Third Quarter Highlights
- Net sales of $196.5 million in a period impacted by rising
commodity costs and global supply chain constraints
- $5.0 million decrease compared to third quarter of 2020
- Gross profit of $38.8 million
- $4.6 million decrease from third quarter of 2020
- Gross profit margin(4) decreased to 19.7% from 21.5% in the
third quarter of 2020
- Operating profit of $6.3 million
- $2.3 million decrease from third quarter of 2020
- Net loss from continuing operations of $2.8 million
- $4.4 million decrease from third quarter of 2020
- Adjusted EBITDA(1) of $13.0 million
- $3.1 million decrease from third quarter of 2020
Horizon Global Corporation (NYSE: HZN), one of the world’s
leading manufacturers of branded towing and trailering equipment,
today reported financial results for the third quarter of 2021.
“When we launched our turnaround plan in late 2019, we set out
to build a strong global organization that would not waver
regardless of the external business climate,” stated Terry Gohl,
Horizon Global’s President and Chief Executive Officer. “Our Q3
2021 performance is evidence that we achieved this objective.
Despite significant and unprecedented macroeconomic headwinds
relating to material costs and supply chain constraints, we did not
bend. Instead, we rose to the occasion and rapidly identified and
deployed targeted actions, including commercial price recovery,
manufacturing rebalancing and operational cost mitigation, to
partially offset the impact of industry-wide headwinds. At the same
time, we never lost sight of our long-term strategic plan and
accelerated the execution of operational improvement initiatives to
support the business in Q3 2021 and beyond.”
2021 Third Quarter Segment
Results
Horizon Americas. Net sales decreased $3.2 million, or
2.8%, to $115.9 million when compared to the third quarter of 2020.
The net sales decrease was primarily driven by an $7.8 million
decrease in the retail sales channel attributable to material and
supply chain constraints, partially offset by a combined $3.3
million increase in the e-commerce and industrial sales channels.
Horizon Americas generated an operating profit of $12.4 million, a
decrease of $0.8 million compared to the third quarter of 2020,
primarily driven by the lower net sales described above, partially
offset by reduced selling, general and administrative costs
(SG&A). Adjusted EBITDA(1) decreased to $14.5 million for the
quarter, as compared to $15.5 million for the third quarter of
2020.
Horizon Europe-Africa. Net sales decreased $1.8 million,
or 2.2%, to $80.7 million when compared to the third quarter of
2020. The net sales decrease was primarily driven by a $7.8 million
decrease in the automotive OEM sales channel attributable to
semiconductor supply constraints, and a $2.0 million decrease in
the aftermarket sales channel. The decrease was partially offset by
a $7.0 million increase in the automotive OES sales channel.
Horizon Europe-Africa generated an operating loss of $0.2 million,
a reduction of $2.6 million compared to the third quarter of 2020,
primarily driven by the lower net sales described above, coupled
with higher SG&A. Adjusted EBITDA(1) decreased to $3.4 million
for the quarter, as compared to $6.1 million for the third quarter
of 2020.
Balance Sheet and Liquidity. Cash and Availability(2) was
$54.9 million, a reduction of $28.5 million compared to December
31, 2020. Working Capital(3) was $109.5 million, an increase of
$53.9 million compared to December 31, 2020, primarily reflecting
increased raw material costs and in-transit inventory levels due to
supply chain and material constraints. Gross debt increased $30.2
million to $296.3 million compared to December 31, 2020, primarily
reflecting additional borrowings on the Company’s ABL as well as
proceeds from the term loan refinancing completed during the first
quarter of 2021.
Summary
Gohl commented, “I want to thank the global team for its
extraordinary efforts so far in 2021. We have delivered exceptional
year-to-date results and, despite a challenging macroeconomic
environment, continue to improve this business day in and day out.
Our sights remain on double-digit margins, and we believe this
target is achievable through the continued execution of operational
improvement initiatives across our global operations, the
optimization of our Europe-Africa manufacturing footprint and,
importantly, continuing to serve as the supplier of choice to our
customers in our core geographies.
