Business Update
- Completed term loan amendment to allow
for increased covenant flexibility
- Completed second lien term loan
agreement to provide additional liquidity to support 2019 business
plan
- Named Barry Steele permanent Chief
Financial Officer
- Net sales of $850.0 million, down 4.8
percent
- Net sales declined 6.0 percent in
constant currency(1)
- Operating loss of $170.4 million, or
20.0 percent of net sales,
- Adjusted operating profit(2) of $5.3
million, or 0.6 percent of net sales
- Diluted loss per share of $8.14
- Adjusted diluted loss per share(3) of
$1.38
Horizon Global Corporation (NYSE: HZN), one of the world’s
leading manufacturers of branded towing and trailering equipment,
today reported fourth quarter and full-year financial results for
2018.
"This past year, we took considerable steps to improve
operational performance, reset the business in the U.S., and
establish a foundation for top- and bottom-line growth in 2019 and
beyond," commented Carl Bizon, President and Chief Executive
Officer of Horizon Global. “As Interim CEO and then permanent CEO
since October, we made impactful changes to our leadership team,
including new leaders in Europe-Africa, and, most recently, the
addition of Barry Steele as our new permanent CFO. We completed the
action plan for the Americas and are now delivering efficiently
from our primary U.S. distribution center in Kansas City, with past
due orders in the Americas decreased to less than $6.0 million at
the end of 2018 from $8.5 million at the end of the third quarter
and a seasonal peak of $26.0 million.
“In Europe-Africa, new leadership is making meaningful progress
on a series of business improvement initiatives intended to
significantly impact operations for improved long-term performance
in the region. These business improvement initiatives will take
time and attention to complete, but, in the end, we believe they
will optimize operations, improve product quality, and reduce
costs. A major focus remains on supply chain and logistics to
improve the overall efficiency of our operations. We remain
optimistic about our team’s ability to drive positive momentum in
the segment over time.”
Bizon continued, “Our Asia-Pacific segment continued to perform
well in 2018, and, in the fourth quarter, this segment was awarded
multiple meaningful contracts, which represent annualized revenue
of approximately $10.4 million. The momentum in this region
continues, and we expect another solid year of performance in 2019.
With the continued momentum in Asia-Pacific, a return to growth in
the Americas, progress on the turnaround in Europe-Africa, and the
recently completed financing to support our business plan, we look
forward to delivering value to our shareholders.”
2018 Fourth Quarter Segment
Results
Horizon Americas. Net sales decreased 19.7 percent, with
this decrease attributable to higher volume shipments in 2017
related to a year-end sales promotion program that was not repeated
in 2018, higher customer sales allowances, higher retail penalties
and the 2017 divestiture of the Broom and Brush business. On a
constant currency basis(1), net sales decreased 19.3 percent.
During 2018, the Americas reported an operating loss of $11.6
million as compared to operating profit of $5.2 million in 2017.
The 2018 result included special items including $5.8 million in
retail penalties and restructuring expenses of $2.1 million. During
2017, there were no retail fines and penalties and restructuring
charges were only $1.1 million. Adjusting for these expenses,
adjusted operating loss(2) in 2018 was $3.7 million compared with
adjusted operating profit of $6.6 million in 2017. This decrease in
adjusted operating profit was due to the lower sales, higher
freight and material costs not recaptured by pricing increases and
higher labor costs in the Kansas City distribution center during
2018 and a benefit in 2017 from the reversal in accrued bonuses.
These were partially offset by headcount and other expense
reduction initiatives.
Horizon Europe-Africa. Net sales decreased 8.3 percent
which included unfavorable currency translation. On a constant
currency basis(1), net sales decreased by 5.3 percent, mainly due
to soft aftermarket sales particularly in the United Kingdom where
Brexit has eroded consumer spending. Operating loss during 2018 was
$16.5 million compared to $7.7 million during 2017. The 2018 loss
included $4.2 million in special items compared to $3.2 million
during 2017. Special items during 2018 mainly included
restructuring expense of $1.8 million and impairment of intangible
assets of $1.0 million whereas special items during 2017 mainly
included $1.9 million in severance costs and $0.9 million in
restructuring. On an adjusted basis, the operating loss was $12.3
million and $4.6 million for 2018 and 2017, respectively. The
higher adjusted operating loss(2) was driven by settlements of
legacy Westfalia claims, higher input costs such as freight and
unfavorable revenue mix.
