign currency impact	(~~1,032~~310)
Acquisitions (1)	21,~~078~~435
Balance as of September 27, 2019	$	45,111
Balance as of March 27, 2020	$	46,809

(1)~~Refer~~See to Note 4, “~~Acquisition~~Acquisitions” for further discussion on the acquisition completed in the ~~second~~first quarter of ~~2019~~2020.

The Company’s other intangible assets - net consisted of the following:

September 27, 2019

December 31, 2018

March 27, 2020

December 31, 2019

GrossCarryingAmount

AccumulatedAmortization

Net

GrossCarryingAmount

AccumulatedAmortization

Net

Patents

2,~~061~~070

(1,~~278~~453)

~~783~~617

2,~~038~~075

(1,~~018~~368)

~~1,020~~707

Customer relationships

7664,~~920~~460

(3021,~~978~~245)

4543,~~942~~215

9062,~~825~~490

(2620,~~220~~205)

6442,~~605~~285

Trademarks and other intangibles

3733,~~298~~015

(1411,~~019~~953)

2321,~~279~~062

4232,~~544~~833

(11,~~723~~235)

3021,~~821~~598

Total other intangible assets - net

~~116~~99,~~279~~545

(4634,~~275~~651)

7064,~~004~~894

~~135~~97,~~407~~398

(3832,~~961~~808)

9664,~~446~~590

~~Long-lived~~Amortization ~~assets,~~of ~~including amortizable~~ intangible assets, ~~are~~was ~~evaluated~~$2.0 ~~for~~million ~~potential~~and ~~impairment whenever events or circumstances indicate that carrying value may not be recoverable~~$1.7 ~~During~~million for the ~~third~~three ~~quarter~~months ofended ~~2019~~March 27, a2020 ~~triggering event was identified due to sustained sales~~ and ~~profitability~~March ~~declines~~29, ~~within a business in the engineered components segment~~2019, ~~which~~respectively. ~~resulted~~Including in the ~~Company~~impact ~~performing an analysis to assess long-lived assets~~ of ~~the~~amortization ~~asset~~resulting ~~group~~from ~~for impairment. The estimated fair value of~~ the ~~long-lived~~Matchless ~~assets~~acquisition ~~was determined using a probability weighted approach using both discounted cash flow projections based~~ on ~~future~~February ~~financial~~27, ~~performance~~2020 and aexcluding ~~market approach. The fair value determination is categorized as Level 3 in~~ the ~~fair~~impact ~~value hierarchy due to its use~~ of ~~internal~~any ~~projections~~future ~~and unobservable measurement inputs. As a result of this analysis~~acquisitions, ~~non-cash impairment charges of $14.9 million and $5.7 million were recorded for customer relationship and trademark intangible assets, respectively, in~~ the ~~engineered~~Company ~~components~~anticipates ~~segment during~~ the ~~third~~annual ~~quarter~~amortization offor ~~2019. These intangible asset impairment charges are recorded as impairment charges in~~ the ~~condensed~~current ~~consolidated~~full ~~statements~~fiscal ofyear ~~operations~~ and aseach ~~a reduction~~ of the ~~gross~~four ~~carrying~~subsequent ~~amount~~fiscal ofyears ~~the~~ended ~~other~~December ~~intangible~~31st ~~assets~~and -thereafter ~~net~~to inbe the ~~condensed consolidated balance sheets.~~following:

Amortization of intangible assets was $2.6 million and $2.5 million for the three months ended September 27, 2019 and September 28, 2018, respectively. Amortization of intangible assets was $7.6 million and $9.9 million for the nine months ended September 27, 2019 and September 28, 2018, respectively. Included within amortization expense for the nine months ended September 28, 2018, was $2.3 million of accelerated amortization expense in the engineered components segment related to the exit from non-core product lines for smart utility meter subassemblies in 2018. Included within the table below is the impact of amortization resulting from the Schaffner acquisition on April 1, 2019. Excluding the impact of any future acquisitions, the Company anticipates the annual amortization for the current full fiscal year and each of the four subsequent fiscal years and thereafter to be the following:


2020	$	8,064
2021	7,883
2022	7,600
2023	7,591
2024	7,029
Thereafter	28,950
	$	67,117

2019	$	9,830
2020	8,185
2021	7,943
2022	7,770
2023	7,761
Thereafter	37,031
	$	78,520


10.			Debt and Hedging Instruments

22The Company’s debt consisted of the following:


	March 27, 2020		December 31, 2019
First Lien Term Loans	$	284,440	$	284,440
Second Lien Term Loans	89,887		89,887
Foreign debt	16,210		13,929
Finance lease obligations and other debt	650		755
Total gross debt	391,187		389,011
Debt discount on Term Loans	(1,512)		(1,739)
Deferred financing costs on Term Loans	(2,153)		(2,522)
Total debt	387,522		384,750
Less: current portion	(373,259)		(5,800)
Total long-term debt	$	14,263	$	378,950

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

10. Debt and Hedging Instruments

The Company’s debt consisted of the following:

	September 27, 2019		December 31, 2018
First Lien Term Loans	$	290,215	$	292,540
Second Lien Term Loans	89,887		89,887
Debt discount on Term Loans	(1,982)		(2,669)
Deferred financing costs on Term Loans	(2,928)		(4,052)
Foreign debt	14,015		15,469
Finance lease obligations and other debt (1)	732		613
Total debt	389,939		391,788
Less: Current portion (1)	(5,769)		(5,687)
Total Long-Term Debt	$	384,170	$	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 8, “Leases” for further information.

Senior Secured Credit Facilities

As of ~~September~~March 27, ~~2019~~2020, the Company’s U.S. credit facility (the “Senior Secured Credit Facilities”) included (i) term loans in an aggregate principal amount of $310.0 million (the “First Lien Term Loans” or “First Lien Credit Agreement”) maturing June 30, 2021, of which $~~290~~284.24 million iswas outstanding as of such date, (ii) term loans in an aggregate principal amount of $110.0 million (the “Second Lien Term Loans” or “Second Lien Credit Agreement”) maturing June 30, 2022, of which $89.9 million iswas outstanding as of such date, and (iii) a revolving loan of up to $25.5 million (“Revolving Credit Facility”) maturing December 31, 2020. During the second quarter of 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 condensed consolidated balance sheets.

The principal amount of the First Lien Term Loans amortizes in quarterly installments equal to $0.8 million, with the balance payable at maturity. At the Company’s election, the interest rate per annum applicable to the loans under the Senior Secured Credit Facilities is based on a fluctuating rate of interest determined by reference to either (i) a base rate determined by reference to the higher of (a) the administrative agent’s prime rate, (b) the federal funds effective rate plus 0.50% or (c) the Eurocurrency rate applicable for an interest period of one month plus 1.00%, plus an applicable margin equal to (x) 3.50% in the case of the First Lien Term Loans, (y) 2.25% in the case of the Revolving Credit Facility or (z) 7.00% in the case of the Second Lien Term Loans or (ii) a Eurocurrency rate determined by reference to the London Interbank Offered Rate (“LIBOR”), adjusted for statutory reserve requirements, plus an applicable margin equal to (x) 4.50% in the case of the First Lien Term Loans, (y) 3.25% in the case of the Revolving Credit Facility or (z) 8.00% in the case of the Second Lien Term Loans. Borrowings are subject to a floor of 1.00% in the case of Eurocurrency loans. The applicable margin for loans under the 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 ~~September~~March 27, ~~2019~~2020, the interest rates on the outstanding balances of the First Lien Term Loans and Second Lien Term Loans were 6.84% and 109.39%, 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, currently specified at 4.~~50 to 1.00, with a decrease to 4.~~25 to 1.00 onas of December 31, 2019 ~~and~~(which awill 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 ~~September~~March 27, ~~2019~~2020 was 69.6284 to 1.00; therefore, borrowings under the Revolving Credit Facility isare limited to a total of $10.0 million, which includes letters of credit in excess of $5.0 million. At ~~September~~March 27, ~~2019~~2020, the Company had letters of credit outstanding of $43.7 million and had no outstanding borrowings under the Revolving Credit Facility. As a result of the events of default further described below, the Company is not able to draw on its Revolving Credit Facility.

23Under the Senior Secured Credit Facilities, the Company is subject to mandatory excess cash flow prepayments if certain requirements are met. At March 27, 2020 and December 31, 2019, 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 $60.9 million, of which $48.4 million was remaining after permitted reinvestments as of March 27, 2020. 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.

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 March 27, 2020, 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.

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

~~Under~~Event the Senior Secured Credit Facilities, the Company is subject to mandatory excess cash flow prepayments if certain requirements are met. At September 27, 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,~~Default ~~subject to certain exceptions~~ and ~~subject~~Forbearance 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 $63.1 million. The Company intends 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.Agreement

~~The~~On ~~Senior~~March ~~Secured~~31, ~~Credit~~2020, ~~Facilities~~the ~~contain~~Borrower, a ~~number~~subsidiary of ~~customary~~the ~~affirmative and negative covenants that~~Company, ~~among~~elected ~~other~~to ~~things,~~defer ~~limit~~making ~~or restrict~~ the ~~ability~~interest payment of ~~Jason~~approximately ~~Incorporated~~$2.3 million ~~and~~due ~~its~~on ~~Restricted~~March ~~Subsidiaries~~31, 2020 to: ~~incur~~lenders ~~additional~~under ~~indebtedness~~the ~~(including~~Second ~~guarantee~~Lien ~~obligations);~~Credit ~~incur~~Agreement. ~~liens;~~This ~~engage~~resulted in ~~mergers,~~an ~~consolidations,~~event ~~liquidations~~of ~~and~~default ~~dissolutions;~~under ~~sell~~the ~~assets;~~Second ~~pay~~Lien ~~dividends~~Credit ~~and~~Agreement, ~~make~~with ~~other~~a ~~payments~~cross-default inunder ~~respect~~the ofFirst ~~capital~~Lien ~~stock;~~Credit ~~make~~Agreement. ~~acquisitions,~~Under ~~investments~~the Intercreditor Agreement, ~~loans~~the ~~and~~lenders ~~advances;~~under ~~pay~~the ~~and~~Second ~~modify~~Lien ~~the~~Credit ~~terms~~Agreement ofare ~~certain~~not ~~indebtedness;~~able ~~engage~~to inexercise ~~certain~~their ~~transactions~~rights ~~with~~and ~~affiliates;~~remedies ~~enter~~in ~~into~~connection ~~negative~~with ~~pledge~~such ~~clauses~~default ~~and~~for ~~clauses~~180 ~~restricting~~days. ~~subsidiary~~As ~~distributions;~~of ~~and~~March ~~change~~27, ~~its~~2020, ~~line~~$89.9 million of ~~business,~~principal inamount ~~each~~of ~~case,~~loans ~~subject~~was tooutstanding ~~certain~~under ~~limited~~the ~~exceptions~~Second Lien Credit Agreement. To ~~comply~~On ~~with~~March ~~these~~31, ~~covenants~~2020, ~~Jason~~the ~~Incorporated~~Company ~~and~~made its ~~Restricted~~quarterly ~~Subsidiaries~~interest ~~are~~and ~~limited~~amortization inpayments to the ~~amount~~lenders ofunder ~~cash~~the ~~that~~First ~~can~~Lien beCredit ~~distributed~~Agreement toand ~~Jason~~following ~~Industries,~~these ~~Inc~~payments $283.7 inmillion ~~the~~of ~~form~~principal amount of ~~dividends,~~ loans orwas ~~other~~outstanding ~~distributions.~~under Asthe ofFirst ~~September~~Lien ~~27,~~Credit ~~2019,~~Agreement ~~this~~as ~~limit~~of ~~was~~such ~~$17~~date.~~0 million.~~

~~Foreign~~As ~~debt~~discussed above, pursuant to the Amended and Restated Forbearance Agreement, the Forbearing Lenders agreed to forbear from exercising their rights and remedies during the Amended and Restated Forbearance Period (as described below) as a result of the failure by the Borrower to make the interest payment due on March 31, 2020 to lenders under the Second Lien Credit Agreement. The Amended and Restated Forbearance Period terminated on June 5, 2020.

On June 5, 2020 the Company entered into a Restructuring Support Agreement with certain creditors representing more than 75% of its outstanding indebtedness under its First Lien Credit Agreement. The Restructuring Support Agreement contemplates agreed-upon terms for a pre-packaged financial restructuring plan to be filed in cases commenced under chapter 11 of title 11 of the United States Code. See Note 18, “Subsequent Events” for further discussion of the terms of the Restructuring Support Agreement.

Foreign Debt

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

	September 27, 2019		December 31, 2018
	March 27, 2020		December 31, 2019
Germany	$	1315,~~481~~514	$	1513,~~002~~413
India	~~534~~696		~~467~~516
Total foreign debt	$	1416,~~015~~210	$	1513,~~469~~929

These various foreign loans are comprised of individual outstanding obligations ranging from approximately $0.21 million to $87.26 million and $0.12 million to $97.37 million as of ~~September~~March 27, ~~2019~~2020 and December 31, ~~2018~~2019, 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 ~~September~~March 27, ~~2019~~2020.

The foreign debt obligations in Germany relate to term loans of $1312.23 million at ~~September~~March 27, 2020 and $12.5 million at December 31, 2019. In addition, the Company has revolving lines of credit in Germany with an aggregate capacity of $7.2 million, of which $3.8 million at March 27, 2020 and $151.05 million at December 31, ~~2018~~2019 was utilized for borrowings and letters of credit. The German borrowings bear interest at fixed and variable rates ranging from 2.1.8% to 4.7% and are subject to repayment in varying amounts through 2025.

Interest Rate Hedge Contracts

The Company is exposed to certain financial risks relating to fluctuations in interest rates. To manage exposure to such fluctuations, the Company entered into forward starting interest rate swap agreements (“Swaps”) in 2015 with notional values totaling $210.0 million at both ~~September~~March 27, ~~2019~~2020 and December 31, ~~2018~~2019. 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 have an expiration date of June 30, 2020. For the three months ended ~~September~~March 27, ~~2019~~2020 and ~~September~~March 2829, ~~2018~~2019, the Company recognized $0.1 million ~~and $0.1 million~~ of interest ~~income,~~expense ~~respectively, related to the Swaps. For the nine months ended September 27, 2019~~ and ~~September 28, 2018, the Company recognized~~ $0.94 million ~~and $0.1 million~~ of interest income, respectively, related to the Swaps. ~~Based~~The ~~on current interest rates, the~~ Company expects to recognize ~~interest~~another ~~expense of~~ $0.13 million of interest expense related to the Swaps inthrough the ~~next~~June 1230, ~~months~~2020 maturity date.

2420

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

The fair values of the Company’s Swaps are recorded on the condensed consolidated balance sheets with the corresponding offset recorded as a component of accumulated other comprehensive loss. The fair value of the Swaps was a net liability of $0.14 million ~~at September 27, 2019~~ and ~~a net asset of~~ $10.93 million at March 27, 2020 and December 31, ~~2018~~2019, respectively. See the amounts recorded on the condensed consolidated balance sheets within the table below:

	September 27, 2019		December 31, 2018
	March 27, 2020		December 31, 2019
Interest rate swaps:
Recorded in other current assets	$	—	$	1,325
Recorded in other current liabilities	$	403	$	260
Recorded in other assets - net	—		542
Total net liability derivatives designated as hedging instruments	$	403	$	260
Recorded in other current liabilities	(143)		—
Total net (liability) asset derivatives designated as hedging instruments	$	(143)	$	1,867


11.			Share-Based Compensation

In 2014, the Company’s Board of Directors approved 3,473,435 shares of common stock to be reserved and authorized for issuance under the 2014 Omnibus Incentive Plan (the “2014 Plan”) to certain executive officers, senior management employees, and members of the Board of Directors. On February 27, 2018, the Company’s Board of Directors unanimously approved an amendment to the 2014 Plan to increase the number of authorized shares of common stock by 4,000,000 shares. At ~~September~~March 27, ~~2019~~2020, there were 1,~~252~~260,~~915~~919 shares of common stock that remained authorized and available for future grants.

The Company recognizes compensation expense based on estimated grant date fair values for all share-based awards issued to employees and directors, including restricted stock units (“RSUs”) and performance share units, which are restricted stock units with vesting conditions contingent upon achieving certain performance goals. Share-based compensation expense is reported in selling and administrative expenses in the Company’s condensed consolidated statements of operations.

The Company recognized the following share-based compensation expense:

~~Three Months Ended~~

Three Months Ended

~~Nine Months Ended~~

September 27, 2019

September 28, 2018

September 27, 2019

September 28, 2018

March 27, 2020

March 29, 2019

Restricted stock units

~~525~~

~~742~~

~~1,717~~474

~~1,252~~626

Adjusted EBITDA vesting awards

~~(168)~~

~~104~~

~~108~~53

~~308~~97

Share-based compensation from continuing operations

~~357~~

~~846~~

~~1,825~~527

~~1,560~~723

Share-based compensation from discontinued operations

~~581~~

~~784~~—

~~167~~153

Total share-based compensation expense

~~938~~

~~944~~

~~2,609~~527

~~1,727~~876

Total income tax benefit recognized from continuing and discontinued operations

~~210~~

~~234~~

~~513~~87

~~428~~214

~~Share-based~~As ~~compensation~~of ~~expense~~March ~~from~~27, ~~discontinued~~2020, ~~operations~~total ~~during~~unrecognized ~~the~~compensation ~~three~~cost ~~and~~related ~~nine~~to ~~months~~share-based ~~ended~~compensation ~~September~~awards ~~27,~~was ~~2019~~approximately ~~includes~~ $02.~~5 million~~1 ~~of accelerated expense for 303~~million,~~030~~ ~~restricted~~which ~~and~~the ~~performance~~Company ~~share~~expects ~~units~~to ~~that~~recognize ~~vested~~over ~~upon~~a ~~the~~weighted ~~sale~~average period of ~~the~~approximately ~~North~~1.3 ~~American fiber solutions business~~years.

AsIn connection with the vesting of ~~September~~RSUs ~~27,~~previously ~~2019~~granted by the Company, ~~total~~a ~~unrecognized~~number ~~compensation~~of ~~cost~~shares ~~related~~sufficient to ~~share-based~~fund ~~compensation~~statutory ~~awards~~minimum tax withholding requirements was ~~approximately~~withheld ~~$3.4~~from ~~million~~the total shares issued or released to the award holder (under the terms of the 2014 Plan, ~~which~~the shares are considered to have been issued and are not added back to the ~~Company~~pool ~~expects~~of shares available for grant). During the three months ended March 27, 2020 and March 29, 2019, there were 251,189 and 246,965 shares, respectively, withheld to ~~recognize~~satisfy ~~over~~the requirement. The withholding is treated as a ~~weighted~~reduction ~~average~~in ~~period~~additional paid-in capital in the accompanying condensed consolidated statements of ~~approximately~~shareholders’ ~~1.6~~(deficit) ~~years~~equity.

In connection with the vesting of RSUs previously granted by the Company, a number of shares sufficient to fund statutory minimum tax withholding requirements was withheld from the total shares issued or released to the award holder (under the terms of the 2014 Plan, the shares are considered to have been issued and are not added back to the pool of shares available for grant). During the nine months ended September 27, 2019 and September 28, 2018, there were 392,115 and 2,837 shares, respectively, withheld to satisfy the requirement. The withholding is treated as a reduction in additional paid-in capital in the accompanying condensed consolidated statements of shareholders’ (deficit) equity.21

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

The following table sets forth the restricted and performance share unit activity:

				Performance Share Units
	Restricted Stock Units				Adjusted EBITDA Vesting Awards
	Units(thousands)	Weighted-Average Grant-Date Fair Value		Units(thousands)	Weighted-Average Grant-Date Fair Value
Outstanding at December 31, 2018	3,150	$	2.89	908	$	1.30
Outstanding at December 31, 2019	2,412	$	2.34	1,473	$	1.44
Granted	~~985~~—	$	~~1.36~~—	~~705~~—	$	~~1.64~~—
Issued	(~~1,487~~601)	$	2.6046	~~(50)~~—	$	~~1.64~~—
Deferred	~~126~~—	$	~~1.60~~—	—	$	—
Forfeited	(~~255~~9)	$	2.7798	~~(77)~~—	$	~~1.52~~—
Outstanding at September 27, 2019	2,519	$	2.42	1,486	$	1.44
Outstanding at March 27, 2020	1,802	$	2.30	1,473	$	1.44

Restricted Stock Units

As of ~~September~~March 27, ~~2019~~2020, there was $3.2.1 million of unrecognized share-based compensation expense related to 21,~~103~~438,~~937~~468 RSU awards, with a weighted-average grant date fair value of $21.0586, that are expected to vest over a weighted-average period of 1.73 years. Included within the 21,~~518~~802,~~736~~376 RSU awards outstanding as of ~~September~~March 27, ~~2019~~2020 are ~~414~~363,~~799~~908 RSU awards for members of our Board of Directors which have vested and issuance of the shares has been deferred, with a weighted-average grant date fair value of $4.2502.