Conference Call Details
Horizon Global will host a conference call regarding third
quarter 2021 earnings on Thursday, November 4, 2021 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
Dennis Richardville, Horizon Global’s 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 join the
Horizon Global call.
The third quarter 2021 results and supplemental materials,
including a presentation in PDF format, will be distributed before
the market opens on November 4, 2021 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 10155632. The telephone replay will be available
approximately two hours after the end of the call and continue
through November 18, 2021.
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 4,350 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. 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 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 COVID-19 pandemic on the Company’s
business, results of operations, financial condition and liquidity;
the overall impact of global supply chain complexities on the
Company and its business, including delays in sourcing key
components and other supply constraints, longer transport times,
especially for container ships and U.S. trucking, and increased
transportation costs; liabilities and restrictions imposed by the
Company’s debt instruments, including the Company’s ability to
comply with the applicable financial covenants related thereto;
market demand; competitive factors; material, logistics and energy
costs, including the increased material and logistic costs
resulting from the COVID-19 pandemic; 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; 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 Part I, Item 1A, “Risk Factors.” in the Company’s
Annual Report on Form 10-K for the twelve months ended December 31,
2020. 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. 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,
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.
(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 Balance
Sheets
(dollars in thousands)
September 30,
2021
December 31,
2020
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
17,350
$
44,970
Restricted cash
5,500
5,720
Receivables, net
96,320
87,420
Inventories
164,270
115,320
Prepaid expenses and other current
assets
13,510
11,510
Total current assets
296,950
264,940
Property and equipment, net
72,940
74,090
Operating lease right-of-use assets
38,290
47,310
Goodwill
—
3,360
Other intangibles, net
52,870
58,230
Deferred income taxes
1,220
1,280
Other assets
6,060
7,280
Total assets
$
468,330
$
456,490
Liabilities and Shareholders'
Equity
Current liabilities:
Short-term borrowings and current
maturities, long-term debt
$
5,940
$
14,120
Accounts payable
111,270
99,520
Short-term operating lease liabilities
11,120
12,180
Accrued liabilities
53,340
59,100
Total current liabilities
181,670
184,920
Gross long-term debt
290,340
251,960
Unamortized debt issuance costs and
discount
(29,000
)
(20,570
)
Long-term debt
261,340
231,390
Deferred income taxes
3,650
3,130
Long-term operating lease liabilities
36,970
46,340
Other long-term liabilities
10,630
14,560
Total liabilities
494,260
480,340
Total Horizon Global shareholders'
deficit
(19,800
)
(18,690
)
Noncontrolling interest
(6,130
)
(5,160
)
Total shareholders' deficit
(25,930
)
(23,850
)
Total liabilities and shareholders'
equity
$
468,330
$
456,490
Horizon Global
Corporation
Condensed Consolidated
Statements of Operations
(unaudited - dollars in
thousands, except share and per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Net sales
$
196,540
$
201,630
$
617,850
$
485,370
Cost of sales
(157,780
)
(158,260
)
(491,240
)
(397,700
)
Gross profit
38,760
43,370
126,610
87,670
Selling, general and administrative
expenses
(32,430
)
(34,810
)
(102,170
)
(93,760
)
Operating profit (loss)
6,330
8,560
24,440
(6,090
)
Other (expense) income, net
