Horizon Global Delivers Profit Improvement for Fourth Consecutive Quarter

Second Quarter 2016 Highlights

  • Operating profit more than doubled from $5.4 million to $11.1 million
  • Operating profit margin increased to 6.6 percent, up 320 basis points
  • Adjusted operating profit(1) margin improved to 10.3
    percent, up 380 basis points
  • Adjusted segment operating profit(1) margin improved to
    13.0 percent, up 400 basis points
  • Net sales increased from $158.5 million to $167.8 million, up 5.8
    percent
  • Net sales increased 7.1 percent on a constant currency basis(2)
  • Diluted earnings per share more than tripled from $0.12 to $0.40
  • Adjusted diluted earnings per share(3) more than doubled to
    $0.64
  • Generated operating cash flow greater than net income
  • Leverage ratio improved to 3.1 times(4) as of June 30,
    2016, down from 3.8 times(4) one year ago

TROY, Mich.–(BUSINESS WIRE)–Horizon Global Corporation (NYSE: HZN), one of the world’s leading
manufacturers of branded towing and trailering equipment, reported
strong second quarter earnings, reflecting a continued focus on
execution while advancing key financial priorities.

“We capped off our first twelve months as a public company with a strong
performance in the second quarter as we saw solid revenue growth, strong
margin expansion and a reduction in leverage. Our accomplishments in our
first twelve months include nearly doubling operating profit, improving
operating margin by 300 basis points, more than doubling net income and
reducing our leverage ratio,” said A. Mark Zeffiro, President and Chief
Executive Officer of Horizon Global. “We continue to execute against our
strategic plan, focusing on our three key financial priorities of
increasing operating margins, improving our capital structure and
growing our revenues. Our automotive OE and aftermarket channels
improved over the prior year with e-Commerce doing particularly well.
Our results in the second quarter are indicative of our ability to
improve operations in the near term while remaining focused on long term
value creation.”

2016 Second Quarter Segment Highlights

Horizon North America. Net sales increased 8.7 percent,
with strong volume in e-commerce, automotive aftermarket and automotive
original equipment (OE) channels, offset by declines in retail and
industrial channels. Operating profit increased $5.2 million to $13.5
million, or 10.6 percent of net sales, due to higher sales, favorable
product mix, and lower input costs. Adjusted operating profit(1)
increased $7.0 million to $19.4 million, or 15.3 percent of net sales.

Horizon International. Net sales decreased 2.2 percent on
a reported basis, but increased 2.7 percent on a constant currency basis(2),
driven by strong growth in the OE channel, both in new and existing
programs. Operating profit increased $1.0 million to $2.2 million, or
5.3 percent of net sales, as a result of increased volume, productivity
initiatives and lower selling costs. Adjusted operating profit(1)
increased $0.5 million to $2.4 million, or 5.9 percent of net sales.

Outlook

Guidance issued for the year ended December 31, 2016 remains the same as
issued on March 1, 2016:

  • Net sales growth of 2 to 4 percent on a GAAP basis and 3 to 5 percent
    on a constant currency basis(5)
  • Adjusted segment operating profit increasing more than 100 basis points(6)
  • Net cash conversion greater than 100 percent of net income (operating
    cash flow as a percent of net income)

“Margin improvement remains our number one priority, and our results in
the first half of 2016 reflect our ongoing commitment to achieving a
10.0 percent operating margin. The consolidation of our facilities in
Mexico is complete and the integration of the Horizon North America
businesses is on track. Our core business model of building strong
brands while driving customer value is showing results. Through our
focus on lean and productivity, along with specific margin improvements,
we achieved a 400 basis point improvement in adjusted segment operating
margins,” said Zeffiro.

“Our outlook for 2016 remains consistent with our previous guidance.
Softening consumer confidence in North America along with signs of
inflation has resulted in uncertain global order patterns. We continue
to show improvements in our business and execute on our strategic plans
as we lay the foundation for our business beyond today and focus on
product innovation to strengthen our competitive advantage.”

Conference Call Details

Horizon Global will host a conference call regarding second quarter 2016
earnings on Tuesday, August 9, 2016 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 (844) 711-8052 and from outside
the U.S. at (832) 900-4641. Please use the conference identification
number 47839715.

The conference call will be webcast simultaneously and in its entirety
through the Horizon Global website. An earnings presentation will also
be available on the Horizon Global website at the time of the conference
call. 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 (800) 585-8367 and from outside the U.S. at (404)
537-3406. Please use the conference identification number 47839715. The
telephone replay will be available approximately two hours after the end
of the call and continue through August 25, 2016.

About Horizon Global

Headquartered in Troy, Michigan, Horizon Global Corporation (NYSE: HZN)
is a leading designer, manufacturer and distributor of industry leading
high-quality, custom-engineered towing, trailering, cargo management and
related accessory products for original equipment, aftermarket and
retail channel customers on a global basis. Our 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. For more information, please visit www.horizonglobal.com.

