First Quarter Summary
- Net sales of $180.9 million
- $18.3 million decrease from first quarter of 2021
- Gross profit of $20.2 million
- $20.4 million decrease from first quarter of 2021
- Gross profit margin(4) decreased to 11.2% from 20.4% in the
first quarter of 2021
- Net loss of $27.0 million
- $11.8 million deterioration from first quarter of 2021
- Adjusted EBITDA(1) of $(6.6) million
- $19.3 million reduction from first 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 first quarter of 2022.
“We are extremely disappointed with our results for the first
quarter,” stated Terry Gohl, Horizon Global’s President and Chief
Executive Officer. “We were faced with a number of challenges, some
were outside our control and others we should have controlled
better. Immediate steps are being taken to address these challenges
going forward. After nearly two years of year-round demand for our
products, we are now experiencing a shift back to seasonal order
patterns for our higher margin non-OE business. This shift impacted
our net sales levels during the first quarter of 2022; however, as
we enter the selling season, we expect to recognize the benefits of
robust inventory levels resulting from our strategic build in the
fourth quarter of 2021 and the first quarter of 2022. We are also
throttling our purchase levels, which, together with natural
inventory attrition during the selling season, should significantly
taper down our inventory levels and optimize our working capital
position over the next few quarters.”
Gohl continued, “Global supply chain constraints continued to
impact Horizon Global during the first quarter of 2022. In addition
to semiconductor shortages, which continued to suppress OEM
production volumes, the Russia-Ukraine war exacerbated OEM
production disruption in Europe, resulting in peak disruption at 17
customer assembly plants that we supply across Europe in March
2022. While there is no set timetable for a return to ‘normal’, the
global market outlook for OEM production remains strong for the
remainder of 2022.”
2022 First Quarter Segment
Results Horizon Americas. Net sales decreased $7.9
million, or 7.2%, to $101.9 million when compared to the first
quarter of 2021. This decrease was driven by an $8.3 million
combined reduction in the aftermarket and automotive OEM sales
channels. Gross profit decreased $16.4 million, driven by lower net
sales, coupled with unfavorable manufacturing input costs,
primarily increased material costs, and only partially offset by
customer pricing recoveries. Adjusted EBITDA(1) decreased to $(2.3)
million, as compared to $12.9 million for the first quarter of
2021, driven primarily by unfavorable gross profit.
Horizon Europe-Africa. Net sales decreased $10.4 million,
or 11.7%, to $78.9 million when compared to the first quarter of
2021. This decrease was primarily due to an $8.6 million reduction
in the automotive OEM sales channel driven by lower volumes from
rapid customer disruptions. Net sales were negatively impacted by
$5.7 million of unfavorable currency translation in the first
quarter of 2022. Gross profit decreased $4.0 million, driven by
lower net sales, coupled with unfavorable manufacturing input
costs, primarily increased material costs and operational
inefficiencies due to sudden customer disruptions. Adjusted
EBITDA(1) declined to $1.5 million, as compared to $5.4 million for
the first quarter of 2021, driven primarily by unfavorable gross
profit.
Balance Sheet and Liquidity. Cash and Availability(2) was
$47.4 million, an increase of $8.2 million compared to December 31,
2021. Working Capital(3) was $111.2 million, an increase of $2.4
million compared to December 31, 2021. Gross debt increased $42.8
million to $343.6 million compared to December 31, 2021, primarily
reflecting $35.0 million of additional borrowings under the
Company’s term loan facility during the first quarter of 2022.
Summary “During the past few
years, we have taken a proactive approach to mitigate the impact of
uncontrollable outside factors,” Gohl stated. “Material costs
remain at the top of this list. We have fully implemented pricing
recovery actions with our non-OE customers and have either
implemented or remain in active discussions with our OE customers.
We expect the benefit of our pricing actions to be fully recognized
during 2022. This recovery, together with expected favorability in
volumes and softening in steel and average freight cost inflation,
should positively impact our performance in 2022.”
Gohl closed, “We are not pleased with our performance in the
first quarter and we are determined to do a better job in
addressing the very dynamic and ever-changing markets that we serve
around the globe. I want to thank our employees and key
stakeholders for their support as we take immediate action to
improve our performance going forward.”
Conference Call Details
Horizon Global will host a conference call regarding first quarter
2022 earnings on Thursday, May 5, 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 Dennis Richardville,
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 use the conference identification number 10165103.
