HZN - Horizon Global Reports Financial Results for Third Quarter 2020

Third Quarter Highlights

• $24.2 million of cash generated from operating activities; $90.0 million improvement over prior year comparable period
• Cash and Availability ⁽¹⁾ of $78.0 million; $17.1 million improvement over prior year comparable period
• Refinanced First and Second Lien Term Loans into single term loan facility; extends maturity, maintains interest rate level and supports Company’s long-term strategic plan
• Net sales of $201.6 million; increase of $23.7 million, or 13.3%, compared to prior year comparable period
• Operating profit of $8.6 million; $21.3 million improvement compared to prior year comparable period
• Net income from continuing operations of $1.6 million; $39.1 million improvement compared to prior year comparable period
• Adjusted EBITDA ⁽²⁾ of $16.1 million; $19.1 million improvement compared to prior year comparable period

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 2020.

“I want to thank each and every member of our global team for the tremendous efforts and leadership demonstrated during the third quarter of 2020 as we continued to navigate our way through an unprecedented macro-economic environment,” stated Terry Gohl, Horizon Global's President and Chief Executive Officer. “We made a commitment in March to accelerate the deployment of our operational improvement initiatives to ensure that we would emerge from the crisis as a stronger company. The team rose to the occasion and, as a result, we delivered on our customer commitments in a period of increased demand, leading to significant improvements in profitability and cash flow generation. While the business continues to improve each and every day, we are beginning to see the fruits of our labor and the third quarter of 2020 marks the first time in three years that we have generated positive net income.”

2020 Third Quarter Segment Results

Horizon Americas . Net sales increased $22.9 million, or 23.8%, to $119.1 million. Net sales increased by $10.9 million combined in the retail and e-commerce sales channels, $8.5 million in the aftermarket and $4.0 million combined in the automotive OEM and automotive OES sales channels. Gross profit increased $15.7 million due to higher net sales coupled with favorable manufacturing costs and efficiencies, lower scrap costs and inventory reserves. Horizon Americas generated operating profit of $13.2 million, an increase of $15.4 million compared to the prior year comparable period, driven by favorable gross profit as described above. Adjusted EBITDA ⁽²⁾ increased to $15.5 million for the quarter, as compared to $0.6 million for the prior year comparable period.

Horizon Europe-Africa . Net sales increased $0.9 million, or 1.1%, to $82.5 million. Net sales increased by $4.5 million in the aftermarket sales channel, partially offset by a $3.5 million decrease in the automotive OEM and automotive OES sales channels. Gross profit decreased $0.6 million, primarily attributable to $4.1 million of material cost and labor efficiencies, which was more than offset by a $4.3 million favorable prior year expense recovery related to a product liability settlement that did not recur. Horizon Europe-Africa generated operating profit of $2.4 million, representing an increase of $0.7 million driven by $1.4 million lower SG&A costs, partially offset by the unfavorable gross profit described above. Adjusted EBITDA ⁽²⁾ increased to $6.1 million for the quarter, as compared to $0.7 million for the prior year comparable period.

Balance Sheet and Liquidity . Cash and Availability ⁽¹⁾ was $78.0 million, an increase of $17.1 million compared to the prior year comparable period. Working Capital ⁽³⁾ was $66.6 million, a reduction of $45.1 million compared to the prior year comparable period. Gross debt increased $28.6 million to $267.8 million over the prior year comparable period, primarily reflecting increased borrowings in the first two quarters of 2020 to strengthen liquidity in response to the COVID-19 pandemic.

Summary

Gohl commented, “We are experiencing an extension of our traditional peak selling season in North America with demand continuing to outpace prior years. Increased take rates in Europe are also favorably impacting our outlook for the remainder of 2020. The increase in demand for our products has resulted in a strong open order book that we expect to capitalize on in the fourth quarter. Our laser-like focus on operational throughput and delivery through lean manufacturing principles positions us to meet heightened demand levels, solidify ourselves as the established market leader and continue to expand our market share in a profitable manner in each of the geographies we serve. We expect all these efforts to create near- and long-term value for our employees, customers and shareholders.”

Conference Call Details

Horizon Global will host a conference call regarding third quarter 2020 earnings on Thursday, November 5, 2020 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 (866) 652-5200 and from outside the U.S. at (412) 317-6060. Please use the conference identification number 10147302.

The third quarter 2020 results and supplemental materials, including a presentation in PDF format, will be distributed before the market opens on November 5, 2020 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 10147302. The telephone replay will be available approximately two hours after the end of the call and continue through November 19, 2020.

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 3,900 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. 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 novel coronavirus (COVID-19) pandemic on the Company’s business, results of operations, financial condition and liquidity; the Company’s ability to regain compliance with the New York Stock Exchange’s continued listing standards; the Company’s debt, including the Company’s ability to refinance any debt on commercially reasonable terms or at all; liabilities and restrictions 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 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; the Company’s ability to meet its covenants in the agreements governing its debt; 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 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.

Appendix I

Horizon Global Corporation
Company and Business Segment Financial Information
(Unaudited - dollars in thousands)

The Company’s management utilizes Adjusted EBITDA ⁽²⁾ 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 ⁽²⁾ 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 ⁽²⁾ that is prepared in accordance with U.S. GAAP. Adjusted EBITDA ⁽²⁾ , 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 ⁽²⁾ 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, impairment of goodwill and other intangibles, non-cash stock compensation, certain product liability recall and litigation claims, acquisition and integration costs, gains (losses) on business divestitures and other assets, board transition support and non-cash unrealized foreign currency remeasurement costs.

The following table summarizes Adjusted EBITDA ⁽²⁾ for our operating segments for the three months ended September 30, 2020 and 2019:

The following table summarizes Adjusted EBITDA ⁽²⁾ for our operating segments for the nine months ended September 30, 2020 and 2019: