HZN Horizon Global Corporation

Third Quarter 2016 Highlights

• Signed definitive agreement to acquire Westfalia
• Operating profit margin decreased to 4.4 percent, down from 5.6 percent
  • Adjusted operating profit(1) margin improved to 7.8 percent, up from 7.6 percent
  • Adjusted segment operating profit(1) margin improved to 11.6 percent, up from 10.1 percent
• Generated operating cash flow greater than two times net income; more than double prior year-to-date
• Leverage ratio improved to 2.7 times(2) as of September 30, 2016, down from 3.6 times(2) one year ago
• Raised full-year guidance

Horizon Global Corporation (NYSE: HZN), one of the world’s leading manufacturers of branded towing and trailering equipment, reported third quarter earnings and raised full-year guidance, reflecting a continued focus on execution while advancing key financial priorities.

"The third quarter brought transformational change to Horizon Global as we signed an agreement to acquire Westfalia, a leading European towing company. In conjunction with closing the transaction in early fourth quarter, we incurred an incremental $152 million of term debt. We are already executing on our integration plans and are on track to achieve the $10 million in synergies in 2017 that we previously communicated," said A. Mark Zeffiro, President and Chief Executive Officer of Horizon Global.

"We are pleased with our third quarter 2016 results, which were more in line with our historical segment operating profit distribution than the third quarter of 2015. Our automotive OE and e-commerce channels experienced significant sales gains in the quarter, offset by the softness we are seeing in the retail channel. Segment operating profit improved on lower sales volume as compared to third quarter 2015. On a full-year basis, we are in sight of our goal of 10% adjusted segment operating profit. Our operating cash flow more than doubled last year, allowing us to reduce our leverage ratio to 2.7 times and the lowest it's been since we became a public company,” continued Zeffiro.

2016 Third Quarter Segment Highlights

Horizon North America. Net sales decreased 5.1 percent, with strong volume in e-commerce and automotive OE channels, offset by declines in retail, aftermarket and industrial channels. Operating profit increased $2.1 million to $13.3 million, or 12.3 percent of net sales, from $11.2 million, due to improved cost structure and lower input costs. Adjusted operating profit(1) decreased $0.3 million to $14.0 million, or 12.8 percent of net sales, as compared to 12.5 percent in the prior year.

Horizon International. Net sales were up 10.9 percent driven by strong growth in the OE channel, reflecting both new and existing programs. Operating profit increased $2.3 million to $3.5 million, or 8.2 percent of net sales, from $1.2 million, as a result of increased volume and productivity initiatives. Adjusted operating profit(1) increased $2.4 million to $3.6 million, or 8.3 percent of net sales, mostly due to increased volume.

Outlook

The impact of Westfalia operations is not reflected in the guidance below due to the timing of the acquisition and ongoing purchase accounting. Guidance (excluding Westfalia) issued for the year ended December 31, 2016 has been updated as follows:

• Net sales growth of 2 to 4 percent on a GAAP basis and 3 to 5 percent on a constant currency basis(3)
• Adjusted segment operating profit increasing 130 to 150 basis points from more than 100 basis points(3)
• Net cash conversion greater than 200 percent of net income (operating cash flow as a percent of net income), from more than 100 percent

"Margin improvement remains our number one priority, and our results year-to-date reflect our ongoing commitment to achieving a 10 percent total Company operating margin. The Westfalia acquisition will help us move closer to that goal over the next two years. The market shift to SUV's and trucks is driving increased demand for our product set, with our OE business outperforming in the quarter. Our core business model of building strong brands while driving customer value is showing results. Through our efforts in driving lean and productivity initiatives, we achieved a 150 basis point increase in adjusted segment operating margins. We are focused on execution as we integrate Westfalia and lay the foundation for our business beyond today," said Zeffiro.

"Our 2016 outlook has been updated to reflect our year-to-date improvement in adjusted segment operating profit as we realize the benefits of our improved cost structure. Our net cash conversion has also improved through efficient management of working capital and profitability. We will continue to pay close attention to the retail environment and the global markets as we close out the year. We are executing our strategic plan, focusing on our three key financial priorities of increasing operating margins, improving our capital structure and growing our revenues. Our results in the third quarter demonstrate our ability to realize the benefits of near-term restructuring activities while remaining focused on long-term value creation.”