Performance Share Units

Performance share unit awards based on Adjusted EBITDA performance metrics are payable at the end of their respective performance period in common stock. The Company expenses the cost of the performance-based share unit awards based on the fair value of the awards at the date of grant and the estimated achievement of the performance metric, ratably over the performance period of approximately three years.

Adjusted EBITDA Vesting Awards - 2019 Grant

In the first quarter of 2019, the Company granted performance share unit awards based on achievement of an Adjusted EBITDA performance target during a three year measurement period ending December 31, 2021. The number of share units awarded can range from zero to 100% depending on achievement of a targeted performance metric, and are payable in common stock within a thirty day period following the end of the performance period.

In the third quarter of 2019, the Company lowered its estimated vesting of the performance share unit awards from 100% of target, or ~~613~~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 ~~September~~March 27, ~~2019~~2020, there was no unrecognized 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

In the third quarter of 2017, the Company granted performance share unit awards based on achievement of an Adjusted EBITDA performance target during a three year measurement period ending March 30, 2020. The number of share units awarded can range from zero to 100% depending on achievement of a targeted performance metric, and are payable in common stock within a thirty day period following the end of the performance period.

In the ~~third~~first quarter of ~~2019~~2020, the Company lowered its estimated vesting of the performance share unit awards from ~~100~~80% ~~of target~~, or ~~872~~697,~~180~~744 shares, to an estimated payout of 8078%, or ~~697~~680,~~744~~301 shares~~, resulting in $0~~.1 ~~million of share-based compensation income due to declines in profitability.~~ As of ~~September~~March 27, ~~2019~~2020, there was ~~$0.2~~nominal ~~million of~~ unrecognized share-based compensation expense related to cumulative Adjusted EBITDA based vesting performance share unit awards, which is expected to be recognized over a weighted average period of 0.51 years.

2622

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)


12.			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 and convertible preferred stock.

The reconciliation of the numerator and denominator of the basic and diluted loss per share calculation and the anti-dilutive shares are as follows:

~~Three Months Ended~~

Three Months Ended

~~Nine Months Ended~~

(share amounts in thousands)

~~September 27, 2019~~

~~September 28, 2018~~

~~September~~March 27, ~~2019~~2020

~~September~~March 2829, ~~2018~~2019

Basic and diluted net (loss) income per share

Basic and diluted net loss per share

Net loss per share from continuing operations

~~(1.08)~~

~~(0.18)~~

(10.8250)

(0.4622)

Net (loss) income per share from discontinued operations

(0.11)

(0.01)

(0.15)

0.15

Net loss per share from discontinued operations

(0.03)

(0.06)

Basic and diluted net loss per share

~~(1.19)~~

~~(0.19)~~

(10.9753)

(0.3228)

Numerator:

Net loss from continuing operations

~~(30,046)~~

~~(4,284)~~

(4913,~~209~~690)

(95,~~538~~253)

Less: Accretion of dividends on preferred stock and redemption premium

~~845~~

~~781~~

~~2,485~~879

~~3,274~~812

Total net loss from continuing operations less accretion of dividends on preferred stock and redemption premium

~~(30,891)~~

~~(5,065)~~

(5114,~~694~~569)

(126,~~812~~065)

Net (loss) income from discontinued operations, net of tax

(3,121)

(174)

(4,130)

4,087

Net income (loss) from discontinued operations, net of tax

(910)

(1,803)

Net loss allocable to common shareholders of Jason Industries

~~(34,012)~~

~~(5,239)~~

(5515,~~824~~479)

(87,~~725~~868)

Denominator:

Basic and diluted weighted-average shares outstanding

~~28,632~~

~~27,683~~

28,~~348~~896

27,~~565~~962

Weighted average number of anti-dilutive shares excluded from denominator:

Warrants to purchase Jason Industries common stock (1)

~~154~~

~~13,994~~

~~9,329~~—

13,994

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

~~3,473~~

~~3,212~~

3,~~407~~611

3,~~222~~339

Restricted stock units

~~2,839~~

~~3,119~~

2,~~780~~364

2,~~052~~761

Performance share units

~~1,573~~

~~1,305~~

1,~~374~~473

~~1,309~~944

Total

~~8,039~~

~~21,630~~

167,~~890~~448

2021,~~577~~038

(1)Public warrants (“warrants”) ~~consist~~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 ~~843~~877 additional Series A Preferred Stock shares from a stock dividend declared on ~~August~~February 14, ~~2019~~2020 to be paid in additional shares of Series A Preferred Stock on ~~October~~April 1, ~~2019~~2020. The Company included the preferred stock within the condensed consolidated balance sheets as of the declaration date. Conversion is presented at the voluntary conversion ratio of approximately 81.18 common shares for each preferred share.

Warrants are considered anti-dilutive and excluded when the exercise price exceeds the average market value of the Company’s common stock price during the applicable period. Performance share units are considered anti-dilutive if the performance targets upon which the issuance of the shares are contingent have not been achieved and the respective performance period has not been completed as of the end of the current period. Due to losses 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.

2723

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)


13.			Income Taxes

At the end of each three month period, the Company estimates a base effective tax rate expected for the full year based on the most recent forecast of its pre-tax income (loss), permanent book and tax differences, and global tax planning strategies. The Company uses this base rate to provide for income taxes on a year-to-date basis, excluding the effect of significant, unusual, discrete or extraordinary items, and items that are reported net of their related tax effects. The Company records the tax effect of significant, unusual, discrete or extraordinary items, and items that are reported net of their tax effects in the period in which they occur. With the downturn in 2020 full year forecasted financial results due to the COVID-19 pandemic and with the passage of the associated Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) legislation, the Company evaluated various accounting considerations related to the preparation of the income tax provision for the three months ended March 27, 2020. As a result, included in the provision is a $0.3 million discrete benefit associated with the CARES Act and the related impact on valuation allowances associated with the computation of the interest expense deduction limitation.

The effective tax rate was 133.59% and 25(7.1)% for the three months ended ~~September~~March 27, ~~2019~~2020 and ~~September~~March 2829, ~~2018, respectively. The effective tax rate was 9.9% and 22.5% for the nine months ended September 27,~~ 2019 ~~and September 28~~, ~~2018,~~ respectively. The effective income tax rate for both ~~2019~~2020 and ~~2018~~2019 reflects the amount of taxable income or loss at the U.S. Federal statutory rate, taxable earnings or losses derived in foreign jurisdictions with tax rates that differ from the U.S. Federal statutory rate, the impact of the global intangible low taxed income (“GILTI”) and interest deduction limitation provisions contained in the Tax Cuts and Jobs Act (the “Tax Reform Act”), and ~~discrete~~as ~~items~~modified ~~including~~by the ~~impairment~~CARES ~~charge~~Act ~~recorded in the engineered components segment~~ for ~~the~~2020, ~~three~~valuation ~~months~~allowances ~~ended~~and ~~September~~discrete ~~27, 2019~~items. The net discrete tax benefit was $30.31 million ~~and $3.2 million~~ for the three ~~and nine~~ months ended ~~September~~March 27, ~~2019,~~2020 ~~respectively~~primarily associated with the retroactive computation of the interest expense deduction limitation for 2019. The net discrete tax ~~benefit~~expense was $0.31 million ~~and $0.9 million~~ for the three ~~and nine~~ months ended ~~September~~March 2829, ~~2018~~2019.

The amount of gross unrecognized tax benefits was $2.3 million and $2.13 million as of ~~September~~March 27, ~~2019~~2020 and December 31, ~~2018~~2019, respectively, all of which would reduce the Company’s effective tax rate if recognized.

InDuring ~~connection~~the ~~with~~next ~~the~~twelve ~~August 30~~months, ~~2019 sale of~~ the ~~North~~Company ~~American~~believes ~~fiber~~it ~~solutions~~is ~~business,~~reasonably possible the ~~Company~~total ~~recognized~~amount aof ~~$24.9~~unrecognized ~~million~~tax ~~taxable~~benefits ~~gain~~will change. The Company ~~expects~~recognizes ~~to use certain~~ interest ~~expense limitation carryovers~~ and ~~federal~~penalties ~~and~~related ~~state~~to ~~net~~tax ~~operating~~matters ~~loss~~in ~~carryovers~~its totax ~~offset this gain~~provision. The Company ~~does~~has ~~not expect to pay any significant U.S. taxes on the gain. As a result of the sale, the Company expects~~ an ~~insignificant~~immaterial amount of ~~federal~~accrued interest and ~~state~~penalties ~~net~~that ~~operating~~were ~~loss~~recorded ~~carryforwards to be available to reduce future taxable earnings, and~~ as a ~~result,~~component ~~taxes~~of ~~payable in~~ the ~~future~~income ~~may~~tax beprovision ~~greater~~as ~~than~~of ~~they~~March ~~would~~27, ~~have~~2020 ~~been~~and inDecember ~~the~~31, ~~absence of such sale~~2019.

~~During the next twelve months, the Company believes it is reasonably possible that the total amount of unrecognized tax benefits will not change~~14. ~~The~~Shareholders’ Company recognizes interest and penalties related to tax matters in its tax provision. The Company has an immaterial amount of accrued interest and penalties that were recorded as a component of the income tax provision as of September 27, 2019 and December 31, 2018.Deficit

28The changes in the components of accumulated other comprehensive loss, net of taxes, for three months ended March 27, 2020 and March 29, 2019 were as follows:


For the three months ended March 27, 2020:	Employee retirement plan adjustments		Foreign currency translation adjustments		Net unrealized losses on cash flow hedges		Total
Balance at December 31, 2019	$	(2,232)	$	(26,213)	$	(198)	$	(28,643)

Other comprehensive loss before reclassifications	—		(2,164)		(163)		(2,327)
Amounts reclassified from accumulated other comprehensive loss	85		—		54		139
Balance at March 27, 2020	$	(2,147)	$	(28,377)	$	(307)	$	(30,831)

For the three months ended March 29, 2019:	Employee retirement plan adjustments		Foreign currency translation adjustments		Net unrealized gains on cash flow hedges		Total
Balance at December 31, 2018	$	(1,831)	$	(23,151)	$	1,411	$	(23,571)

Other comprehensive loss before reclassifications	—		(1,566)		(304)		(1,870)
Amounts reclassified from accumulated other comprehensive loss	15		—		(333)		(318)
Balance at March 29, 2019	$	(1,816)	$	(24,717)	$	774	$	(25,759)

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

14. Shareholders’ (Deficit) Equity

The changes in the components of accumulated other comprehensive loss, net of taxes, for the three and nine months ended September 27, 2019 and September 28, 2018 were as follows:

For the three months ended September 27, 2019:	Employee retirement plan adjustments		Foreign currency translation adjustments (1)		Net unrealized (losses) gains on cash flow hedges		Total
Balance at June 28, 2019	$	(1,801)	$	(23,765)	$	(139)	$	(25,705)
Other comprehensive loss before reclassifications	—		(3,444)		135		(3,309)
Amounts reclassified from accumulated other comprehensive loss	15		(1,112)		(104)		(1,201)
Balance at September 27, 2019	$	(1,786)	$	(28,321)	$	(108)	$	(30,215)
For the three months ended September 28, 2018:	Employee retirement plan adjustments		Foreign currency translation adjustments		Net unrealized gains on cash flow hedges		Total
Balance at June 29, 2018	$	(1,645)	$	(21,190)	$	2,072	$	(20,763)
Other comprehensive loss before reclassifications	—		(879)		288		(591)
Amounts reclassified from accumulated other comprehensive loss	4		—		(103)		(99)
Balance at September 28, 2018	$	(1,641)	$	(22,069)	$	2,257	$	(21,453)
For the nine months ended September 27, 2019:	Employee retirement plan adjustments		Foreign currency translation adjustments (1)		Net unrealized (losses) gains on cash flow hedges		Total
Balance at December 31, 2018	$	(1,831)	$	(23,151)	$	1,411	$	(23,571)
Other comprehensive loss before reclassifications	—		(4,058)		(872)		(4,930)
Amounts reclassified from accumulated other comprehensive loss	45		(1,112)		(647)		(1,714)
Balance at September 27, 2019	$	(1,786)	$	(28,321)	$	(108)	$	(30,215)
For the nine months ended September 28, 2018:	Employee retirement plan adjustments		Foreign currency translation adjustments		Net unrealized gains on cash flow hedges		Total
Balance at December 31, 2017	$	(1,517)	$	(18,596)	$	51	$	(20,062)
Cumulative impact of accounting changes	(137)		—		11		(126)
Other comprehensive income before reclassifications	—		(3,473)		2,237		(1,236)
Amounts reclassified from accumulated other comprehensive loss	13		—		(42)		(29)
Balance at September 28, 2018	$	(1,641)	$	(22,069)	$	2,257	$	(21,453)

(1)Amounts reclassified from accumulated other comprehensive loss and included in other income - net in the condensed consolidated statements of operations for the three and nine months ended September 27, 2019 includes the reclassification to earnings of 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 three and nine months ended September 27, 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.

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

Series A Preferred Stock Dividends

The Company paid the following dividends on the Series A Preferred Stock in additional shares of Series A Preferred Stock during the ~~nine~~three months ended ~~September~~March 27, ~~2019~~2020:

Payment Date	Record Date	Amount Per Share	Total Dividends Paid	Preferred Shares Issued
January 1, 2019	November 15, 2018	$20.00	$796	794
January 1, 2020	November 15, 2019	$20.00	$862	860
April 1, 2019	February 15, 2019	$20.00	$812	809
July 1, 2019	May 15, 2019	$20.00	$828	826

On ~~August~~February 14, ~~2019~~2020, 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 ~~October~~April 1, ~~2019~~2020 to holders of record on ~~August~~February 15, ~~2019~~2020. As of ~~September~~March 27, ~~2019~~2020, the Company has recorded the ~~843~~877 additional Series A Preferred Stock shares declared for the dividend of $0.89 million within preferred stock in the condensed consolidated balance sheets.

Shareholder Rights Agreement

On September 1, 2019, the 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 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.

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

On January 22, 2018, certain holders of the Company’s Series A Preferred Stock exchanged 12,136 shares of Series A Preferred Stock for 1,395,640 shares of the Company’s common stock, a conversion rate of 115 shares of common stock for each share of Series A Preferred Stock. Under the terms of the Series A Preferred Stock agreements, holders of the Series A Preferred Stock have the option to convert each share of Series A Preferred Stock into approximately 81.18 shares of the Company’s common stock, subject to certain adjustments in the conversion rate. The excess of the book value of the Series A Preferred Stock over the par value of the Company’s common stock issued in the exchange was recorded as an increase to additional paid-in capital on the condensed consolidated balance sheets. The fair value of the redemption premium, represented by the excess of the exchange conversion rate over the agreement conversion rate, was recorded as a reduction to net loss available to common shareholders of Jason Industries within the condensed consolidated statements of operations.


15.			Business Segments, Geographic and Customer Information

InThe ~~the first quarter of 2019, as part of a review of the~~ Company’'s ~~organizational~~business ~~structure,~~activities ~~the~~are ~~Company~~organized ~~made~~into ~~certain strategic leadership changes which required a reassessment of~~ reportable segments. ~~Based~~based on ~~this evaluation, the Company changed~~ how it makes operating decisions, assesses performance of the business, and allocates resources. AsThe ~~a result, the~~ Company ~~reduced~~has ~~the~~two ~~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~~. On August 30, 2019, the Company completed the sale of its North American fiber solutions business, which comprised all of the fiber solutions segment for the periods presented, is classified as a discontinued operation and excluded from the disclosures below. The prior year disclosures have been updated to conform with current year presentation. Previously, on August 30, 2017, the

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

Company completed the sale of the European fiber solutions, which did not meet the criteria for discontinued operations presentation at the time of the divestiture.

Net sales information relating to the Company’s reportable segments was as follows:

~~Three Months Ended~~

Three Months Ended

~~Nine Months Ended~~

September 27, 2019

September 28, 2018

September 27, 2019

September 28, 2018

March 27, 2020

March 29, 2019

Industrial

~~48,859~~

~~51,016~~

~~153~~48,~~589~~389

~~160~~49,~~448~~737

Engineered Components

~~36,751~~

~~56,013~~

~~143~~35,~~065~~643

~~194~~43,~~992~~179

Net Sales

~~85,610~~

~~107,029~~

~~296~~84,~~654~~032

~~355~~92,~~440~~916

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, ~~tax~~ 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 and costs related to the strategic alternatives process, including executive retention agreements.

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~~the 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.

3125

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

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

~~Three Months Ended~~

Three Months Ended

~~Nine Months Ended~~

September 27, 2019

September 28, 2018

September 27, 2019

September 28, 2018

March 27, 2020

March 29, 2019

Segment Adjusted EBITDA

Industrial

~~5,004~~

~~7,579~~

174,~~772~~178

236,~~815~~841

Engineered Components

~~1,424~~

~~6,150~~

104,~~712~~418

255,~~587~~988

Total segment Adjusted EBITDA

~~6,428~~

~~13,729~~

288,~~484~~596

4912,~~402~~829

Interest expense

~~(157)~~

~~(212)~~

(~~476~~214)

(~~656~~176)

Depreciation and amortization

~~(6,823)~~

~~(7,007)~~

(225,~~103~~320)

(235,~~378~~023)

Impairment charges

(20,597)

—

(20,597)

—

Loss on disposal of property, plant and equipment-net

(21)

(8)

Gain (Loss) on disposal of property, plant and equipment - net

(14)

(18)

(94)

Restructuring

(754)

(1,193)

Restructuring

(1,277)

(298)

(3,631)

(1,245)

Transaction-related expenses

(464)

—

Integration and other restructuring costs

~~(323)~~

—

(~~621~~1,208)

(~~1,068~~7)

Total segment income before income taxes

~~(22,763)~~

~~6,300~~

~~(18,962)~~615

226,~~961~~422

Corporate general and administrative expenses

~~(3,347)~~

~~(2,949)~~

(82,~~175~~873)

(92,~~339~~070)

Corporate interest expense

~~(8,023)~~

~~(8,114)~~

(247,~~262~~241)

(248,~~053~~029)

Corporate depreciation

~~(150)~~

~~(110)~~

(~~463~~170)

(~~320~~157)

Corporate restructuring

—

~~(164)~~—

—(173)

Corporate transaction-related expenses

(28)

—

(670)

—

Corporate transaction-related and strategic alternatives expenses

(4,053)

(239)

Corporate integration and other restructuring costs

~~(69)~~

—

~~(112)~~2

—65

Corporate share-based compensation

~~(357)~~

~~(846)~~

(~~1,825~~527)

(~~1,560~~723)

Loss from continuing operations before income taxes

~~(34,737)~~

~~(5,719)~~

(5414,~~633~~247)

(124,~~311~~904)

Assets held by reportable segments were as follows:

	September 27, 2019		December 31, 2018
	March 27, 2020		December 31, 2019
Industrial	$	~~236~~239,~~497~~213	$	~~230~~235,~~185~~726
Engineered Components	~~118~~86,~~704~~912		~~145~~82,~~409~~197
Total segments	~~355~~326,~~201~~125		~~375~~317,~~594~~923
Assets held for sale	—		110,040
Corporate and eliminations	61,410		69,178
Corporate and eliminations	78,489		17,963
Consolidated total assets	$	387,535	$	387,101
Consolidated total assets	$	433,690	$	503,597

3226

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)


16.			Fair Value Measurements

Fair value of financial instruments

Current accounting guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. It also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with the guidance, fair value measurements are classified under the following hierarchy:

•Level 1 — Quoted prices for identical instruments in active markets.

•Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.

•Level 3 — Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.

Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.

The carrying amounts within the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments. The Company assessed the amounts recorded under revolving loans, if any, and long-term debt and determined that the fair value of total debt was approximately $~~342~~180.47 million at ~~September~~March 27, ~~2019~~2020 and $~~387~~297.43 million at December 31, ~~2018~~2019. 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.


17.			Commitments and Contingencies

Litigation Matters

The Company is a party to various legal proceedings that have arisen in the normal course of its business. These legal proceedings typically include product liability, labor, and employment claims. The Company has recorded reserves for loss contingencies based on the specific circumstances of each case. Such reserves are recorded when it is probable that a loss has been incurred as of the balance sheet date 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 ~~September~~March 27, ~~2019~~2020 and December 31, ~~2018~~2019, the Company held reserves of $1.0 million for environmental matters at one location. The ultimate cost of any remediation required will depend on the results of future investigation. Based upon available information, the Company believes that it has obtained and is in substantial compliance with those material environmental permits and approvals necessary to conduct its business. Based on the facts presently known, the Company does not expect environmental costs to have a material adverse effect on its financial condition, results of operations, or cash flows.

3327

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

Other Contingencies

In connection with the sale of the Metalex business on December 13, 2019, the purchase price (subject to a net working capital adjustment as defined by the Metalex Sale Agreement), is currently in dispute between the Company and Morton Global. Morton Global has proposed a working capital adjustment that results in a purchase price reduction of $0.6 million. The Company believes this claim lacks merit and a loss for the amount subject to dispute is not probable as of March 27, 2020. See Note 3, “Discontinued Operations” for additional information relating to the transaction.


