UNITED STATES | ||
SECURITIES AND EXCHANGE COMMISSION | ||
Washington, D.C. 20549 | ||
FORM 8-K |
Delaware | 001-37427 | 47-3574483 | ||
(State or other jurisdiction | (Commission | (IRS Employer | ||
of incorporation) | File Number) | Identification No.) |
2600 West Big Beaver Road, Suite 555, Troy, Michigan | 48084 | |
(Address of principal executive offices) | (Zip Code) |
Exhibit No. | Description | |||
99.1 | Press Release | |||
HORIZON GLOBAL CORPORATION | ||||||
Date: | November 1, 2016 | By: | /s/ David G. Rice | |||
Name: | David G. Rice | |||||
Title: | Chief Financial Officer |
CONTACT: | Maria C. Duey | ||
Vice President, Corporate Development & Investor Relations | |||
(248) 593-8810 | |||
mduey@horizonglobal.com |
▪ | Signed definitive agreement to acquire Westfalia |
▪ | Operating profit margin decreased to 4.4 percent, down from 5.6 percent |
* | Adjusted operating profit(1) margin improved to 7.8 percent, up from 7.6 percent |
* | Adjusted segment operating profit(1) margin improved to 11.6 percent, up from 10.1 percent |
▪ | Generated operating cash flow greater than two times net income; more than double prior year-to-date |
▪ | Leverage ratio improved to 2.7 times(2) as of September 30, 2016, down from 3.6 times(2) one year ago |
▪ | Raised full-year guidance |
▪ | Net sales growth of 2 to 4 percent on a GAAP basis and 3 to 5 percent on a constant currency basis(3) |
▪ | Adjusted segment operating profit increasing 130 to 150 basis points from more than 100 basis points(3) |
▪ | Net cash conversion greater than 200 percent of net income (operating cash flow as a percent of net income), from more than 100 percent |
(1) | Please refer to "Company and Business Segment Financial Information," which details certain costs, expenses, other charges, collectively described as ''Special Items,'' that are included in the determination of operating profit under GAAP, but that management would consider important in evaluating the quality of the Company's operating results as they are not indicative of the Company's core operating results or may obscure trends useful in evaluating the Company's continuing activities. Accordingly, the Company presents adjusted operating profit and adjusted segment operating profit excluding these Special Items to help investors evaluate our operating performance and trends in our business consistent with how management evaluates such performance and trends. |
(2) | Appendix III reconciles net income to "Consolidated Bank EBITDA" as defined in our credit agreement. We believe this reconciliation provides valuable supplemental information regarding our capital structure, consistent with how we evaluate our performance. Leverage ratio is calculated by dividing “Total Consolidated Indebtedness” by “Consolidated Bank EBITDA”. “Total Consolidated Indebtedness” is defined as total Company debt less domestic cash. Domestic cash as of September 30, 2016 and 2015 was $27.7 million and $18.4 million, respectively. |
