Third Quarter Summary
- Strategic alternatives process ongoing with objective to
maximize shareholder value
- Focus on margin improvement through commercial actions, key
business initiatives and cost structure optimization
- Net sales of $149.0 million
- $47.5 million decrease from third quarter of 2021
- Gross profit of $16.7 million
- $22.1 million decrease from third quarter of 2021
- Gross profit margin(4) decreased to 11.2% from 19.7% in third
quarter of 2021
- Net loss of $25.7 million
- $22.9 million deterioration from third quarter of 2021
- Adjusted EBITDA(1) of $(5.9) million
- $18.9 million decrease from third quarter of 2021
Horizon Global Corporation (NYSE: HZN), one of the leading
manufacturers of branded towing and trailering equipment, today
reported financial results for the third quarter of 2022.
“In August, we announced that we would be undertaking a broad
review of strategic alternatives, with the ultimate objective being
to maximize shareholder value,” stated Terry Gohl, Horizon Global’s
President and Chief Executive Officer. “This could result in a sale
of some or all of the company. This process is ongoing and we will
provide an update when appropriate.”
Gohl continued, “The third quarter was marked with continued
softness in our higher margin non-OE sales channels. This was a
result of market factors and elevated inventory levels at certain
of our large customers. The resulting volume underperformance and
unfavorable sales mix significantly impacted our margins for the
quarter. This is a disappointing result, but we are not standing
still. Despite market headwinds, we are taking aggressive actions
to improve margin performance and position the business for
profitable growth.”
2022 Third Quarter Segment
Results
Horizon Americas. Net sales decreased $36.6 million, or
31.6%, to $79.2 million when compared to the third quarter of 2021.
This decrease was primarily driven by a $20.5 million reduction in
the aftermarket sales channel and a combined $15.6 million decrease
in the retail and e-commerce sales channel attributable to lower
sales volumes as we experienced softening market demand coupled
with customers using existing inventories to satisfy consumer
demand. Customer pricing recoveries partially offset the
unfavorable impacts of lower sales volumes. Gross profit decreased
$17.5 million, driven by lower net sales and a significant mix
shift from higher margin to lower margin sales channels, coupled
with a continuation of elevated manufacturing input costs,
primarily increased material inflation. Adjusted EBITDA(1) was
$(1.4) million, as compared to $14.5 million for the third quarter
of 2021, primarily due to unfavorable gross profit.
Horizon Europe-Africa. Net sales decreased $10.9 million,
or 13.6%, to $69.8 million when compared to the third quarter of
2021. This decrease was primarily driven by a $7.7 million
reduction in the aftermarket sales channel and a $6.3 million
decrease in the automotive OES sales channel, which were
attributable to lower sales volumes. Net sales were also negatively
impacted by $11.5 million of unfavorable currency translation.
Customer pricing recoveries partially offset the unfavorable
impacts of lower sales volumes and currency translation. Gross
profit decreased $4.6 million, driven by lower net sales and a mix
shift from higher margin to lower margin sales channels, coupled
with increased material costs and operational inefficiencies.
Adjusted EBITDA(1) was $(0.2) million, as compared to $3.4 million
for the third quarter of 2021, primarily due to unfavorable gross
profit.
Balance Sheet and Liquidity. Cash and Availability(2) was
$17.5 million, a decrease of $21.7 million compared to December 31,
2021. Working Capital(3) was $99.9 million, a decrease of $8.9
million compared to December 31, 2021. Gross debt plus redeemable
preferred stock increased $51.0 million to $351.9 million compared
to December 31, 2021, primarily reflecting the Company’s issuance
of $41.0 million of redeemable preferred stock during 2022, coupled
with additional borrowings on the Company’s Revolving Credit
Facility.
Summary
“We are determined to unlock the value of our innovative
products and iconic brands,” Gohl stated. “A primary focus is to
shift our sales mix to higher margin non-OE channels. As market
headwinds ease and our customers destock their inventory, we
believe we are well positioned to serve these more profitable
channels. Further, we are taking aggressive action to optimize our
cost structure, including our global footprint. The transformation
of our Brasov, Romania facility has been met with strong customer
acceptance and new business awards, and we intend to apply the
principles of this transformation to other geographies.
Importantly, these actions, along with many others being executed
throughout our organization, are aligned with our long-term
double-digit margin target.”
Conference Call Details
Horizon Global will host a conference call regarding third
quarter 2022 earnings on Wednesday, November 9, 2022 at 8:30 a.m.