18.			Subsequent Events

Restructuring Support Agreement

On June 5, 2020 (the “Agreement Effective Date”), the Company and certain of its direct and indirect subsidiaries (collectively, the “Company Parties”) entered into a Restructuring Support Agreement with certain creditors (the “Consenting Creditors”) under its First Lien Credit Agreement. The Restructuring Support Agreement contemplates agreed-upon terms for a pre-packaged financial restructuring plan (the “Plan”).

The Consenting Creditors as of the Agreement Effective Date represent in excess of 75% of outstanding principal amount of term loans under the First Lien Credit Agreement.

Under the Restructuring Support Agreement, the Consenting Creditors have agreed, subject to certain terms and conditions, to support a financial restructuring (the “Restructuring”) of the existing debt of, existing equity interests in, and certain other obligations of the Company Parties, pursuant to the Plan to be filed in cases commenced under chapter 11 (the “Chapter 11 Cases”) of title 11 of the United States Code (the “Bankruptcy Code”).

The Plan will be implemented in accordance with the restructuring term sheet attached to and incorporated into the Restructuring Support Agreement (the “Term Sheet”) (such transactions described in, and in accordance with the Restructuring Support Agreement and the Term Sheet, the “Restructuring Transactions”) which, among other things, contemplates:

•the Consenting Creditors will consent to the Company’s use of cash collateral to fund the Chapter 11 Cases, provided that such use is in accordance with the cash collateral order;

•(i) if lenders holding 100% of the outstanding principal amount of term loans under the First Lien Credit Agreement are Consenting Creditors, the Company shall make a voluntary prepayment in an amount equal to $10 million; or (ii) if lenders holding less than 100% of the outstanding principal amount of term loans under the First Lien Credit Agreement are Consenting Creditors, the Company shall purchase term loans from such Consenting Creditors in an amount equal to $10 million;

•the Company shall pay a forbearance fee to the Consenting Creditors equal to 4.00% of the principal amount of term loans outstanding under the First Lien Credit Agreement held by Consenting Creditors, of which (i) 2.00% shall be paid in cash by the 10th business day following the Agreement Effective Date; provided that any forbearance fee previously paid in cash by the Company to a Consenting Creditor in connection with the forbearance agreements shall be credited against such 2.00% cash portion owed to such Consenting Creditor pursuant to the Restructuring Support Agreement; and (ii) 2.00% shall be paid on the earlier of (A) the date of termination of the Restructuring Support Agreement or (B) the effective date of the chapter 11 plan; provided that if such fee is paid on the effective date of the plan, such fee shall be paid as a portion of the recovery under the plan and for the avoidance of doubt, shall not be a cash fee;

•on the effective date of the chapter 11 plan, the reorganized Company will enter into an asset-based or similar new exit facility that (i) provides availability of at least $20 million for revolving borrowing after permitting for any amounts on account of outstanding letters of credit and (ii) has aggregate total commitments of not less than $30 million;

•the holders of claims under the First Lien Credit Agreement shall receive their pro rata share of and interest in: (i) a $75 million new first lien credit facility; (ii) a $50 million new junior convertible term loan; (iii) 90% of the new equity, subject to dilution on account of the new warrants, the management incentive plan and the new junior convertible term loan; and (iv) if applicable, the irrevocable right to offer the entirety of their pro rata distribution of both the new equity and new junior convertible term loan to one or more members designated by the Consenting Creditors.

Jason Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts) (Unaudited)

new warrants, the management incentive plan, and the new junior convertible term loan, and (y) new warrants for 10% of the new equity, subject to dilution on account of the management incentive plan and the new junior convertible term loan; or (ii) if such class of holders rejects the plan, no distribution;

•all general unsecured claims will be paid in full or otherwise provided such treatment as to render such claims unimpaired; and

•all preferred and common equity interests in the Company shall be cancelled and released without any distribution.

In accordance with the Restructuring Support Agreement, the Consenting Creditors agreed, among other things, to: (i) use commercially reasonable efforts to support the Restructuring Transactions as contemplated by, and within the timeframes outlined in, the Restructuring Support Agreement and the definitive documents governing the Restructuring Transactions; (ii) not object to, delay or impede the acceptance, implementation, or consummation of the Restructuring Transactions in accordance with the Restructuring Support Agreement; (iii) vote and consent to accept the Plan; and (iv) except as permitted in the Restructuring Support Agreement, not transfer any ownership (including any beneficial ownership as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) held by each Consenting Creditor.

In accordance with the Restructuring Support Agreement, the Company Parties agreed, among other things, to: (i) support and take all steps necessary and desirable to consummate the Restructuring Transactions in accordance with the Restructuring Support Agreement; (ii) not take any action, that is inconsistent in any material respect, or that would reasonably be expected to prevent, interfere with, delay, frustrate or impede approval, implementation and consummation of the Restructuring Transactions; (iii) to the extent any legal or structural impediment arises that would prevent, hinder, or delay the consummation of the Restructuring Transactions contemplated in the Restructuring Support Agreement or the Plan, (a) support and take all steps reasonably necessary and desirable to address any such impediment and (b) negotiate in good faith appropriate additional or alternative provisions to address any such impediment, in consultation with the Consenting Creditors; (iv) obtain any and all required governmental, regulatory and/or third-party approvals for the Restructuring Transactions; (v) negotiate in good faith and execute and deliver the Definitive Documents (as defined in the Restructuring Support Agreement) and any other required agreements to effectuate and consummate the Restructuring Transactions as contemplated by this Agreement; (vi) operate their business in the ordinary course of business in a manner consistent with the Restructuring Support Agreement, provided, however, that the Company board may determine in good faith that operation of the business in the ordinary course is not advisable due to potential health or safety concerns related to the COVID-19 emergency; (vii) seek additional support for the Restructuring Transactions from their other material stakeholders to the extent reasonably prudent and (viii) actively oppose and object to the efforts of any person seeking to object to, delay, impede, or take any other action to interfere with the acceptance, implementation, or consummation of the Restructuring Transactions (including, if applicable, the timely filing of objections or written responses in the Chapter 11 Cases) to the extent such opposition or objection is reasonably necessary or desirable to facilitate implementation of the Restructuring Transactions.

The Restructuring Support Agreement may be terminated upon the occurrence of certain events set forth in the Definitive Documents, including the failure to meet specified milestones specified in the Restructuring Term Sheet.

The Company expects to continue to operate its businesses serving customers without interruption during the course of the restructuring proceedings, and while the Plan remains subject to court approval, the Company expects that all trade creditors, employees, sales agents and unsecured creditors will be paid in full and on time in the normal course of business.

Foreign Debt Issuance

In May 2020, the Company’s Osborn GmbH subsidiary located in Germany, received loan commitments for two separate term loans with two of its banks. Each loan is in the amount of $1.7 million. The loans have identical terms and will be issued in connection with a special German government sponsored loan program established to mitigate the economic consequences of the COVID-19 crisis. The loans bear interest at a fixed annual rate of 2.0% and are subject to equal quarterly payments of $0.2 million beginning on September 30, 2021, with final maturity on June 30, 2025. The Company is in the process of finalizing and executing the required loan agreements and documentation.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

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

This report contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Specifically, forward-looking statements may include statements relating to: 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 as of the ~~Company’s~~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 ~~financial~~events ~~performance;~~or otherwise, except as may be required under applicable securities laws.

~~•changes~~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. Many of these risks and uncertainties are currently amplified by, and will continue to be amplified by, or in the ~~market~~future ~~for~~may be amplified by, the ~~Company’s~~COVID-19 ~~products;~~outbreak and the related governmental restrictions and the adverse impact on the global economy from the outbreak. Some factors that could cause actual results to differ include, among others:

•our ability to obtain confirmation of the ~~Company’s~~Plan ~~expansion~~under ~~plans~~the Chapter 11 Cases and ~~opportunities;~~successfully consummate the Restructuring (each, as defined herein), including by satisfying the conditions and milestones in the Restructuring Support Agreement (as defined herein);

•~~other~~our ~~statements~~ability ~~preceded~~to ~~by,~~improve ~~followed~~our byliquidity orand ~~that~~long-term ~~include~~capital structure and to address our debt service obligations through the ~~words~~Restructuring ~~“estimate,”~~and ~~“plan,”~~the ~~“project,”~~potential ~~“forecast,”~~adverse ~~“intend,”~~effects ~~“expect,”~~of ~~“anticipate,”~~the ~~“believe,”~~Chapter ~~“seek,”~~11 ~~“target”~~Cases oron ~~similar~~our ~~expressions.~~liquidity and results of operations;

~~These~~•our ~~forward-looking~~ability ~~statements~~to ~~are~~obtain ~~based~~timely onapproval ~~information~~by ~~available as of~~ the ~~date~~bankruptcy ofcourt ~~this~~with ~~report~~respect ~~and~~to ~~current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing~~ the ~~Company’s~~motions ~~views~~filed asin ~~of any subsequent date, and~~ the ~~Company~~Chapter ~~does~~11 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.Cases;

As•objections ato ~~result of a number of known and unknown risks and uncertainties,~~ the Company’'s ~~actual~~recapitalization ~~results~~process or ~~performance~~other ~~may~~pleadings befiled ~~materially~~that ~~different~~could ~~from~~protract ~~those~~the ~~expressed~~Chapter or11 ~~implied~~Cases byand ~~these~~third ~~forward-looking~~party ~~statements.~~motions ~~Some~~which ~~factors~~may ~~that~~interfere ~~could~~with ~~cause~~Company's ~~actual~~ability ~~results~~ to ~~differ~~consummate ~~include,~~the ~~among~~Restructuring ~~others:~~or an alternative restructuring;

•the ~~level~~length of ~~demand~~time ~~for~~that the Company’s ~~products~~will operate under Chapter 11 protection and the continued availability of operating capital during the pendency of the Chapter 11 Cases;

•~~competition~~increased inadministrative and legal costs related to the ~~Company’s~~Chapter ~~markets~~11 process;

•~~volatility~~potential delays in the ~~prices~~Chapter of11 ~~raw~~process ~~materials~~due ~~and~~to the ~~Company’s~~effects ~~ability~~of tothe ~~pass~~COVID-19 ~~along increased costs~~pandemic;

•the ~~Company’s~~effects ~~ability~~of tothe ~~grow~~Restructuring and ~~manage~~the ~~growth~~Chapter ~~profitably~~11 Cases on the Company and the interests of various constituents;

•~~the~~our ~~Company’s~~substantial ~~ability~~level of indebtedness and related debt service obligations and restrictions, including those expected to ~~access~~be ~~additional~~imposed ~~capital~~by covenants in any exit financing, that may limit our operational and financial flexibility;

•our ability to continue as a going concern and our ability to maintain relationships with suppliers, customers, employees and other third parties as a result of such going concern, the Restructuring and the Chapter 11 Cases;

•the COVID-19 pandemic, which has had, and is expected to continue to have, a significant impact on our operations, including, but not limited to, weakened demand for our products, supply chain disruptions, and the inability of certain of our customers to timely meet their obligations to us;

•our ability to access additional capital and/or the capital markets;

•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 integrate acquisitions;

•our ability to grow and manage growth profitably;

•changes in applicable laws or regulations;

•~~the~~our ~~Company’s~~ ability to attract and retain qualified personnel;

•the impact of proposed and potential regulations related to the U.S. Tax Cuts and Jobs Act and the CARES Act;

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

•other risks and uncertainties indicated in this report, as well as those disclosed in the Company’s other filings with the Securities and Exchange Commission (the “SEC”), including those discussed under “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K/A for the year ended December 31, ~~2018~~2019, which may be amended or supplemented in Part II, Item 1A, “Risk Factors,” of ~~the~~our ~~Company’s~~ subsequently filed Quarterly Reports on Form 10-Q (including this report).

Introductory Note

The following discussion and analysis of financial condition and results of operations of the Company should be read in conjunction with ~~our~~the audited consolidated financial statements for the year ended December 31, ~~2018~~2019, ~~and~~including ~~related~~the notes thereto, along with the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our ~~2018~~2019 Annual Report on Form 10-K/A.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains certain financial measures, in particular ~~the presentation of~~ EBITDA and Adjusted EBITDA, which are not presented in accordance with GAAP. These non-GAAP financial measures are being presented because management believes that they provide readers of this MD&A with additional insight into ~~our~~the Company's operational performance relative to comparable prior periods presented and relative to ~~our~~its ~~peer group~~competitors. EBITDA and Adjusted EBITDA are key measures used by usthe Company to evaluate ~~our~~its performance. WeThe doCompany 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.

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~~2020, our fiscal quarters are comprised of the three months ended March 2927, June 2826, September 2725, and December 31. In ~~2018~~2019, our fiscal quarters were comprised of the three months ended March 3029, June 2928, September 2827, and December 31. Throughout this MD&A, we refer to the period from ~~June~~January 291, ~~2019~~2020 through ~~September~~March 27, ~~2019~~2020 as the “~~third~~first quarter of ~~2019~~2020” or the “~~third~~first quarter ended ~~September~~March 27, ~~2019~~2020”. Similarly, we refer to the period from ~~June~~January 301, ~~2018~~2019 through ~~September~~March 2829, ~~2018~~2019 as the “~~third~~first quarter of ~~2018~~2019” or the “~~third~~first quarter ended ~~September~~March 2829, ~~2018~~2019.”

Revision of the Condensed Consolidated Financial Statements

During the first quarter of 2019, we identified an error in the income tax provision presented within the condensed consolidated financial statements for the three and nine months ended September 28, 2018. This MD&A has been revised to reflect the revision of the income tax provision. See Note 2, “Revision of Previously Reported Financial Information” in the notes to the condensed consolidated financial statements for further information.

Overview

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 2622 manufacturing facilities and 9nine sales offices, 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 of 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 of the evaluation, 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 current year presentation.

~~During~~We ~~the~~focus ~~third~~on ~~quarter~~markets ofwith ~~2019,~~long-term wesustainable ~~determined~~growth ~~that~~characteristics ~~the~~and ~~North~~where ~~American~~we ~~fiber~~are, ~~solutions~~or ~~business~~have ~~met~~ the ~~criteria~~opportunity to bebecome, ~~classified~~the asindustry ~~a discontinued operation~~leader. AsOur aindustrial ~~result,~~segment ~~our~~focuses ~~prior~~on ~~period~~the ~~results~~production of ~~operations~~industrial ~~and~~brushes, ~~financial~~polishing ~~position~~buffs ~~have~~and ~~been~~compounds, ~~recast to be presented on a continuing operations basis~~abrasives, ~~except where noted. The assets~~ and ~~liabilities~~roller oftechnology ~~the~~products ~~North~~that ~~American~~are ~~fiber~~used ~~solutions~~in ~~business~~a ~~have~~broad ~~been~~range ~~presented~~of asindustrial ~~held~~and ~~for~~infrastructure ~~sale~~applications. ~~for~~The ~~periods~~engineered ~~prior~~components tosegment ~~the sale. On August 30~~designs, ~~2019~~engineers, weand ~~completed~~manufactures ~~the~~seating ~~divestiture~~products ofused ~~our~~in ~~North~~heavy ~~American~~industry ~~fiber~~(construction, ~~solutions business. Previously~~agriculture, onand ~~August~~material 30handling), ~~2017,~~turf ~~we completed the sale of the European fiber solutions~~care, ~~which~~and ~~did~~power ~~not~~sports ~~meet the criteria for discontinued operations presentation at the time of the divestiture~~applications.

WeDuring ~~focus~~the onthree ~~markets~~months ~~with~~ended ~~sustainable~~March ~~growth~~27, ~~characteristics~~2020 and ~~where~~March we29, ~~are~~2019, orapproximately ~~have~~34% ~~the~~and ~~opportunity~~35% toof ~~become~~our sales, ~~the industry leader. Our industrial segment~~respectively, ~~formerly~~were ~~the~~derived ~~finishing~~from ~~segment,~~customers ~~focuses~~outside onof the ~~production~~United ofStates. ~~industrial~~As ~~brushes~~a diversified, ~~polishing~~global ~~buffs and compounds~~business, ~~abrasives,~~our ~~and~~operations ~~roller technology products that~~ are ~~used~~affected inby aworldwide, ~~broad~~regional ~~range~~and ofindustry-specific ~~industrial~~economic and ~~infrastructure~~political ~~applications~~factors. ~~The~~Our ~~engineered~~geographic ~~components segment, the combined former seating~~ and ~~components~~industry ~~segments~~diversity, ~~designs,~~as ~~engineers,~~well ~~and~~as ~~manufactures~~the ~~seating,~~wide ~~safety,~~range ~~and~~of ~~filtration~~our products, ~~used~~help inmitigate ~~heavy~~the ~~industry~~impact ~~(construction,~~of ~~agriculture,~~industry ~~and~~or ~~material~~economic ~~handling),~~fluctuations. ~~turf~~Given ~~care,~~the ~~power~~broad ~~sports,~~range ~~rail~~of ~~and general industrial applications.~~

During both the nine months ended September 27, 2019 and September 28, 2018, approximately 32% of our net sales were from outside of the United States based on the country of origin of the final sale with the external customer. As a diversified, global business, our operations are affected by worldwide, regional and industry-specific economic and political factors. Given the broad range of products manufactured and industries and geographies served, management primarily uses general economic trends to predict the overall outlook for the Company. 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.31

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.

During 2019, we 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, our 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. On August 30, 2019 and December 13, 2019, we completed the divestitures of our North American fiber solutions business and our Metalex business, respectively.

On February 27, 2020, we acquired selected assets of Matchless, a North American manufacturer of high-quality polishing buffs, compounds, and chemicals. Through the acquisition of Matchless, we expanded our product line offerings within North America. The business has been integrated into our industrial segment.

Impact of COVID-19

COVID-19 was first identified in late 2019, continued to spread throughout the world in early 2020 and was eventually declared a pandemic by the World Health Organization by the end of the first quarter of 2020. The COVID-19 pandemic has resulted in national, state and local government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, border closings, restrictions on public gatherings, quarantining of people who may have been exposed to the virus, shelter-in-place restrictions, and limitations or shutdowns of business operations. The Company has significant operations worldwide, including in the United States, Mexico and Germany, and each of these countries has been affected by the outbreak and taken measures to try to contain it, resulting in disruptions and closures at some of our manufacturing facilities and support operations. These measures have impacted and may further impact our workforce and operations, the operations of our customers and distributors, and those of our vendors and suppliers. There is considerable uncertainty regarding the impact, and expected duration, of such measures and potential future measures, and restrictions on our access to our facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers.

Going Concern

The condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company faces significant challenges and uncertainties related to the COVID-19 pandemic. As a result, the Company’s available capital resources are expected to be consumed more rapidly than previously forecasted due to (a) significantly increased economic and demand uncertainty that has resulted in decreases in actual and expected future sales of the Company’s products; (b) significant disruptions to the Company’s ability to operate its manufacturing facilities due to restrictions placed on business operations, which has resulted in decreases in actual and future expected sales of the Company’s products; (c) the effect of the COVID-19 pandemic on the Company's ability to obtain parts and materials from the Company's suppliers, which has resulted in decreases in actual and expected future sales of the Company’s products; (d) the costs of continuing to staff critical production and fulfillment functions despite the significant declines in sales; (e) restructuring actions which are increasing operating expenses; (f) costs related to the strategic alternatives process, including executive and salaried retention agreements; and (g) other items affecting the Company’s forecasted level of expenditures and use of cash resources. These factors will adversely impact the Company’s ability to make a mandatory prepayment in August 2020 on its First Lien Term Loans of the net proceeds from the 2019 sale of the Fiber Solutions business, of which $48.4 million was remaining after permitted reinvestments as of March 27, 2020. At March 27, 2020 the Company had $76.1 million of total liquidity, including

$72.0 million of available cash (including $48.4 million of net proceeds from the 2019 sale of the Fiber Solutions business and $12.5 million held at our non-U.S. operations) and $4.1 million available under revolving loan facilities outside the U.S. See “Senior Secured Credit Facilities” in the “Liquidity and Capital Resources” section of this MD&A for further discussion of mandatory prepayments of debt.

On March 31, 2020, Jason Incorporated (the “Borrower”), a subsidiary of the Company, elected to defer making the interest payment of approximately $2.3 million due on March 31, 2020 to lenders under the Second Lien Credit Agreement (as defined in “Senior Secured Credit Facilities” in the “Liquidity and Capital Resources” section of this MD&A). This resulted in an event of default under the Second Lien Credit Agreement, with a cross-default under the First Lien Credit Agreement (as defined in “Senior Secured Credit Facilities” in the “Liquidity and Capital Resources” section of this MD&A). Under the Intercreditor Agreement, the lenders under the Second Lien Credit Agreement are not able to exercise their rights and remedies in connection with such default for 180 days. As of March 27, 2020, $89.9 million of principal amount of loans was outstanding under the Second Lien Credit Agreement. On March 31, 2020, the Company made its quarterly interest and amortization payments to the lenders under the First Lien Credit Agreement and following these payments $283.7 million of principal amount of loans was outstanding under the First Lien Credit Agreement as of such date. As a result of the event of default, the Company is not able to draw on its Revolving Credit Facility (as defined in “Senior Secured Credit Facilities” in the “Liquidity and Capital Resources” section of this MD&A).