The first quarter 2022 results and supplemental materials,
including a presentation in PDF format, will be distributed before
the market opens on May 5, 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 5076799. The telephone replay will be available
approximately two hours after the end of the call and continue
through May 19, 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 3,800 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 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 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; 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; 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; 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.
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 share and per share data)
Three Months Ended
March 31,
2022
2021
Net sales
$
180,860
$
199,190
Cost of sales
(160,650
)
(158,630
)
Gross profit
20,210
40,560
Selling, general and administrative
expenses
(33,770
)
(33,780
)
Operating (loss) profit
(13,560
)
6,780
Interest expense
(7,670
)
(7,050
)
Loss on debt extinguishment of Replacement
Term Loan
—
(11,650
)
Other expense, net
(5,490
)
(2,230
)
Loss before income tax
(26,720
)
(14,150
)
Income tax expense
(230
)
(1,000
)
Net loss
(26,950
)
(15,150
)
Less: Net loss attributable to
noncontrolling interest
(270
)
(340
)
Net loss attributable to Horizon
Global
$
(26,680
)
$
(14,810
)
Net loss per share:
Basic
$
(0.98
)
$
(0.55
)
Diluted
$
(0.98
)
$
(0.55
)
Horizon Global
Corporation
Condensed Consolidated Balance
Sheets
(dollars in thousands)
March 31,
December 31,
2022
2021
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
29,660
$
11,780
Restricted cash
5,470
5,490
Receivables, net
95,570
80,720
Inventories
178,840
162,830
Prepaid expenses and other current
assets
15,180
12,340
Total current assets
324,720
273,160
Property and equipment, net
72,600
71,610
Operating lease right-of-use assets
37,300
37,810
Other intangibles, net
46,860
48,910
Deferred income taxes
1,750
1,750
Other assets
5,270
5,680
Total assets
$
488,500
$
438,920
Liabilities and Shareholders'
Equity
Current liabilities:
Short-term borrowings and current
maturities, long-term debt
$
3,670
$
3,780
Accounts payable
128,710
102,190
Short-term operating lease liabilities
11,210
11,010
Accrued liabilities
49,680
44,870
Total current liabilities
193,270
161,850
Gross long-term debt
339,970
297,070
Unamortized debt issuance costs and
discount
(27,830
)
(26,520
)
Long-term debt
312,140
270,550
Deferred income taxes
1,650
1,920
Long-term operating lease liabilities
34,290
35,930
Other long-term liabilities
8,800
8,920
Total liabilities
550,150
479,170
Total Horizon Global shareholders'
deficit
(54,820
)
(33,690
)
Noncontrolling interest
(6,830
)
(6,560
)
Total shareholders' deficit
(61,650
)
(40,250
)
Total liabilities and shareholders'
deficit
$
488,500
$
438,920
Horizon Global
Corporation
Condensed Consolidated
Statements of Cash Flows
(unaudited - dollars in
thousands)
Three Months Ended March
31,
2022
2021
Cash Flows from Operating
Activities:
Net loss
$
(26,950
)
$
(15,150
)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation
3,350
4,200
Amortization of intangible assets
1,270
1,300
Amortization of original issuance discount
and debt issuance costs
2,870
2,810
Deferred income taxes
(200
)
470
Non-cash compensation expense
1,250
860
Loss on debt extinguishment of Replacement
Term Loan
—
11,650
Paid-in-kind interest
—
650
Increase in receivables
(16,250
)
(26,870
)
Increase in inventories
(17,000
)
(20,950
)
Increase in prepaid expenses and other
assets
(2,710
)
(940
)
Increase in accounts payable and accrued
liabilities
33,350
23,120
Other, net
2,690
600
Net cash used for operating activities
(18,330
)
(18,250
)
Cash Flows from Investing