Eastern Time. The conference call will be hosted by Horizon
Global's President and Chief Executive Officer, Terry Gohl, and
James Zhou, Chief Financial Officer. Participants on the call are
asked to register five to ten minutes prior to the scheduled start
time by dialing (844) 825-9786 and from outside the U.S. at (412)
902-4185. Please ask to be joined into the Horizon Global call,
using the conference identification number 10172174.
The third quarter 2022 results and supplemental materials,
including a presentation in PDF format, will be distributed before
the market opens on November 9, 2022 and will be available on the
Company’s website at www.horizonglobal.com prior to the start of
the call.
The conference call will be webcast simultaneously and in its
entirety through the Horizon Global website. 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 6916805. The telephone replay will be available
approximately two hours after the end of the call and continue
through November 23, 2022.
About Horizon Global
Headquartered in Plymouth, Michigan, Horizon Global is a leading
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 premium 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 3,500 employees.
For more information, please visit www.horizonglobal.com.
Forward-Looking
Statements
This release may contain “forward-looking statements” as defined
in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements 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
outcome of the Company’s review of strategic alternatives; the
impact of the COVID-19 pandemic on the Company’s business, results
of operations, financial condition and liquidity, including,
without limitation, supply chain and logistics issues and
inflationary pressures; interest rate volatility; liabilities and
restrictions imposed by the Company’s debt instruments, including
the Company’s ability to comply with the applicable financial
covenants related thereto or obtain any necessary amendments or
waivers with respect to such financial covenants; market demand;
competitive factors; supply constraints and shipping disruptions;
material, logistics and energy costs, including the increased
material costs resulting from the COVID-19 pandemic; inflation and
deflation rates; the impact the conflict between Russia and Ukraine
has on our business, financial condition or future results,
including the duration and scope of such conflict, its impact on
disruptions and inefficiencies in our supply chain and our ability
to procure certain raw materials, as well as on our energy supply
in Europe; 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, including recessionary
conditions and volatile interest rates; 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;
factors affecting the Company’s business that are outside of its
control, including natural disasters and severe weather conditions
(including those caused by climate change), global health
pandemics, accidents and governmental actions; our ability to
regain and remain in compliance with the New York Stock Exchange’s
(“NYSE”) continued listing requirements; our ability to continue as
a going concern; and other risks that are discussed in Part I, Item
1A, “Risk Factors.” in the Company’s Annual Report on Form 10-K for
the twelve months ended December 31, 2021. The risks described in
the Company’s Annual Report on Form 10-K 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.
The cautionary statements set forth above should be considered
in connection with any subsequent written or oral forward-looking
statements that we or persons acting on our behalf may issue. We
caution readers not to place undue reliance on forward-looking
statements, which speak only as of the date of this release. New
risks and uncertainties arise from time to time, and it is
impossible for us to predict these events or how they may affect
the Company. 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 of this release or to reflect the
occurrence of unanticipated events, except as otherwise required by
law.
(1)
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 U.S. 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. Adjusted EBITDA, as determined and measured by Horizon
Global, should also not be compared to similarly titled measures
reported by other companies.
(2)
"Cash and Availability" refers to “cash
and cash equivalents” and amounts of cash accessible but undrawn
from credit facilities.
(3)
“Working Capital” defined as "total
current assets" excluding "cash, cash equivalents and restricted
cash", less "total current liabilities" excluding "current
maturities, long-term debt" and "short-term operating lease
liabilities".
(4)
“Gross Profit Margin” refers to “gross
profit” as a percentage of “net sales”.