Also on March 31, 2020, the Borrower and certain of the Company’s other subsidiaries entered into a forbearance agreement with certain lenders under the Borrower’s First Lien Credit Agreement, which was subsequently amended and restated on April 30, 2020, May 14, 2020, June 2, 2020 and June 3, 2020 (as amended and restated, the “Amended and Restated Forbearance Agreement”). Pursuant to the Amended and Restated Forbearance Agreement, the Forbearing Lenders agreed to forbear from exercising their rights and remedies during the Amended and Restated Forbearance Period (as described below) as a result of the failure by the Borrower to make the interest payment due on March 31, 2020 to lenders under the Second Lien Credit Agreement. The Amended and Restated Forbearance Period terminated on June 5, 2020.

On June 5, 2020 the Company entered into a Restructuring Support Agreement (the “Restructuring Support Agreement”) with certain creditors representing more than 75% of its outstanding indebtedness under its First Lien Credit Agreement. The Restructuring Support Agreement contemplates agreed-upon terms for a pre-packaged financial restructuring plan to be filed in cases commenced under chapter 11 of title 11 of the United States Code. See the “Restructuring Support Agreement” section of this MD&A below for further discussion of the terms of the Restructuring Support Agreement.

The impact of the COVID-19 pandemic on the Company’s forecasted liquidity and the factors resulting from the event of default, cross-default and terms of the Restructuring Support Agreement raise substantial doubt about the Company’s ability to continue as a going concern for the one-year period from the date of issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Restructuring Support Agreement

On June 5, 2020, the Company and certain of its direct and indirect subsidiaries (collectively, the “Company Parties”) entered into a Restructuring Support Agreement with certain creditors (the “Consenting Creditors”) under its First Lien Credit Agreement, originally dated as of June 30, 2014 (the “First Lien Credit Agreement”). The Restructuring Support Agreement contemplates agreed-upon terms for a pre-packaged financial restructuring plan (the “Plan”).

The Consenting Creditors as of the Agreement Effective Date (as defined in the Restructuring Support Agreement) represent in excess of 75% of outstanding principal amount of term loans under the First Lien Credit Agreement.

•the Consenting Creditors will consent to the Company’s use of cash collateral to fund the Chapter 11 Cases, provided that such use is in accordance with the cash collateral order;

•the holders of claims under the First Lien Credit Agreement shall receive their pro rata share of and interest in: (i) a $75 million new first lien credit facility; (ii) a $50 million new junior convertible term loan; (iii) 90% of the new equity, subject to dilution on account of the new warrants, the management incentive plan and the new junior convertible term loan; and (iv) if applicable, the irrevocable right to offer the entirety of their pro rata distribution of both the new equity and new junior convertible term loan to one more members designated by the Consenting Creditors.

•the holders of claims under the Second Lien Credit Agreement shall receive: (i) if such class of holders timely votes to accept the plan, their pro rata share of (x) 10% of the new equity, subject to dilution on account of the new warrants, the management incentive plan, and the new junior convertible term loan, and (y) new warrants for 10% of the new equity, subject to dilution on account of the management incentive plan and the new junior convertible term loan; or (ii) if such class of holders rejects the plan, no distribution;

•all general unsecured claims will be paid in full or otherwise provided such treatment as to render such claims unimpaired; and

•all preferred and common equity interests in the Company shall be cancelled and released without any distribution.

Consolidated Results of Operations

The following table sets forth our consolidated results of operations (unaudited):

	~~Three Months Ended~~				Three Months Ended		~~Nine Months Ended~~
(in thousands)	~~September 27, 2019~~		~~September 28, 2018~~		~~September~~March 27, ~~2019~~2020		~~September~~March 2829, ~~2018~~2019
Net sales	$	~~85,610~~	$	~~107,029~~	$	~~296~~84,~~654~~032	$	~~355~~92,~~440~~916
Cost of goods sold	~~70,840~~		~~84,562~~		~~239~~65,~~218~~857		~~275~~69,~~495~~320
Gross profit	~~14,770~~		~~22,467~~		5718,~~436~~175		7923,~~945~~596
Selling and administrative expenses	~~20,416~~		~~20,169~~		6324,~~699~~470		6719,~~717~~069
Impairment charges	20,597		—		20,597		—
Loss on disposals of property, plant and equipment-net					21		8
Loss (gain) on disposals of property, plant and equipment - net	14		(88)		18		94
Restructuring					754		1,366
Restructuring	1,277		298		3,795		1,245
Operating (loss) income					(7,070)		3,153
Operating (loss) income	(27,534)		2,088		(30,673)		10,889
Interest expense-net					(7,455)		(8,205)
Interest expense	(8,180)		(8,326)		(24,738)		(24,709)
Equity income					25		84
Equity income	45		468		167		903
Other income-net					253		64
Other income - net	932		51		611		606
Loss from continuing operations before income taxes					(14,247)		(4,904)
Loss from continuing operations before income taxes	(34,737)		(5,719)		(54,633)		(12,311)
Tax (benefit) provision					(557)		349
Tax benefit	(4,691)		(1,435)		(5,424)		(2,773)
Net loss from continuing operations					(13,690)		(5,253)
Net loss from continuing operations	$	(30,046)	$	(4,284)	$	(49,209)	$	(9,538)
Net loss from discontinued operations, net of tax					(910)		(1,803)
Net (loss) income from discontinued operations, net of tax	(3,121)		(174)		(4,130)		4,087
Net loss					(14,600)		(7,056)
Net loss	(33,167)		(4,458)		(53,339)		(5,451)
Accretion of dividends on preferred stock					879		812
Accretion of dividends on preferred stock and redemption premium	845		781		2,485		3,274
Net loss allocable to common shareholders of Jason Industries					$	(15,479)	$	(7,868)
Net loss allocable to common shareholders of Jason Industries	(34,012)		(5,239)		(55,824)		(8,725)
Total other comprehensive loss					$	(2,188)	$	(2,188)
Total other comprehensive loss	$	(4,510)	$	(690)	$	(6,644)	$	(1,265)

Other financial data: ⁽¹⁾

	Three Months Ended								Increase/(Decrease)
(in thousands, except percentages)	~~September~~March 27, ~~2019~~2020			~~September~~March 2829, ~~2018~~2019			$		%
Consolidated
Net sales	$	8584,~~610~~032		$	~~107~~92,~~029~~916		$	(218,~~419~~884)	(209.06)	%
Net loss from continuing operations	(3013,~~046~~690)			(45,~~284~~253)			258,~~762~~437		~~601~~160.46
Net loss from continuing operations as a % of net sales	3516.13		%	45.07		%	31,~~110~~060 bps
Adjusted EBITDA	35,~~081~~723			10,~~780~~759			(75,~~699~~036)		(7146.48)
Adjusted EBITDA % of net sales	3.6.8		%	1011.16		%	(~~650~~480) bps
	Nine Months Ended								Increase/(Decrease)
(in thousands, except percentages)	September 27, 2019			September 28, 2018			$		%
Consolidated
Net sales	$	296,654		$	355,440		$	(58,786)	(16.5)	%
Net loss from continuing operations	(49,209)			(9,538)			39,671		415.9
Net loss from continuing operations as a % of net sales	16.6		%	2.7		%	1,390 bps
Adjusted EBITDA	20,309			40,063			(19,754)		(49.3)
Adjusted EBITDA % of net sales	6.8		%	11.3		%	(450) bps

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

The Three ~~and Nine~~ Months Ended ~~September~~March 27, ~~2019~~2020 Compared with the Three ~~and Nine~~ Months Ended ~~September~~March 2829, ~~2018~~2019

Net sales. Net sales were $8584.60 million for the three months ended ~~September~~March 27, ~~2019~~2020, a decrease of $218.49 million, or 209.06%, compared with $~~107~~92.09 million for the three months ended ~~September~~March 2829, ~~2018~~2019, reflecting decreased net sales in the engineered components segment of $197.35 million and the industrial segment of $21.~~2 million. The $19.~~3 ~~million~~ ~~decrease in the engineered components segment was partially due to a $5.8~~ million ~~decrease related to the exit from non-core product lines for smart utility meter subassemblies~~. See “Segment Financial Data” within Item 2, “Management’s Discussion and Analysis,” for further discussion on net sales for each segment.

~~Net~~On ~~sales were $296.7~~April ~~million~~1, ~~for~~2019, ~~the~~we ~~nine~~acquired ~~months~~Schaffner ~~ended~~and ~~September~~on February 27, ~~2019~~2020, awe ~~decrease~~acquired ~~of $58~~Matchless.~~8 million,~~ orThe ~~16.5%,~~results ~~compared~~of ~~with~~operations ~~$355.4 million~~ for the ~~nine~~acquisitions ~~months~~are ~~ended~~included ~~September~~within ~~28, 2018, reflecting decreased net sales in~~ the ~~engineered~~industrial ~~components~~ segment ~~of $51.9 million~~ and the ~~industrial~~Company’s ~~segment~~condensed ofconsolidated ~~$6.9 million.~~results ~~The~~of ~~$51.9 million~~operations ~~decrease~~since in the ~~engineered~~respective ~~components~~dates ~~segment~~of ~~was~~acquisition. ~~partially~~Net ~~due~~sales tofor aMatchless were $190.56 million ~~decrease~~for ~~related to~~ the ~~exit~~three ~~from~~months ~~non-core~~ended ~~product~~March ~~lines~~27, ~~for smart utility meter subassemblies~~2020. See ~~“Segment~~Note ~~Financial~~4, ~~Data~~“Acquisitions” ~~within~~in ~~Item~~the 2,condensed ~~“Management’s~~consolidated ~~Discussion~~financial ~~and~~statements ~~Analysis,”~~ for further discussion on ~~net~~the ~~sales~~Schaffner ~~for~~and ~~each~~Matchless ~~segment~~acquisitions.

OnChanges ~~April~~in 1,foreign ~~2019,~~currency weexchange ~~acquired~~rates ~~Schaffner~~compared with the U.S. ~~Schaffner’s~~dollar ~~results~~had ofa ~~operations~~net ~~are~~negative ~~included~~impact ~~within~~of ~~the~~$0.9 million ~~industrial~~on ~~segment~~consolidated ~~and~~net ~~the~~sales ~~Company’s~~during ~~condensed~~the ~~consolidated~~three ~~results~~months ofended ~~operations~~March ~~since~~27, ~~the~~2020 ~~date~~compared ofwith ~~acquisition.~~2019, ~~Net~~negatively ~~sales~~impacting ~~from~~the ~~Schaffner~~industrial ~~were~~segment’s ~~$4.4~~net ~~million~~sales ~~and~~by $0.9 million.7 ~~million~~This ~~for~~was ~~the~~due ~~three~~principally ~~and~~to ~~nine~~the ~~months~~net ~~ended~~strengthening ~~September~~of ~~27,~~the ~~2019, respectively~~U.S. ~~See~~dollar ~~Note~~against 4,the ~~“Acquisition”~~Euro in the ~~condensed~~three ~~consolidated~~months ~~financial~~ended ~~statements~~March ~~for~~27, ~~further~~2020 ~~discussion~~compared onto the ~~Schaffner~~three ~~acquisition~~months ended March 29, 2019.

~~Changes~~Cost inof ~~foreign~~goods ~~currency~~sold. ~~exchange~~Cost ~~rates~~of ~~compared~~goods ~~with~~sold ~~the~~was U$65.S.9 million ~~dollar~~for ~~had~~the athree ~~net~~months ~~negative~~ended ~~impact~~March of27, 2020, compared with $169.53 million onfor ~~consolidated net sales during~~ the three months ended ~~September~~March 2729, 2019. ~~compared~~The ~~with~~decrease ~~2018,~~in ~~negatively~~cost ~~impacting~~of ~~the~~goods ~~industrial~~sold ~~segment’s~~was ~~net~~primarily ~~sales~~due byto ~~$1.5 million.~~lower ~~This~~sales ~~was~~volumes ~~due~~across ~~principally~~all tosegments, ~~the~~a ~~net~~$0.6 ~~strengthening~~million ofdecrease ~~the~~related ~~U.S.~~to ~~dollar~~foreign ~~against~~currency ~~the~~exchange ~~Euro~~rates in the ~~three~~industrial ~~months~~segment, ~~ended~~and ~~September~~reduced ~~27,~~material ~~2019~~usage ~~compared~~and tolabor ~~the~~costs ~~three~~as ~~months~~a ~~ended~~result ~~September~~of ~~28,~~continuous ~~2018.~~improvement ~~Changes~~programs in ~~foreign~~the ~~currency~~engineered ~~exchange~~components ~~rates~~segment. ~~compared~~The ~~with~~decrease ~~the~~was ~~U.S.~~partially ~~dollar~~offset ~~had~~by ahigher ~~net~~manufacturing ~~negative~~costs ~~impact~~in ofthe ~~$6.2 million~~industrial onsegment ~~consolidated~~due ~~net~~to ~~sales during~~ the ~~nine~~Schaffner ~~months~~and ~~ended~~Matchless ~~September 27~~acquisitions, ~~2019~~wage ~~compared~~inflation ~~with~~across ~~2018~~both segments, ~~negatively~~material ~~impacting~~inflation in the industrial segment’s, ~~net~~lower ~~sales~~material byand ~~$6.2 million.~~labor ~~This~~efficiencies ~~was~~related ~~due principally~~ to ~~the~~sales ~~net~~volume ~~strengthening~~declines ofin the ~~U.S.~~industrial ~~dollar~~segment ~~against~~and ~~the~~unfavorable ~~Euro~~product ~~for~~mix ~~the~~in ~~first nine months of 2019 compared to~~ the ~~first~~engineered ~~nine~~components ~~months of 2018~~segment.

~~Cost~~Gross ofprofit. ~~goods~~For ~~sold.~~the ~~Cost~~reasons ofdescribed ~~goods~~above, ~~sold~~gross profit was $7018.82 million for the three months ended ~~September~~March 27, ~~2019~~2020, compared with $8423.6 million for the three months ended ~~September~~March 2829, ~~2018~~2019. The decrease in cost of goods sold was primarily due to lower sales volumes across all segments, lower manufacturing costs of $4.7 million in the engineered components segment due to the exit from non-core product lines for smart utility meter subassemblies, a $1.1 million decrease related to foreign currency exchange rates, reduced material usage and labor costs as a result of continuous improvement programs, lower material costs in the engineered components segment and reduced freight costs. The decrease was partially offset by higher manufacturing costs in the industrial segment due to the Schaffner acquisition of $4.0 million, lower material and labor efficiencies related to sales volume declines in the engineered components and industrial segments and unfavorable product mix in the engineered components segment.

~~Cost~~Selling ofand ~~goods~~administrative ~~sold~~expenses. ~~was~~Selling and administrative expenses were $~~239~~24.2 5 million for the ~~nine~~three months ended ~~September~~March 27, ~~2019~~2020, compared with $~~275~~19.51 million for the ~~nine~~three months ended ~~September~~March 2829, ~~2018.~~2019, ~~The~~an ~~decrease~~increase ~~in cost~~ of ~~goods~~$5.4 million. ~~sold~~The ~~was~~increase is primarily due to ~~lower~~increased ~~sales~~transaction ~~volumes~~related ~~across~~and ~~all~~strategic ~~segments~~alternative costs, ~~lower~~higher ~~manufacturing~~selling ~~costs~~and ofadministrative ~~$15.2~~costs ~~million~~ in the ~~engineered~~industrial ~~components~~ segment due to the ~~exit~~Schaffner ~~from~~acquisition ~~non-core~~of ~~product~~$0.7 ~~lines~~million ~~for~~and ~~smart utility meter subassemblies, a~~ $41.63 million ~~decrease~~of ~~related~~integration ~~to foreign currency exchange rates, reduced material usage~~ and ~~labor~~transaction costs asrelated ato ~~result~~both ~~of continuous improvement programs in~~ the ~~engineered~~Schaffner ~~components segment~~ and ~~reduced~~Matchless ~~freight costs across both segments~~acquisitions. The ~~decrease~~increase was partially offset by ~~higher~~a ~~manufacturing~~decrease ~~costs~~ in ~~the~~share-based ~~industrial~~compensation ~~segment~~expense ~~due to the Schaffner acquisition~~ of $80.2 million, lower ~~material~~headcount ~~and~~across ~~labor efficiencies related to sales volume declines in both~~ the ~~engineered components and industrial~~ segments, ~~raw~~decreased ~~material~~incentive ~~inflation~~compensation ~~across all segments, unfavorable product mix in the engineered components segment~~ and ~~accelerated~~a ~~depreciation expense of~~ $10.52 million indecrease ~~the engineered components segment~~ related to ~~facility~~foreign ~~consolidation~~currency exchange rates.

~~Gross~~Loss ~~profit.~~on ~~For~~disposals ~~the~~of ~~reasons described above~~property, ~~gross~~plant ~~profit~~and ~~was $14~~equipment-net.~~8 million~~ ~~for~~Loss ~~the~~on ~~three~~disposals ~~months~~of ~~ended September 27~~property, ~~2019,~~plant ~~compared~~and ~~with~~equipment-net ~~$22.5 million~~ for both the three months ended ~~September~~March 2827, ~~2018~~2020 and ~~$57.4 million~~March ~~for the nine months ended September 27~~29, 2019, ~~compared~~was ~~with~~ $790.90 million ~~for the nine months ended September 28, 2018~~.

~~Selling and administrative expenses~~Restructuring. ~~Selling~~Restructuring ~~and~~costs ~~administrative expenses~~ were $200.4 8 million for the three months ended ~~September~~March 27, ~~2019,~~2020 compared with $201.24 million for the three months ended ~~September~~March 2829, ~~2018, an increase of $0~~2019.~~2 million.~~ ~~The~~During ~~increase~~2020, issuch ~~primarily~~costs ~~due~~included tocontinued ~~higher~~footprint ~~selling~~rationalization ~~and~~activities ~~administrative costs~~ in the industrial segment ~~due~~identified toduring the ~~Schaffner~~due ~~acquisition~~diligence ofprocess ~~$0.7~~with ~~million~~the ~~and~~acquisition ~~$0.4 million~~ of ~~integration~~Schaffner, severance and ~~transaction~~other restructuring costs related to ~~the~~plant ~~Schaffner~~closures ~~acquisition.~~and ~~The~~consolidations ~~increase~~in ~~was~~the ~~partially~~industrial ~~offset~~and byengineered acomponents ~~decrease~~segments. inDuring ~~share-based~~2019, ~~compensation~~such ~~expense~~costs were primarily transitional costs of $0moving production to U.~~5 million,~~S. ~~lower~~facilities ~~headcount~~as ~~across~~a result of the ~~segments~~closure ~~and~~of a $0U.3K. ~~million~~facility ~~decrease~~in ~~related~~the toengineered ~~foreign~~components ~~currency~~segment, ~~exchange~~severance ~~rates.~~activities ~~The~~in ~~decrease~~the industrial segment and corporate related to the segment reorganization in ~~share-based~~the ~~compensation~~first quarter of 2019.

Operating (loss) income. For the reasons described above, operating loss was $7.1 million for the three months ended March 27, 2020, compared with operating income of $3.2 million for the three months ended March 29, 2019.

Interest expense-net. Interest expense-net was $7.5 million for the three months ended March 27, 2020 compared to $8.2 million for the three months ended March 29, 2019. The decrease was primarily due to the decrease in outstanding long-term debt balances and lower variable interest rates. The effective interest rate on the Company’s total outstanding indebtedness for the three months ended March 27, 2020 was 7.8% as compared to 8.4% for the three months ended March 29, 2019. See “Senior Secured Credit Facilities” in the “Liquidity and Capital Resources” section of this MD&A for further discussion.

Equity income. Equity income was $0.0 million for the three months ended March 27, 2020 and $0.1 million for the three months ended March 29, 2019. 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 income of $0.3 million for the three months ended March 27, 2020 and income of $0.1 million for the three months ended March 29, 2019. Other income-net for the three months ended March 27, 2020 includes income from transition services performed subsequent to business divestitures.

~~was~~Loss ~~primarily~~from ~~due~~continuing tooperations abefore ~~decrease~~income intaxes. ~~assumed~~For ~~vesting~~the ofreasons ~~Adjusted~~described ~~EBITDA~~above, ~~based~~loss ~~awards~~from incontinuing operations before income taxes was $14.2 million for the ~~third~~three ~~quarter~~months ofended ~~2019~~March 27, ~~which~~2020, ~~resulted~~compared inwith a $04.29 million ~~reversal~~for ofthe ~~previously~~three ~~recorded~~months ~~expense~~ended March 29, 2019.

