UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 | ||
FORM 8-K | ||
CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported): November 12, 2019 | ||
Horizon Global Corporation (Exact Name of Registrant as Specified in Charter) |
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 ___________ (Zip Code) | |
(Address of principal executive offices) |
Registrant’s telephone number, including area code: | (248) 593-8820 _____________ |
Not Applicable |
________________________________________ (Former name or former address, if changed since last report) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 par value | HZN | New York Stock Exchange |
Exhibit No. | Description | |||
99.1 | ||||
HORIZON GLOBAL CORPORATION | ||||||
Date: | November 12, 2019 | By: | /s/ Jamie G. Pierson | |||
Name: | Jamie G. Pierson | |||||
Title: | Chief Financial Officer |
CONTACT: | Jeff Tryka, CFA | ||
Investor Relations, Lambert & Co. | |||
(616) 295-2509 | |||
jtryka@horizonglobal.com |
▪ | Net sales decreased $16.2 million, or 8.3%, to $177.9 million from prior-year comparable period, primarily attributable to lower net sales in Horizon Americas |
▪ | Operating loss of $12.8 million, or 7.2% of net sales; improvement of $17.1 million over prior-year comparable period, primarily due to a $26.6 million goodwill impairment charge recorded in third quarter 2018 |
▪ | Net loss from continuing operations of $37.5 million; down $0.4 million from prior-year comparable period |
▪ | Adjusted EBITDA(2) decreased $12.9 million to $(3.1) million from prior-year comparable period due to lower net sales and reduced gross margin in Horizon Americas |
(1) | We evaluate growth in our operations on both an as reported basis 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 period revenue in local currency using the prior period’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. See Appendix II for reconciliation. |
(2) | 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 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. |
September 30, 2019 | December 31, 2018 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 16,360 | $ | 27,650 | ||||
Receivables, net of allowance for doubtful accounts of approximately $5.0 million and $4.8 million at September 30, 2019 and December 31, 2018, respectively | 93,480 | 95,170 | ||||||
Inventories | 141,150 | 152,200 | ||||||
Prepaid expenses and other current assets | 9,480 | 8,270 | ||||||
Current assets held-for-sale | — | 36,080 | ||||||
Total current assets | 260,470 | 319,370 | ||||||
Property and equipment, net | 78,670 | 86,500 | ||||||
Operating lease right-of-use assets | 56,170 | — | ||||||
Goodwill | 4,200 | 4,500 | ||||||
Other intangibles, net | 60,350 | 69,400 | ||||||
Deferred income taxes | 440 | 660 | ||||||
Non-current assets held-for-sale | — | 34,790 | ||||||
Other assets | 5,700 | 6,130 | ||||||
Total assets | $ | 466,000 | $ | 521,350 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current liabilities: | ||||||||
Short-term borrowings and current maturities, long-term debt | $ | 24,270 | $ | 13,860 | ||||
Accounts payable | 79,440 | 102,350 | ||||||
Short-term operating lease liabilities | 9,850 | — | ||||||
Current liabilities held-for-sale | — | 28,080 | ||||||
Accrued liabilities | 53,020 | 58,520 | ||||||
Total current liabilities | 166,580 | 202,810 | ||||||
Gross long-term debt | 214,930 | 382,220 | ||||||
Unamortized debt issuance costs and discount | (34,200 | ) | (31,570 | ) | ||||
Long-term debt | 180,730 | 350,650 | ||||||
Deferred income taxes | 8,280 | 12,620 | ||||||
Long-term operating lease liabilities | 50,890 | — | ||||||
Non-current liabilities held-for-sale | — | 1,740 | ||||||
Other long-term liabilities | 20,770 | 19,750 | ||||||
Total liabilities | 427,250 | 587,570 | ||||||
Total Horizon Global shareholders' equity (deficit) | 42,090 | (63,720 | ) | |||||
Noncontrolling interest | (3,340 | ) | (2,500 | ) | ||||
Total shareholders' equity (deficit) | 38,750 | (66,220 | ) | |||||