Conference Call Details

Horizon Global will host a conference call regarding third quarter 2016 earnings on Wednesday, November 2, 2016 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 91077408.

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 91077408. The telephone replay will be available approximately two hours after the end of the call and continue through November 17, 2016.

About Horizon Global

Headquartered in Troy, Michigan, Horizon Global Corporation (NYSE: HZN) is a leading designer, manufacturer and distributor of high-quality, custom-engineered towing, trailering, cargo management and related accessory products for original equipment, aftermarket and retail channel customers on a global basis. Our mission is to utilize forward-thinking technology to develop and deliver best-in-class products for our customers, engage with our employees and realize value creation for our shareholders. For more information, please visit www.horizonglobal.com.

Safe Harbor Statement

This earnings release may contain "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 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; 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; risks inherent in the achievement of cost synergies and timing thereof in connection with the Westfalia acquisition, including whether the acquisition will be accretive; the Company's ability to promptly and effectively integrate Westfalia; the performance and costs of integration of Westfalia; 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)   Please refer to "Company and Business Segment Financial Information," which details certain costs, expenses, other charges, collectively described as ''Special Items,'' that are included in the determination of operating profit under GAAP, but that management would 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 and adjusted segment 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. (2) Appendix III reconciles net income to "Consolidated Bank EBITDA" as defined in our credit agreement. We believe this reconciliation provides valuable supplemental information regarding our capital structure, consistent with how we evaluate our performance. Leverage ratio is calculated by dividing “Total Consolidated Indebtedness” by “Consolidated Bank EBITDA”. “Total Consolidated Indebtedness” is defined as total Company debt less domestic cash. Domestic cash as of September 30, 2016 and 2015 was $27.7 million and $18.4 million, respectively. (3) The Company provides guidance with respect to certain non-GAAP financial measures. The Company is unable to reconcile these non-GAAP financial measures to the most directly comparable GAAP financial measures, due to the timing of the Westfalia acquisition and ongoing purchase accounting. Accordingly, the impact of Westfalia's operations are not reflected in our 2016 guidance. The Company has included a reconciliation for revenue growth on a constant currency basis and adjusted segment operating profit growth, excluding the impact of Westfalia operations, in order to provide investors a better understanding of the Company's view of 2016 guidance as compared to prior periods. Please refer to Appendix V, "2016 Guidance Reconciliation" for a reconciliation of the Company's 2016 guidance of revenue growth on a constant currency basis and adjusted segment operating profit growth.

Horizon Global Corporation

Condensed Consolidated Balance Sheets

(Dollars in thousands)

    September 30, 2016   December 31, 2015 (unaudited) Assets Current assets: Cash and cash equivalents $ 41,420 $ 23,520 Receivables, net 73,380 63,050 Inventories 100,780 119,470 Prepaid expenses and other current assets 7,740   5,120 Total current assets 223,320 211,160 Property and equipment, net 47,560 45,890 Goodwill 5,360 4,410 Other intangibles, net 49,970 56,020 Deferred income taxes 3,700 4,500 Other assets 9,960   9,600 Total assets $ 339,870   $ 331,580 Liabilities and Shareholders' Equity Current liabilities: Current maturities, long-term debt $ 11,740 $ 10,130 Accounts payable 72,310 78,540 Accrued liabilities 42,810   39,820 Total current liabilities 126,860 128,490 Long-term debt 178,890 178,610 Deferred income taxes 680 2,910 Other long-term liabilities 17,440   19,570 Total liabilities 323,870 329,580 Commitments and contingent liabilities —   — Total shareholders' equity 16,000   2,000 Total liabilities and shareholders' equity $ 339,870   $ 331,580

Horizon Global Corporation

Consolidated Statements of Income

(Unaudited - dollars in thousands, except per share amounts)