~~Selling~~Tax ~~and~~benefit. ~~administrative~~The ~~expenses~~tax ~~were~~benefit was $630.76 million for the ~~nine~~three months ended ~~September~~March 27, ~~2019~~2020, compared with a tax expense of $670.73 million for the ~~nine~~three months ended ~~September~~March 2829, ~~2018, a decrease of $4~~2019.~~0 million.~~ The ~~decrease~~effective istax ~~primarily~~rate ~~due~~for to the ~~acceleration~~three ofmonths ~~amortization~~ended ~~expense~~March of27, ~~$2.3~~2020 ~~million~~was on3.9%, ~~intangible~~compared ~~assets~~with in(7.1)% ~~the~~for ~~engineered components segment related to~~ the ~~exit~~three ~~from~~months ~~non-core~~ended ~~product~~March ~~lines for smart utility meter subassemblies in 2018~~29, ~~a $1~~2019.4 ~~million~~The ~~decrease~~net ~~related~~discrete totax ~~foreign~~benefit ~~currency exchange rates, lower headcount across the segments and decreased incentive compensation. The decrease~~ was ~~partially offset by higher selling and administrative costs in the industrial segment due to the Schaffner acquisition of~~ $~~1.8 million, a $~~0.31 million ~~increase~~for inthe ~~integration~~three ~~and~~months ~~transaction~~ended ~~costs~~March ~~related~~27, to2020, ~~Schaffner acquisition~~ and anthe ~~increase~~net indiscrete ~~share-based~~tax ~~compensation~~ expense ofwas $0.3 1 million ~~due~~for tothe ~~restricted~~three ~~stock~~months ~~units~~ended ~~granted in May 2018 and~~ March 29, 2019.

~~Impairment~~The ~~charges~~tax provision is impacted by a number of factors, including, among others, new provisions included in the Tax Reform Act, the amount of taxable earnings or losses at the U.S. ~~Non-cash~~federal ~~impairment~~statutory ~~charges~~rate, ~~were~~the ~~$20~~amount of taxable earnings or losses derived in foreign jurisdictions with tax rates that differ from the U.6S. ~~million~~federal ~~for~~statutory ~~both~~rate, permanent items, state tax rates, the ~~three~~ability to utilize foreign net operating loss carry forwards and ~~nine~~adjustments to valuation allowances. The effective tax rate for the three months ended ~~September~~March 27, ~~2019.~~2020 ~~Non-cash~~was ~~impairment~~impacted ~~charges~~by the levels of ~~$14~~U.9S. ~~million~~and foreign pre-tax losses and ~~$5.7~~earnings, ~~million~~respectively, ~~were~~pre-tax ~~recorded~~losses in foreign jurisdictions for ~~customer~~which ~~relationship~~no ~~and~~tax ~~trademark~~benefit ~~intangible~~was ~~assets~~recognized, ~~respectively~~U.S. interest disallowance, ~~related~~and tothe anew ~~business~~GILTI intax provisions. With the ~~engineered~~downturn ~~components~~in ~~segment~~2020 full year forecasted financial results due to ~~sustained~~the ~~sales~~COVID-19 pandemic and ~~profitability~~with ~~declines~~the passage of the CARES Act legislation, the Company evaluated various accounting considerations related to the preparation of the income tax provision for the three months ended March 27, 2020. ~~See~~As ~~Note~~a 9result, ~~“Goodwill~~included in the provision is a $0.3 million discrete benefit associated with the CARES Act and ~~Other~~the ~~Intangible~~related ~~Assets”~~impact inon valuation allowances associated with the ~~condensed~~computation ~~consolidated~~of ~~financial~~the ~~statements~~interest ~~for~~expense ~~further~~deduction ~~discussion~~limitation.

~~Loss~~Net ~~(gain)~~loss onfrom ~~disposals~~continuing ~~of property, plant and equipment - net~~operations. ~~Loss~~For onthe ~~disposals~~reasons ofdescribed ~~property~~above, ~~plant and equipment -~~ net ~~for~~loss ~~the~~from ~~three~~continuing ~~months~~operations ~~ended September 27, 2019~~ was $013.07 million ~~compared to a gain of $0.1 million~~ for the three months ended ~~September~~March 2827, ~~2018. Loss on disposals of property~~2020, ~~plant and equipment - net for the nine months ended September 27, 2019 was $0.0 million~~ compared towith $05.13 million for the ~~nine~~three months ended ~~September~~March 2829, ~~2018~~2019. The loss on disposals of property, plant and equipment - net for the nine months ended September 28, 2018 includes $0.2 million from the disposition of equipment in connection with the consolidation of two U.S. facilities in the engineered components segment.

~~Restructuring.~~Other ~~Restructuring~~comprehensive ~~costs were $1~~loss.~~3 million~~ ~~for~~Other ~~the~~comprehensive ~~three~~loss ~~months~~was ~~ended September 27, 2019 compared with~~ $02.3 2 million for both the three months ended ~~September~~March ~~28, 2018. Restructuring costs were $3.8 million for the nine months ended September~~ 27, ~~2019~~2020 ~~compared~~and ~~with $1.2 million~~ for the ~~nine~~three months ended ~~September~~March 2829, ~~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 in the second and third quarters of 2019 in response to declining end market demand. Other restructuring costs included plant closure and consolidation in the industrial 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 consolidation of two U.S. facilities in the engineered components segment.

~~Interest~~Other ~~expense.~~comprehensive ~~Interest~~loss ~~expense~~for the net change in unrealized (losses) gains on cash flow hedges was $80.2 1 million for the three months ended ~~September~~March 27, ~~2019~~2020 compared to $80.36 million for the three months ended ~~September~~March 2829, ~~2018~~2019. ~~The~~ ~~effective~~Gains ~~interest~~and ~~rate~~losses on cash flow hedges are based on the ~~Company’s~~changes ~~total~~in ~~outstanding~~current ~~indebtedness~~interest ~~for~~rates and market expectations of the timing and amount of future interest rate changes. For both the three months ended ~~September~~March 27, ~~2019~~2020 and ~~September~~the 28three months ended March 29, ~~2018~~2019, ~~was~~the 8fair value of the hedging instruments decreased, based on actual and future expectations for short-term interest rate decreases.~~3%.~~

~~Interest~~Other ~~expense~~comprehensive loss related to foreign currency translation adjustments was $242.7 2 million for ~~both~~ the ~~nine~~three months ended ~~September~~March 27, ~~2019~~2020 ~~and~~compared ~~September~~with ~~28,~~$1.6 ~~2018~~million ~~as the increase in interest expense caused by higher variable interest rates~~ for the ~~nine~~three months ended ~~September~~March 2729, 2019. asForeign ~~compared~~currency totranslation ~~the~~adjustments ~~nine~~are ~~months~~based ~~ended~~on ~~September~~fluctuations ~~28,~~in ~~2018, was offset by~~ the ~~decrease~~value inof ~~outstanding~~foreign ~~long-term~~currencies ~~debt~~(primarily ~~balances.~~the ~~The~~Euro ~~effective~~and ~~interest rate on~~ the ~~Company’s~~Mexican ~~total~~Peso) ~~outstanding~~against ~~indebtedness for~~ the ~~nine months ended September 27, 2019 was 8~~U.~~4% as compared to 8~~S.3% ~~for~~Dollar ~~the~~each ~~nine months ended September 28, 2018~~period.

~~See~~Employee ~~“Senior~~retirement ~~Secured~~plan ~~Credit~~adjustments ~~Facilities”~~was ina loss of $0.1 million for the ~~“Liquidity~~three months ended March 27, 2020, compared with $0.0 million for the three months ended March 29, 2019. 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 ~~Capital~~mortality ~~Resources”~~rates, ~~section~~future ofcompensation ~~this~~increases, ~~MD&A~~and health care cost trend rates. The employee retirement plan loss for ~~further~~the ~~discussion~~three months ended March 27, 2020 primarily relates to actuarial losses recognized in the German pension plan within the industrial segment.

~~Equity~~Adjusted ~~income~~EBITDA. ~~Equity~~Adjusted ~~income~~EBITDA was $05.07 million, or 6.8% of net sales for the three months ended ~~September~~March 27, ~~2019~~2020, ~~and~~compared with $010.5 million ~~for the three months ended September 28~~, ~~2018~~or 11.6% ~~Equity~~of ~~income~~net ~~was~~sales ~~$0.2 million~~ for the ~~nine~~three months ended ~~September~~March 2729, 2019, ~~and~~a decrease of $05.90 million, ~~for~~or ~~the~~46.8%. ~~nine~~The ~~months~~decrease ~~ended~~reflects ~~September~~lower ~~28,~~Adjusted ~~2018.~~EBITDA ~~The decrease~~ in ~~equity~~the ~~income~~industrial issegment ~~due~~of to$2.7 million, ~~lower~~the ~~sales~~engineered ~~volumes~~components insegment ~~our~~of ~~joint~~$1.6 million, ~~ventures~~and inhigher ~~China~~corporate ~~and~~expenses ~~Taiwan~~of $0.8 million.

~~Other~~Changes ~~income~~in -foreign ~~net.~~currency ~~Other~~exchange ~~income~~rates -compared ~~net~~with ~~was income of $0.9 million for~~ the ~~three months ended September 27, 2019 and income of $0~~U.~~1 million for the three months ended September 28, 2018~~S. ~~Other~~dollar ~~income~~had -a ~~net~~negative ~~was~~impact ~~income~~ of $0.6 1 million ~~for~~on ~~both~~consolidated ~~the~~Adjusted ~~nine~~EBITDA ~~months~~during ~~ended September 27, 2019 and September 28, 2018. Other income - net for both~~ the three ~~and nine~~ months ended ~~September~~March 27, ~~2019~~2020 ~~includes~~compared ~~the reclassification~~ to ~~earnings of foreign currency translation gains of $0.8 million for~~ the ~~wind~~three ~~down and substantial dissolution of certain U.K. entities. Other income - net for the nine~~ months ended ~~September~~March 2729, 2019, ~~also~~negatively ~~includes~~impacting ~~$0.3 million of transaction-related expenses related to debt financing activities. Other income - net for both~~ the ~~three~~industrial ~~and~~segment’s ~~nine~~Adjusted ~~months~~EBITDA ~~ended~~by ~~September 28, 2018 includes~~ $0.41 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~~.

Loss from continuing operations before income taxes. For the reasons described above, loss from continuing operations before income taxes was $34.7 million for the three months ended September 27, 2019, compared with $5.7 million

for the three months ended September 28, 2018. Loss from continuing operations before income taxes was $54.6 million for the nine months ended September 27, 2019 compared with $12.3 million for the nine months ended September 28, 2018.

Tax benefit. The tax benefit was $4.7 million for the three months ended September 27, 2019, compared with a tax benefit of $1.4 million for the three months ended September 28, 2018. The tax benefit was $5.4 million for the nine months ended September 27, 2019 compared with a tax benefit of $2.8 million for the nine months ended September 28, 2018. The effective tax rate for the three months ended September 27, 2019 was 13.5%, compared with 25.1% for the three months ended September 28, 2018. The effective tax rate was 9.9% for the nine months ended September 27, 2019 compared with 22.5% for the nine months ended September 28, 2018. The net discrete tax benefit was $3.3 million and $3.2 million for the three and nine months ended September 27, 2019, respectively, and the net discrete tax benefit was $0.3 million and $0.9 million for the three and nine months ended September 28, 2018. The net discrete tax benefits during the three and nine months ended September 27, 2019 primarily related to the impairment charge recorded in the engineered components segment.

The tax provision is impacted by a number of factors, including, among others, new provisions included in the Tax Reform Act, the amount of taxable earnings or losses at the U.S. federal statutory rate, the amount of taxable earnings or losses derived in foreign jurisdictions with tax rates that differ from the U.S. federal statutory rate, permanent items, state tax rates, the ability to utilize foreign net operating loss carry forwards and adjustments to valuation allowances. The effective tax rate for the three and nine months ended September 27, 2019 was impacted by the levels of U.S. and foreign pre-tax losses and earnings, respectively, pre-tax losses in foreign jurisdictions for which no tax benefit was recognized, U.S. interest disallowance, the new GILTI tax provisions, and the impairment charge in the engineered components segment.

Net loss from continuing operations. For the reasons described above, net loss from continuing operations was $30.0 million for the three months ended September 27, 2019, compared with $4.3 million for the three months ended September 28, 2018. Net loss from continuing operations was $49.2 million for the nine months ended September 27, 2019 compared with $9.5 million for the nine months ended September 28, 2018.

Other comprehensive (loss) income. Other comprehensive loss was $4.5 million for the three months ended September 27, 2019 compared with other comprehensive loss of $0.7 million for the three months ended September 28, 2018. Other comprehensive loss was $6.6 million for the nine months ended September 27, 2019 compared with other comprehensive loss of $1.3 million for the nine months ended September 28, 2018.

Other comprehensive income for the net change in unrealized (losses) gains on cash flow hedges was $0.0 million for the three months ended September 27, 2019 compared with other comprehensive income of $0.2 million for the three months ended September 28, 2018. Other comprehensive loss for the net change in unrealized (losses) gains on cash flow hedges was $1.5 million for the nine months ended September 27, 2019 compared with other comprehensive income of $2.2 million for the nine months ended September 28, 2018. Gains and losses on cash flow hedges are based on the changes in current interest rates and market expectations of the timing and amount of future interest rate changes. For the three and nine months ended September 27, 2019, the fair value of the hedging instruments decreased, based on actual and future expectations for short-term interest rate decreases. For the three and nine months ended September 28, 2018, the fair value of the hedging instruments increased, based on actual and future expectations for interest rate increases.

Other comprehensive loss related to foreign currency translation adjustments was $4.6 million for the three months ended September 27, 2019 compared with other comprehensive loss for foreign currency translation adjustments of $0.9 million for the three months ended September 28, 2018. Other comprehensive loss for foreign currency translation adjustments was $5.2 million for the nine months ended September 27, 2019 compared with other comprehensive loss for foreign currency translation adjustments of $3.5 million for the nine months ended September 28, 2018. Foreign currency translation adjustments are based on fluctuations in the value of foreign currencies (primarily the Euro) against the U.S. Dollar each period.

Adjusted EBITDA. Adjusted EBITDA was $3.1 million, or 3.6% of net sales for the three months ended September 27, 2019, compared with $10.8 million, or 10.1% of net sales for the three months ended September 28, 2018, a decrease of $7.7 million, or 71.4%. The decrease reflects lower Adjusted EBITDA in the engineered components segment of $4.7 million, the industrial segment of $2.6 million and higher corporate expenses of $0.4 million.

Adjusted EBITDA was $20.3 million, or 6.8% of net sales for the nine months ended September 27, 2019, compared with $40.1 million, or 11.3%, of net sales for the nine months ended September 28, 2018, a decrease of $19.8 million, or 49.3%. The decrease reflects lower Adjusted EBITDA in the engineered components segment of $14.9 million and the industrial segment of $6.0 million, partially offset by lower corporate expenses of $1.2 million.

Changes in foreign currency exchange rates compared with the U.S. dollar had a negative impact of $0.2 million on consolidated Adjusted EBITDA during the three months ended September 27, 2019 compared to the three months ended September 28, 2018, negatively impacting the industrial segment’s Adjusted EBITDA by $0.2 million.

During the nine months ended September 27, 2019, changes in foreign currency exchange rates had a negative impact of $0.9 million on consolidated Adjusted EBITDA compared to the nine months ended September 28, 2018, which negatively impacted the industrial segment’s Adjusted EBITDA by $0.9 million.

See “Segment Financial Data” within Item 2, “Management’s Discussion and Analysis,” for further discussion on Adjusted EBITDA for each segment.

Key Measures the Company Uses to Evaluate Its Performance

EBITDA and Adjusted EBITDA. We use “Adjusted EBITDA” as the primary measure of profit or loss for the purposes of assessing the operating performance of our segments. We define EBITDA as net income (loss) from continuing operations before interest expense, provision (benefit) for income taxes, depreciation and amortization. We define 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 and costs related to the strategic alternatives process, including executive retention agreements.

Management believes that Adjusted EBITDA provides a more clear picture of our operating results by eliminating expenses and income that are not reflective of the underlying business performance. We use this metric to facilitate a comparison of our operating performance on a consistent basis from period to period and to analyze the factors and trends affecting our segments. Our internal plans, budgets and forecasts use Adjusted EBITDA as a key metric and we use this measure to evaluate our operating performance and segment operating performance and to determine the level of incentive compensation paid to ~~its~~our employees.

The Senior Secured Credit Facilities (defined in Note 10, “Debt and Hedging Instruments” and below) definition of EBITDA excludes income of partially owned affiliates, unless such earnings have been received in cash.

Set forth below is a reconciliation of Adjusted EBITDA to net loss:

	~~Three Months Ended~~				Three Months Ended		~~Nine Months Ended~~
(in thousands)	~~September 27, 2019~~		~~September 28, 2018~~		~~September~~March 27, ~~2019~~2020		~~September~~March 2829, ~~2018~~2019
Net loss from continuing operations	$	~~(30,046)~~	$	~~(4,284)~~	$	(4913,~~209~~690)	$	(95,~~538~~253)
Interest expense	~~8,180~~		~~8,326~~		247,~~738~~455		248,~~709~~205
Tax benefit	(4,691)		(1,435)		(5,424)		(2,773)
Tax (benefit) provision					(557)		349
Depreciation and amortization	~~6,973~~		~~7,117~~		225,~~566~~490		235,~~698~~180
EBITDA	~~(19,584)~~		~~9,724~~		(71,~~329~~302)		368,~~096~~481
Adjustments:
Restructuring (1)	~~1,277~~		~~298~~		~~3,795~~754		1,~~245~~366
Transaction-related expenses (2)	28		—		670		—
Transaction-related and strategic alternatives expenses (2)					4,517		239
Integration and other restructuring costs (3)	~~392~~		—		~~733~~1,206		~~1,068~~(58)
Share-based compensation (4)	~~357~~		~~846~~		~~1,825~~527		~~1,560~~723
Loss on disposals of property, plant and equipment - net (5)	14		(88)		18		94
Loss on disposals of property, plant and equipment-net					21		8
Impairment charges (6)	20,597		—		20,597		—
Total adjustments					7,025		2,278
Total adjustments	22,665		1,056		27,638		3,967
Adjusted EBITDA					$	5,723	$	10,759
Adjusted EBITDA	$	3,081	$	10,780	$	20,309	$	40,063

(1)Restructuring includes costs associated with exit or disposal activities as defined by GAAP related to facility consolidation, including one-time employee termination benefits, costs to close facilities and relocate employees, and costs to terminate contracts other than financing ~~leases in 2018~~ and ~~financing and~~ operating leases ~~in 2019~~. See Note 6, “Restructuring Costs” of the accompanying condensed consolidated financial statements for further information.

(2)Transaction-related and strategic alternatives expenses primarily consist of professional fees and other expenses related to acquisitions, divestitures, ~~and~~ financing activities and costs relating to the Company's strategic alternatives process, including executive retention agreements.

40(3)During the three months ended March 27, 2020, integration and other restructuring costs includes $1.0 million of integration costs related to two acquisitions in the industrial segment and $0.2 million related to lease expense associated with facilities that have been or are planned to be vacated in the industrial segment.

~~(3)~~During the three ~~and nine~~ months ended ~~September~~March 2729, 2019, integration and other restructuring costs includes $0.51 million ~~and $0.8 million, respectively,~~ of ~~integration~~legal ~~costs~~settlement ~~related~~income ~~to an acquisition in the industrial segment, $0.4 million in both periods~~ related to ~~lease~~proceeds ~~expense~~from ~~associated with facilities that have been or are planned to be vacated in the engineered components segment and $0.4 million in both periods related to~~ a ~~reserve~~supplier ~~for~~claim ~~excess inventory for a vacated warehouse~~ in the engineered components segment. ~~This~~associated ~~was~~with ~~offset by $0.8 million in both~~ periods ~~related~~prior to the ~~reclassification~~Company’s togo ~~earnings~~public ofbusiness ~~a foreign currency translation gain for the wind down and substantial dissolution of certain U~~combination.~~K. entities.~~

During the nine months ended September 28, 2018, integration and other restructuring costs of $1.5 million were incurred associated with a force majeure incident at a supplier in the engineered components segment that resulted in incremental costs to maintain production. Such costs are not included in restructuring for GAAP purposes and were subsequently recovered through insurance during the remainder of 2018. The integration and other restructuring costs during the nine months ended September 28, 2018 were partially offset by a $0.4 million settlement gain on proceeds from a supplier claim in the engineered components segment associated with periods prior to the Company’s go public business combination.

(4)Represents share-based compensation expense for awards under the Company’s 2014 Omnibus Incentive Plan. See Note 11, “Share-Based Compensation” of the accompanying condensed consolidated financial statements for further information.