(3) | The Company provides guidance with respect to certain non-GAAP financial measures. The Company is unable to reconcile these non-GAAP financial measures to the most directly comparable GAAP financial measures, due to the timing of the Westfalia acquisition and ongoing purchase accounting. Accordingly, the impact of Westfalia's operations are not reflected in our 2016 guidance. The Company has included a reconciliation for revenue growth on a constant currency basis and adjusted segment operating profit growth, excluding the impact of Westfalia operations, in order to provide investors a better understanding of the Company's view of 2016 guidance as compared to prior periods. Please refer to Appendix V, "2016 Guidance Reconciliation" for a reconciliation of the Company's 2016 guidance of revenue growth on a constant currency basis and adjusted segment operating profit growth. |
September 30, 2016 | December 31, 2015 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 41,420 | $ | 23,520 | ||||
Receivables, net | 73,380 | 63,050 | ||||||
Inventories | 100,780 | 119,470 | ||||||
Prepaid expenses and other current assets | 7,740 | 5,120 | ||||||
Total current assets | 223,320 | 211,160 | ||||||
Property and equipment, net | 47,560 | 45,890 | ||||||
Goodwill | 5,360 | 4,410 | ||||||
Other intangibles, net | 49,970 | 56,020 | ||||||
Deferred income taxes | 3,700 | 4,500 | ||||||
Other assets | 9,960 | 9,600 | ||||||
Total assets | $ | 339,870 | $ | 331,580 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current liabilities: | ||||||||
Current maturities, long-term debt | $ | 11,740 | $ | 10,130 | ||||
Accounts payable | 72,310 | 78,540 | ||||||
Accrued liabilities | 42,810 | 39,820 | ||||||
Total current liabilities | 126,860 | 128,490 | ||||||
Long-term debt | 178,890 | 178,610 | ||||||
Deferred income taxes | 680 | 2,910 | ||||||
Other long-term liabilities | 17,440 | 19,570 | ||||||
Total liabilities | 323,870 | 329,580 | ||||||
Commitments and contingent liabilities | — | — | ||||||
Total shareholders' equity | 16,000 | 2,000 | ||||||
Total liabilities and shareholders' equity | $ | 339,870 | $ | 331,580 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net sales | $ | 151,720 | $ | 153,340 | $ | 465,590 | $ | 454,240 | ||||||||
Cost of sales | (109,210 | ) | (115,580 | ) | (339,760 | ) | (343,430 | ) | ||||||||
Gross profit | 42,510 | 37,760 | 125,830 | 110,810 | ||||||||||||
Selling, general and administrative expenses | (35,850 | ) | (29,090 | ) | (97,510 | ) | (91,280 | ) | ||||||||
Impairment of intangible assets | — | — | (2,240 | ) | — | |||||||||||
Net loss on dispositions of property and equipment | (30 | ) | (60 | ) | (520 | ) | (1,850 | ) | ||||||||
Operating profit | 6,630 | 8,610 | 25,560 | 17,680 | ||||||||||||
Other expense, net: | ||||||||||||||||
Interest expense | (4,100 | ) | (4,350 | ) | (12,600 | ) | (4,590 | ) | ||||||||
Other expense, net | (1,000 | ) | (1,060 | ) | (2,170 | ) | (3,030 | ) | ||||||||
Other expense, net | (5,100 | ) | (5,410 | ) | (14,770 | ) | (7,620 | ) | ||||||||
Income before income tax credit (expense) | 1,530 | 3,200 | 10,790 | 10,060 | ||||||||||||
Income tax credit (expense) | (1,160 | ) | 3,150 | (900 | ) | (30 | ) | |||||||||
Net income | $ | 370 | $ | 6,350 | $ | 9,890 | $ | 10,030 | ||||||||
Net income per share: | ||||||||||||||||
Basic | $ | 0.02 | $ | 0.35 | $ | 0.55 | $ | 0.55 | ||||||||
Diluted | $ | 0.02 | $ | 0.35 | $ | 0.54 | $ | 0.55 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 18,174,509 | 18,098,404 | 18,144,998 | 18,073,836 | ||||||||||||
Diluted | 18,519,077 | 18,215,209 | 18,333,226 | 18,160,858 |
Nine months ended September 30, | ||||||||
