Horizon Global Corporation (NYSE: HZN), one of the leading
manufacturers of branded towing and trailering equipment, today
announced an amendment to the agreement governing its term loan
with Atlantic Park Strategic Capital Fund, L.P. (“Atlantic Park”)
and the execution of a commitment letter to issue, solely at the
Company’s option, up to $40.0 million of a new Series B Preferred
Stock to Corre Partners Management, L.L.C. (“Corre”) to facilitate
meeting the Company's upcoming convertible note maturity. In
addition, the Company announced its preliminary fourth quarter and
full year financial results for the period ended December 31,
2021.
Term Loan Agreement Amendment and
Series B Preferred Commitment Letter
The term loan agreement amendment provides for a $35.0 million
draw on the Company’s existing delayed draw term loan facility and
allows the net proceeds from the draw to be used for working
capital purposes and to fund low-cost country expansion in the
Company’s Europe-Africa segment. All amounts drawn under the
delayed draw term loan facility are governed by the existing terms
of the Company’s term loan agreement with Atlantic Park. In
connection with the term loan agreement amendment, the Company
issued Atlantic Park warrants to purchase up to 975,000 shares of
the Company’s common stock at an exercise price of $9.00 per
share.
The Company also executed a commitment letter with Corre to
issue, solely at the Company’s option, up to $40.0 million of
Series B Preferred Stock. To the extent issued, the net proceeds of
the Series B Preferred may be used to repay up to $35.0 million of
the Company’s outstanding convertible senior notes at maturity on
July 1, 2022 and, following such repayment, for general corporate
purposes. If needed and issued, the Series B Preferred Stock would
accrue dividends in kind at a rate of 11.0% per annum. The Series B
Preferred Stock would be perpetual, but subject to voluntary
redemption by the Company at its option and subject to mandatory
redemption upon a change in control or the one-year anniversary of
the maturity of the term loans. Additionally, if issued, if the
Series B Preferred Stock is not redeemed after the occurrence of
certain events, it would be convertible into common stock, at the
option of Corre and subject to shareholder approval. The commitment
letter expires on July 1, 2022.
“We’d like to thank two of our largest stakeholders, Corre and
Atlantic Park, for their continued support of our long-term
strategic plan as we addressed macroeconomic headwinds through the
fourth quarter of 2021 and into early 2022,” stated Terry Gohl,
Horizon Global’s President and Chief Executive Officer. “Increasing
supply chain constraints throughout the quarter and persistent
microchip shortages leading to sudden OE production shutdowns
throttled our ability to invoice against an otherwise historically
strong open order book. Inventories significantly increased given
delays in logistics from an abnormally high level of port traffic
and we experienced significant operational inefficiencies in many
jurisdictions where we are unable to rapidly flex our labor force
to match our ability to produce. We expect this funding to support
our temporary working capital needs as we improve our inventory
turns, allowing us to better and more reliably fill open orders and
service continued heightened demand levels during the upcoming
selling season.”
Gohl continued, “Additionally, the funds will also support our
strategy to benefit from a continued expansion of our low-cost
country manufacturing facility in Eastern Europe. Despite
industry-wide supply chain headwinds, we continue to take actions
to improve the foundation of our business, and we expect this
investment to solidify the Company as a best-in-class,
cost-competitive supplier to our major OEM customers in
Europe.”
Preliminary Fourth Quarter and Full
Year Financial Results
The preliminary financial results announced today cover the
fourth quarter and full year results for the period ended December
31, 2021:
- Net sales for the fourth quarter of 2021 of approximately
$164.3 million, an approximate $11.6 million decrease compared to
fourth quarter of 2020
- Loss from continuing operations before income tax for the
fourth quarter of 2021 of approximately $19.4 to $20.9 million, an
approximate $11.9 to $13.4 million deterioration compared to fourth
quarter of 2020
- Adjusted EBITDA(1) for the fourth quarter of 2021 of
approximately $(8.3) to $(9.8) million, an approximate $15.6 to
$17.1 million deterioration from the fourth quarter of 2020
- Net sales for the full year 2021 of approximately $782.1
million, an approximate $120.9 million increase compared to prior
year
- Loss from continuing operations before income tax for the full
year 2021 of approximately $33.6 to $35.1 million, an approximate
$4.0 to $5.5 million improvement compared to prior year
- Adjusted EBITDA(1) for the full year 2021 of approximately
$33.9 to $35.4 million, an approximate $7.5 to $9.0 million
improvement compared to prior year
Gohl commented, “We are disappointed with our fourth quarter
2021 financial performance, which was adversely affected by
short-term, industry-wide supply chain headwinds. We remain focused
on long-term value creation and continue to identify and execute
operational improvement initiatives across our global operations.