(5)Loss on disposals of property, plant and equipment - net for the nine months ended September 28, 2018 includes a loss of $0.2 million from the disposition of equipment in connection with the consolidation of two U.S. facilities in the engineered components segment.39

(6)During the three and nine months ended September 27, 2019, non-cash impairment charges of $14.9 million and $5.7 million were recorded for customer relationship and trademark intangible assets, respectively, related to a business in the engineered components segment due to sustained sales and profitability declines. See Note 9, "Goodwill and Other Intangible Assets" of the accompanying condensed 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 three ~~and nine~~ months ended ~~September~~March 27, ~~2019~~2020 and ~~September~~March 2829, ~~2018~~2019. The Company uses Adjusted EBITDA as the primary measure of profit or loss for purposes of assessing the operating performance of its segments. See “Key Measures the Company Uses to Evaluate Its Performance” above for a reconciliation of Adjusted EBITDA to Net Loss which is the nearest GAAP measure.

	Three Months Ended								Increase/ (Decrease)
(in thousands, except percentages)	~~September~~March 27, ~~2019~~2020			~~September~~March 2829, ~~2018~~2019			$		%
Industrial
Net sales	$	48,~~859~~389		$	5149,~~016~~737		$	(21,~~157~~348)	(4.2.7)	%
Adjusted EBITDA	54,~~004~~178			76,~~579~~841			(2,~~575~~663)		(3438.09)
Adjusted EBITDA % of net sales	108.26		%	1413.98		%	(~~470~~520) bps
Engineered Components
Net sales	$	3635,~~751~~643		$	5643,~~013~~179		$	(197,~~262~~536)	(3417.45)	%
Adjusted EBITDA	14,~~424~~418			65,~~150~~988			~~(4,726)~~$	(1,570)	(7626.82)
Adjusted EBITDA % of net sales	312.94		%	1113.09		%	(~~710~~150) bps
Corporate
Adjusted EBITDA	$	(32,~~347~~873)		$	(2,~~949~~070)		$	(~~398~~803)	(1338.58)	%
Consolidated
Net sales	$	8584,~~610~~032		$	~~107~~92,~~029~~916		$	(218,~~419~~884)	(209.06)	%
Adjusted EBITDA	35,~~081~~723			10,~~780~~759			~~(7,699)~~$	(5,036)	(7146.48)
Adjusted EBITDA % of net sales	3.6.8		%	1011.16		%	(~~650~~480) bps
	Nine Months Ended								Increase/ (Decrease)
(in thousands, except percentages)	September 27, 2019			September 28, 2018			$		%
Industrial
Net sales	$	153,589		$	160,448		$	(6,859)	(4.3)	%
Adjusted EBITDA	17,772			23,815			(6,043)		(25.4)
Adjusted EBITDA % of net sales	11.6		%	14.8		%	(320) bps
Engineered Components
Net sales	$	143,065		$	194,992		$	(51,927)	(26.6)	%
Adjusted EBITDA	10,712			25,587			$	(14,875)	(58.1)
Adjusted EBITDA % of net sales	7.5		%	13.1		%	(560) bps
Corporate
Adjusted EBITDA	$	(8,175)		$	(9,339)		$	1,164	12.5	%
Consolidated
Net sales	$	296,654		$	355,440		$	(58,786)	(16.5)	%
Adjusted EBITDA	20,309			40,063			$	(19,754)	(49.3)
Adjusted EBITDA % of net sales	6.8		%	11.3		%	(450) bps

Industrial Segment

	Three Months Ended								Increase/ (Decrease)
(in thousands, except percentages)	~~September~~March 27, ~~2019~~2020			~~September~~March 2829, ~~2018~~2019			$		%
Net sales	$	48,~~859~~389		$	5149,~~016~~737		$	(21,~~157~~348)	(4.2.7)	%
Adjusted EBITDA	54,~~004~~178			76,~~579~~841			(2,~~575~~663)		(3438.09)
Adjusted EBITDA % of net sales	108.26		%	1413.98		%	(~~470~~520) bps

Net sales in the industrial segment for the three months ended ~~September~~March 27, ~~2019~~2020 were $48.94 million, a decrease of $21.23 million, or 4.2.7%, compared with $5149.07 million for the three months ended ~~September~~March 2829, ~~2018~~2019. For the three months ended ~~September~~March 27, ~~2019~~2020, the ~~Schaffner~~Matchless acquisition on ~~April 1~~February 27, ~~2019~~2020 contributed $40.46 million of incremental net sales. ~~and~~Changes ~~foreign~~in ~~currency~~exchange ~~fluctuations~~rates had a net negative impact of $10.59 million. Onfor athe ~~constant~~three ~~currency~~months ~~basis~~ended ~~and~~March ~~excluding~~27, 2020. Excluding the impact of the ~~Schaffner~~ acquisition, ~~for~~and the ~~three~~negative ~~months~~currency ~~ended September 27~~impact, ~~2019,~~ net sales were $4648.07 million, a decrease of $5.1.0 million or 102.01%. The $5.1.0 million decrease in net sales for the three months ended ~~September~~March 27, ~~2019~~2020 was primarily due to lower sales volume in industrial end markets in Europe and the U.S. from decreased demand and the impacts of the COVID-19 pandemic, partially offset by increased pricing. Net sales was also impacted by the acquisition of Schaffner on April 1, 2019.

Adjusted EBITDA for the three months ended ~~September~~March 27, ~~2019~~2020 decreased $2.67 million to $54.02 million (108.26% of net sales) from $7.6.8 million (1413.98% of net sales) for the three months ended ~~September~~March 2829, ~~2018~~2019. For the three months ended ~~September~~March 27, ~~2019~~2020, the ~~Schaffner~~Matchless acquisition on ~~April 1~~February 27, ~~2019~~2020 contributed $0.51 million of incremental Adjusted EBITDA. ~~and~~Changes ~~foreign~~in ~~currency~~exchange ~~fluctuations~~rates had a net negative impact of $0.21 million. Onfor athe ~~constant~~three ~~currency~~months ~~basis~~ended ~~and~~March ~~excluding~~27, 2020. Excluding the ~~impact~~impacts of the ~~Schaffner~~ acquisition, ~~for~~and the ~~three~~negative ~~months~~currency ~~ended September 27~~impact, ~~2019,~~ Adjusted EBITDA was $4.72 million (108.26% of net sales) for the three months ended March 27, 2020, a decrease of $2.97 million or 38.29%. The $2.97 million decrease primarily resulted from lower sales volume in industrial end markets, ~~lower~~from ~~labor~~decreased ~~productivity~~demand ~~related~~and tothe impacts of the ~~sales~~COVID-19 ~~volume~~pandemic, ~~decline~~raw material and wage inflation, and $0.51 million of lower equity income due to lower sales volumes in our joint ventures in China and Taiwan. The decrease was partially offset by decreased incentive compensation, increased sales pricing, ~~lower headcount~~ and lower ~~freight costs~~headcount. Adjusted

	Nine Months Ended								Increase/ (Decrease)
(in thousands, except percentages)	September 27, 2019			September 28, 2018			$		%
Net sales	$	153,589		$	160,448		$	(6,859)	(4.3)	%
Adjusted EBITDA	17,772			23,815			(6,043)		(25.4)
Adjusted EBITDA % of net sales	11.6		%	14.8		%	(320) bps

~~Net~~EBITDA ~~sales~~was inalso ~~the~~impacted ~~industrial~~by ~~segment for~~ the ~~nine~~acquisition ~~months ended September 27, 2019 were $153.6 million, a decrease~~ of ~~$6.9 million or 4.3%, compared with $160.4 million for the nine months ended September 28, 2018. For the nine months ended September 27, 2019, the~~ Schaffner ~~acquisition~~ on April 1, 2019 contributed $9.7 million of incremental net sales and foreign currency fluctuations had a net negative impact of $6.2 million. On a constant currency basis and excluding the impact of the Schaffner acquisition, ~~for~~which ~~the~~was ~~nine~~not ~~months~~determinable ~~ended September 27, 2019, net sales were $150.1 million, a decrease of $10.3 million or 6.4%. The $10.3 million decrease in net sales~~ for the ~~nine~~three months ended ~~September~~March 27, ~~2019~~2020 ~~was primarily~~ due to ~~lower~~the ~~sales~~integration ~~volume~~of inthe ~~industrial~~business ~~end~~into ~~markets in Europe and~~ the ~~U.S.,~~industrial ~~partially offset by increased pricing~~segment.

Adjusted EBITDA for the nine months ended September 27, 2019 decreased $6.0 million to $17.8 million (11.6% of net sales) from $23.8 million (14.8% of net sales) for the nine months ended September 28, 2018. For the nine months ended September 27, 2019, the Schaffner acquisition on April 1, 2019 contributed $0.9 million of incremental Adjusted EBITDA and foreign currency fluctuations had a net negative impact of $0.9 million. On a constant currency basis and excluding the impact of the Schaffner acquisition, for the nine months ended September 27, 2019, Adjusted EBITDA was $17.8 million (11.9% of net sales), a decrease of $6.0 million or 25.2%. The $6.0 million decrease primarily resulted from lower sales volume in industrial end markets, raw material inflation, lower labor productivity related to the sales volume decline, 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 freight costs and decreased incentive compensation.

Engineered Components Segment

	Three Months Ended								Increase/ (Decrease)
(in thousands, except percentages)	~~September~~March 27, ~~2019~~2020			~~September~~March 2829, ~~2018~~2019			$		%
Net sales	$	3635,~~751~~643		$	5643,~~013~~179		$	(197,~~262~~536)	(3417.45)	%
Adjusted EBITDA	14,~~424~~418			65,~~150~~988			(41,~~726~~570)		(7626.82)
Adjusted EBITDA % of net sales	312.94		%	1113.09		%	(~~710~~150) bps

Net sales in the engineered components segment for the three months ended ~~September~~March 27, ~~2019~~2020 were $3635.86 million, a decrease of $197.35 million, or 3417.45%, compared with $5643.02 million for the three months ended ~~September~~March 2829, ~~2018~~2019. The decrease during the three months ended ~~September~~March 27, ~~2019~~2020 was due to ~~a $5.8 million decrease related to the exit from non-core product lines for smart utility meter subassemblies and~~ lower sales volumes due to end market declines in the construction, agriculture, power sports, and turf care, ~~rail~~markets from decreased demand and ~~industrial~~the ~~markets~~impacts of the COVID-19 pandemic. The decrease was partially offset by increased pricing on core product lines.

Adjusted EBITDA decreased $41.76 million, or 7626.82%, for the three months ended ~~September~~March 27, ~~2019~~2020 to $14.4 million (312.94% of net sales) compared with $6.20 million (1113.09% of net sales) for the three months ended ~~September~~March 2829, ~~2018~~2019. The decrease in Adjusted EBITDA for the three months ended ~~September~~March 27, ~~2019~~2020 primarily resulted from ~~non-recurring price increases during the 2018 exit of the non-core product lines for smart utility meter subassemblies,~~ lower sales volumes, ~~lower~~from ~~material~~decreased demand and ~~labor~~the ~~efficiencies~~impacts ~~related~~of to the ~~sales~~COVID-19 ~~volume~~pandemic, ~~decline and~~ unfavorable product mix compared with the prior period, wage inflation, 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, decreased incentive compensation, ~~lower raw material costs~~ and lower headcounts.

	Nine Months Ended								Increase/ (Decrease)
(in thousands, except percentages)	September 27, 2019			September 28, 2018			$		%
Net sales	$	143,065		$	194,992		$	(51,927)	(26.6)	%
Adjusted EBITDA	10,712			25,587			(14,875)		(58.1)
Adjusted EBITDA % of net sales	7.5		%	13.1		%	(560) bps

Net sales in the engineered components segment for the nine months ended September 27, 2019 were $143.1 million, a decrease of $51.9 million, or 26.6%, compared with $195.0 million for the nine months ended September 28, 2018. The decrease during the nine months ended September 27, 2019 was due to a $19.5 million decrease related to the exit from non-core product lines for smart utility meter subassemblies and lower sales volumes due to end market declines in the construction, agriculture, power sports, turf care, rail and industrial markets. The decrease was partially offset by increased pricing on core product lines.

Adjusted EBITDA decreased $14.9 million, or 58.1%, for the nine months ended September 27, 2019 to $10.7 million (7.5% of net sales) compared with $25.6 million (13.1% of net sales) for the nine months ended September 28, 2018. The decrease in Adjusted EBITDA for the nine months ended September 27, 2019 resulted from non-recurring price increases during the 2018 wind down of the non-core product lines for smart utility meter subassemblies, lower sales volumes, lower material and labor efficiencies related to the sales volume decline, unfavorable product mix compared with the prior period and raw material inflation. 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 headcounts and decreased incentive compensation.

Corporate

	Three Months Ended						Increase/ (Decrease)
(in thousands, except percentages)	~~September~~March 27, ~~2019~~2020		~~September~~March 2829, ~~2018~~2019		$		%
Adjusted EBITDA	$	(32,~~347~~873)	$	(2,~~949~~070)	$	(~~398~~803)	(1338.58)	%

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

44The increase of $0.8 million in expense in the three months ended March 27, 2020 compared with the prior year primarily resulted from timing of incentive compensation, higher third party professional fees, and increased health care costs.

The increase of $0.4 million in expense in the three months ended September 27, 2019 compared with the prior year primarily resulted from timing of incentive compensation, partially offset by decreased health care costs.

	Nine Months Ended						Increase/ (Decrease)
(in thousands, except percentages)	September 27, 2019		September 28, 2018		$		%
Adjusted EBITDA	$	(8,175)	$	(9,339)	$	1,164	12.5	%

The decrease of $1.2 million in expense in the nine months ended September 27, 2019 compared with the prior year primarily resulted from decreased incentive compensation and lower professional fees, partially offset by increased health care costs.

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 ~~September~~March 27, ~~2019~~2020, we had $~~110~~76.61 million of total liquidity, including $9272.70 million of available cash, ~~$10.0 million of additional borrowings available under the Revolving Credit Facility portion of our U.S. credit agreement,~~ and $74.91 million available under revolving loan facilities that we maintain outside the U.S. Included in our consolidated cash balance of $9272.70 million at ~~September~~March 27, ~~2019~~2020, is cash of $1112.65 million held at our non-U.S. operations and cash of $48.4 ~~These~~million ~~funds,~~held ~~with~~in ~~some~~the ~~restrictions~~U.S. ~~and~~relating ~~tax~~to ~~implications,~~the proceeds from the sale of the North American fiber solutions business (further described below). These funds are ~~available~~generally ~~for~~used ~~repatriation~~to assupport ~~deemed~~liquidity ~~necessary~~requirements byin usour foreign operations. ~~The~~As ~~Revolving~~a ~~Credit~~result ~~Facility~~of ~~portion~~the events of default further described below, we are not able to draw on our U.S. ~~credit~~Revolving ~~agreement~~Credit ~~and~~Facility. The foreign revolving loan facilities are available for working capital requirements, capital expenditures and other general corporate purposes. in the respective locations outside of the U.S.

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 $6360.19 million., Weof ~~intend~~which to$48.4 ~~reinvest~~million ~~these~~was ~~net~~remaining ~~proceeds~~after as permitted ~~under~~reinvestments ~~the~~as ~~terms~~ of ~~the~~March ~~Senior~~27, ~~Secured Credit Facilities~~2020. 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. As

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.41

discussed above, the impact of the COVID-19 pandemic will adversely impact the Company’s ability to make a mandatory prepayment in August 2020 on its First Lien Term Loans of the net proceeds from the 2019 sale of the North American fiber solutions business.

As of March 27, 2020, 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 restructure our debt and/or obtain alternative forms of financings or investments to achieve our longer-term strategic plans. We can make no assurances we will be able to restructure our debt or obtain alternative forms of financing or investments. Furthermore, if economic conditions or demand for our products continues to deteriorate, we may experience a material adverse effect on our business, operating results, liquidity and financial condition. In addition, 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. See the “Going Concern” and “Restructuring Support Agreement” sections of this MD&A above for further discussion of our assessment of liquidity.

Indebtedness

As of ~~September~~March 27, ~~2019~~2020, our total outstanding indebtedness of $~~389~~387.95 million was comprised of term loans outstanding under our Senior Secured Credit Facilities of $~~375~~370.27 million (net of a debt discount of $21.05 million and deferred financing costs of $2.92 million), various foreign bank term loans and revolving loan facilities of $1416.02 million and finance lease obligations of $0.7 million. No borrowings were outstanding under the U.S. Revolving Credit Facility portion of the Senior Secured Credit Facilities as of ~~September~~March 27, ~~2019~~2020.

As of December 31, ~~2018~~2019, our total outstanding indebtedness of $~~391~~384.8 million was comprised of term loans outstanding under its Senior Secured Credit Facilities of $~~375~~370.71 million (net of a debt discount of $21.7 million and deferred financing costs of $42.15 million), various foreign bank term loans and revolving loan facilities of $1513.59 million and finance lease obligations of $0.68 million. No borrowings were outstanding under the U.S. Revolving Credit Facility portion of the Senior Secured Credit Facilities as of December 31, ~~2018~~2019.

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 $1416.02 million as of ~~September~~March 27, ~~2019~~2020, including borrowings of $1315.5 million incurred by our subsidiaries in Germany, compared to $1513.59 million as of December 31, ~~2018~~2019, including borrowings of $1513.04 million incurred by our subsidiaries in Germany. The foreign debt obligations in Germany primarily relate to term loans within our industrial segment of $1312.23 million at ~~September~~March 27, ~~2019~~2020 and $1512.05 million at December 31, ~~2018~~2019. The borrowings bear interest at fixed and variable rates ranging from 2.1.8% to 4.7% and are subject to repayment in varying amounts through 2025.

Senior Secured Credit Facilities

General. On June 30, 2014, Jason Incorporated, as the borrower, entered into (i) the First Lien Credit Agreement, with Jason Partners Holdings Inc., Jason Holdings, Inc. I, 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~~with asJason ofPartners ~~June~~Holdings 30Inc., ~~2014~~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, ~~the~~are ~~subsidiary~~indirect wholly-owned subsidiaries of Jason Industries, Inc.

45The 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 March 27, 2020, 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 senior secured loan facilities (the “First Lien Credit Facilities”). The Second Lien Credit Agreement provides for term loans in an aggregate principal amount of $110.0 million, of which $89.9 million is outstanding as of March 27, 2020, 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 the second quarter of 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 condensed consolidated balance sheets. As of March 27, 2020, we were in compliance with the financial covenants contained in our credit agreements; however, as a result of the events of default further described below, the Company is not able to draw on its Revolving Credit Facility.