(1,720
)
690
(5,940
)
(1,430
)
Loss on debt extinguishment
—
—
(11,650
)
—
Interest expense
(6,970
)
(7,560
)
(21,000
)
(23,970
)
(Loss) income from continuing operations
before income tax
(2,360
)
1,690
(14,150
)
(31,490
)
Income tax expense
(410
)
(100
)
(2,810
)
(170
)
Net (loss) income from continuing
operations
(2,770
)
1,590
(16,960
)
(31,660
)
Loss from discontinued operations, net of
income tax
—
—
—
(500
)
Net (loss) income
(2,770
)
1,590
(16,960
)
(32,160
)
Less: Net loss attributable to
noncontrolling interest
(300
)
(340
)
(970
)
(1,010
)
Net (loss) income attributable to Horizon
Global
$
(2,470
)
$
1,930
$
(15,990
)
$
(31,150
)
Net (loss) income per share
attributable to Horizon Global:
Basic:
Continuing operations
$
(0.09
)
$
0.07
$
(0.59
)
$
(1.19
)
Discontinued operations
—
—
—
(0.02
)
Total
$
(0.09
)
$
0.07
$
(0.59
)
$
(1.21
)
Diluted:
Continuing operations
$
(0.09
)
$
0.06
$
(0.59
)
$
(1.19
)
Discontinued operations
—
—
—
(0.02
)
Total
$
(0.09
)
$
0.06
$
(0.59
)
$
(1.21
)
Weighted average common shares
outstanding:
Basic
27,286,600
25,939,741
27,019,554
25,651,789
Diluted
27,286,600
33,329,106
27,019,554
25,651,789
Horizon Global
Corporation
Condensed Consolidated
Statements of Cash Flows
(unaudited - dollars in
thousands)
Nine Months Ended September
30,
2021
2020
Cash Flows from Operating
Activities:
Net loss
$
(16,960
)
$
(32,160
)
Less: Net loss from discontinued
operations
—
(500
)
Net loss from continuing operations
(16,960
)
(31,660
)
Adjustments to reconcile net loss from
continuing operations to net cash (used for) provided by operating
activities:
Depreciation
11,710
11,110
Amortization of intangible assets
4,220
5,040
Loss on debt extinguishment
11,650
—
Amortization of original issuance discount
and debt issuance costs
8,010
11,450
Deferred income taxes
730
(820
)
Non-cash compensation expense
2,590
2,190
Paid-in-kind interest
650
6,280
Increase in receivables
(12,360
)
(35,170
)
(Increase) decrease in inventories
(52,700
)
30,100
Increase in prepaid expenses and other
assets
(1,910
)
(4,080
)
Increase in accounts payable and accrued
liabilities
11,820
29,800
Other, net
1,910
(50
)
Net cash (used for) provided by operating
activities from continuing operations
(30,640
)
24,190
Cash Flows from Investing
Activities:
Capital expenditures
(14,730
)
(8,090
)
Other, net
20
70
Net cash used for investing activities
from continuing operations
(14,710
)
(8,020
)
Cash Flows from Financing
Activities:
Proceeds from borrowings on credit
facilities
2,870
6,440
Repayments of borrowings on credit
facilities
(1,960
)
(3,330
)
Proceeds from Senior Term Loan, net of
issuance costs
75,300
—
Repayments of borrowings on Replacement
Term Loan, including transaction fees
(94,940
)
—
Proceeds from Revolving Credit Facility,
net of issuance costs
28,680
54,680
Repayments of borrowings on Revolving
Credit Facility
(8,000
)
(28,300
)
Proceeds from ABL revolving debt, net of
issuance costs
—
8,000
Repayments of borrowings on ABL revolving
debt
—
(27,920
)
Proceeds from Paycheck Protection Program
Loan
—
8,670
Proceeds from issuance of common stock
warrants
16,300
—
Proceeds from exercise of common stock
warrants
420
—
Other, net
(650
)
(320
)
Net cash provided by financing activities
from continuing operations
18,020
17,920
Discontinued Operations:
Net cash used for discontinued
operations
—
(500
)
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
(510
)
290
Cash, Cash Equivalents and Restricted
Cash:
(Decrease) increase for the period
(27,840
)
33,880
At beginning of period
50,690
11,770
At end of period
$
22,850
$
45,650
Supplemental disclosure of cash flow
information:
Cash paid for interest
$
16,130
$
4,990
Cash paid for taxes, net of refunds
$
2,010
$
990
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 (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 debt extinguishment, 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.