2016 | 2015 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 9,890 | $ | 10,030 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Net loss on dispositions of property and equipment | 520 | 1,850 | ||||||
Depreciation | 7,490 | 7,580 | ||||||
Amortization of intangible assets | 5,480 | 5,540 | ||||||
Impairment of intangible assets | 2,240 | — | ||||||
Amortization of original issuance discount and debt issuance costs | 1,390 | 330 | ||||||
Deferred income taxes | (1,500 | ) | (4,620 | ) | ||||
Non-cash compensation expense | 2,840 | 1,750 | ||||||
Increase in receivables | (8,260 | ) | (16,120 | ) | ||||
Decrease in inventories | 19,920 | 5,330 | ||||||
Increase in prepaid expenses and other assets | (1,670 | ) | (1,910 | ) | ||||
Increase (decrease) in accounts payable and accrued liabilities | (10,040 | ) | 2,860 | |||||
Other, net | (790 | ) | 170 | |||||
Net cash provided by operating activities | 27,510 | 12,790 | ||||||
Cash Flows from Investing Activities: | ||||||||
Capital expenditures | (10,090 | ) | (6,400 | ) | ||||
Net proceeds from disposition of property and equipment | 240 | 1,770 | ||||||
Net cash used for investing activities | (9,850 | ) | (4,630 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from borrowings on credit facilities | 37,050 | 100,420 | ||||||
Repayments of borrowings on credit facilities | (37,210 | ) | (95,420 | ) | ||||
Proceeds from Term B Loan, net of issuance costs | — | 192,920 | ||||||
Repayments of borrowings on Term B Loan | (7,500 | ) | (2,500 | ) | ||||
Proceeds from ABL Revolving Debt | 105,230 | 37,900 | ||||||
Repayments of borrowings on ABL Revolving Debt | (98,430 | ) | (30,980 | ) | ||||
Proceeds from borrowings on Vendor Financing | 3,110 | — | ||||||
Repayments of borrowings on Vendor Financing | (1,820 | ) | — | |||||
Net transfers from former parent | — | 27,630 | ||||||
Cash dividend paid to former parent | — | (214,500 | ) | |||||
Shares surrendered upon vesting of employees' share based payment awards to cover tax obligations | (230 | ) | — | |||||
Net cash provided by financing activities | 200 | 15,470 | ||||||
Effect of exchange rate changes on cash | 40 | (1,220 | ) | |||||
Cash and Cash Equivalents: | ||||||||
Increase for the period | 17,900 | 22,410 | ||||||
At beginning of period | 23,520 | 5,720 | ||||||
At end of period | $ | 41,420 | $ | 28,130 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 11,180 | $ | 3,760 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Horizon North America | ||||||||||||||||
Net sales | $ | 108,640 | $ | 114,480 | $ | 344,230 | $ | 334,770 | ||||||||
Operating profit | $ | 13,330 | $ | 11,220 | $ | 36,910 | $ | 25,360 | ||||||||
Special Items to consider in evaluating operating profit: | ||||||||||||||||
Severance and business restructuring costs | $ | 580 | $ | 3,050 | $ | 4,910 | $ | 5,520 | ||||||||
Loss on software disposal | $ | — | $ | — | $ | — | $ | 1,870 | ||||||||
Impairment of intangible assets | $ | 50 | $ | — | $ | 2,330 | $ | — | ||||||||
Adjusted operating profit | $ | 13,960 | $ | 14,270 | $ | 44,150 | $ | 32,750 | ||||||||
Horizon International | ||||||||||||||||
Net sales | $ | 43,080 | $ | 38,860 | $ | 121,360 | $ | 119,470 | ||||||||
Operating profit | $ | 3,540 | $ | 1,210 | $ | 8,150 | $ | 4,690 | ||||||||
Special Items to consider in evaluating operating profit: | ||||||||||||||||
Severance and business restructuring costs | $ | 40 | $ | 10 | $ | 320 | $ | 1,070 | ||||||||