Horizon Asia-Pacific. Net sales decreased 1.6 percent,
but increased 4.0 percent on a constant currency basis(1),
attributable, in part, to strong OE and retail sales volume.
Operating profit of $5.2 million, or 15.3 percent of net sales,
declined slightly mainly due to the lower currency translation
offset partially by the higher sales volume. Adjusted operating
profit(2) of $5.5 million, or 15.9 percent of net sales, was
consistent with the prior year.
2019 Full-Year Outlook
Bizon concluded, “We are optimistic regarding our outlook for
the year, although we are experiencing a slow start to the prime
spring and summer selling season in the U.S. due to cold and wet
weather conditions impacting numerous industries. With our new
financing in place, providing the liquidity and capital flexibility
we need to execute our business plan, we have a stronger foundation
from which to operate in the coming year. Our senior leadership
team is now fully transitioned with the addition of a permanent
CFO, and we are operating as one team with one goal to complete the
operational turnaround at Horizon Global. We remain focused on
providing the best products and service to our customers and
end-users, ultimately translating to enhanced value for our
shareholders.”
Conference Call Details
Horizon Global will host a conference call regarding fourth
quarter and full year 2018 earnings on Monday, March 18, 2019
at 8:30 a.m. Eastern Time. Participants in the call are asked to
register five to ten minutes prior to the scheduled start time by
dialing (844) 711-8052 and from outside the U.S. at (832) 900-4641.
Please use the conference identification number 7447016.
The conference call will be webcast simultaneously and in its
entirety through the Horizon Global website. An earnings
presentation will also be available on the Horizon Global website
at the time of the conference call. Shareholders, media
representatives and others may participate in the webcast by
registering through the investor relations section on the Company’s
website.
A replay of the call will be available on Horizon Global’s
website or by phone by dialing (800) 585-8367 and from outside the
U.S. at (404) 537-3406. Please use the conference identification
number 7447016. The telephone replay will be available
approximately two hours after the end of the call and continue
through April 1, 2019.
About Horizon Global
Horizon Global is the #1 designer, manufacturer and distributor
of a wide variety of high-quality, custom-engineered towing,
trailering, cargo management and other related accessory products
in North America, Australia and Europe. The Company serves OEMs,
retailers, dealer networks and the end consumer as the category
leader in the automotive, leisure and agricultural market segments.
Horizon provides its customers with outstanding products and
services that reflect the Company's commitment to market
leadership, innovation and operational excellence. The Company’s
mission is to utilize forward-thinking technology to develop and
deliver best-in-class products for our customers, engage our
employees and create value for our shareholders.
Horizon Global is home to some of the world’s most recognized
brands in the towing and trailering industry, including: BULLDOG,
Draw-Tite, Fulton, Hayman Reese, Reese, ROLA, Tekonsha, and
Westfalia. Horizon Global has approximately 4,200 employees in 37
facilities across 18 countries.
For more information, please
visit www.horizonglobal.com.
Forward-Looking
Statements
This release contains “forward-looking statements” as defined in
the Private Securities Litigation Reform Act of 1995.
Forward-looking statements contained herein speak only as of the
date they are made and give our current expectations or forecasts
of future events. These forward-looking statements can be
identified by the use of forward-looking words, such as “may,”
“could,” “should,” “estimate,” “project,” “forecast,” “intend,”
“expect,” “anticipate,” “believe,” “target,” “plan” or other
comparable words, or by discussions of strategy that may involve
risks and uncertainties. These forward-looking statements are
subject to numerous assumptions, risks and uncertainties which
could materially affect our business, financial condition or future
results including, but not limited to, risks and uncertainties with
respect to: the Company’s ability to regain compliance with the
NYSE’s continued listing standards and maintain such compliance;
the Company’s leverage; liabilities imposed by the Company’s debt
instruments; market demand; competitive factors; supply
constraints; material and energy costs; technology factors;
litigation; government and regulatory actions, including the impact
of any tariffs, quotas or surcharges; the Company’s accounting
policies; future trends; general economic and currency conditions;
various conditions specific to the Company’s business and industry;
the spin-off from TriMas Corporation; the success of our Action
Plan, including the actual amount of savings and timing thereof;
the success of our business improvement initiatives in
Europe-Africa, including the amount of savings and timing thereof;
the Company's exposure to product liability claims from customers
and end users, and the costs associated therewith; the Company’s
ability to meet its covenants in the agreements governing its debt,
including the requirement to reduce its first lien term loan, or
obtain any amendments or waivers thereto; and other risks that are
discussed in the Company’s most recent Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. The
risks described herein are not the only risks facing our Company.