Further, with our iconic brands and strong open order book of
approximately $58.8 million in North America at the end of 2021,
which reflects a 17.4% increase over the end of 2020, we expect to
progress against our long-term financial objectives in 2022 and
beyond. When we release our fourth quarter and full year 2021
earnings in March, we will give a more detailed outlook on our
positive view of 2022 and why we remain confident in achieving our
long-term financial targets, including double-digit adjusted EBITDA
margins.”
The financial information in this press release is preliminary
and based upon information currently available to the Company.
During the course of the Company’s financial statement reporting
process, items may be identified that would require the Company to
make adjustments that may be material, and, as a result, the
preliminary unaudited financial results included in this press
release are forward-looking information and are subject to
change.
Horizon Global will release detailed financial results for the
quarter and year ended December 31, 2021, in March with a
conference call hosted by Horizon Global President and Chief
Executive Officer, Terry Gohl. Detailed instructions for the
conference call will be issued in advance of the call.
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 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 3,770 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 finalization of the Company’s financial statements
for the quarter and year ended December 31, 2021; 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, 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. 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 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.
Appendix I
Horizon Global Corporation Company Financial
Information (Unaudited - dollars in thousands)
The Company’s management utilizes Adjusted EBITDA(1) 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(1) 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(1) that is prepared
in accordance with U.S. GAAP. Adjusted EBITDA(1), 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(1) 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, 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.
The following table summarizes the Company’s Adjusted EBITDA(1)
for the three months ended December 31, 2021 and 2020:
Three months ended December
31, 2021
Three months ended December
31, 2020
Variance Lower Range
Variance Upper Range
Consolidated
Lower Range
Consolidated Upper
Range
Consolidated
Consolidated
Consolidated
(dollars in thousands)
Loss from continuing operations
before
income tax
$
(20,920
)
$
(19,420
)
$
(7,570
)
$
(13,350
)
$
(11,850
)
Interest expense
6,970
6,970
7,710
(740
)
(740
)
Depreciation and amortization
6,070
6,070
6,760
(690
)
(690
)
EBITDA
$
(7,880
)
$
(6,380
)
$
6,900
$
(14,780
)
$
(13,280
)
Net loss attributable to noncontrolling
interest
430
430
410
20
20
Severance
—
—
(180
)
180
180
Restructuring, relocation and related
business disruption costs
1,180
1,180
580
600
600
Gain on extinguishment of debt
(7,530
)
(7,530
)
—
(7,530
)
(7,530
)
Non-cash stock compensation
930
930
810
120
120
Loss on business divestitures and other
assets
1,920
1,920
460
1,460
1,460
Board transition support
—
—
(170
)
170
170
Debt issuance costs
100
100
90
10
10
Unrealized foreign currency remeasurement
costs
1,100
1,100
(1,580
)
2,680
2,680
Adjusted EBITDA
$
(9,750
)
$
(8,250
)
$
7,320
$
(17,070
)
$
(15,570
)
The following table summarizes the Company’s Adjusted EBITDA(1)
for the twelve months ended December 31, 2021 and 2020:
Twelve months ended December
31, 2021
Twelve months ended December
31, 2020
Variance Lower Range
Variance Upper Range
Consolidated Lower
Range
Consolidated Upper
Range
Consolidated
Consolidated
Consolidated
(dollars in thousands)
Loss from continuing operations
before
income tax
$
(35,070
)
$
(33,570
)
$
(39,060
)
$
3,990
$
5,490
Loss from discontinued operations, net of
income tax
—
—
(500
)
500
500
Interest expense
27,970
27,970
31,680
(3,710
)
(3,710
)
Depreciation and amortization
22,000
22,000
22,910
(910
)
(910
)
EBITDA
$
14,900
$
16,400
$
15,030
$
(130
)
$
1,370
Net loss attributable to noncontrolling
interest
1,400
1,400
1,420
(20
)
(20
)
Loss from discontinued operations, net of
income tax
—
—
500
(500
)
(500
)
Severance
50
50
190
(140
)
(140
)
Restructuring, relocation and related
business disruption costs
420
420
2,610
(2,190
)
(2,190
)
Loss on extinguishment of debt
11,650
11,650
—
11,650
11,650
Gain on extinguishment of debt
(7,530
)
(7,530
)
—
(7,530
)
(7,530
)
Non-cash stock compensation
3,520
3,520
3,000
520
520
Loss on business divestitures and other
assets
4,950
4,950
1,320
3,630
3,630
Board transition support
—
—
(170
)
170
170
Product liability and litigation
claims
—
—
1,510
(1,510
)
(1,510
)
Debt issuance costs
460
460
1,930
(1,470
)
(1,470
)
Unrealized foreign currency remeasurement
costs
4,080
4,080
(930
)
5,010
5,010
Adjusted EBITDA
$
33,900
$
35,400
$
26,410
$
7,490
$
8,990
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220209006186/en/
Jeff Tryka, CFA Investor Relations, Lambert & Co. (616)
295-2509 jtryka@horizonglobal.com
Horizon Global (NYSE:HZN)
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