Total liabilities and shareholders' equity | $ | 466,000 | $ | 521,350 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net sales | $ | 177,850 | $ | 194,030 | $ | 548,170 | $ | 576,250 | ||||||||
Cost of sales | (149,560 | ) | (159,500 | ) | (460,010 | ) | (472,120 | ) | ||||||||
Gross profit | 28,290 | 34,530 | 88,160 | 104,130 | ||||||||||||
Selling, general and administrative expenses | (41,100 | ) | (37,680 | ) | (113,140 | ) | (134,210 | ) | ||||||||
Impairment of goodwill and intangible assets | — | (26,640 | ) | — | (125,770 | ) | ||||||||||
Net gain (loss) on dispositions of property and equipment | 50 | (110 | ) | 1,500 | (520 | ) | ||||||||||
Operating loss | (12,760 | ) | (29,900 | ) | (23,480 | ) | (156,370 | ) | ||||||||
Other expense, net | (1,640 | ) | (1,040 | ) | (6,610 | ) | (7,410 | ) | ||||||||
Interest expense | (24,120 | ) | (7,590 | ) | (50,270 | ) | (19,580 | ) | ||||||||
Loss from continuing operations before income tax | (38,520 | ) | (38,530 | ) | (80,360 | ) | (183,360 | ) | ||||||||
Income tax benefit | 1,020 | 1,420 | 2,330 | 15,770 | ||||||||||||
Net loss from continuing operations | (37,500 | ) | (37,110 | ) | (78,030 | ) | (167,590 | ) | ||||||||
Income from discontinued operations, net of tax | 182,750 | 4,110 | 189,520 | 9,670 | ||||||||||||
Net income (loss) | 145,250 | (33,000 | ) | 111,490 | (157,920 | ) | ||||||||||
Less: Net loss attributable to noncontrolling interest | (260 | ) | (240 | ) | (840 | ) | (720 | ) | ||||||||
Net income (loss) attributable to Horizon Global | $ | 145,510 | $ | (32,760 | ) | $ | 112,330 | $ | (157,200 | ) | ||||||
Net income (loss) per share attributable to Horizon Global: | ||||||||||||||||
Basic: | ||||||||||||||||
Continuing operations | $ | (1.47 | ) | $ | (1.47 | ) | $ | (3.05 | ) | $ | (6.67 | ) | ||||
Discontinued operations | $ | 7.21 | $ | 0.16 | $ | 7.50 | $ | 0.39 | ||||||||
Total | $ | 5.74 | $ | (1.31 | ) | $ | 4.45 | $ | (6.28 | ) | ||||||
Diluted: | ||||||||||||||||
Continuing operations | $ | (1.47 | ) | $ | (1.47 | ) | $ | (3.05 | ) | $ | (6.67 | ) | ||||
Discontinued operations | $ | 7.21 | $ | 0.16 | $ | 7.50 | $ | 0.39 | ||||||||
Total | $ | 5.74 | $ | (1.31 | ) | $ | 4.45 | $ | (6.28 | ) | ||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 25,329,492 | 25,101,847 | 25,267,310 | 25,028,072 | ||||||||||||
Diluted | 25,329,492 | 25,101,847 | 25,267,310 | 25,028,072 |
Nine months ended September 30, | ||||||||
2019 | 2018 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income (loss) | $ | 111,490 | $ | (157,920 | ) | |||
Less: Net income from discontinued operations | 189,520 | 9,670 | ||||||
Net loss from continuing operations | (78,030 | ) | (167,590 | ) | ||||
Adjustments to reconcile net loss from continued operations to net cash used for operating activities: | ||||||||
Net (gain) loss on dispositions of property and equipment | (1,500 | ) | 520 | |||||
Depreciation | 11,980 | 9,410 | ||||||
Amortization of intangible assets | 4,800 | 5,640 | ||||||
Write off of operating lease assets | 4,250 | — | ||||||
Impairment of goodwill and intangible assets | — | 125,770 | ||||||
Amortization of original issuance discount and debt issuance costs | 18,570 | 6,050 | ||||||
Deferred income taxes | (3,390 | ) | (3,370 | ) | ||||
Non-cash compensation expense | 1,790 | 1,430 | ||||||
Paid-in-kind interest | 7,620 | — | ||||||
Increase in receivables | (4,680 | ) | (31,950 | ) | ||||
Decrease in inventories | 1,920 | 5,630 | ||||||
(Increase) decrease in prepaid expenses and other assets | (2,770 | ) | 1,150 | |||||
Decrease in accounts payable and accrued liabilities | (15,560 | ) | (27,450 | ) | ||||
Other, net | (10,800 | ) | 220 | |||||
Net cash used for operating activities for continuing operations | (65,800 | ) | (74,540 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Capital expenditures | (8,460 | ) | (9,660 | ) | ||||
Net proceeds from sale of business | 214,570 | — | ||||||