Activities:
Capital expenditures
(5,000
)
(3,360
)
Net cash used for investing activities
(5,000
)
(3,360
)
Cash Flows from Financing
Activities:
Proceeds from borrowings on credit
facilities
1,040
1,530
Repayments of borrowings on credit
facilities
(1,930
)
(720
)
Proceeds from Senior Term Loan, net of
issuance costs
30,900
75,300
Repayments of borrowings on Replacement
Term Loan, including transaction fees
—
(94,940
)
Proceeds from Revolving Credit Facility,
net of issuance costs
9,170
4,450
Proceeds from issuance of common stock
warrants
3,040
16,300
Proceeds from exercise of common stock
warrants
—
420
Other, net
(720
)
(650
)
Net cash provided by financing
activities
41,500
1,690
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
(310
)
(510
)
Cash, Cash Equivalents and Restricted
Cash:
Increase (decrease) for the period
17,860
(20,430
)
At beginning of period
17,270
50,690
At end of period
$
35,130
$
30,260
Supplemental disclosure of cash flow
information:
Cash paid for interest
$
5,280
$
7,270
Cash paid for taxes, net of refunds
$
390
$
530
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 March 31, 2022 and 2021 is as follows:
Three Months Ended March 31,
2022
Three Months Ended March 31,
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
$
(26,680
)
$
(14,810
)
$
(11,870
)
Net loss attributable to noncontrolling
interest
(270
)
(340
)
70
Net loss
$
(26,950
)
$
(15,150
)
$
(11,800
)
Interest expense
7,670
7,050
620
Income tax expense
230
1,000
(770
)
Depreciation and amortization
4,620
5,500
(880
)
EBITDA
$
(2,830
)
$
610
$
(12,210
)
$
(14,430
)
$
13,200
$
3,790
$
(18,590
)
$
(1,600
)
$
(12,830
)
Net loss attributable to noncontrolling
interest
—
270
—
270
—
340
—
340
(70
)
Severance
—
—
(20
)
(20
)
—
—
—
—
(20
)
Restructuring, relocation and related
business disruption costs
60
20
(20
)
60
(860
)
(70
)
—
(930
)
990
Loss on debt extinguishment
—
—
—
—
—
—
11,650
11,650
(11,650
)
Non-cash stock compensation
—
—
1,250
1,250
—
—
860
860
390
Loss (gain) on business divestitures and
other assets
250
(60
)
3,160
3,350
240
—
—
240
3,110
Debt issuance costs
—
—
1,570
1,570
—
—
—
—
1,570
Unrealized foreign currency remeasurement
costs
270
650
410
1,330
270
1,290
530
2,090
(760
)
Adjusted EBITDA
$
(2,250
)
$
1,490
$
(5,860
)
$
(6,620
)
$
12,850
$
5,350
$
(5,550
)
$
12,650
$
(19,270
)
Segment Information
Financial information for our operating segments for the three
months ended March 31, 2022 and 2021 is as follows:
Three Months Ended
March 31,
Change
2022
2021
$
%
(dollars in thousands)
Net Sales
Horizon Americas
$
101,940
$
109,830
$
(7,890
)
(7.2
%)
Horizon Europe-Africa
78,920
89,360
(10,440
)
(11.7
%)
Total
$
180,860
$
199,190
$
(18,330
)
(9.2
%)
Gross Profit
Horizon Americas
$
12,880
$
29,270
$
(16,390
)
(56.0
%)
Horizon Europe-Africa
7,330
11,290
(3,960
)
(35.1
%)
Total
$
20,210
$
40,560
$
(20,350
)
(50.2
%)
Operating (Loss) Profit
Horizon Americas
$
(4,300
)
$
11,840
$
(16,140
)
(136.3
%)
Horizon Europe-Africa
(1,540
)
1,460
(3,000
)
(205.5
%)
Corporate
(7,720
)
(6,520
)
(1,200
)
(18.4
%)
Total
$
(13,560
)
$
6,780
$
(20,340
)
(300.0
%)
Adjusted EBITDA
Horizon Americas
$
(2,250
)
$
12,850
$
(15,100
)
(117.5
%)
Horizon Europe-Africa
1,490
5,350
(3,860
)
(72.1
%)
Corporate
(5,860
)
(5,550
)
(310
)
(5.6
%)
Total
$
(6,620
)
$
12,650
$
(19,270
)
(152.3
%)
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, 2022
Horizon
Horizon
Americas
Europe-Africa
Consolidated
Revenue growth as reported
(7.2
)%
(11.7
)%
(9.2
)%
Less: currency impact
—
%
(6.4
)%
(2.8
)%
Revenue growth at constant currency
(7.2
)%
(5.3
)%
(6.4
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220505005222/en/
Jeff Tryka, CFA Investor Relations, Lambert & Co. (616)
295-2509 jtryka@horizonglobal.com
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