First Quarter Highlights
- Successfully amended ABL facility to stabilize liquidity and
support future operating flexibility
- Net sales decreased $14.4 million, or 8.1%, to $163.3 million
from prior year comparable period, primarily attributable to lower
sales volumes due to the COVID-19 pandemic
- Operating loss of $6.7 million, or 4.1% of net sales;
improvement of $6.7 million over prior year comparable period
- Net loss from continuing operations of $16.5 million;
improvement of $12.9 million from prior year comparable period
- Adjusted EBITDA(2) increased $4.0 million to $2.9 million from
prior year comparable period due to improved gross profit and lower
SG&A costs
Horizon Global Corporation (NYSE: HZN), one of the world’s
leading manufacturers of branded towing and trailering equipment,
today reported financial results for the first quarter of 2020.
“Horizon Global delivered a strong year-over-year performance
and generated positive operating cash flow in the first quarter of
2020, despite the unfavorable impact of COVID-19 on our business
and economies around the globe,” stated Terry Gohl, Horizon
Global's President and Chief Executive Officer. "I want to thank
Horizon Global’s employees for their commitment to maintaining our
operations and excellent service delivery to our customers during
these uncertain times. I also want to recognize their efforts in
ensuring the health and safety of their colleagues, customers and
those in the communities in which we operate.”
Gohl continued, “As we resume our global operations, we are
focused on providing a safe and healthy workplace for our
employees. During the relaunch of our business, we are carefully
managing our liquidity in light of the continued macroeconomic
uncertainty due to COVID-19. We will continue to flex our
operations and partner with our supply chain to service our
customers and meet market demand. Importantly, our business
continues to improve every day as we aggressively pursue our
operational improvement initiatives in 2020.”
2020 First Quarter Segment
Results
Horizon Americas. Net sales decreased $3.1 million, or
3.3%, to $92.4 million. Net sales in the retail and industrial
channels were $6.3 million lower than the prior year comparable
period as these channels were negatively impacted by the COVID-19
pandemic. These decreases were partially offset by aftermarket and
e-commerce sales, which increased $2.6 million and $0.7 million,
respectively, with strong demand for our products through the first
part of March 2020. Gross profit increased $1.7 million, primarily
due to lower scrap costs and inventory reserves and lower outbound
freight costs, partially offset by the unfavorable net sales.
Horizon Americas generated an operating profit of $2.7 million,
representing an increase of $4.2 million attributable to gross
profit improvements and lower SG&A costs. Adjusted EBITDA(2)
increased to $6.1 million for the quarter, as compared to $1.4
million during the prior year comparable period.
Horizon Europe-Africa. Net sales decreased $11.3 million,
or 13.7%, to $70.9 million due primarily to the COVID-19 outbreak.
In response, the Company temporarily idled certain manufacturing
facilities in line with customer demand and in accordance with
applicable government mandated operations restrictions, leading to
a $7.5 million decrease in net sales in the automotive OEM channel.
Net sales on a constant currency(1) basis decreased $9.3 million,
or 11.4%. Gross profit increased $1.0 million, primarily due to
prior-year charges related to a product liability claim, offset by
lower net sales. Operating loss for the quarter was $2.5 million,
which represented a $0.7 million improvement primarily relating to
the increase in gross profit. Adjusted EBITDA(2) was $2.3 million
for the quarter, a decrease of $1.2 million over the prior year
comparable period.
Balance Sheet and Liquidity. Gross debt decreased $161.7
million to $278.1 million from the prior year comparable period.
Total liquidity, which includes borrowing availability under the
ABL and cash on-hand, was $50.8 million, up $8.5 million as
compared to the prior year comparable period, after removing any
prior-year impacts related to the APAC discontinued operations
reporting.
Summary
Gohl commented, “We expect this unprecedented global pandemic to
have an ongoing effect on our business and customer demand
patterns, which will result in a continued impact on Horizon
Global’s financial results in 2020. Due to these uncertain
macroeconomic conditions, we are proactively preserving liquidity
and managing our variable and support cost structure to allow for
operating flexibility, while continuing to execute on our
operational improvement initiatives that will support cash flow
generation and drive near- and long-term value for our employees,
customers and shareholders.”
COVID-19 Pandemic
The Company has taken decisive actions in response to the
unprecedented uncertainty related to the impact the COVID-19
pandemic is having on the global automotive industry and economies
around the world. These actions include actively managing costs,
capital spending and working capital to further strengthen
liquidity, including the idling or ramping down of certain
production facilities and distribution centers in response to the
economic uncertainties and changes in customer ordering patterns.