Net proceeds from disposition of property and equipment | 1,470 | (280 | ) | |||||
Net cash provided by (used for) investing activities for continuing operations | 207,580 | (9,940 | ) | |||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from borrowings on credit facilities | 13,780 | 12,550 | ||||||
Repayments of borrowings on credit facilities | (6,520 | ) | (14,390 | ) | ||||
Proceeds from Second Lien Term Loan, net of issuance costs | 35,520 | 45,430 | ||||||
Repayments of borrowings on First Lien Term Loan, inclusive of transaction costs | (173,430 | ) | (6,490 | ) | ||||
Proceeds from ABL Revolving Debt, net of issuance costs | 68,790 | 72,430 | ||||||
Repayments of borrowings on ABL Revolving Debt | (112,510 | ) | (34,830 | ) | ||||
Proceeds from issuance of Series A Preferred Stock | 5,340 | — | ||||||
Proceeds from issuance of Warrants | 5,380 | — | ||||||
Other, net | (10 | ) | (300 | ) | ||||
Net cash (used for) provided by financing activities for continuing operations | (163,660 | ) | 74,400 | |||||
Discontinued Operations: | ||||||||
Net cash provided by discontinued operating activities | 11,430 | 8,500 | ||||||
Net cash used for discontinued investing activities | (1,120 | ) | (720 | ) | ||||
Net cash provided by (used for) discontinued financing activities | — | — | ||||||
Net cash provided by discontinued operations | 10,310 | 7,780 | ||||||
Effect of exchange rate changes on cash | 280 | 40 | ||||||
Cash and Cash Equivalents: | ||||||||
Decrease for the period | (11,290 | ) | (2,260 | ) | ||||
At beginning of period | 27,650 | 29,570 | ||||||
At end of period | $ | 16,360 | $ | 27,310 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 19,730 | $ | 13,430 | ||||
Cash paid for taxes | $ | 480 | $ | 2,170 |
Three months ended September 30, 2019 | Three months ended September 30, 2018 | Variance | ||||||||||||||||||||||||||||||||||
Horizon Americas | Horizon Europe-Africa | Corporate | Consolidated | Horizon Americas | Horizon Europe-Africa | Corporate | Consolidated | Consolidated | ||||||||||||||||||||||||||||
(dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||||||||||||||||
Net income attributable to Horizon Global | $ | 145,510 | $ | (32,760 | ) | $ | 178,270 | |||||||||||||||||||||||||||||
Net loss attributable to noncontrolling interest | (260 | ) | (240 | ) | (20 | ) | ||||||||||||||||||||||||||||||
Net income | 145,250 | (33,000 | ) | 178,250 | ||||||||||||||||||||||||||||||||
Interest expense | 24,120 | 7,590 | 16,530 | |||||||||||||||||||||||||||||||||
Income tax benefit | (1,020 | ) | (1,420 | ) | 400 | |||||||||||||||||||||||||||||||
Depreciation and amortization | 6,250 | 5,090 | 1,160 | |||||||||||||||||||||||||||||||||
EBITDA | (940 | ) | 1,380 | 174,160 | 174,600 | 8,030 | (31,560 | ) | 1,790 | (21,740 | ) | 196,340 | ||||||||||||||||||||||||
Net loss attributable to noncontrolling interest | — | 260 | — | 260 | — | 230 | — | 230 | 30 | |||||||||||||||||||||||||||
Income from discontinued operations, net of tax | — | — | (182,750 | ) | (182,750 | ) | — | — | (4,110 | ) | (4,110 | ) | (178,640 | ) | ||||||||||||||||||||||
Severance | — | — | 1,620 | 1,620 | 660 | — | — | 660 | 960 | |||||||||||||||||||||||||||
Restructuring, relocation and related business disruption costs | (200 | ) | — | 4,250 | 4,050 | 4,220 | 1,370 | — | 5,590 | (1,540 | ) | |||||||||||||||||||||||||
Impairment of goodwill and other intangibles | — | — | — | — | — | 26,640 | — | 26,640 | (26,640 | ) | ||||||||||||||||||||||||||
Non-cash stock compensation | — | — | 850 | 850 | — | — | 230 | 230 | 620 | |||||||||||||||||||||||||||
Acquisition and integration costs | — | — | — | — | — | 70 | 1,130 | 1,200 | (1,200 | ) | ||||||||||||||||||||||||||
(Gain) loss on business divestitures and other assets | 320 | — | (1,320 | ) | (1,000 | ) | 650 | — | — | 650 | (1,650 | ) | ||||||||||||||||||||||||
Product liability and litigation claims | 820 | (4,270 | ) | — | (3,450 | ) | — | — | — | — | (3,450 | ) | ||||||||||||||||||||||||