Additional risks and uncertainties not currently known to us or
that we currently deemed to be immaterial also may materially
adversely affect our business, financial position and results of
operations or cash flows. We caution readers not to place undue
reliance on such statements, which speak only as of the date
hereof. We do not undertake any obligation to review or confirm
analysts’ expectations or estimates or to release publicly any
revisions to any forward-looking statement to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
(1) We evaluate growth in our operations on both an as
reported basis and a constant currency basis. The constant currency
presentation, which is a non-GAAP measure, excludes the impact of
fluctuations in foreign currency exchange rates. We believe
providing constant currency information provides valuable
supplemental information regarding our growth, consistent with how
we evaluate our performance. Constant currency revenue results are
calculated by translating current period revenue in local currency
using the prior period’s currency conversion rate. This non-GAAP
measure has limitations as an analytical tool and should not be
considered in isolation or as a substitute for an analysis of our
results as reported under GAAP. Our use of this term may vary from
the use of similarly-titled measures by other issuers due to the
potential inconsistencies in the method of calculation and
differences due to items subject to interpretation. See Appendix II
for reconciliation. (2) Please refer to “Company and
Business Segment Financial Information,” which details certain
costs, expenses, other charges, gains or income, collectively
described as ‘’Special Items,’’ that are included in the
determination of operating profit under GAAP, but that management
would not consider important in evaluating the quality of the
Company’s operating results as they are not indicative of the
Company’s core operating results or may obscure trends useful in
evaluating the Company’s continuing activities. Accordingly, the
Company presents adjusted operating profit excluding these Special
Items to help investors evaluate our operating performance and
trends in our business consistent with how management evaluates
such performance and trends. Further, the Company presents adjusted
operating profit excluding these Special Items to provide investors
with a better understanding of the Company’s view of our results as
compared to prior periods. (3) Appendix I details certain
costs, expenses, other charges, gains or income, collectively
described as “Special Items,” that are included in the
determination of net income under GAAP, but that management would
not consider important in evaluating the quality of the Company’s
operating results as they are not indicative of the Company’s core
operating results or may obscure trends useful in evaluating the
Company’s continuing activities. Accordingly, the Company presents
adjusted net income and adjusted diluted earnings per share
excluding these Special Items to help investors evaluate our
operating performance and trends in our business consistent with
how management evaluates such performance and trends.
Horizon Global Corporation Condensed Consolidated Balance
Sheets (Dollars in thousands) December
31, 2018 December 31, 2017
Assets Current assets: Cash and cash equivalents $ 27,650 $
29,570 Receivables, net of allowance for doubtful accounts of
approximately $5.1 million and $3.1 million at December 31, 2018
and December 31, 2017, respectively 108,340 91,770 Inventories, net
173,690 171,500 Prepaid expenses and other current assets 9,690
10,950 Total current assets 319,370 303,790 Property
and equipment, net 102,280 113,020 Goodwill 12,660 138,190 Other
intangibles, net 78,050 90,230 Deferred income taxes 2,690 4,290
Other assets 6,300 11,510 Total assets $ 521,350
$ 661,030
Liabilities and Shareholders' Equity
Current liabilities: Short-term borrowings and current maturities,