~~guarantors~~The ~~party~~Revolving ~~thereto~~Credit ~~and~~Facility ~~the~~matures ~~several~~December ~~banks~~31, ~~and~~2020, ~~other~~the ~~financial~~First ~~institutions~~Lien orTerm ~~entities~~Loans ~~from~~mature ~~time~~June to30, ~~time~~2021 ~~party~~and ~~thereto (~~the “Second Lien ~~Credit~~Term ~~Agreement”~~Loans ~~and,~~mature ~~together~~June ~~with the First Lien Credit Agreement~~30, ~~the “Credit Agreements”)~~2022. ~~Jason~~The ~~Incorporated,~~principal ~~Jason~~amount ~~Partners~~of ~~Holdings~~the ~~Inc.,~~First ~~and~~Lien ~~Jason~~Term ~~Holdings,~~Loans ~~Inc.~~amortizes Iin ~~are~~quarterly ~~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 $290.2 million is outstanding as of September 27, 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 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 September 27, 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 the second quarter of 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 condensed consolidated balance sheets.42

~~The~~installments 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 equal to $0.8 million ~~quarterly installments,~~ 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 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 ~~September~~March 27, ~~2019~~2020 and December 31, ~~2018~~2019. 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 three months ended ~~September~~March 27, ~~2019~~2020 and ~~September~~March 2829, ~~2018~~2019, the Company recognized $0.1 million of interest expense and $0.14 million of interest income, respectively, related to the Swaps. ~~For~~The ~~the~~Company ~~nine~~expects ~~months~~to ~~ended~~recognize ~~September~~another ~~27, 2019 and September 28, 2018, we recognized~~ $0.93 million ~~and $0.1 million~~ of interest ~~income,~~expense ~~respectively,~~ related to the Swaps. ~~Based~~through onthe ~~current~~June ~~interest rates~~30, we2020 ~~would~~maturity ~~expect to recognize interest expense of $0~~date.~~1 million related to the Swaps in the next 12 months.~~

46The fair values of our Swaps are recorded on the condensed consolidated balance sheets with the corresponding offset recorded as a component of accumulated other comprehensive loss. The fair values of the Swaps was a net liability of $0.4 million and $0.3 million at March 27, 2020 and December 31, 2019, respectively. See the amounts recorded on the condensed consolidated balance sheets within the table below:

The fair values of our Swaps are recorded on the condensed consolidated balance sheets with the corresponding offset recorded as a component of accumulated other comprehensive loss. The fair values of the Swaps was a net liability of $0.1 million at September 27, 2019 and a net asset of $1.9 million at December 31, 2018, respectively. See the amounts recorded on the condensed consolidated balance sheets within the table below:


	March 27, 2020		December 31, 2019
Interest rate swaps:


Recorded in other current liabilities	$	403	$	260

Total net liabilities derivatives designated as hedging instruments	$	403	$	260

	September 27, 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	(143)		—
Total net asset derivatives designated as hedging instruments	$	(143)	$	1,867

Mandatory Prepayment. Subject to certain exceptions, the Senior Secured Credit Facilities are subject to mandatory prepayments in amounts equal to: (1) a percentage of the net cash proceeds from any non-ordinary course sale or other disposition of assets (including as a result of casualty or condemnation) by Jason Incorporated or any of its Restricted Subsidiaries in excess of a certain amount and subject to customary reinvestment provisions and certain other exceptions; (2) 100% of the net cash proceeds from the issuance or incurrence of debt by Jason Incorporated or any of its Restricted Subsidiaries (other than indebtedness permitted by the Senior Secured Credit Facilities); and (3) 75% (with step-downs to 50%, 25% and 0% based upon achievement of specified consolidated first lien net leverage ratios under the First Lien Credit 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 $60.9 million, of which $48.4 million was remaining after permitted reinvestments as of March 27, 2020. To the extent that there are

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 $63.1 million. We intend 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. At September 27, 2019 and December 31, 2018, there was no required mandatory excess cash flow prepayment required under the Senior Secured Credit Facilities.43

~~Covenants.~~net ~~The~~proceeds ~~Senior~~that ~~Secured~~are ~~Credit~~not ~~Facilities~~reinvested ~~contain~~within atwelve ~~number~~months of ~~customary affirmative and negative covenants that~~receipt, ~~among other things, limit~~ or ~~restrict~~within ~~the~~180 ~~ability~~days of ~~Jason~~a ~~Incorporated~~contractual ~~and~~commitment ~~its~~if ~~Restricted~~such ~~Subsidiaries~~commitment ~~to:~~is ~~incur~~made ~~additional~~during ~~indebtedness~~the ~~(including~~twelve ~~guarantee~~month ~~obligations); incur liens; engage in mergers~~period, ~~consolidations,~~a ~~liquidations~~mandatory ~~and~~prepayment ~~dissolutions;~~will ~~sell~~be ~~assets;~~required. ~~pay~~At ~~dividends~~March ~~and make other payments in respect of capital stock; make acquisitions~~27, ~~investments,~~2020 ~~loans~~ and ~~advances;~~December 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 business31, ~~in each case~~2019, ~~subject~~there towas ~~certain~~no ~~limited~~required ~~exceptions.~~mandatory Toexcess ~~comply with these covenants, Jason Incorporated and its Restricted Subsidiaries are limited in the amount of~~ cash ~~that~~flow ~~can~~prepayment berequired ~~distributed~~under ~~to Jason Industries, Inc. in~~ the ~~form~~Senior ofSecured ~~dividends,~~Credit ~~loans or other distributions~~Facilities. ~~As of September 27, 2019, this limit was $17.0 million.~~

InCovenants. ~~addition,~~The ~~under~~Senior ~~the~~Secured ~~Revolving~~ Credit ~~Facility,~~Facilities ifcontain ~~the~~a ~~aggregate~~number ~~outstanding amount~~ of ~~all~~customary ~~revolving~~affirmative ~~loans, swingline loans~~ and ~~certain~~negative ~~letter~~covenants ofthat, ~~credit~~among ~~obligations~~other ~~exceed~~things, ~~$10.0~~limit ~~million~~or atrestrict the ~~end~~ability of ~~any fiscal quarter,~~ Jason Incorporated and its Restricted Subsidiaries ~~will~~to: beincur ~~required~~additional toindebtedness ~~not~~(including ~~exceed~~guarantee aobligations); ~~consolidated~~incur ~~first~~liens; ~~lien~~engage ~~net~~in ~~leverage ratio~~mergers, ~~currently specified at 4.50 to 1.00~~consolidations, ~~with~~liquidations aand ~~decrease~~dissolutions; tosell ~~4.25~~assets; topay ~~1.00~~dividends onand ~~December 31,~~make ~~2019~~other ~~and~~payments ain ~~decrease~~respect toof ~~4.00~~capital tostock; ~~1.00~~make onacquisitions, ~~June 26~~investments, ~~2020~~loans and ~~thereafter.~~advances; Ifpay ~~such~~and ~~outstanding~~modify ~~amounts do not exceed $10.0 million at~~ the ~~end~~terms of ~~any~~certain ~~fiscal~~indebtedness; ~~quarter,~~engage noin ~~financial~~certain ~~covenants~~transactions ~~are~~with ~~applicable.~~affiliates; Asenter ofinto ~~September~~negative ~~27,~~pledge ~~2019,~~clauses ~~the~~and ~~consolidated~~clauses ~~first~~restricting ~~lien~~subsidiary ~~net~~distributions; ~~leverage~~and ~~ratio~~change ~~was~~its ~~6.62~~line toof ~~1.00~~business, onin aeach ~~pro~~case, ~~forma~~subject ~~trailing~~to ~~twelve-month~~certain ~~basis~~limited ~~calculated~~exceptions. inTo ~~accordance~~comply with ~~the~~these ~~respective~~covenants, ~~provisions~~Jason ofIncorporated ~~the~~and ~~Credit~~its ~~Agreements~~Restricted ~~which~~Subsidiaries ~~exclude~~are ~~the~~limited ~~Second~~in ~~Lien~~the ~~Term~~amount ~~Loans~~of ~~from~~cash ~~the~~that ~~calculation~~can ofbe ~~net~~distributed ~~debt~~to ~~(numerator)~~Jason ~~and~~Industries, ~~allow~~Inc. in the ~~inclusion~~form of ~~certain~~dividends, ~~pro~~loans ~~forma~~or ~~adjustments~~other ~~and~~distributions. ~~exclusion~~These ofrestrictions ~~certain~~are ~~specified~~triggered orif ~~nonrecurring~~Jason ~~costs~~Incorporated and ~~expenses~~its inRestricted ~~calculating~~Subsidiaries ~~Adjusted~~do ~~EBITDA~~not ~~(denominator).~~achieve ~~Because~~a ~~the~~ consolidated ~~first lien~~ net leverage ratio atthat ~~September~~is ~~27,~~equal ~~2019~~to ~~exceeded~~or 4less than 5.5025 to 1.00, ~~borrowings~~on ~~under~~a ~~the~~trailing ~~Revolving~~twelve-month ~~Credit~~basis ~~Facility~~calculated ~~would~~in beaccordance ~~limited~~with tothe aprovisions ~~total~~ of ~~$10.0~~the ~~million~~Credit ~~(which~~Agreements. ~~includes~~As ~~letters~~ of ~~credit~~March ~~in excess of $5.0 million). At September~~ 27, ~~2019~~2020, wethe ~~had~~consolidated ~~letters~~net ofleverage ~~credit~~ratio ~~outstanding~~for ofJason ~~$4.7~~Incorporated ~~million~~ and ~~had~~its noRestricted ~~outstanding~~Subsidiaries ~~borrowings~~exceeded ~~outstanding~~5.25 ~~under~~to ~~the Revolving Credit Facility~~1.00; ~~As of September 27~~therefore, ~~2019,~~it weis ~~were~~not incurrently ~~compliance~~able ~~with~~to ~~the~~distribute ~~financial~~cash ~~covenants~~to ~~contained~~Jason inIndustries, ~~our credit agreements~~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 March 27, 2020, the consolidated first lien net leverage ratio was 9.84 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 March 27, 2020 exceeded 4.25 to 1.00, borrowings under the Revolving Credit Facility would be limited to a total of $10.0 million (which includes letters of credit in excess of $5.0 million). At March 27, 2020, we had letters of credit outstanding of $3.7 million and had no outstanding borrowings outstanding under the Revolving Credit Facility. As of March 27, 2020, we were in compliance with the financial covenants contained in our credit agreements; however, as a result of the events of default further described below, the Company is not able to draw on its Revolving Credit Facility.

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.

47Event of Default and Forbearance Agreement. On March 31, 2020, the Borrower, a subsidiary of the Company, elected to defer making the interest payment of approximately $2.3 million due on March 31, 2020 to lenders under the Second Lien Credit Agreement. This resulted in an event of default under the Second Lien Credit Agreement, with a cross-default under the First Lien Credit Agreement. Under the Intercreditor Agreement, the lenders under the Second Lien Credit Agreement are not able to exercise their rights and remedies in connection with such default for 180 days. Further, the Borrower failed to deliver a consolidated budget due on April 29, 2020, which failure, after giving effect to the grace period applicable thereto, will constitute an event of default under each of the First Lien Credit Agreement and, to the extent the applicable lenders under the Second Lien Credit Agreement do not waive the corresponding event of default under the Second Lien Credit Agreement, an event of default under the Second Lien Credit Agreement. As of March 27, 2020, $89.9 million of principal amount of loans was outstanding under the Second Lien Credit Agreement. On March 31, 2020, the Company made its quarterly interest and amortization payments to the lenders under the First Lien Credit Agreement and following these payments $283.7 million of principal amount of loans was outstanding under the First Lien Credit Agreement as of such date.

Also on March 31, 2020, the Borrower and certain of the Company’s other subsidiaries entered into a forbearance agreement, which was subsequently amended and restated, with certain lenders under the Borrower’s First Lien Credit Agreement. Pursuant to the Amended and Restated Forbearance Agreement, the Forbearing Lenders agreed to forbear from exercising their rights and remedies during the Amended and Restated Forbearance Period (as described below) as a result of the failure by the Borrower to make the interest payment due on March 31, 2020 to lenders under the Second Lien Credit Agreement. The Amended and Restated Forbearance Period terminated on June 5, 2020.

On June 5, 2020, the Company entered into a Restructuring Support Agreement with certain creditors representing more than 75% of its outstanding indebtedness under its First Lien Credit Agreement. The Restructuring Support Agreement contemplates agreed-upon terms for a pre-packaged financial restructuring plan to be filed in cases commenced under chapter 11 of title 11 of the United States Code. See the “Restructuring Support Agreement” section of this MD&A above for further discussion of the terms of the Restructuring Support Agreement.

Series A Preferred Stock

Holders of the 4344,~~090~~827 shares of Series A Preferred Stock are entitled to receive, when, as and if declared by our Board of Directors, cumulative dividends at the rate of 8.0% per annum (the dividend rate) on the $1,000 liquidation preference per share of the Series A Preferred Stock, payable quarterly in arrears on each dividend payment date. Dividends shall be paid, if lawful, in cash (if permitted under our Senior Secured Credit Facilities) 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 ~~nine~~three months ended ~~September~~March 27, ~~2019~~2020:

(in thousands, except share and per share amounts)
Payment Date	Record Date	Amount Per Share	Total Dividends Paid	Preferred Shares Issued
January 1, 2019	November 15, 2018	$20.00	$796	794
January 1, 2020	November 15, 2019	$20.00	$862	860
April 1, 2019	February 15, 2019	$20.00	$812	809
July 1, 2019	May 15, 2019	$20.00	$828	826

On ~~August~~February 14, ~~2019~~2020, 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 ~~October~~April 1, ~~2019~~2020 to holders of record on ~~August~~February 15, ~~2019~~2020. As of ~~September~~March 27, ~~2019~~2020, we have recorded the ~~843~~877 additional Series A Preferred Stock shares declared for the dividend of $0.89 million within preferred stock in the condensed 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. NOWC as a percentage of trailing twelve month net sales was 1720.70% as of ~~September~~March 27, ~~2019~~2020, 1317.78% as of December 31, ~~2018~~2019 and 1517.24% as of ~~September~~March 2829, ~~2018~~2019.

The ~~table~~increase ~~below~~in ~~summarizes~~ NOWC as a percentage of ~~September~~net ~~27,~~sales ~~2019,~~of 2.2% from December 31, ~~2018~~2019 is primarily due to a $11.7 million increase in accounts receivable-net as a result of the timing of sales and ~~September~~cash 28receipts from customers and higher inventory levels as a percentage of net sales, ~~2018:~~as inventory levels increased from year end despite the sales volume decline experienced in the previous twelve months of net sales.

(in thousands)	September 27, 2019		December 31, 2018		September 28, 2018
Accounts receivable - net	$	41,641	41,325		$	51,179
Inventories	55,435		55,627		56,505
Accounts payable	(27,578)		(35,331)		(38,045)
NOWC	$	69,498	$	61,621	$	69,639

The increase in NOWC as a percentage of net sales of 2.6% from March 29, 2019 is primarily due to a $7.6 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 decreased slightly from prior year despite the sales volume decline experienced in the year over year previous twelve months of net sales.

The table below summarizes NOWC as of March 27, 2020, December 31, 2019 and March 29, 2019:


(in thousands)	March 27, 2020		December 31, 2019		March 29, 2019
Accounts receivable - net	$	44,823	33,085		$	48,133
Inventories	51,319		49,943		52,449
Accounts payable	(30,241)		(22,914)		(37,887)
NOWC	$	65,901	$	60,114	$	62,695

The table below reconciles our NOWC from our working capital:

(in thousands)

~~September~~March 27, ~~2019~~2020

December 31, ~~2018~~2019

~~September~~March 2829, ~~2018~~2019

Working Capital

~~134~~(263,~~361~~086)

~~110~~119,~~276~~585

~~115~~100,~~897~~027

Less: Cash and cash equivalents

(9271,~~695~~964)

(4684,~~457~~526)

(4042,~~379~~055)

Less: Other current assets

(8,~~039~~363)

(7,~~049~~433)

(106,~~006~~205)

Less: Current assets held for sale

—

~~(45,681)~~—

(4950,~~316~~214)

Add: Current portion long-term debt

5373,~~769~~259

5,~~687~~800

5,~~777~~655

Add: Current portion operating lease liabilities

54,~~469~~385

—4,275

—4,223

Add: Accrued compensation and employee benefits

108,~~325~~642

128,~~154~~551

1312,~~504~~860

Add: Accrued interest

16,723

8979

8286

Add: Other current liabilities

1416,~~307~~305

13,~~923~~783

1211,~~402~~238

Add: Current liabilities held for sale

—

~~18,679~~—

2127,~~678~~080

NOWC

6965,~~498~~901

6160,~~621~~114

6962,~~639~~695

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 ~~motorcycle~~power ~~and~~sports ~~lawn~~ and turf care markets to fill the supply chain for the spring season. There are, however, variations in the seasonal demands from year to year depending on weather, customer inventory levels, customer planning, and model year changes. We historically generate approximately 51%-56% of our annual net sales in the first half of the year.

inventory levels, customer planning, and model year changes. We historically generate approximately 51%-55% of our annual net sales in the first half of the year.

NOWC as a percentage of trailing twelve month net sales was unfavorably impacted by approximately 0.7% as of September 27, 2019 related to the April 1, 2019 acquisition of Schaffner. NOWC as a percentage of trailing twelve month net sales was favorably impacted by approximately 0.1% and 0.7% as of September 27, 2019 and December 31, 2018, respectively, related to the exit of the non-core smart utility meter subassemblies product line.

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~~including onthe ~~our~~impact ~~current level~~ of ~~operations~~COVID-19, wein ~~believe~~addition ~~that~~to ~~our~~financial, ~~existing~~competitive, ~~cash~~regulatory ~~balances~~ and ~~expected~~other ~~cash~~conditions, ~~flows~~as ~~from~~well ~~operations~~as ~~will~~the becost ~~sufficient~~and totiming ~~meet~~of our ~~operating~~debt ~~requirements~~restructuring ~~for~~process. atBased ~~least~~on ~~the~~our ~~next~~current 12level ~~months.~~of ~~However,~~operations we may require borrowings under our foreign credit facilities and alternative forms of financings or investments to achieve our longer-term strategic plans.

~~Capital~~See ~~expenditures~~“Going ~~during~~Concern” ~~the~~within ~~nine~~Item ~~months ended September 27~~2, ~~2019~~“Management’s ~~were~~Discussion ~~$7.2~~and ~~million on a continuing operations basis~~Analysis,” ~~or 2.4% of net sales. Capital expenditures~~ for ~~2019~~further ~~are expected to be approximately 2~~discussion.0% to 2.5% of net sales, but could vary from that depending on business performance, growth opportunities, project activity and the amount of assets we lease instead of purchase. We finance our annual capital requirements with existing cash balances and funds generated from operations.

~~Condensed~~Capital ~~Consolidated~~expenditures ~~Statements~~during the three months ended March 27, 2020 were $2.0 million, or 2.3% of ~~Cash~~net ~~Flows~~sales. Capital expenditures for ~~the~~2020 ~~Nine~~are ~~Months~~expected ~~Ended~~to ~~September~~be 27approximately 4.5% to 5.0% of net sales, ~~2019~~but could vary from that depending on business performance, growth opportunities, project activity and the ~~Nine~~amount ~~Months~~of ~~Ended~~assets ~~September~~we ~~28,~~lease ~~2018~~instead of purchase. We finance our annual capital requirements with existing cash balances and funds generated from operations.

	Nine Months Ended
Includes cash flow activities from both continuing and discontinued operations (in thousands)	September 27, 2019		September 28, 2018
Net cash (used in) provided by operating activities	$	(15,815)	$	20,015
Net cash provided by (used in) investing activities	56,391		(9,478)
Net cash used in financing activities	(5,523)		(7,492)
Effect of exchange rate changes on cash and cash equivalents	(527)		(562)
Net increase in cash and cash equivalents	34,526		2,483
Cash and cash equivalents at beginning of period	58,169		48,887
Cash and cash equivalents at end of period	$	92,695	$	51,370
Depreciation and amortization	$	28,783	$	31,657
Capital expenditures	$	8,743	$	9,636

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 27, 2020 and the Three Months Ended March 29, 2019

Cash Flows (Used in) Provided by Operating Activities


	Three Months Ended
Includes cash flow activities from both continuing and discontinued operations (in thousands)	March 27, 2020		March 29, 2019
Net cash used in operating activities	$	(8,534)	$	(7,249)
Net cash used in investing activities	(5,866)		(3,284)
Net cash provided by (used in) financing activities	2,373		(2,318)
Effect of exchange rate changes on cash and cash equivalents	(535)		(165)
Net decrease in cash and cash equivalents	(12,562)		(13,016)
Cash and cash equivalents at beginning of period	84,526		58,169
Cash and cash equivalents at end of period	$	71,964	$	45,153

Depreciation and amortization	$	5,490	$	9,361
Capital expenditures	$	1,970	$	3,468

Cash flows used in operating activities were $15.8 million for the nine months ended September 27, 2019 compared to cash flows provided by operating activities of $20.0 million for the nine months ended September 28, 2018, a decrease of $35.8 million. The decrease was primarily driven by lower operating profit across all segments principally as a result of lower sales volume for the nine months ended September 27, 2019 as compared to the nine months ended September 28, 2018. In addition, the decrease resulted from acquisition and divestiture related transaction costs of $3.8 million, changes in operating working capital of $3.6 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 nine months ended September 27, 2019.46

Cash Flows ~~Provided by (~~Used in) ~~Investing~~Operating Activities

Cash flows ~~provided~~used byin ~~investing~~operating activities were $568.45 million for the ~~nine~~three months ended ~~September~~March 27, ~~2019~~2020 compared ~~with~~to ~~cash used of~~ $97.52 million for the ~~nine~~three months ended ~~September~~March 2829, ~~2018~~2019, an increase of $1.3 million. The increase inwas ~~cash~~primarily ~~flows~~driven ~~provided~~ by ~~investing~~lower ~~activities~~operating ~~was~~profit ~~primarily~~across ~~the~~all segments principally as a result of ~~cash~~lower ofsales ~~$75.0~~volume ~~million~~for ~~received~~the ~~from~~three months ended March 27, 2020 as compared to the ~~sale~~three ofmonths ended March 29, 2019. In addition, the ~~North~~increase ~~American~~was ~~fiber~~due ~~solutions~~to ~~business~~acquisition related, ~~before~~divestiture related and other transaction costs, ~~income~~of ~~taxes~~$4.1 ~~and~~million ~~certain~~compared ~~retained~~to ~~liabilities~~$0.2 million for the three months ended March 29, 2019 and ~~higher~~changes ~~proceeds~~in ~~from~~net ~~disposal~~operating working capital balances primarily related to the timing of ~~property,~~accounts ~~plant,~~payable ~~and~~payments. ~~equipment,~~The increase was partially offset by ~~cash~~$7.4 ~~used~~million ~~for~~due to the ~~acquisition~~timing of ~~Schaffner~~interest payments in 2020 as compared to 2019, changes in operating working capital of $112.0 million, ~~net~~and $0.7 million of cash ~~acquired,~~related ~~and~~to bydividends ~~lower~~received ~~capital~~from ~~expenditures~~our ofjoint ~~$0.9~~venture ~~million~~during ~~compared~~the tothree months ended March 29, 2019 and none received during the ~~prior~~three ~~year~~months ~~period~~ended March 27, 2020.