The Company will continue to closely monitor the ongoing potential
impacts of COVID-19 and, while the ultimate impact of the pandemic
to our business remains highly uncertain, we will continue to seek
to aggressively mitigate and minimize its impact on our
business.
During the COVID-19 pandemic, Horizon Global’s top priority is
ensuring the health and safety of our employees. The Company is
adhering to all federal, state and local mandates and guidelines,
including the frequent disinfection of our facilities, equipment
and individual work areas, promoting social distancing, requiring
office employees to work remotely, preventing visitors from
entering our facilities and restricting business travel.
Conference Call Details
Horizon Global will host a conference call regarding first
quarter 2020 earnings on Monday, May 18, 2020 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 (866) 652-5200
and from outside the U.S. at (412) 317-6060. Please use the
conference identification number 10143768.
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 (877) 344-7529 and from outside the
U.S. at (412) 317-0088. Please use the conference identification
number 10143768. The telephone replay will be available
approximately two hours after the end of the call and continue
through June 1, 2020.
About Horizon Global
Headquartered in Plymouth, MI, 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
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 with our employees and realize value creation for
our shareholders.
Horizon Global is home to some of the world’s most recognized
brands in the towing and trailering industry, including: Draw-Tite,
Reese, Westfalia, BULLDOG, Fulton and Tekonsha. Horizon Global has
approximately 3,600 employees.
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 impact of the novel coronavirus (COVID-19) pandemic
on the Company’s business, results of operations, financial
condition and liquidity; the Company’s ability to regain compliance
with the New York Stock Exchange’s continued listing standards; the
Company’s leverage; liabilities and restrictions 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 success of the Company’s action plan, including the actual
amount of savings and timing thereof; the success of the Company’s
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; factors affecting
the Company's business that are outside of its control, including
natural disasters, pandemics, including the current COVID-19
pandemic, accidents and governmental actions; 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 results 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 results, 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,
expense, other charges, that are included in the determination of
net income attributable to Horizon Global under GAAP, but that
management would not consider important in evaluating the quality
of the Company’s operating results. The Company’s management
utilizes Adjusted EBITDA as the key measure of company and segment
performance and for planning and forecasting purposes, as
management believes this measure is most reflective of the
operational profitability or loss of the Company and its operating
segments and provides management and investors with information to
evaluate the operating performance of its business and is
representative of its performance used to measure certain of its
financial covenants. Adjusted EBITDA should not be considered a
substitute for results prepared in accordance with U.S. GAAP and
should not be considered an alternative to net income attributable
to Horizon Global, which is the most directly comparable financial
measure to Adjusted EBITDA that is prepared in accordance with U.S.
GAAP.
Horizon Global
Corporation
Condensed Consolidated Balance
Sheets
(dollars in thousands)
March 31, 2020
December 31, 2019
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
38,670
$
11,770
Restricted cash
8,740
—
Receivables, net
84,900
71,680
Inventories
119,370
136,650
Prepaid expenses and other current
assets
8,220
8,570
Total current assets
259,900
228,670
Property and equipment, net
74,100
75,830
Operating lease right-of-use assets
41,870
45,770
Goodwill
3,360
4,350
Other intangibles, net
57,420
60,120
Deferred income taxes
450
430
Other assets
8,660
5,870
Total assets
$
445,760
$
421,040
Liabilities and Shareholders'
Equity
Current liabilities:
Short-term borrowings and current
maturities, long-term debt
$
61,220
$
4,310
Accounts payable
83,380
78,450
Short-term operating lease liabilities
9,980
9,880
Accrued liabilities
50,080
48,850
Total current liabilities
204,660
141,490
Gross long-term debt
216,880
236,550
Unamortized debt issuance costs and
discount
(28,500
)
(31,500
)
Long-term debt
188,380
205,050
Deferred income taxes
3,990
4,040
Long-term operating lease liabilities
45,570
48,070
Other long-term liabilities
15,570
13,790
Total liabilities
458,170
412,440
Total Horizon Global shareholders'
(deficit) equity
(8,380
)
12,340
Noncontrolling interest
(4,030
)
(3,740
)
Total shareholders' (deficit) equity
(12,410
)
8,600
Total liabilities and shareholders'
equity
$
445,760
$
421,040
Horizon Global
Corporation