Horizon Global
Corporation
Condensed Consolidated
Statements of Operations
(unaudited - dollars in
thousands, except per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Net sales
$
148,970
$
196,540
$
511,050
$
617,850
Cost of sales
(132,320
)
(157,780
)
(453,470
)
(491,240
)
Gross profit
16,650
38,760
57,580
126,610
Selling, general and administrative
expenses
(25,270
)
(32,430
)
(90,070
)
(102,170
)
Operating (loss) profit
(8,620
)
6,330
(32,490
)
24,440
Interest expense
(10,230
)
(6,970
)
(26,210
)
(21,000
)
Loss on debt extinguishment of Replacement
Term Loan
—
—
—
(11,650
)
Other expense, net
(5,760
)
(1,720
)
(14,610
)
(5,940
)
Loss before income tax
(24,610
)
(2,360
)
(73,310
)
(14,150
)
Income tax expense
(1,070
)
(410
)
(1,750
)
(2,810
)
Net loss
(25,680
)
(2,770
)
(75,060
)
(16,960
)
Less: Net loss attributable to
noncontrolling interest
(220
)
(300
)
(720
)
(970
)
Net loss attributable to Horizon
Global
$
(25,460
)
$
(2,470
)
$
(74,340
)
$
(15,990
)
Net loss per share:
Basic
$
(0.92
)
$
(0.09
)
$
(2.70
)
$
(0.59
)
Diluted
$
(0.92
)
$
(0.09
)
$
(2.70
)
$
(0.59
)
Horizon Global
Corporation
Condensed Consolidated Balance
Sheets
(dollars in thousands)
September 30,
2022
December 31,
2021
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
7,760
$
11,780
Restricted cash
5,380
5,490
Receivables, net
75,600
80,720
Inventories
155,600
162,830
Prepaid expenses and other current
assets
17,080
12,340
Total current assets
261,420
273,160
Property and equipment, net
66,200
71,610
Operating lease right-of-use assets
34,360
37,810
Other intangibles, net
41,410
48,910
Deferred income taxes
1,520
1,750
Other assets
5,140
5,680
Total assets
$
410,050
$
438,920
Liabilities and Shareholders'
Deficit
Current liabilities:
Short-term borrowings and current
maturities, long-term debt
$
74,450
$
3,780
Accounts payable
106,730
102,190
Short-term operating lease liabilities
10,600
11,010
Accrued liabilities
41,660
44,870
Total current liabilities
233,440
161,850
Gross long-term debt
235,110
297,070
Unamortized debt issuance costs and
discount
(26,020
)
(26,520
)
Long-term debt
209,090
270,550
Redeemable preferred stock, $0.01 par:
Authorized 100,000,000 shares; Issued and outstanding: 41,000 and 0
shares at September 30, 2022 and December 31, 2021,
respectively
42,320
—
Deferred income taxes
1,800
1,920
Long-term operating lease liabilities
30,680
35,930
Other long-term liabilities
8,390
8,920
Total liabilities
525,720
479,170
Total Horizon Global shareholders'
deficit
(108,400
)
(33,690
)
Noncontrolling interest
(7,270
)
(6,560
)
Total shareholders' deficit
(115,670
)
(40,250
)
Total liabilities and shareholders'
deficit
$
410,050
$
438,920
Horizon Global
Corporation
Condensed Consolidated
Statements of Cash Flows
(unaudited - dollars in
thousands)
Nine Months Ended September
30,
2022
2021
Cash Flows from Operating
Activities:
Net loss
$
(75,060
)
$
(16,960
)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation
9,980
11,710
Amortization of intangible assets
3,260
4,220
Amortization of original issuance discount
and debt issuance costs
7,560
8,010
Deferred income taxes
290
730
Non-cash compensation (income) expense
(420
)
2,590
Paid-in-kind dividends and interest
1,170
650
Redeemable preferred stock redemption
costs
160
—
Loss on debt extinguishment of Replacement
Term Loan
—
11,650
Increase in receivables
(4,120
)
(12,360
)
Increase in inventories
(160
)
(52,700
)
Increase in prepaid expenses and other
assets
(5,890
)
(1,910
)
Increase in accounts payable and accrued
liabilities
18,070
11,820
Other, net
8,140
1,910
Net cash used for operating activities
(37,020
)
(30,640
)
Cash Flows from Investing
Activities:
Capital expenditures
(12,020
)
(14,730
)
Other, net
30
20
Net cash used for investing activities
(11,990
)
(14,710
)
Cash Flows from Financing
Activities:
Proceeds from Revolving Credit Facility,
net of issuance costs
24,510
28,680
Repayments of borrowings on Revolving
Credit Facility
(12,160
)
(8,000
)
Proceeds from Senior Term Loan, net of
issuance costs
118,200
75,300
Repayments of borrowings on Replacement
Term Loan, including transaction fees
—
(94,940
)
Repayments of borrowings on Convertible
Notes
(85,000
)
—
Proceeds from borrowings on credit
facilities
2,230
2,870
Repayments of borrowings on credit
facilities
(3,460
)
(1,960
)
Proceeds from issuance of common stock
warrants
3,040
16,300
Proceeds from exercise of common stock
warrants
—
420
Other, net
(930
)
(650
)
Net cash provided by financing
activities
46,430
18,020
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
(1,550
)
(510
)
Cash, Cash Equivalents and Restricted
Cash:
Decrease for the period
(4,130
)
(27,840
)
At beginning of period
17,270
50,690
At end of period
$
13,140
$
22,850
Supplemental disclosure of cash flow
information:
Cash paid for interest
$
17,110
$
16,130
Cash paid for taxes, net of refunds
$
1,190
$
2,010
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, further discussed in the
Liquidity and Capital Resources section below. 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 profit (loss) to measure
stand-alone segment performance.
