Jason Industries chairman and chief executive officer Jeffry Quinn said the decision to seek the resignation of former CEO Dave Westgate in November was the right one and the company is now moving in the right direction.
“We are a work in progress, but make no mistake about it, we are making progress,” Quinn said during the company’s fourth quarter earnings call.
Milwaukee-based Jason Industries was created by the acquisition of Jason Inc. by Quinpario Acquisition Corp. in June 2014. The company – a global family of seating, finishing, components and automotive acoustics manufacturers – has struggled to meet its guidance expectations since becoming a public company.
Quinn acknowledged that not everyone on the board of directors favored removing Westgate and that led some directors to resign. One of them, Vince Martin, wrote in his letter of resignation that the change would “detrimentally affect company results going forward.”
“It has become abundantly clear in the last weeks that the management route you are taking will be different than we have taken in the past and will be governed more by the whims and judgments of ill-informed activist shareholders than by the rational and thoughtful evaluations of those who created the company and have grown it to its current state,” Martin wrote.
Quinn defended the decision and said there were numerous attempts to work with Westgate.
“Sometimes the right decisions are difficult as we all know,” he said.
The company reported a loss of $89.6 million for 2015, with much of that coming in the fourth quarter, including a intangible asset impairment charge of $94.1 million, restructuring and integration charges of $12.8 million and pre-tax share based compensation expense of $8 million. The company claimed an adjusted net income of $5.6 million for the full year.
Jason’s revenue was up slightly for the full year at $708.4 million from $702.5 the previous year. For the fourth quarter, revenue was up 5.9 percent to $173.8 million.
Quinn, who led Quinpario prior to the acquisition, said he was aware the management team at Jason Inc. hadn’t had experience running a public company before, “but felt that team could grow and develop in that regard.”
“That simply never happened. The result was a lack of communication and transparency with the board and a failure to articulate a clear vision and strategy,” Quinn said. “Under the previous leadership, there was a belief that Jason had to grow first before deciding the strategic direction of the company. That is not where I am.”
He said the assumption was that Jason was “a group of market leading businesses with attractive organic and inorganic growth opportunities.” While that turned out to be true, Quinn said the management team didn’t properly handle the inorganic growth opportunities.
“The pipeline wasn’t properly primed for action. When the first expected deal didn’t materialize, there was not a systematic process to find another one,” he said.
Quinn also said the company had experienced a number of manufacturing issues that led to missed earnings expectations.
“The board was told repeatedly this was atypical of Jason and not what the company was all about, but the facts spoke for themselves,” Quinn said. “We believed we had a strong base in operational and manufacturing excellence that would yield consistent financial performance. We were wrong on that one.”
Quinn said his fear stepping into the CEO role was that he would find there wasn’t much that could be done to fix the company.
“That wasn’t the case,” he said, adding that the company was suffering from a lack of operational consistency.
“We were a manufacturing company that was having trouble running our plants consistently and predictably,” he said, noting that changes including plant startups and platform launches were causing problems.
Jason Industries announced a restructuring in January that aims to streamline its sales organization to target core end-markets under two commercial groups – seating and acoustics and finishing and components.
Quinn said the idea is for the leaders of those two commercial groups to focus on growth while recently appointed chief operating officer Craig Ivey focuses on improving the company’s manufacturing process.
Ivey said on the earnings call that Jason Industries is aiming to find $30 million in savings by the end of 2017. That includes a $10 million reduction in sales, general and administrative costs and $20 million in operations optimization. The efforts in the latter have already started with a review of the North American supply chain and moving operations from a plant in Buffalo Grove, Ill. to Mexico.
Ivey said the company has over 40 locations around the world and he is taking a structured approach to reviewing operations.
“There’s a lot of opportunity here when we combine our manufacturing footprint with our supply chain review,” he said.