49Cash Flows Used in Investing Activities

Cash ~~Flows~~flows ~~Used~~used in ~~Financing~~investing ~~Activities~~activities were $5.9 million for the three months ended March 27, 2020 compared with $3.3 million for the three months ended March 29, 2019. The increase in cash flows used in investing activities was primarily the result of cash used for the acquisition of Matchless of $4.0 million, net of cash acquired, partially offset by lower capital expenditures of $1.5 million compared to the prior year period.

Cash ~~flows~~Flows ~~used~~Provided inby ~~financing~~(Used ~~activities were $5.5 million for the nine months ended September 27, 2019 compared with $7.5 million for the nine months ended September 28, 2018. The decrease~~ in) ~~cash~~Financing flows used in financing activities was driven by lower payments of $2.5 million on First and Second Lien Term Loans, lower payments of deferred financing costs of $0.3 million, and remittance of $0.7 million of value added tax during the first quarter of 2019 related to the December 2018 sale of our U.K. building.Activities

Cash flows provided by financing activities were $2.4 million for the three months ended March 27, 2020 compared with cash flows used in financing activities of $2.3 million for the three months ended March 29, 2019. The increase in cash flows provided by financing activities was driven by an increase in cash proceeds from other long-term debt of $2.2 million, lower payments of $0.8 million on First and Second Lien Term Loans, lower payments of other long-term debt of $0.6 million, a decrease in the withholding taxes in connection with vesting of restricted stock unit and performance share unit awards presented to the Company of $0.4 million, and the remittance of $0.7 million of value added tax during the first quarter of 2019 related to the December 2018 sale of our U.K. building.

Depreciation and Amortization

Depreciation and amortization totaled $285.85 million for the ~~nine~~three months ended ~~September~~March 27, ~~2019~~2020, compared with $319.74 million for the ~~nine~~three months ended ~~September~~March 2829, ~~2018~~2019. Depreciation and amortization for the ~~nine~~three months ended ~~September~~March 27, ~~2019~~2020 is lower than the prior period primarily due to ~~$2.3 million of accelerated intangible amortization expense recorded for a customer relationship intangible asset to reflect~~ the ~~exit of the non-core smart utility meter product lines in the engineered components segment during 2018 and due to the~~ sale of the North American fiber solutions business on August 30, 2019, ~~partially~~and ~~offset~~the bysale ~~$1.5 million~~ of ~~accelerated depreciation expense recorded in~~ the ~~engineered~~Metalex ~~components~~business ~~segment~~on ~~during~~December 13, 2019.

Capital Expenditures

Capital expenditures totaled $82.70 million for the ~~nine~~three months ended ~~September~~March 27, ~~2019~~2020, compared with $93.65 million for the ~~nine~~three months ended ~~September~~March 2829, ~~2018~~2019. Capital expenditures for the three months ended March 29, 2019 included $1.0 million incurred by the North American fiber solutions and Metalex businesses which were sold on August 30, 2019 and December 13, 2019, respectively.

Contractual Obligations

There are no material changes to the disclosures regarding contractual obligations made in Part II, Item 7 of our Annual Report on Form 10-K/A for the year ended December 31, ~~2018~~2019, except for the ~~August 30,~~debt ~~2019~~maturities ~~sale~~under ofour ~~the~~Senior ~~North~~Secured ~~American~~Credit ~~fiber~~Facilities ~~solutions~~which ~~business.~~are ~~The~~now ~~following~~current ~~table~~due ~~summarizes~~to the ~~contractual~~events ~~obligations~~ of ~~the~~default ~~Company~~further ~~that~~discussed ~~were previously reported~~ in the ~~Commitments~~“Events ~~and~~of ~~Contractual~~Default ~~Obligations~~and ~~table~~Forbearance inAgreement” ~~Part~~section ~~II, Item 7~~ of ~~our~~this ~~Annual Report on Form 10-K/~~MD&A ~~for the year ended December 31, 2018 recast on a continuing operations basis~~.

			Payments Due by Period
(in thousands)	Total		2019		2020-2021		2022-2023		Thereafter
Long-term debt obligations under U.S. credit agreement	$	382,427	$	3,100	$	289,440	$	89,887	$	—
Other long-term debt obligations	15,469		2,319		5,011		5,683		2,456
Interest payments on long-term debt obligations	85,521		30,274		49,988		5,228		31
Capital lease obligations	613		268		319		26		—
Operating lease obligations	40,644		7,403		10,388		6,530		16,323
Purchase obligations	—		—		—		—		—
Multiemployer and UK pension obligations	2,874		373		747		747		1,007
Total before other long-term liabilities	$	527,548	$	43,737	$	355,893	$	108,101	$	19,817
Other long-term liabilities	16,383
Total	$	543,931

Off-Balance Sheet Arrangements

AsThere of the date of this report, other than changes related to the adoption of the new lease accounting standard as described in Note 8, “Leases” to the condensed consolidated financial statements, there are no material changes to the disclosures regarding off-balance sheet arrangements made in Part II, Item 7 of our Annual Report on Form 10-K/A for the year ended December 31, ~~2018~~2019.

Critical Accounting Policies and Estimates

The condensed consolidated financial statements have been prepared in accordance with GAAP which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K/A filed with the SEC on ~~May~~March 134, ~~2019~~2020 for the year ended December 31, ~~2018~~2019 and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q) for information with respect to our critical accounting policies, which we believe could have the most significant effect on our reported results and require subjective or complex judgments by management. Management believes that as of March 27, 2020 and during the period from January 1, 2020 through March 27, 2020, there has been no material change to this information.

5047

Management believes that as of September 27, 2019 and during the period from June 29, 2019 through September 27, 2019, there has been no material change to this information.

New Accounting Pronouncements

See Note 1, “Description of Business and Basis of Presentation” under the heading “Recently issued accounting standards” of the accompanying condensed consolidated financial statements.

5148

ITEM 3. 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 $9527.1 2 million, or 32%, of our sales from continuing operations originated in a currency other than the U.S. dollar during the first ~~nine~~three months of ~~2019~~2020. 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 ~~nine~~three months ended ~~September~~March 27, ~~2019~~2020, sales denominated in Euros approximated $7122.10 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 $72.12 million, respectively, and the change in our net (loss) income would increase or decrease by approximately $10.24 million. The net assets and liabilities of our non-U.S. dollar denominated subsidiaries, which totaled approximately $~~148~~120.47 million as of ~~September~~March 27, ~~2019~~2020, are translated into USD at the exchange rates in effect at the end of the period. The resulting translation adjustments are recorded in shareholders’ (deficit) equity as cumulative translation adjustments. The cumulative translation adjustments recorded in accumulated other comprehensive loss at ~~September~~March 27, ~~2019~~2020 resulted in an increase to shareholders’ deficit of $28.34 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 ~~September~~March 27, ~~2019~~2020, 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 ~~September~~March 27, ~~2019~~2020, long-term debt denominated in currencies other than the USD totaled approximately $1416.78 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~~During the ~~second~~first quarter of ~~2018~~2020, ~~applicable~~contract interest rates ~~were~~exceeded ~~lower than~~ the ~~designated~~established 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 $0.4 9 million. However, ~~net~~due ofto the impact of the COVID-19 pandemic, interest ~~rate~~rates ~~swaps~~have ~~discussed~~recently indeclined below the ~~paragraph~~established ~~below~~floor.

As of ~~September~~March 27, ~~2019~~2020, 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. AsUnder ofthe ~~September~~interest ~~27,~~rate ~~2019~~swap agreements, ~~LIBOR~~the ~~exceeded~~Company ~~2.08%;~~is ~~therefore,~~required ~~assuming~~to ~~interest~~make ~~rates~~a ~~remain~~$0.1 ~~above~~million ~~2.08%,~~payment aon 25March ~~basis~~31, ~~point~~2020 ~~increase~~and ora ~~decrease~~$0.3 inmillion ~~interest~~payment ~~rates~~on ~~would~~June ~~increase~~30, or2020, ~~decrease~~the ~~annual~~date the interest ~~expense~~rate byswaps $0mature.~~4 million.~~

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 ~~September~~March 27, ~~2019~~2020, we did not have any commodity hedging instruments in place.

5249

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)), that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of ~~September~~March 27, ~~2019~~2020. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September~~March 27, ~~2019~~2020, our disclosure controls and procedures were ~~not~~ effective ~~at a reasonable level of assurance, due to the material weakness in our internal control over financial reporting discussed below~~.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We did not maintain effective internal controls over the accounting for the recoverability of deferred tax assets. Specifically, the internal controls to assess the recoverability of a deferred tax asset for disallowed interest expense were not performed at the appropriate level of precision. This control deficiency resulted in the overstatement of the tax provision and net deferred tax liabilities as of and for the year ended December 31, 2018. As a result of this error, we restated our previously reported annual financial statements for the year and quarter ended December 31, 2018 on Form 10-K/A and revised the Company's previously issued unaudited condensed consolidated financial statements as of and for the three months ended June 29, 2018. Additionally, this control deficiency could result in additional misstatements of the aforementioned balances that would result in a material misstatement to our annual or interim consolidated financial statements that would not be prevented or detected.

Remediation Plan

During the second and third quarters of 2019, in conjunction with the preparation of the interim 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 this remediation plan will effectively remediate the material weakness, however, due to the inherent differences in the process of accounting for income taxes during an interim versus an annual period, the Company's process for remediating the material weakness will not be deemed complete until management has concluded, through testing, that such control is operating effectively in conjunction with the preparation of the Company’s tax provision for the year ended December 31, 2019.

Changes in Internal Control Over Financial Reporting

~~The~~There remediation efforts related to the material weakness are considered a change in the Company’s internal control over financial reporting during the quarter ended September 27, 2019 that has materially affected the Company’s internal control over financial reporting. Except as stated above, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended ~~September~~March 27, ~~2019~~2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

5350

PART II — OTHER INFORMATION

ITEM 1A. RISK FACTORS

There ~~are~~have been no material changes to the ~~disclosures regarding~~ risk factors ~~made~~previously disclosed in Part I, Item 1A of our "Risk Factors," in Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, ~~2018~~2019, which was filed with the SEC on March 4, 2020, other than the following.

The coronavirus (COVID-19) pandemic has had, and will continue to have, a negative impact on our business, financial condition, cash flows, results of operations and supply chain.

The COVID-19 pandemic has resulted in national, state and local government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, border closings, restrictions on public gatherings, quarantining of people who may have been exposed to the virus, shelter-in-place restrictions, and limitations or shutdowns of business operations. These measures have impacted and may further impact our workforce and operations, the operations of our customers and distributors, and those of our vendors and suppliers. We have significant operations worldwide, including in the United States, Mexico and Germany, and each of these countries has been affected by the outbreak and taken measures to try to contain it, resulting in disruptions at some of our manufacturing facilities and support operations. There is considerable uncertainty regarding the impact, and expected duration, of such measures and potential future measures, and restrictions on our access to our facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers. There is no certainty that measures taken by governmental authorities will be sufficient to mitigate the risks posed by the virus, and our ability to perform critical functions could be harmed.

The COVID-19 pandemic has significantly increased economic and demand uncertainty. The pandemic has caused an economic slowdown that is likely to continue, and it is possible that it could cause an extended global recession. A global recession would negatively impact our business, financial condition, cash flows, results of operations and supply chain, and we could be required to recognize a non-cash impairment charge to operating earnings for goodwill, other intangible assets, or other long-lived assets.

The COVID-19 pandemic has weakened demand for our products, which has resulted in a decline in sales and customer orders, and it remains uncertain what impact this weakened demand will have on future sales and customer orders once conditions begin to improve. The pandemic has also disrupted, and could in the future continue to disrupt, our supply chain.

In recent weeks, the spread of COVID-19 has led to disruption and volatility in the global capital markets, which may adversely affect our and our customers’ and suppliers’ liquidity, cost of capital and ability to access the capital markets. As a result, the continued spread of COVID-19 could adversely affect our liquidity as well as the ability of our customers to perform, including in making timely payments to us, which could further adversely impact our business, financial condition, cash flows and results of operations. There can be no assurance that the Company will be successful in accessing the capital markets to obtain financing for additional liquidity, if needed, on acceptable terms. The disruption and volatility in the global capital markets may restrict our ability to raise any such additional funds, at least in the near term, resulting in a negative impact on the Company’s liquidity.

The COVID-19 pandemic has had, and will continue to have, a negative impact on our business, financial condition, cash flows, results of operations and supply chain, although the full extent is uncertain. As the pandemic continues to rapidly evolve, the extent of the impact on our business, financial condition, cash flows, results of operations and supply chain will depend on future developments, including, but not limited to, the duration and spread of the pandemic (including any relapses), its severity, the actions to contain the virus and/or treat its impact, related restrictions on travel, the duration, timing and severity of the impact on customer spending (including any recession resulting from the pandemic), and how quickly and to what extent normal economic and operating conditions can resume, all of which are highly uncertain and cannot be predicted.

We may not be able to continue as a going concern if we do not restructure our capital structure, return to profitable operations and meet our obligations when they become due.

The Company faces significant challenges and uncertainties related to the COVID-19 pandemic. As a result, the Company's available capital resources are expected to be consumed more rapidly than previously forecasted due to (a) significantly increased economic and demand uncertainty that has resulted in decreases in actual and expected future sales of the Company's products; (b) significant disruptions to the Company's ability to operate its manufacturing facilities due to restrictions placed on business operations, which has resulted in decreases in actual and future expected sales of the Company's products; (c) the effect of the COVID-19 pandemic on the Company's ability to obtain parts and materials from the Company's suppliers, which has resulted in decreases in actual and expected future sales of the Company's products; (d) the costs of continuing to staff critical production and fulfillment functions despite the significant declines in sales; (e) restructuring actions which are increasing operating expenses; (f) costs related to the strategic alternatives process, including executive retention agreements; and (g) other items affecting the Company's forecasted level of expenditures and use of cash resources. These

factors will adversely impact the Company's ability to make a mandatory prepayment in August 2020 on its First Lien Term Loans of the net proceeds from the 2019 sale of the Fiber Solutions business, of which $48.4 million was remaining after permitted reinvestments as of March 27, 2020. At March 27, 2020 the Company had $76.1 million of total liquidity, including $72.0 million of available cash (including $48.4 million of net proceeds from the 2019 sale of the Fiber Solutions business and $12.5 million held at our non-U.S. operations), and $4.1 million available under revolving loan facilities outside the U.S. On March 31, 2020, Jason Incorporated, a subsidiary of the Company, elected to defer making the interest payment of approximately $2.3 million due on March 31, 2020 to lenders under the Second Lien Credit Agreement. This resulted in an event of default under the Second Lien Credit Agreement, with a cross-default under the First Lien Credit Agreement.

On June 5, 2020, the Company entered into a Restructuring Support Agreement with certain creditors representing more than 75% of its outstanding indebtedness under its First Lien Credit Agreement. The Restructuring Support Agreement contemplates agreed-upon terms for a pre-packaged financial restructuring plan to be filed in cases commenced under chapter 11 of title 11 of the United States Code. See Note 18, “Subsequent Events” in the accompanying financial statements for further discussion of the terms of the Restructuring Support Agreement.

The impact of the COVID-19 pandemic on the Company's forecasted liquidity and the factors resulting from the event of default, cross-default, and terms of the Restructuring Support Agreement raise substantial doubt about the Company's ability to continue as a going concern for the one-year period from the date of issuance of the financial statements included in this quarterly report. The ability to continue as a going concern is dependent upon the Company restructuring its capital structure, returning to profitable operations, and meeting its obligations when they become due.

There can be no assurance that the Company will be successful in its plans to restructure its capital structure or to obtain alternative financing on acceptable terms. If such plans are not realized, the Company may be forced to limit its business activities or be unable to continue as a going concern, which will have a material adverse effect on our business, results of operations and financial position. In addition, our ability to continue as a going concern could also impact our ability to maintain our relationships with our suppliers, customers, employees and other third parties, which could have a material and adverse impact on our business.

In addition, the COVID-19 pandemic, as well as the related governmental restrictions and adverse impact on the global economy, currently is amplifying, will continue to amplify and/or in the future may amplify many of the risk factors previously disclosed in Part I, Item 1A, “Risk Factors,” in Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2019, which was filed with the SEC on March 4, 2020, including the following:

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

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

•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;

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

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

•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;

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

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

•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;

•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;

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

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

•Natural disasters, epidemics and other events outside our control, and our inability to successfully mitigate the effects of such events, may harm our business;

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

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

•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;

•The market price of our common stock may decline; and

•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.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table contains detail related to the repurchase of common stock based on the date of trade during the three months ended ~~September~~March 27, ~~2019~~2020:

2019 Fiscal Month	Total Number of Shares Purchased (1)	Average Price Paid per Share ($)	Total Number of Shares Purchased as Part of Publicly Plans or Programs Announced (2)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
2020 Fiscal Month	Total Number of Shares Purchased (1)	Average Price Paid per Share ($)	Total Number of Shares Purchased as Part of Publicly Plans or Programs Announced (2)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
June 29 to August 2	1,192	0.66	—	N/A
January 1 to January 31	—	—	—	N/A
August 3 to August 30	72,251	0.50	—	N/A
February 1 to February 28	—	—	—	N/A
August 31 to September 27	22,264	0.40	—	N/A
February 29 to March 27	251,189	0.17	—	N/A
Total	95251,~~707~~189	0.4817	—

(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 ~~nine~~three months ended ~~September~~March 27, ~~2019~~2020, the Company withheld ~~392~~251,~~115~~189 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.

As disclosed in Note 14, “Shareholders’ (Deficit~~) Equity~~” of the accompanying condensed consolidated financial statements and under the heading “Liquidity and Capital Resources-Series A Preferred Stock” in MD&A, the Company paid the ~~July~~January 1, ~~2019~~2020 dividend on its Series A Preferred Stock by issuing an additional ~~826~~860 shares of Series A Preferred Stock. These shares were issued in reliance on the private placement exemption from the registration requirements of the Securities Act of 1933, as amended, provided by Section 4(a)(2) of such Act. Holders of the Series A Preferred Stock have the option to convert each share of Series A Preferred Stock initially into approximately 81.18 shares of the Company’s common stock, subject to certain adjustments in the conversion rate.

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ITEM 6. EXHIBITS

The exhibits listed in the exhibit index below are filed as part of this Quarterly Report on Form 10-Q.

EXHIBIT INDEX

Exhibit Number						Description
3						Amended and Restated Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred Stock to the Second Amended and Restated Articles of Incorporation of Jason Industries, Inc., dated as of September 1, 2019 (Incorporated by reference to Exhibit A to Exhibit 4 to the Registrant's Form 8-K, filed with the Securities and Exchange Commission on September 4, 2019 (File No. 001-36051)).
10.1						Fourth Amended and Restated Forbearance Agreement, dated June 3, 2020 (incorporated by reference to Exhibit 10 to the Registrant's Form 8-K filed with the Securities Exchange Commission (the "Commission") on June 4, 2020 (File No. 001-36051)).
4						Rights Agreement, dated as of September 1, 2019, by and between Jason Industries, Inc. and Continental Stock Transfer & Trust Company, as the Rights Agent (Incorporated by reference to Exhibit 4 to the Registrant's Form 8-K, filed with the Securities and Exchange Commission on September 4, 2019 (File No. 001-36051)).
10.2						Form Addendum to Employment Agreement (incorporated by reference to Exhibit 10 to the Registrant's Form 8-K filed with the Commission on April 1, 2020 (File No. 001-36051)).
10						Purchase Agreement dated as of August 11, 2019 by and among Jason Incorporated, Jason International Holdings, Inc., ACR II Motus Integrated Technologies Cooperatief U.A., Motus Pivot MX Holding B.V., Motus Holding B.V., and Motus Pivot Inc.
10.3						Form Retention Agreement (incorporated by reference to Exhibit 10 to the Registrant's Form 8-K filed with the Commission on March 6, 2020 (File No. 001-36051)).
10.4						Restructuring Support Agreement, dated as of June 5, 2020 (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed with the Commission on June 8, 2020 (File No. 001-36051)).
31.1						Certification of the Principal Executive Officer required by Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2						Certification of the Principal Financial Officer required by Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32.1						Certification of the Principal Executive Officer required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
32.2						Certification of the Principal Financial Officer required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
101.INS						XBRL Instance Document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Labels Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			JASON INDUSTRIES, INC.
Dated: November 08, 2019			/s/ Brian K. Kobylinski
Dated: June 10, 2020			/s/ Brian K. Kobylinski
			Brian K. KobylinskiPresident, Chief Executive Officer and Chairman of the Board of Directors(Principal Executive Officer)

Dated: ~~November~~June 0810, ~~2019~~2020 /s/ Chad M. Paris Chad M. ParisSenior Vice President and Chief Financial Officer(Principal Accounting Officer)

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