Adjusted EBITDA is defined as net income (loss) 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, gains (losses) on extinguishment of debt,
impairment of goodwill and other intangibles, non-cash stock
compensation, certain product liability and litigation claims,
acquisition and integration costs, gains (losses) on business
divestitures and other assets, debt issuance costs, board
transition support and non-cash unrealized foreign currency
remeasurement costs.
Adjusted EBITDA for our operating segments for the three months
ended September 30, 2022 and 2021 is as follows:
Three Months Ended September
30, 2022
Three Months Ended September
30, 2021
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
$
(25,460
)
$
(2,470
)
$
(22,990
)
Net loss attributable to noncontrolling
interest
(220
)
(300
)
80
Net loss
$
(25,680
)
$
(2,770
)
$
(22,910
)
Interest expense
10,230
6,970
3,260
Income tax expense
1,070
410
660
Depreciation and amortization
4,300
5,210
(910
)
EBITDA
$
(2,610
)
$
(4,490
)
$
(2,980
)
$
(10,080
)
$
14,050
$
2,030
$
(6,260
)
$
9,820
$
(19,900
)
Net loss attributable to noncontrolling
interest
—
220
—
220
—
300
—
300
(80
)
Severance
200
40
10
250
50
—
—
50
200
Restructuring, relocation and related
business disruption costs
90
20
220
330
60
30
10
100
230
Non-cash stock compensation
—
—
(2,470
)
(2,470
)
—
—
880
880
(3,350
)
Loss (gain) on business divestitures and
other assets
580
20
(30
)
570
300
10
10
320
250
Debt issuance costs
—
—
—
—
—
70
100
170
(170
)
Unrealized foreign currency remeasurement
costs
370
3,950
920
5,240
(10
)
950
400
1,340
3,900
Adjusted EBITDA
$
(1,370
)
$
(240
)
$
(4,330
)
$
(5,940
)
$
14,450
$
3,390
$
(4,860
)
$
12,980
$
(18,920
)
Segment Information
Financial information for our operating segments for the three
months ended September 30, 2022 and 2021 is as follows:
Three Months Ended September
30,
Change
2022
2021
$
%
(dollars in thousands)
Net Sales
Horizon Americas
$
79,220
$
115,850
$
(36,630
)
(31.6
%)
Horizon Europe-Africa
69,750
80,690
(10,940
)
(13.6
%)
Total
$
148,970
$
196,540
$
(47,570
)
(24.2
%)
Gross Profit
Horizon Americas
$
11,780
$
29,310
$
(17,530
)
(59.8
%)
Horizon Europe-Africa
4,870
9,450
(4,580
)
(48.5
%)
Total
$
16,650
$
38,760
$
(22,110
)
(57.0
%)
Operating (Loss) Profit
Horizon Americas
$
(3,500
)
$
12,400
$
(15,900
)
(128.2
%)
Horizon Europe-Africa
(2,940
)
(150
)
(2,790
)
(1,860.0
%)
Corporate
(2,180
)
(5,920
)
3,740
63.2
%
Total
$
(8,620
)
$
6,330
$
(14,950
)
(236.2
%)
Adjusted EBITDA
Horizon Americas
$
(1,370
)
$
14,450
$
(15,820
)
(109.5
%)
Horizon Europe-Africa
(240
)
3,390
(3,630
)
(107.1
%)
Corporate
(4,330
)
(4,860
)
530
10.9
%
Total
$
(5,940
)
$
12,980
$
(18,920
)
(145.8
%)
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
September 30, 2022
Horizon Americas
Horizon
Europe-Africa
Consolidated
Revenue growth as reported
(31.6
)%
(13.6
)%
(24.2
)%
Less: currency impact
—
%
(14.2
)%
(5.8
)%
Revenue growth at constant currency
(31.6
)%
0.6
%
(18.4
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221109005378/en/
Matthew Meyer, Chief Accounting Officer Horizon Global
Corporation (734) 656-3000 mmeyer@horizonglobal.com
Horizon Global (NYSE:HZN)
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