    Three months endedSeptember 30,   Nine months endedSeptember 30, 2016   2015 2016   2015 Net sales $ 151,720 $ 153,340 $ 465,590 $ 454,240 Cost of sales (109,210 ) (115,580 ) (339,760 ) (343,430 ) Gross profit 42,510 37,760 125,830 110,810 Selling, general and administrative expenses (35,850 ) (29,090 ) (97,510 ) (91,280 ) Impairment of intangible assets — — (2,240 ) — Net loss on dispositions of property and equipment (30 ) (60 ) (520 ) (1,850 ) Operating profit 6,630   8,610   25,560   17,680   Other expense, net: Interest expense (4,100 ) (4,350 ) (12,600 ) (4,590 ) Other expense, net (1,000 ) (1,060 ) (2,170 ) (3,030 ) Other expense, net (5,100 ) (5,410 ) (14,770 ) (7,620 ) Income before income tax credit (expense) 1,530 3,200 10,790 10,060 Income tax credit (expense) (1,160 ) 3,150   (900 ) (30 ) Net income $ 370   $ 6,350   $ 9,890   $ 10,030   Net income per share: Basic $ 0.02 $ 0.35 $ 0.55 $ 0.55 Diluted $ 0.02 $ 0.35 $ 0.54 $ 0.55 Weighted average common shares outstanding: Basic 18,174,509 18,098,404 18,144,998 18,073,836 Diluted 18,519,077 18,215,209 18,333,226 18,160,858

Horizon Global Corporation

Consolidated Statements of Cash Flows

(Unaudited - dollars in thousands)

    Nine months endedSeptember 30, 2016   2015 Cash Flows from Operating Activities: Net income $ 9,890 $ 10,030 Adjustments to reconcile net income to net cash provided by operating activities: Loss on dispositions of property and equipment 520 1,850 Depreciation 7,490 7,580 Amortization of intangible assets 5,480 5,540 Impairment of intangible assets 2,240 — Amortization of original issuance discount and debt issuance costs 1,390 330 Deferred income taxes (1,500 ) (4,620 ) Non-cash compensation expense 2,840 1,750 Increase in receivables (8,260 ) (16,120 ) Decrease in inventories 19,920 5,330 Increase in prepaid expenses and other assets (1,670 ) (1,910 ) Increase (decrease) in accounts payable and accrued liabilities (10,040 ) 2,860 Other, net (790 ) 170   Net cash provided by operating activities 27,510   12,790   Cash Flows from Investing Activities: Capital expenditures (10,090 ) (6,400 ) Net proceeds from disposition of property and equipment 240   1,770   Net cash used for investing activities (9,850 ) (4,630 ) Cash Flows from Financing Activities: Proceeds from borrowings on credit facilities 37,050 100,420 Repayments of borrowings on credit facilities (37,210 ) (95,420 ) Proceeds from Term B Loan, net of issuance costs — 192,920 Repayments of borrowings on Term B Loan (7,500 ) (2,500 ) Proceeds from ABL Revolving Debt 105,230 37,900 Repayments of borrowings on ABL Revolving Debt (98,430 ) (30,980 ) Proceeds from borrowings on Vendor Financing 3,110 — Repayments of borrowings on Vendor Financing (1,820 ) — Net transfers from former parent — 27,630 Cash dividend paid to former parent — (214,500 ) Shares surrendered upon vesting of employees' share based payment awards to cover tax obligations (230 ) —   Net cash provided by financing activities 200   15,470   Effect of exchange rate changes on cash 40   (1,220 ) Cash and Cash Equivalents: Increase for the period 17,900 22,410 At beginning of period 23,520   5,720   At end of period $ 41,420   $ 28,130   Supplemental disclosure of cash flow information: Cash paid for interest $ 11,180   $ 3,760  

Horizon Global Corporation

Company and Business Segment Financial Information

(Unaudited - dollars in thousands)