Safe Harbor Statement

This earnings release may contain “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 Company’s leverage; liabilities imposed by the
Company’s debt instruments; market demand; competitive factors; supply
constraints; material and energy costs; technology factors; litigation;
government and regulatory actions; the Company’s accounting policies;
future trends; general economic and currency conditions; various
conditions specific to the Company’s business and industry; the spin-off
from TriMas Corporation; 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.

(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 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) 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.
 
(3) Appendix I details certain costs, expenses, and other charges,
collectively described as ”Special Items,” that are included in
the determination of net income 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 net income and adjusted diluted earnings per share
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.
 
(4) 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 June 30, 2016 and 2015 was $16.1 million and $1.5 million,
respectively.
 
(5) 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 V for reconciliation
of the Company’s 2016 guidance of revenue growth on a constant
currency basis to growth on a GAAP basis.
 
(6) Excluding “Special Items”. Included in Appendix V, “2016 Guidance
Reconciliation”, this non-GAAP measure has been reconciled to the
most comparable GAAP measure. “Special Items” detail certain costs,
expenses, and other charges 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.
 
   
Horizon Global Corporation
Condensed Consolidated Balance Sheets
(Dollars in thousands)
 
June 30, December 31,
2016 2015
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 31,040 $ 23,520
Receivables, net 88,540 63,050
Inventories 107,600 119,470
Prepaid expenses and other current assets 6,880   5,120
Total current assets 234,060 211,160
Property and equipment, net 46,430 45,890
Goodwill 5,440 4,410
Other intangibles, net 51,830 56,020
Deferred income taxes 4,760 4,500
Other assets 10,320   9,600
Total assets $ 352,840   $ 331,580
Liabilities and Shareholders’ Equity
Current liabilities:
Current maturities, long-term debt $ 12,490 $ 10,130
Accounts payable 79,760 78,540
Accrued liabilities 40,910   39,820
Total current liabilities 133,160 128,490
Long-term debt 184,280 178,610
Deferred income taxes 2,970 2,910
Other long-term liabilities 18,640   19,570
Total liabilities 339,050 329,580
Commitments and contingent liabilities  
Total shareholders’ equity 13,790   2,000
Total liabilities and shareholders’ equity $ 352,840   $ 331,580
   
Horizon Global Corporation
Consolidated Statements of Income
(Unaudited – dollars in thousands, except per share amounts)
 
Three months ended Six months ended
June 30, June 30,
2016   2015 2016   2015
Net sales $ 167,760 $ 158,540 $ 313,870 $ 300,900
Cost of sales (122,050 ) (120,790 ) (230,550 ) (227,850 )
Gross profit 45,710 37,750 83,320 73,050
Selling, general and administrative expenses (31,970 ) (30,550 ) (61,660 ) (62,190 )
Impairment of intangible assets (2,240 ) (2,240 )
Net loss on dispositions of property and equipment (380 ) (1,840 ) (490 ) (1,790 )
Operating profit 11,120   5,360   18,930   9,070  
Other expense, net:
Interest expense (4,230 ) (120 ) (8,500 ) (240 )
Other expense, net (560 ) (720 ) (1,170 ) (1,970 )
Other expense, net (4,790 ) (840 ) (9,670 ) (2,210 )
Income before income tax credit (expense) 6,330 4,520 9,260 6,860
Income tax credit (expense) 1,000   (2,320 ) 260   (3,180 )
Net income $ 7,330   $ 2,200   $ 9,520   $ 3,680  
Net income per share:
Basic $ 0.40 $ 0.12 $ 0.53 $ 0.20
Diluted $ 0.40 $ 0.12 $ 0.52 $ 0.20
Weighted average common shares outstanding:
Basic 18,162,451 18,062,027 18,130,081 18,062,027
Diluted 18,319,068 18,134,475 18,260,246 18,134,475
 
Horizon Global Corporation
Consolidated Statements of Cash Flows
(Unaudited – dollars in thousands)
 