long-term debt $ 13,860 $ 16,710 Accounts payable 123,130 138,730
Accrued liabilities 65,820 53,070 Total current
liabilities 202,810 208,510 Long-term debt 350,650 258,880 Deferred
income taxes 14,150 14,870 Other long-term liabilities 19,960
38,370 Total liabilities 587,570 520,630 Commitments
and contingencies (See Notes 13 and 14) — Total Horizon Global
shareholders' equity (deficit) (63,720 ) 141,890 Noncontrolling
interest (2,500 ) (1,490 ) Total shareholders' equity (deficit)
(66,220 ) 140,400 Total liabilities and shareholders' equity
$ 521,350 $ 661,030
Horizon Global
Corporation Consolidated Statements of Loss (Dollars
in thousands, except per share amounts)
Three months endedDecember
31,
Twelve months endedDecember
31,
2018 2017 2018 2017 Net
sales $ 171,960 $ 195,990 $ 849,950 $ 892,980 Cost of sales
(157,720 ) (159,870 ) (706,070 ) (685,380 ) Gross profit 14,240
36,120 143,880 207,600 Selling, general and administrative expenses
(40,140 ) (37,340 ) (185,360 ) (171,620 ) Net loss on dispositions
of property and equipment (2,140 ) (890 ) (2,140 ) (1,220 )
Impairment of goodwill and intangible assets (1,000 ) —
(126,770 ) — Operating profit (loss) (29,040 ) (2,110 )
(170,390 ) 34,760 Other expense, net: Interest expense
(7,950 ) (5,760 ) (27,740 ) (22,410 ) Loss on extinguishment of
debt — — — (4,640 ) Other expense, net (3,890 ) (170 ) (13,130 )
(2,730 ) Other expense, net (11,840 ) (5,930 ) (40,870 ) (29,780 )
Income (loss) before income tax (40,880 ) (8,040 ) (211,260 ) 4,980
Income tax benefit (expense) (6,100 ) (13,100 ) 6,360 (9,750
) Net loss (46,980 ) (21,140 ) (204,900 ) (4,770 ) Less: Net loss
attributable to noncontrolling interest (220 ) (300 ) (940 ) (1,220
) Net loss attributable to Horizon Global $ (46,760 ) $ (20,840 ) $
(203,960 ) $ (3,550 )
Net loss per share attributable to Horizon
Global: Basic $ (1.86 ) $ (0.84 ) $ (8.14 ) $ (0.14 ) Diluted $
(1.86 ) $ (0.84 ) $ (8.14 ) $ (0.14 )
Weighted average common
shares outstanding: Basic 25,127,022 24,937,748 25,053,013
24,781,349 Diluted 25,127,022 24,937,748 25,053,013 24,781,349
Horizon Global Corporation Consolidated
Statements of Cash Flows (Dollars in thousands)
Twelve months ended December
31,
2018 2017 Cash Flows from Operating
Activities: Net loss $ (204,900 ) $ (4,770 ) Adjustments to
reconcile net loss to net cash provided by operating activities,
net of acquisition impact: Net loss on dispositions of property and
equipment 2,140 1,220 Impairment of goodwill and intangible assets
126,770 — Depreciation 16,440 14,930 Amortization of intangible
assets 8,940 10,410 Amortization of original issuance discount and
debt issuance costs 8,330 6,940 Deferred income taxes 1,360 (100 )
Non-cash compensation expense 1,550 3,630 Loss on extinguishment of
debt — 4,640 Amortization of purchase accounting inventory step-up
— 420 (Increase) decrease in receivables (21,890 ) (9,540 )
(Increase) decrease in inventories (7,530 ) (17,710 ) (Increase)
decrease in prepaid expenses and other assets 6,940 1,410 Increase
(decrease) in accounts payable and accrued liabilities (6,770 )
3,540 Other, net (1,880 ) (860 ) Net cash (used for) provided by
operating activities (70,500 ) 14,160
Cash Flows from
Investing Activities: Capital expenditures (13,870 ) (27,290 )
Acquisition of businesses, net of cash acquired — (19,800 ) Net
proceeds from disposition of product line, property and equipment
200 6,350
Net cash used for investing activities
(13,670 ) (40,740 )
Cash Flows from Financing Activities:
Proceeds from borrowing on credit facilities 23,380 52,310
Repayments of borrowings on credit facilities (28,520 ) (50,910 )
Proceeds from Term B Loan, net of issuance costs 45,430 —
Repayments of borrowings on Term B Loan, including transaction fees
(9,090 ) (189,760 ) Proceeds from ABL Facility, net of issuance
costs 87,930 139,100 Repayments of borrowings on ABL Facility
(36,380 ) (129,100 ) Proceeds from sale of common stock in