Condensed Consolidated
Statements of Operations
(Unaudited - dollars in
thousands, except share and per share data)
Three Months Ended March
31,
2020
2019
Net sales
$
163,250
$
177,670
Cost of sales
(137,000
)
(154,110
)
Gross profit
26,250
23,560
Selling, general and administrative
expenses
(32,860
)
(38,370
)
Net (loss) gain on dispositions of
property and equipment
(70
)
1,440
Operating loss
(6,680
)
(13,370
)
Other expense, net
(1,670
)
(5,470
)
Interest expense
(8,190
)
(10,830
)
Loss from continuing operations before
income tax
(16,540
)
(29,670
)
Income tax benefit
10
270
Net loss from continuing operations
(16,530
)
(29,400
)
(Loss) income from discontinued
operations, net of tax
(500
)
3,780
Net loss
(17,030
)
(25,620
)
Less: Net loss attributable to
noncontrolling interest
(290
)
(520
)
Net loss attributable to Horizon
Global
$
(16,740
)
$
(25,100
)
Net (loss) income per share
attributable to Horizon Global:
Basic:
Continuing operations
$
(0.64
)
$
(1.15
)
Discontinued operations
(0.02
)
0.15
Total
$
(0.66
)
$
(1.00
)
Diluted:
Continuing operations
$
(0.64
)
$
(1.15
)
Discontinued operations
(0.02
)
0.15
Total
$
(0.66
)
$
(1.00
)
Weighted average common shares
outstanding:
Basic
25,393,668
25,188,094
Diluted
25,393,668
25,188,094
Horizon Global
Corporation
Condensed Consolidated
Statements of Cash Flows
(unaudited - dollars in
thousands)
Three Months Ended March
31,
2020
2019
Cash Flows from Operating
Activities:
Net loss
$
(17,030
)
$
(25,620
)
Less: (Loss) income from discontinued
operations
(500
)
3,780
Net loss from continuing operations
(16,530
)
(29,400
)
Adjustments to reconcile net loss from
continuing operations to net cash provided by (used for) operating
activities:
Net loss (gain) on dispositions of
property and equipment
70
(1,440
)
Depreciation
3,490
3,310
Amortization of intangible assets
1,570
1,900
Amortization of original issuance discount
and debt issuance costs
4,400
5,470
Deferred income taxes
(40
)
1,710
Non-cash compensation expense
420
350
Paid-in-kind interest
1,570
—
Increase in receivables
(15,610
)
(19,200
)
Decrease (increase) in inventories
15,350
(6,970
)
Increase in prepaid expenses and other
assets
(2,060
)
(2,700
)
Increase in accounts payable and accrued
liabilities
11,550
10,180
Other, net
1,530
(12,770
)
Net cash provided by (used for) operating
activities for continuing operations
5,710
(49,560
)
Cash Flows from Investing
Activities:
Capital expenditures
(4,060
)
(1,550
)
Net proceeds from sale of business
—
4,970
Net proceeds from disposition of property
and equipment
70
1,390
Net cash (used for) provided by investing
activities for continuing operations
(3,990
)
4,810
Cash Flows from Financing
Activities:
Net cash provided by financing activities
for continuing operations
34,650
33,230
Discontinued Operations:
Net cash (used for) provided by
discontinued operating activities
(500
)
9,120
Net cash used for discontinued investing
activities
—
(440
)
Net cash provided by discontinued
financing activities
—
—
Net cash (used for) provided by
discontinued operations
(500
)
8,680
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
(230
)
150
Cash, Cash Equivalents and Restricted
Cash:
Increase (decrease) for the period
35,640
(2,690
)
At beginning of period
11,770
27,650
At end of period
$
47,410
$
24,960
Supplemental disclosure of cash flow
information:
Cash paid for interest
$
3,150
$
6,620
Cash paid for taxes, net of refunds
$
200
$
30
Appendix I
Horizon Global Corporation Company and
Business Segment Financial Information (Unaudited - dollars in
thousands)
The Company’s management utilizes Adjusted EBITDA as the key
measure of company and segment performance and for planning and
forecasting purposes, as management believes this measure is most
reflective of the operational profitability or loss of the Company
and its operating segments and provides management and investors
with information to evaluate the operating performance of its
business and is representative of its performance used to measure
certain of its financial covenants. Adjusted EBITDA should not be
considered a substitute for results prepared in accordance with
U.S. GAAP and should not be considered an alternative to net income
attributable to Horizon Global, which is the most directly
comparable financial measure to Adjusted EBITDA that is prepared in
accordance with U.S. GAAP. Adjusted EBITDA, as determined and
measured by Horizon Global, should also not be compared to
similarly titled measures reported by other companies. The Company
also uses operating income (loss) to measure stand-alone segment
performance.
Adjusted EBITDA is defined as net income attributable to Horizon
Global before interest expense, income taxes, depreciation and
amortization, and before certain items, as applicable such as
severance, restructuring, relocation and related business
disruption costs, impairment of goodwill and other intangibles,
non-cash stock compensation, certain product liability recall and
litigation claims, acquisition and integration costs, gains
(losses) on business divestitures and other assets, board
transition support and non-cash unrealized foreign currency
remeasurement costs.