Debt issuance costs | — | — | 530 | 530 | — | — | — | — | 530 | |||||||||||||||||||||||||||
Unrealized remeasurement costs | 240 | 650 | 300 | 1,190 | 110 | 530 | (110 | ) | 530 | 660 | ||||||||||||||||||||||||||
Other (income) expense, net | 310 | 2,720 | (1,980 | ) | 1,050 | 570 | 2,650 | (3,290 | ) | (70 | ) | 1,120 | ||||||||||||||||||||||||
Adjusted EBITDA | $ | 550 | $ | 740 | $ | (4,340 | ) | $ | (3,050 | ) | $ | 14,240 | $ | (70 | ) | $ | (4,360 | ) | $ | 9,810 | $ | (12,860 | ) |
Nine months ended September 30, 2019 | Nine months ended September 30, 2018 | Variance | ||||||||||||||||||||||||||||||||||
Horizon Americas | Horizon Europe-Africa | Corporate | Consolidated | Horizon Americas | Horizon Europe-Africa | Corporate | Consolidated | Consolidated | ||||||||||||||||||||||||||||
(dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||||||||||||||||
Net income attributable to Horizon Global | $ | 112,330 | $ | (157,200 | ) | $ | 269,530 | |||||||||||||||||||||||||||||
Net loss attributable to noncontrolling interest | (840 | ) | (720 | ) | (120 | ) | ||||||||||||||||||||||||||||||
Net income | 111,490 | (157,920 | ) | 269,410 | ||||||||||||||||||||||||||||||||
Interest expense | 50,270 | 19,580 | 30,690 | |||||||||||||||||||||||||||||||||
Income tax benefit | (2,330 | ) | (15,770 | ) | 13,440 | |||||||||||||||||||||||||||||||
Depreciation and amortization | 16,790 | 15,070 | 1,720 | |||||||||||||||||||||||||||||||||
EBITDA | 10,100 | (3,770 | ) | 169,890 | 176,220 | 7,260 | (132,630 | ) | (13,670 | ) | (139,040 | ) | 315,260 | |||||||||||||||||||||||
Net loss attributable to noncontrolling interest | — | 840 | — | 840 | — | 720 | — | 720 | 120 | |||||||||||||||||||||||||||
Income from discontinued operations, net of tax | — | — | (189,520 | ) | (189,520 | ) | — | — | (9,670 | ) | (9,670 | ) | (179,850 | ) | ||||||||||||||||||||||
Severance | (200 | ) | 10 | 1,620 | 1,430 | 5,010 | 1,560 | 2,750 | 9,320 | (7,890 | ) | |||||||||||||||||||||||||
Restructuring, relocation and related business disruption costs | 1,110 | (1,410 | ) | 4,250 | 3,950 | 11,830 | 2,820 | — | 14,650 | (10,700 | ) | |||||||||||||||||||||||||
Impairment of goodwill and other intangibles | — | — | — | — | — | 125,770 | — | 125,770 | (125,770 | ) | ||||||||||||||||||||||||||
Non-cash stock compensation | — | — | 1,820 | 1,820 | — | — | 1,440 | 1,440 | 380 | |||||||||||||||||||||||||||
Acquisition and integration costs | — | — | — | — | — | 1,390 | 16,130 | 17,520 | (17,520 | ) | ||||||||||||||||||||||||||
(Gain) loss on business divestitures and other assets | 1,280 | 3,630 | — | 4,910 | 1,490 | — | — | 1,490 | 3,420 | |||||||||||||||||||||||||||
Board transition support | — | — | 1,450 | 1,450 | — | — | — | — | 1,450 | |||||||||||||||||||||||||||
Product liability and litigation claims | 820 | 50 | — | 870 | — | — | — | — | 870 | |||||||||||||||||||||||||||
Debt issuance costs | — | — | 2,660 | 2,660 | — | — | — | — | 2,660 | |||||||||||||||||||||||||||
Unrealized remeasurement costs | 160 | 1,210 | 440 | 1,810 | 110 | 750 | 200 | 1,060 | 750 | |||||||||||||||||||||||||||
Other (income) expense, net | 730 | 8,140 | (7,120 | ) | 1,750 | 2,160 | 8,310 | (10,710 | ) | (240 | ) | 1,990 | ||||||||||||||||||||||||
Adjusted EBITDA | $ | 14,000 | $ | 8,700 | $ | (14,510 | ) | $ | 8,190 | $ | 27,860 | $ | 8,690 | $ | (13,530 | ) | $ | 23,020 | $ | (14,830 | ) |
Three months ended September 30, 2019 | Nine months ended September 30, 2019 | |||||||||||||||||||
Horizon Americas | Horizon Europe-Africa | Consolidated | Horizon Americas | Horizon Europe-Africa | Consolidated | |||||||||||||||
Revenue growth as reported | (16.7 | )% | 4.0 | % | (8.3 | )% | (6.0 | )% | (3.5 | )% | (4.9 | )% | ||||||||
Less: currency impact | — | % | (4.9 | )% | (2.0 | )% | (0.2 | )% | (6.4 | )% | (3.0 | )% | ||||||||
Revenue growth at constant currency | (16.7 | )% | 8.9 | % | (6.3 | )% | (5.8 | )% | 2.9 | % | (1.9 | )% |
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