Jason Industries Finishes Another Difficult Quarter

By Markets Fool.com

Image source: Jason Industries.

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Jason Industries Inc.(NASDAQ: JASN)(NASDAQ: JASNW)released second-quarter 2016 results late last week, and shares fell hard as the company's industry headwinds showed no signs of abating. Now that the dust has settled, let's take a closer look at how the maker of finishing, seating, components, and automotive acoustic products polished the first half of the year, as well as what to expect going forward.

Jason Industries results: The raw numbers

Q2 2016 Actuals

Q2 2015 Actuals

Growth (YOY)

GAAP revenue

$185.7 million

$187.6 million

(1%)

GAAP net income (loss)

($2.9 million)

($1.6 million)

N/A

GAAP earnings (loss) per share

($0.13)

($0.07)

N/A

Data source: Jason Industries.

What happened with Jason Industries this quarter?

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  • On an adjusted (non-GAAP) basis, which adds perspective by excluding items like stock-based compensation and restructuring expenses, Jason Industries' net loss was $1.9 million, or $0.07 per share, compared to adjusted net income of $3.4 million, or $0.12 per share in last year's second quarter.
  • Revenue included a $0.2 million negative impact from foreign currency translation, as well as contributions of $7.5 million, or 4% growth, from Jason Industries' acquisition of industrial abrasives specialist DRONCO last year.
  • Adjusted earnings before interest, taxes, depreciation and amortization declined 24.5% year over year, to $18.8 million, due to lower seating and components volumes, new-platform launch inefficiencies in acoustics, and investments in operational efficiency initiatives.
  • Cost-reduction program savings were $2.4 million during the quarter.
  • Revenue by segment:
    • Seating revenue fell 13.9% year over year, to $44.7 million, driven by lower volumes in heavyweight motorcycle, heavy industry, and an earlier-than-expected end to the turf-care season.
    • Finishing revenue grew 13.9%, to $53.2 million, driven primarily by contributions from DRONCO. Excluding currencies and acquisitions, organic growth within finishing was negative 1.5%, due to lower industrial demand in the United States.
    • Acoustics revenue grew 12.8% (12.5% adjusting for a favorable currency impact), to $63.2 million, driven by higher volumes on new platform awards.
    • Components revenue fell 25.3%, to $24.6 million, on lower rail-care component volumes and lower industrial metal demand, as well as delayed orders at the end of the quarter

What management had to say

Jason Industries CEO Jeffrey Quinn called the quarter "disappointing" given the market slowdowns in components and seating, noting the company expects both to continue to suffer from weak trends throughout the remainder of 2016 and into 2017. Quinn elaborated:

While we have made progress addressing the issues in our plants, we are not yet performing up to our expectations. Improving the consistency of our results remains our highest priority. As we fix our operating issues, we have also taken the initial actions in our global cost reduction program and achieved savings in the quarter as expected. We will enhance and accelerate that program to manage through changing end markets to better position Jason for the long term.

Looking forward

Consequently, Jason Industries also reduced its full-year guidance, and now expects 2016 revenue in the range of $715 million to $730 million (down from $735 million to $750 million previously), and adjusted EBITDA of $73 million to $76 million (down from $84 million to $90 million previously).

In the end, while Jason Industries might be effectively positioning itself to benefit when these market headwinds fade, I agree this was a disappointing quarter in which only a few bright spots lit the way. Considering this only extends the company's recent woes after a string of quarterly disappointments, and until investors see signs of concrete improvement in Jason Industries' end markets, it's no surprise to see shares remaining under pressure on Thursday.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Jason Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.