The following table summarizes Adjusted EBITDA for our operating
segments for the three months ended September 30, 2021 and
2020:
Three Months Ended September
30, 2021
Three Months Ended September
30, 2020
Variance
Horizon Americas
Horizon Europe- Africa
Corporate
Consolidated
Horizon Americas
Horizon Europe- Africa
Corporate
Consolidated
Consolidated
(dollars in thousands)
(dollars in thousands)
Net (loss) income attributable to
Horizon Global
$
(2,470
)
$
1,930
$
(4,400
)
Net loss attributable to noncontrolling
interest
(300
)
(340
)
40
Net (loss) income
$
(2,770
)
$
1,590
$
(4,360
)
Interest expense
6,970
7,560
(590
)
Income tax expense
410
100
310
Depreciation and amortization
5,210
5,620
(410
)
EBITDA
$
14,050
$
2,030
$
(6,260
)
$
9,820
$
13,870
$
7,490
$
(6,490
)
$
14,870
$
(5,050
)
Net loss attributable to noncontrolling
interest
—
300
—
300
—
340
—
340
(40
)
Severance
50
—
—
50
—
(170
)
—
(170
)
220
Restructuring, relocation and related
business disruption costs
60
30
10
100
250
(20
)
150
380
(280
)
Non-cash stock compensation
—
—
880
880
—
—
870
870
10
Loss (gain) on business divestitures and
other assets
300
10
10
320
420
—
(20
)
400
(80
)
Debt issuance costs
—
70
100
170
—
—
530
530
(360
)
Unrealized foreign currency remeasurement
costs
(10
)
950
400
1,340
980
(1,580
)
(500
)
(1,100
)
2,440
Adjusted EBITDA
$
14,450
$
3,390
$
(4,860
)
$
12,980
$
15,520
$
6,060
$
(5,460
)
$
16,120
$
(3,140
)
Segment Information
The following table summarizes financial information for our
operating segments for the three months ended September 30, 2021
and 2020:
Three Months Ended September
30,
Change
2021
2020
$
%
(dollars in thousands)
Net Sales
Horizon Americas
$
115,850
$
119,140
$
(3,290
)
(2.8
%)
Horizon Europe-Africa
80,690
82,490
(1,800
)
(2.2
%)
Total
$
196,540
$
201,630
$
(5,090
)
(2.5
%)
Gross Profit
Horizon Americas
$
29,310
$
32,960
$
(3,650
)
(11.1
%)
Horizon Europe-Africa
9,450
10,410
(960
)
(9.2
%)
Total
$
38,760
$
43,370
$
(4,610
)
(10.6
%)
Operating Profit (Loss)
Horizon Americas
$
12,400
$
13,170
$
(770
)
(5.8
%)
Horizon Europe-Africa
(150
)
2,440
(2,590
)
(106.1
%)
Corporate
(5,920
)
(7,050
)
1,130
16.0
%
Total
$
6,330
$
8,560
$
(2,230
)
(26.1
%)
Adjusted EBITDA
Horizon Americas
$
14,450
$
15,520
$
(1,070
)
(6.9
%)
Horizon Europe-Africa
3,390
6,060
(2,670
)
(44.1
%)
Corporate
(4,860
)
(5,460
)
600
11.0
%
Total
$
12,980
$
16,120
$
(3,140
)
(19.5
%)
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 U.S. 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, 2021
Horizon Americas
Horizon Europe-
Africa
Consolidated
Revenue growth as reported
(2.8
)%
(2.2
)%
(2.5
)%
Less: currency impact
—
%
1.4
%
0.6
%
Revenue growth at constant currency
(2.8
)%
(3.6
)%
(3.1
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211104005288/en/
Jeff Tryka, CFA Investor Relations, Lambert & Co. (616)
295-2509 jtryka@horizonglobal.com
Horizon Global (NYSE:HZN)
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