    Three months endedSeptember 30,   Nine months endedSeptember 30, 2016   2015 2016   2015 Horizon North America Net sales $ 108,640 $ 114,480 $ 344,230 $ 334,770 Operating profit $ 13,330 $ 11,220 $ 36,910 $ 25,360 Special Items to consider in evaluating operating profit: Severance and business restructuring costs $ 580 $ 3,050 $ 4,910 $ 5,520 Loss on software disposal $ — $ — $ — $ 1,870 Impairment of intangible assets $ 50 $ — $ 2,330 $ — Adjusted operating profit $ 13,960 $ 14,270 $ 44,150 $ 32,750   Horizon International Net sales $ 43,080 $ 38,860 $ 121,360 $ 119,470 Operating profit $ 3,540 $ 1,210 $ 8,150 $ 4,690 Special Items to consider in evaluating operating profit: Severance and business restructuring costs $ 40 $ 10 $ 320 $ 1,070 Adjusted operating profit $ 3,580 $ 1,220 $ 8,470 $ 5,760   Operating Segments Segment operating profit $ 16,870 $ 12,430 $ 45,060 $ 30,050 Special Items to consider in evaluating operating profit: Severance and business restructuring costs $ 620 $ 3,060 $ 5,230 $ 6,590 Loss on software disposal $ — $ — $ — $ 1,870 Impairment of intangible assets $ 50 $ — $ 2,330 $ — Adjusted segment operating profit $ 17,540 $ 15,490 $ 52,620 $ 38,510   Corporate Expenses Operating loss $ (10,240 ) $ (3,820 ) $ (19,500 ) $ (12,370 ) Special Items to consider in evaluating operating loss: Acquisition costs $ 4,570 $ — $ 4,570 $ — Adjusted operating loss $ (5,670 ) $ (3,820 ) $ (14,930 ) $ (12,370 )   Total Company Net sales $ 151,720 $ 153,340 $ 465,590 $ 454,240 Operating profit $ 6,630 $ 8,610 $ 25,560 $ 17,680 Total Special Items to consider in evaluating operating profit $ 5,240 $ 3,060 $ 12,130 $ 8,460 Adjusted operating profit $ 11,870 $ 11,670 $ 37,690 $ 26,140

Appendix I

Horizon Global Corporation

Additional Information Regarding Special Items Impacting

Reported GAAP Financial Measures

(Unaudited - dollars in thousands, except per share amounts)

    Three months endedSeptember 30,   Nine months endedSeptember 30, 2016   2015 2016   2015 Net income, as reported $ 370 $ 6,350 $ 9,890 $ 10,030 Impact of Special Items to consider in evaluating quality of income: Severance and business restructuring costs 620 3,060 5,230 6,590 Loss on software disposal — — — 1,870 Impairment of intangible assets 50 — 2,330 — Acquisition costs 4,580 — 4,580 — Tax impact of Special Items 60   (410 ) (1,920 ) (2,070 ) Adjusted net income $ 5,680   $ 9,000   $ 20,110   $ 16,420                 Three months endedSeptember 30, Nine months endedSeptember 30, 2016 2015 2016 2015 Diluted earnings per share, as reported $ 0.02 $ 0.35 $ 0.54 $ 0.55 Impact of Special Items to consider in evaluating quality of EPS: Severance and business restructuring costs 0.03 0.17 0.29 0.36 Loss on software disposal — — — 0.10 Impairment of intangible assets — — 0.13 — Acquisition costs 0.25 — 0.25 — Tax impact of Special Items —   (0.02 ) (0.10 ) (0.11 ) Adjusted earnings per share $ 0.30   $ 0.50   $ 1.11   $ 0.90   Weighted-average shares outstanding, diluted 18,519,077   18,215,209   18,333,226   18,160,858  

Appendix II

Horizon Global Corporation

Reconciliation of Reported Revenue Growth

to Constant Currency Basis

(Unaudited)

    Three months endedSeptember 30, 2016 Nine months endedSeptember 30, 2016 Consolidated  

HorizonNorth

America

 

Horizon

International

Consolidated  

HorizonNorth

America

 

Horizon

International

Revenue growth as reported (1.1 )% (5.1 )% 10.9 % 2.5 % 2.8 % 1.6 % Less: currency impact 0.1 % — % 0.5 % (1.3 )% — % (5.0 )% Revenue growth at constant currency (1.2 )% (5.1 )% 10.4 % 3.8 % 2.8 % 6.6 %

Appendix III

Horizon Global Corporation

LTM Bank EBITDA as Defined in Credit Agreement

(Unaudited - dollars in thousands)

    Less:   Add:  

Year Ended

December 31,

2015

Nine Months

Ended September

30, 2015

Nine Months

Ended September

30, 2016

Twelve Months

Ended September

30, 2016

Net income $ 8,300 $ 10,030 $ 9,890 $ 8,160 Bank stipulated adjustments: Interest expense, net (as defined) 8,810 4,590 12,600 16,820