connection with the Company's equity offering, net of issuance
costs — 79,920 Repurchase of common stock — (10,000 ) Proceeds from
issuance of Convertible Notes, net of issuance costs — 121,130
Proceeds from issuance of Warrants, net of issuance costs — 20,930
Payments on Convertible Note Hedges, inclusive of issuance costs —
(29,680 ) Repayments of Westfalia Group debt — — Other, net (390 )
(240 )
Net cash provided by financing
activities
82,360 3,700
Effect of exchange rate changes on
cash (110 ) 2,210
Cash and Cash Equivalents: Increase
(decrease) for the year (1,920 ) (20,670 ) At beginning of year
29,570 50,240 At end of year $ 27,650 $ 29,570
Supplemental disclosure of cash flow information: Cash paid
for interest $ 18,630 $ 14,270 Cash paid for taxes $
5,780 $ 7,740
Horizon Global
Corporation Company and Business Segment Financial
Information (Unaudited - dollars in thousands)
Three months ended December 31, Twelve
months ended December 31, 2018 2017
2018 2017 Horizon Americas Net sales $
70,880 $ 88,300 $ 390,690 $ 439,700 Operating profit (loss) $
(11,580 ) $ 5,220 $ (6,850 ) $ 44,060 Special Items to consider in
evaluating operating profit: Severance $ 40 $ 310 $ 5,050 $ 970
Distribution center inefficiencies & fines $ 5,810 $ — $ 12,330
$ — Restructuring $ 2,050 $ 1,100 $ 7,360 $ 1,220 Adjusted
operating profit (loss) $ (3,680 ) $ 6,630 $ 17,890 $ 46,250
Horizon Europe-Africa Net sales $ 66,840 $ 72,900 $ 323,260
$ 325,970 Operating loss $ (16,480 ) $ (7,740 ) $ (148,630 ) $
(1,790 ) Special Items to consider in evaluating operating loss:
Severance $ 120 $ 1,930 $ 3,060 $ 5,720 Impairment of intangible
assets $ 1,000 $ — $ 126,770 $ — Restructuring $ 1,760 $ 860 $
3,200 $ 1,090 Brink transaction & termination costs $ — $ — $
660 $ — Acquisition, integration, and other costs $ 1,330 $ 370 $
2,070 $ 640 Adjusted operating profit (loss) $ (12,270 ) $ (4,580 )
$ (12,870 ) $ 5,660
Horizon Asia-Pacific Net sales $
34,240 $ 34,790 $ 136,000 $ 127,310 Operating profit $ 5,230 $
5,500 $ 20,250 $ 18,740 Special Items to consider in evaluating
operating profit: Severance $ 140 $ — $ 210 $ 270 Acquisition &
integration costs $ — $ 200 $ 70 $ 1,200 Restructuring $ 80 $ — $
270 $ 30 Impairment of intangible assets $ — $ — $ — $ — Adjusted
operating profit $ 5,450 $ 5,700 $ 20,800 $ 20,240
Corporate Expenses Operating loss $ (6,210 ) $ (5,090 ) $
(35,160 ) $ (26,250 ) Special Items to consider in evaluating
operating loss: Severance $ 1,200 $ — $ 3,950 $ 520 Brink Group
transaction & termination costs $ (260 ) $ — $ 10,680 $ —
Restructuring $ — $ — $ — $ 260 Acquisition, integration, and other
costs $ — $ 2,130 $ 50 $ 4,830 Adjusted operating loss $ (5,270 ) $
(2,960 ) $ (20,480 ) $ (20,640 )
Total Company Net
sales $ 171,960 $ 195,990 $ 849,950 $ 892,980 Operating profit
(loss) $ (29,040 ) $ (2,110 ) $ (170,390 ) $ 34,760 Total Special
Items to consider in evaluating operating profit (loss) $ 13,270 $
6,900 $ 175,730 $ 16,750 Adjusted operating profit (loss) $ (15,770
) $ 4,790 $ 5,340 $ 51,510
Appendix I
Horizon Global CorporationAdditional
Information Regarding Special Items ImpactingReported GAAP
Financial Measures(Unaudited - dollars in thousands, except
per share amounts)
This appendix details certain costs, expenses, other charges,
and gains or income, collectively described as ''Special Items,''
that are included in the determination of net income (loss) and
earnings (loss) per share under GAAP, but that management would not
consider important in evaluating the quality of the Company's
operating results as they are not indicative of the Company's core
operating results or may obscure trends useful in evaluating the
Company's continuing activities. Accordingly, the Company presents
adjusted net income (loss) and adjusted diluted earnings (loss) per
share excluding these Special Items to help investors evaluate our
operating performance and trends in our business consistent with
how management evaluates such performance and trends.
