Horizon Global Reports Financial Results for Third Quarter 2018
TROY, Mich.--(BUSINESS WIRE)--Nov 8, 2018--Horizon Global Corporation (NYSE: HZN), one of the world’s leading manufacturers of branded towing and trailering equipment, today reported third quarter results. The Company also provided an update on its Action Plan, including activities related to its Kansas City aftermarket and retail distribution facility. With new leadership in place in its Europe-Africa segment, the Company continued to identify business improvement initiatives for this region.
“Having recently been named to the permanent role of President and CEO, I am just as encouraged about our Company as I was when I took over the interim role in May of this year,” said Carl Bizon, President and Chief Executive Officer of Horizon Global. “Our primary 2018 selling season in the Americas did not deliver the desired revenue and earnings result due mainly to ramp-up challenges in our Kansas City distribution facility. That being said, Kansas City proved during the third quarter that we now have the capabilities, processes and resources to support future growth in next year’s season. At quarter end, we had past due orders of approximately $8.5 million, down from a peak of approximately $26 million early in the quarter. With the Americas Action Plan items now complete, we have a greatly reduced cost structure to leverage in the region. We have also announced price increases to address rising input costs and tariffs. We will start to see the full impact of these actions in our financial results as volume ramps up with our normal seasonality in the second quarter of 2019.”
Bizon continued, “Operational challenges continued during the third quarter in our Europe-Africa segment and results came in below expectations. The new leadership team has made additional organizational and structural changes, and we identified further initiatives expected to improve the long-term performance of the business. With the revised view of full-year performance, we recorded a non-cash goodwill impairment for the segment of approximately $26.6 million in the quarter. I have great confidence in our leadership and am working closely with this team to ensure we are initiating near-term operational improvements that will lead to longer-term transformation of this region.
“As we look across our global business, Asia-Pacific continues to perform well, the Americas is poised to capitalize on efforts made this year, and we are fully engaged in improving performance in Europe-Africa. As a company, Horizon Global is focused on performance improvement and accountability at every level, which led to a number of significant management changes and operational shifts over the past year. Ultimately, I remain convinced of the underlying strengths of Horizon Global -- our leading brands, performance products, dedicated team members, loyal customers and diverse channels and geographies -- which will help see us through these near-term challenges and set our company back to a path of growth and returning value to our shareholders.”
2018 Third Quarter Segment Results
Horizon Americas. Net sales were substantially unchanged from the third quarter of 2017, with increases in aftermarket and OE offset by a decline in the retail channel, which was impacted by supply constraints from overseas vendors and the fourth quarter 2017 divestiture of the Broom and Brush business. Operating profit decreased $3.7 million to $7.3 million, or 6.3 percent of net sales, primarily as a result of unfavorable input costs in advance of pricing actions and the costs of executing the Company’s Action Plan in the period. Adjusted operating profit (1) increased $0.4 million to $12.2 million, or 10.5 percent of net sales.
Horizon Europe-Africa. Net sales decreased 10.7 percent (9.5 percent in constant currency (3) ), primarily resulting from higher-than-normal volume of a program with a major OE customer in 2017 that did not repeat in the third quarter of 2018. The aftermarket channel declined due to limited product availability resulting from the production shift to Romania. Operating loss in the quarter was $31.4 million, or 40.0 percent of net sales, attributable to the impairment of the remaining goodwill balance in the segment. The adjusted operating loss (1) of $3.3 million, or 4.2 percent of net sales, reflects a decline of $7.3 million from 2017 driven by an unfavorable margin mix impact from weaker aftermarket sales, input cost increases not fully recovered by pricing actions, and the incremental costs incurred with production transfers between facilities.
Horizon Asia-Pacific. Net sales decreased $2.9 million, or 7.9 percent, primarily attributable to $2.1 million in unfavorable currency impact and a small decline in existing programs in our Thailand operation. Operating profit increased 1.4 percent to $6.0 million, or 17.6 percent, as the impact of operational improvements were mostly offset by increased costs of purchases in U.S. dollars and Thai baht.
Horizon Global announced a business improvement plan on March 1, 2018, with targeted initiatives to drive operating results in its Americas and Europe-Africa segments. Action Plan updates include:Completed ramp-up of the Kansas City distribution center and, at quarter end, reduced shippable past due orders to approximately two days’ sales De-layering of organization and consolidation of facilities in the Americas is now complete
The Action Plan items previously identified for Europe-Africa will now be included as part of a set of ongoing business improvement initiatives that will be the primary focus of the region for the foreseeable future.
Bizon concluded, “We see significant long-term opportunities for our company and remain focused on the near-term difficulties that persist in our European operations. We are pleased with our accomplishments under the Action Plan, but we recognize there is much work ahead, particularly as we address the necessary business improvement initiatives in Europe. With that in mind, we expect the next two quarters to be difficult. We are fully engaged in identifying a seasoned financial executive to serve as the Company’s permanent CFO, but until then I will be working closely with our interim CFO to ensure we have the resources and flexibility needed to continue the substantial progress made over the last six months. Achieving a performance turnaround is a large task and takes time, but we are committed to this effort that will ultimately benefit our customers, end-users and our shareholders.”
Conference Call Details
Horizon Global will host a conference call regarding third quarter 2018 earnings on Thursday, November 8, 2018, 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 7695549.
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 7695549. The telephone replay will be available approximately two hours after the end of the call and continue through November 22, 2018.
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 4,300 employees in 58 facilities across 21 countries.
For more information, please visit www.horizonglobal.com.
Safe Harbor Statement
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 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; 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; the timing and amount of repurchases of the Company’s common stock, if any; the Company’s ability to meet its financial covenants in the agreements governing its debt 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.
Horizon Global Corporation Company and Business Segment Financial Information (Unaudited - dollars in thousands)
We evaluate 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.
Horizon Global Corporation Additional Information Regarding Special Items Impacting Reported GAAP Financial Measures (Unaudited - dollars in thousands, except per share amounts)
This appendix details certain costs, expenses, other charges, 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.
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.
Horizon Global Corporation LTM Bank EBITDA as Defined in Credit Agreement (Unaudited - dollars in thousands)
This appendix 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.
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CONTACT: Horizon Global Corporation
Director, Corporate Communications & Investor Relations
KEYWORD: UNITED STATES NORTH AMERICA MICHIGAN
INDUSTRY KEYWORD: MANUFACTURING AUTOMOTIVE MANUFACTURING ENGINEERING OTHER MANUFACTURING AUTOMOTIVE AFTERMARKET OFF-ROAD TRUCKS & SUVS PERFORMANCE & SPECIAL INTEREST RECREATIONAL VEHICLES OTHER AUTOMOTIVE
SOURCE: Horizon Global Corporation
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