Income tax expense (benefit)

(1,280 ) 30 900 (410 ) Depreciation and amortization 17,080 13,120 12,970 16,930 Extraordinary charges (as defined) — — 4,120 4,120 Non-cash compensation expense(a) 2,530 1,750 2,840 3,620 Other non-cash expenses or losses 11,350 11,150 3,410 3,610 Non-recurring expenses or costs (as defined)(b) 5,000 5,000 4,860 4,860 Interest-equivalent costs associated with any Specified Vendor Receivables Financing 900   690   940   1,150   Consolidated Bank EBITDA, as defined $ 52,690   $ 46,360   $ 52,530   $ 58,860     September 30, 2016 Total Consolidated Indebtedness(d) $ 161,120 Consolidated Bank EBITDA, as defined 58,860 Actual leverage ratio 2.74 x Covenant requirement 5.25 x     Less:   Add:  

Year Ended

December 31,

2014

Nine Months

Ended September

30, 2014

Nine Months

Ended September

30, 2015

Twelve Months

Ended September

30, 2015

Net income $ 15,350 $ 18,410 $ 10,030 $ 6,970 Bank stipulated adjustments: Interest expense, net (as defined) 720 510 4,590 4,800 Income tax expense 5,240 5,890 30 (620 ) Depreciation and amortization 18,930 14,560 13,120 17,490 Non-cash compensation expense(a) 2,660 2,410 1,750 2,000 Other non-cash expenses or losses 15,260 11,960 11,150 14,450 Non-recurring expenses or costs (as defined)(b) 4,440 4,140 5,000 5,300 Acquisition integration costs(c) 90 90 — — Interest-equivalent costs associated with any Specified Vendor Receivables Financing 870   570   690   990   Consolidated Bank EBITDA, as defined $ 63,560   $ 58,540   $ 46,360   $ 51,380     September 30, 2015 Total Consolidated Indebtedness(d) $ 185,110 Consolidated Bank EBITDA, as defined 51,380 Actual leverage ratio 3.60 x Covenant requirement 5.25 x

______________

(a)

  Non-cash compensation expenses resulting from the grant of restricted shares of common stock and common stock options. Includes amounts allocated by former parent company.

(b)

Under our credit agreement, costs and expenses related to cost savings projects, including restructuring and severance expenses, are not to exceed $5 million in any fiscal year and $15 million in aggregate, commencing on or after January 1, 2015.

(c)

Costs and expenses arising from the integration of any business acquired not to exceed $7.5 million in any fiscal year $20 million in the aggregate.

(d)

"Total Consolidated Indebtedness" refers to the sum of "long-term debt" and "current maturities, long-term debt" excluding "Bank facilities, capital leases and other long-term debt" less domestic cash of $27.7 million and $18.4 million as of September 30, 2016 and 2015, respectively.

Appendix V

Horizon Global Corporation2016 Guidance Reconciliation(Unaudited)

The Company is unable to reconcile certain forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures, due to the timing of the Westfalia acquisition and ongoing purchase accounting. Accordingly, the impact of the Westfalia acquisition is not included in the Company's 2016 guidance. In order to provide investors a better understanding of the Company's view of 2016 guidance as compared to prior periods, the Company has included a reconciliation of revenue growth on a constant currency basis and adjusted segment operating profit growth, excluding the impact of Westfalia operations.

 

Twelve months ending on

December 31, 2016

 

Twelve months ended

December 31, 2015

  Change Operating Profit Margin 4.3% - 4.4% 3.4% Less: Corporate Expenses (4.1)% (3.2)% Segment Operating Profit Margin, as reported 8.4% - 8.5% 6.6% Special Items to consider in evaluating operating profit: Severance and business restructuring costs 0.9% - 1.0% 1.5% Loss on software disposal —% 0.3% Impairment of intangible assets 0.4% —% Adjusted Segment Operating Profit Margin 9.7% - 9.9% 8.4% 130 - 150 bps   Twelve months ending on

December 31, 2016

Revenue growth 2 - 4% Less: currency impact (1 - 2)% Revenue growth at constant currency 3 - 5%

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Horizon Global CorporationMaria C. DueyVice President, Corporate Development & Investor Relations(248) 593-8810mduey@horizonglobal.com