Adjusted operating profit | $ | 3,580 | $ | 1,220 | $ | 8,470 | $ | 5,760 | ||||||||
Operating Segments | ||||||||||||||||
Segment operating profit | $ | 16,870 | $ | 12,430 | $ | 45,060 | $ | 30,050 | ||||||||
Special Items to consider in evaluating operating profit: | ||||||||||||||||
Severance and business restructuring costs | $ | 620 | $ | 3,060 | $ | 5,230 | $ | 6,590 | ||||||||
Loss on software disposal | $ | — | $ | — | $ | — | $ | 1,870 | ||||||||
Impairment of intangible assets | $ | 50 | $ | — | $ | 2,330 | $ | — | ||||||||
Adjusted segment operating profit | $ | 17,540 | $ | 15,490 | $ | 52,620 | $ | 38,510 | ||||||||
Corporate Expenses | ||||||||||||||||
Operating loss | $ | (10,240 | ) | $ | (3,820 | ) | $ | (19,500 | ) | $ | (12,370 | ) | ||||
Special Items to consider in evaluating operating loss: | ||||||||||||||||
Acquisition costs | $ | 4,570 | $ | — | $ | 4,570 | $ | — | ||||||||
Adjusted operating loss | $ | (5,670 | ) | $ | (3,820 | ) | $ | (14,930 | ) | $ | (12,370 | ) | ||||
Total Company | ||||||||||||||||
Net sales | $ | 151,720 | $ | 153,340 | $ | 465,590 | $ | 454,240 | ||||||||
Operating profit | $ | 6,630 | $ | 8,610 | $ | 25,560 | $ | 17,680 | ||||||||
Total Special Items to consider in evaluating operating profit | $ | 5,240 | $ | 3,060 | $ | 12,130 | $ | 8,460 | ||||||||
Adjusted operating profit | $ | 11,870 | $ | 11,670 | $ | 37,690 | $ | 26,140 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income, as reported | $ | 370 | $ | 6,350 | $ | 9,890 | $ | 10,030 | ||||||||
Impact of Special Items to consider in evaluating quality of income: | ||||||||||||||||
Severance and business restructuring costs | 620 | 3,060 | 5,230 | 6,590 | ||||||||||||
Loss on software disposal | — | — | — | 1,870 | ||||||||||||
Impairment of intangible assets | 50 | — | 2,330 | — | ||||||||||||
Acquisition costs | 4,580 | — | 4,580 | — | ||||||||||||
Tax impact of Special Items | 60 | (410 | ) | (1,920 | ) | (2,070 | ) | |||||||||
Adjusted net income | $ | 5,680 | $ | 9,000 | $ | 20,110 | $ | 16,420 | ||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Diluted earnings per share, as reported | $ | 0.02 | $ | 0.35 | $ | 0.54 | $ | 0.55 | ||||||||
Impact of Special Items to consider in evaluating quality of EPS: | ||||||||||||||||
Severance and business restructuring costs | 0.03 | 0.17 | 0.29 | 0.36 | ||||||||||||
Loss on software disposal | — | — | — | 0.10 | ||||||||||||
Impairment of intangible assets | — | — | 0.13 | — | ||||||||||||
Acquisition costs | 0.25 | — | 0.25 | — | ||||||||||||
Tax impact of Special Items | — | (0.02 | ) | (0.10 | ) | (0.11 | ) | |||||||||
Adjusted earnings per share | $ | 0.30 | $ | 0.50 | $ | 1.11 | $ | 0.90 | ||||||||
Weighted-average shares outstanding, diluted | 18,519,077 | 18,215,209 | 18,333,226 | 18,160,858 |
Three months ended September 30, 2016 | Nine months ended September 30, 2016 | |||||||||||||||||
Consolidated | Horizon North America | Horizon International | Consolidated | Horizon North America | Horizon International | |||||||||||||
Revenue growth as reported | (1.1 | )% | (5.1 | )% | 10.9 | % | 2.5 | % | 2.8 | % | 1.6 | % | ||||||
Less: currency impact | 0.1 | % | — | % | 0.5 | % | (1.3 | )% | — | % | (5.0 | )% | ||||||
Revenue growth at constant currency | (1.2 | )% | (5.1 | )% | 10.4 | % | 3.8 | % | 2.8 | % | 6.6 | % |