Three months endedDecember
31,
Twelve months endedDecember
31,
2018 2017 2018 2017
Net loss attributable to Horizon Global, as reported $
(46,760 ) $ (20,840 ) $ (203,960 ) $ (3,550 )
Impact of Special
Items to consider in evaluating quality of income (loss):
Impairment of goodwill & other intangibles 1,000 — 126,770 —
Brink Group transaction & termination costs (260 ) — 16,480 —
Severance 1,500 2,240 12,270 7,480 Distribution center
inefficiencies & fines 5,810 — 12,330 — Restructuring 3,890
1,970 10,830 2,720 Acquisition, integration, and other costs 1,340
2,710 2,190 6,830 Loss on extinguishment of debt — — — 4,640 Gain
on sale of product line — (1,290 ) — (1,290 ) Tax reform — 11,850 —
11,850 Tax impact of special items (1,800 ) 660 (11,460 )
(4,080 )
Adjusted net income (loss) $ (35,280 ) $ (2,700 ) $
(34,550 ) $ 24,600
Three months endedDecember
31,
Twelve months endedDecember
31,
2018 2017 2018 2017 Diluted loss per
share attributable to Horizon Global, as reported $ (1.86 ) $
(0.84 ) $ (8.14 ) $ (0.14 )
Impact of Special Items to consider
in evaluating quality of EPS: Impairment of goodwill &
other intangibles 0.04 — 5.06 — Brink Group transaction &
termination costs (0.01 ) — 0.66 — Severance 0.06 0.09 0.49 0.30
Distribution center inefficiencies & fines 0.23 — 0.49 —
Restructuring 0.15 0.08 0.43 0.11 Acquisition, integration, and
other costs 0.05 0.11 0.09 0.27 Loss on extinguishment of debt — —
— 0.19 Gain on sale of product line — (0.05 ) — (0.05 ) Tax reform
— 0.48 — 0.48 Tax impact of special items (0.07 ) 0.02 (0.46 )
(0.17 ) Impact of change in dilutive shares outstanding due to
Special Items — — — (0.01 )
Adjusted
earnings (loss) per share attributable to Horizon Global $
(1.40 ) $ (0.11 ) $ (1.38 ) $ 0.98 Weighted-average
shares outstanding, diluted, as reported 25,127,022 24,937,748
25,053,013 24,781,349 Impact of Special Items on diluted weighted
average common shares outstanding — — —
431,516 Diluted weighted average common shares outstanding,
adjusted to exclude Special Items 25,127,022 24,937,748
25,053,013 25,212,865
Appendix II
Horizon Global Corporation Reconciliation of
Reported Revenue Growth to Constant Currency Basis
(Unaudited)
Three months endedDecember 31,
2018
Twelve months endedDecember 31,
2018
HorizonAmericas
HorizonEurope-Africa
HorizonAsia-Pacific
Consolidated
HorizonAmericas
HorizonEurope-Africa
HorizonAsia-Pacific
Consolidated Revenue growth as reported (19.7 )% (8.3
)% (1.6 )% (12.3 )% (11.1 )% (0.8 )% 6.8 % (4.8 )% Less:
currency impact (0.4 )% (3.0 )% (5.6 )% (2.3 )% (0.3 )% 4.3 % (1.6
)% 1.2 % Revenue growth at constant currency (19.3 )% (5.3 )% 4.0 %
(10.0 )% (10.8 )% (5.1 )% 8.4 % (6.0 )%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190318005327/en/
Christi CowdinDirector, Corporate Communications & Investor
Relations(248) 593-8810ccowdin@horizonglobal.com
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