Horizon Global Reports Financial Results for Third Quarter 2022
Horizon Global Corporation (NYSE: HZN) reported a net loss of $25.7 million for Q3 2022, a significant decrease in net sales to $149.0 million, down $47.5 million from Q3 2021. Gross profit fell to $16.7 million, reflecting a gross profit margin decrease from 19.7% to 11.2%. The company is exploring strategic alternatives to enhance shareholder value amid adverse market conditions, including high inventory levels and a decline in aftermarket sales. Adjusted EBITDA was $(5.9) million, a drop from $18.9 million in the previous year. Horizon remains focused on margin improvement and optimizing operations.
- Ongoing strategic alternatives process aimed at maximizing shareholder value.
- Initiatives to improve margin performance despite market challenges.
- Net sales decreased by $47.5 million compared to Q3 2021.
- Gross profit decreased by $22.1 million, impacting overall profitability.
- Net loss of $25.7 million represents a deterioration from the prior year.
- Adjusted EBITDA fell to $(5.9) million, a drop of $18.9 million.
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
-
-
Gross profit of
$16.7 million -
$22.1 million
-
-
Gross profit margin(4) decreased to
11.2% from19.7% in third quarter of 2021 -
Net loss of
$25.7 million -
$22.9 million
-
-
Adjusted EBITDA(1) of
$(5.9) million -
$18.9 million
-
“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
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
Horizon
Balance Sheet and Liquidity. Cash and Availability(2) was
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,
Conference Call Details
The third quarter 2022 results and supplemental materials, including a presentation in PDF format, will be distributed before the market opens on
The conference call will be webcast simultaneously and in its entirety through the
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
About
Headquartered in
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
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 |
|
(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”. |
Condensed Consolidated Statements of Operations (unaudited - dollars in thousands, except per share data) |
||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
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 |
|
$ |
(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 |
) |
Condensed Consolidated Balance Sheets (dollars in thousands) |
||||||||
|
|
|
|
|
||||
|
|
(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, |
|
|
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 |
|
|
(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 |
|
Condensed Consolidated Statements of Cash Flows (unaudited - dollars in thousands) |
||||||||
|
|
Nine Months Ended |
||||||
|
|
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
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
Adjusted EBITDA is defined as net income (loss) attributable to
Adjusted EBITDA for our operating segments for the three months ended
|
|
Three Months Ended |
|
Three Months Ended |
|
Variance |
|||||||||||||||||||||||||||||
|
|
Horizon |
|
Horizon |
|
Corporate |
|
Consolidated |
|
Horizon |
|
Horizon |
|
Corporate |
|
Consolidated |
|
Consolidated |
|||||||||||||||||
|
|
(dollars in thousands) |
|
(dollars in thousands) |
|||||||||||||||||||||||||||||||
Net loss attributable to |
|
|
|
|
|
|
|
$ |
(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
|
|
Three Months Ended |
|
Change |
|||||||||||
|
|
2022 |
|
2021 |
|
$ |
|
% |
|||||||
|
|
(dollars in thousands) |
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||||
Horizon |
|
$ |
79,220 |
|
|
$ |
115,850 |
|
|
$ |
(36,630 |
) |
|
(31.6 |
%) |
Horizon |
|
|
69,750 |
|
|
|
80,690 |
|
|
|
(10,940 |
) |
|
(13.6 |
%) |
Total |
|
$ |
148,970 |
|
|
$ |
196,540 |
|
|
$ |
(47,570 |
) |
|
(24.2 |
%) |
Gross Profit |
|
|
|
|
|
|
|
|
|||||||
Horizon |
|
$ |
11,780 |
|
|
$ |
29,310 |
|
|
$ |
(17,530 |
) |
|
(59.8 |
%) |
Horizon |
|
|
4,870 |
|
|
|
9,450 |
|
|
|
(4,580 |
) |
|
(48.5 |
%) |
Total |
|
$ |
16,650 |
|
|
$ |
38,760 |
|
|
$ |
(22,110 |
) |
|
(57.0 |
%) |
Operating (Loss) Profit |
|
|
|
|
|
|
|
|
|||||||
Horizon |
|
$ |
(3,500 |
) |
|
$ |
12,400 |
|
|
$ |
(15,900 |
) |
|
(128.2 |
%) |
Horizon |
|
|
(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 |
|
$ |
(1,370 |
) |
|
$ |
14,450 |
|
|
$ |
(15,820 |
) |
|
(109.5 |
%) |
Horizon |
|
|
(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
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
|
|||||||
|
|
Horizon |
|
Horizon
|
|
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/
(734) 656-3000
mmeyer@horizonglobal.com
Source:
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