Less: | Add: | |||||||||||||||
Year Ended December 31, 2015 | Nine Months Ended September 30, 2015 | Nine Months Ended September 30, 2016 | Twelve Months Ended September 30, 2016 | |||||||||||||
Net income | $ | 8,300 | $ | 10,030 | $ | 9,890 | $ | 8,160 | ||||||||
Bank stipulated adjustments: | ||||||||||||||||
Interest expense, net (as defined) | 8,810 | 4,590 | 12,600 | 16,820 | ||||||||||||
Income tax expense (benefit) | (1,280 | ) | 30 | 900 | (410 | ) | ||||||||||
Depreciation and amortization | 17,080 | 13,120 | 12,970 | 16,930 | ||||||||||||
Extraordinary charges (as defined) | — | — | 4,120 | 4,120 | ||||||||||||
Non-cash compensation expense(a) | 2,530 | 1,750 | 2,840 | 3,620 | ||||||||||||
Other non-cash expenses or losses | 11,350 | 11,150 | 3,410 | 3,610 | ||||||||||||
Non-recurring expenses or costs (as defined)(b) | 5,000 | 5,000 | 4,860 | 4,860 | ||||||||||||
Interest-equivalent costs associated with any Specified Vendor Receivables Financing | 900 | 690 | 940 | 1,150 | ||||||||||||
Consolidated Bank EBITDA, as defined | $ | 52,690 | $ | 46,360 | $ | 52,530 | $ | 58,860 |
September 30, 2016 | ||||
Total Consolidated Indebtedness(d) | $ | 161,120 | ||
Consolidated Bank EBITDA, as defined | 58,860 | |||
Actual leverage ratio | 2.74 x | |||
Covenant requirement | 5.25 x |
Less: | Add: | |||||||||||||||
Year Ended December 31, 2014 | Nine Months Ended September 30, 2014 | Nine Months Ended September 30, 2015 | Twelve Months Ended September 30, 2015 | |||||||||||||
Net income | $ | 15,350 | $ | 18,410 | $ | 10,030 | $ | 6,970 | ||||||||
Bank stipulated adjustments: | ||||||||||||||||
Interest expense, net (as defined) | 720 | 510 | 4,590 | 4,800 | ||||||||||||
Income tax expense | 5,240 | 5,890 | 30 | (620 | ) | |||||||||||
Depreciation and amortization | 18,930 | 14,560 | 13,120 | 17,490 | ||||||||||||
Non-cash compensation expense(a) | 2,660 | 2,410 | 1,750 | 2,000 | ||||||||||||
Other non-cash expenses or losses | 15,260 | 11,960 | 11,150 | 14,450 | ||||||||||||
Non-recurring expenses or costs (as defined)(b) | 4,440 | 4,140 | 5,000 | 5,300 | ||||||||||||
Acquisition integration costs(c) | 90 | 90 | — | — | ||||||||||||
Interest-equivalent costs associated with any Specified Vendor Receivables Financing | 870 | 570 | 690 | 990 | ||||||||||||
Consolidated Bank EBITDA, as defined | $ | 63,560 | $ | 58,540 | $ | 46,360 | $ | 51,380 |
September 30, 2015 | ||||
Total Consolidated Indebtedness(d) | $ | 185,110 | ||
Consolidated Bank EBITDA, as defined | 51,380 | |||
Actual leverage ratio | 3.60 x | |||
Covenant requirement | 5.25 x |
Twelve months ending on December 31, 2016 | Twelve months ended December 31, 2015 | Change | ||||
Operating Profit Margin | 4.3% - 4.4% | 3.4% | ||||
Less: Corporate Expenses | (4.1)% | (3.2)% | ||||
Segment Operating Profit Margin, as reported | 8.4% - 8.5% | 6.6% | ||||
Special Items to consider in evaluating operating profit: | ||||||
Severance and business restructuring costs | 0.9% - 1.0% | 1.5% | ||||
Loss on software disposal | —% | 0.3% | ||||
Impairment of intangible assets | 0.4% | —% | ||||
Adjusted Segment Operating Profit Margin | 9.7% - 9.9% | 8.4% | 130 - 150 bps |
Twelve months ending on December 31, 2016 | ||
Revenue growth | 2 - 4% | |
Less: currency impact | (1 - 2)% | |
Revenue growth at constant currency | 3 - 5% |
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