The following table summarizes Adjusted EBITDA for our operating
segments for the three months ended March 31, 2020 (“1Q20”) and
2019 (“1Q19”):
Three Months Ended March 31,
2020
Three Months Ended March 31,
2019
Variance
Horizon Americas
Horizon Europe- Africa
Corporate
Consolidated
Horizon Americas
Horizon Europe- Africa
Corporate
Consolidated
Consolidated
(dollars in thousands)
(dollars in thousands)
Net loss attributable to Horizon
Global
$
(16,740
)
$
(25,100
)
$
8,360
Net loss attributable to noncontrolling
interest
(290
)
(520
)
230
Net loss
$
(17,030
)
$
(25,620
)
$
8,590
Interest expense
8,190
10,830
(2,640
)
Income tax benefit
(10
)
(270
)
260
Depreciation and amortization
5,060
5,210
(150
)
EBITDA
$
4,940
$
(1,090
)
$
(7,640
)
$
(3,790
)
$
30
$
(4,640
)
$
(5,240
)
$
(9,850
)
$
6,060
Net loss attributable to noncontrolling
interest
—
290
—
290
—
520
—
520
(230
)
Loss (income) from discontinued
operations, net of tax
—
—
500
500
—
—
(3,780
)
(3,780
)
4,280
Severance
530
20
(10
)
540
80
(20
)
—
60
480
Restructuring, relocation and related
business disruption costs
890
—
110
1,000
770
(1,400
)
—
(630
)
1,630
Non-cash stock compensation
—
—
420
420
—
—
370
370
50
Loss (gain) on business divestitures and
other assets
360
(180
)
—
180
530
3,630
—
4,160
(3,980
)
Board transition support
—
—
—
—
—
—
690
690
(690
)
Product liability and litigation
claims
—
1,510
—
1,510
—
4,320
—
4,320
(2,810
)
Debt issuance costs
—
—
750
750
—
—
1,740
1,740
(990
)
Unrealized foreign currency remeasurement
costs
(600
)
1,750
380
1,530
(230
)
1,240
330
1,340
190
Other
—
—
—
—
210
(110
)
(100
)
—
—
Adjusted EBITDA
$
6,120
$
2,300
$
(5,490
)
$
2,930
$
1,390
$
3,540
$
(5,990
)
$
(1,060
)
$
3,990
Segment Information
The following table summarizes financial information for our
operating segments for 1Q20 and 1Q19:
Three Months Ended March
31,
Change
2020
2019
$
%
(dollars in thousands)
Net Sales
Horizon Americas
$
92,370
$
95,500
$
(3,130
)
(3.3
%)
Horizon Europe-Africa
70,880
82,170
(11,290
)
(13.7
%)
Total
$
163,250
$
177,670
$
(14,420
)
(8.1
%)
Gross Profit
Horizon Americas
$
19,620
$
17,910
$
1,710
9.5
%
Horizon Europe-Africa
6,630
5,650
980
17.3
%
Total
$
26,250
$
23,560
$
2,690
11.4
%
Operating Profit (Loss)
Horizon Americas
$
2,730
$
(1,500
)
$
4,230
(282.0
%)
Horizon Europe-Africa
(2,510
)
(3,190
)
680
(21.3
%)
Corporate
(6,900
)
(8,680
)
1,780
(20.5
%)
Total
$
(6,680
)
$
(13,370
)
$
6,690
(50.0
%)
Adjusted EBITDA
Horizon Americas
$
6,120
$
1,390
$
4,730
340.3
%
Horizon Europe-Africa
2,300
3,540
(1,240
)
(35.0
%)
Corporate
(5,490
)
(5,990
)
500
(8.3
%)
Total
$
2,930
$
(1,060
)
$
3,990
(376.4
%)
Appendix II
Horizon Global Corporation Reconciliation of
Reported Revenue Growth to Constant Currency Basis
(Unaudited)
We evaluate growth in our operations on both an as reported 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 year revenue in local currency using the prior
year'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.
Three Months Ended March 31,
2020
Horizon Americas
Horizon
Europe-Africa
Consolidated
Revenue growth as reported
(3.3
)%
(13.7
)%
(8.1
)%
Less: currency impact
(0.2
)%
(2.4
)%
(1.2
)%
Revenue growth at constant currency
(3.1
)%
(11.4
)%
(6.9
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200518005202/en/
Jeff Tryka, CFA Investor Relations, Lambert & Co. (616)
295-2509 jtryka@horizonglobal.com
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