Six months ended
June 30,
2016   2015
Cash Flows from Operating Activities:
Net income $ 9,520 $ 3,680
Adjustments to reconcile net income to net cash provided by (used
for) operating activities:
Loss on dispositions of property and equipment 490 1,790
Depreciation 4,990 5,080
Amortization of intangible assets 3,640 3,720
Impairment of intangible assets 2,240
Amortization of original issuance discount and debt issuance costs 930
Deferred income taxes (370 ) 980
Non-cash compensation expense 1,830 1,270
Increase in receivables (23,870 ) (31,110 )
(Increase) decrease in inventories 12,540 (4,140 )
Increase in prepaid expenses and other assets (1,580 ) (1,630 )
Increase (decrease) in accounts payable and accrued liabilities (2,680 ) 12,800
Other, net (270 ) 670  
Net cash provided by (used for) operating activities 7,410   (6,890 )
Cash Flows from Investing Activities:
Capital expenditures (6,670 ) (4,140 )
Net proceeds from disposition of property and equipment 240   1,470  
Net cash used for investing activities (6,430 ) (2,670 )
Cash Flows from Financing Activities:
Proceeds from borrowings on credit facilities 36,770 73,100
Repayments of borrowings on credit facilities (37,280 ) (65,410 )
Proceeds from Term B Loan, net of issuance costs 192,970
Repayments of borrowings on Term B Loan (5,000 )
Proceeds from ABL Revolving Debt 81,930 7,720
Repayments of borrowings on ABL Revolving Debt (71,930 )
Proceeds from borrowings on Vendor Financing 2,390
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
(260 )  
Net cash provided by financing activities 6,620   21,510  
Effect of exchange rate changes on cash (80 ) (620 )
Cash and Cash Equivalents:
Increase for the period 7,520 11,330
At beginning of period 23,520   5,720  
At end of period $ 31,040   $ 17,050  
Supplemental disclosure of cash flow information:
Cash paid for interest $ 7,510   $ 220  
   
Horizon Global Corporation
Company and Business Segment Financial Information
(Unaudited – dollars in thousands)
 
Three months ended Six months ended
June 30, June 30,
2016   2015 2016   2015
Horizon North America
Net sales $ 126,860 $ 116,710 $ 235,590 $ 220,290
Operating profit $ 13,470 $ 8,240 $ 23,580 $ 14,140
Special Items to consider in evaluating operating profit:
Severance and business restructuring costs $ 3,630 $ 2,250 $ 4,330 $ 2,470
Loss on software disposal $ $ 1,870 $ $ 1,870
Impairment of intangible assets $ 2,280 $ $ 2,280 $
Adjusted operating profit $ 19,380 $ 12,360 $ 30,190 $ 18,480
 
Horizon International
Net sales $ 40,900 $ 41,830 $ 78,280 $ 80,610
Operating profit $ 2,160 $ 1,210 $ 4,610 $ 3,480
Special Items to consider in evaluating operating profit:
Severance and business restructuring costs $ 260 $ 750 $ 280 $ 1,060
Adjusted operating profit $ 2,420 $ 1,960 $ 4,890 $ 4,540
 
Operating Segments
Operating profit $ 15,630 $ 9,450 $ 28,190 $ 17,620
Special Items to consider in evaluating operating profit:
Severance and business restructuring costs $ 3,890 $ 3,000 $ 4,610 $ 3,530
Loss on software disposal $ $ 1,870 $ $ 1,870
Impairment of intangible assets $ 2,280 $ $ 2,280 $
Adjusted operating profit $ 21,800 $ 14,320 $ 35,080 $ 23,020
 
Corporate Expenses
Operating loss $ (4,510 ) $ (4,090 ) $ (9,260 ) $ (8,550 )
 
Total Company

Net sales

$ 167,760 $ 158,540 $ 313,870 $ 300,900
Operating profit $ 11,120 $ 5,360 $ 18,930 $ 9,070
Total Special Items to consider in evaluating operating profit $ 6,170 $ 4,870 $ 6,890 $ 5,400
Adjusted operating profit $ 17,290 $ 10,230 $ 25,820 $ 14,470
   
Appendix I
Horizon Global Corporation
Additional Information Regarding Special Items Impacting
Reported GAAP Financial Measures
(Unaudited – dollars in thousands, except per share amounts)
 
Three months ended Six months ended
June 30, June 30,
2016   2015 2016   2015
Net income, as reported $ 7,330 $ 2,200 $ 9,520 $ 3,680
Impact of Special Items to consider in evaluating quality of
income:
Severance and business restructuring costs 3,890 3,000 4,610 3,530
Loss on software disposal 1,870 1,870
Impairment of intangible assets 2,280 2,280
Tax impact of Special Items (1,850 ) (1,530 ) (1,980 ) (1,660 )
Adjusted net income $ 11,650   $ 5,540   $ 14,430   $ 7,420  
 
           
Three months ended Six months ended
June 30, June 30,
2016 2015 2016 2015
Diluted earnings per share, as reported $ 0.40 $ 0.12 $ 0.52 $ 0.20
Impact of Special Items to consider in evaluating quality of EPS:
Severance and business restructuring costs 0.21 0.17 0.25 0.19
Loss on software disposal 0.10 0.10
Impairment of intangible assets 0.13 0.13
Tax impact of Special Items (0.10 ) (0.08 ) (0.11 ) (0.09 )
Adjusted earnings per share $ 0.64   $ 0.31   $ 0.79   $ 0.40  
Weighted-average shares outstanding, diluted 18,319,068   18,134,475   18,260,246   18,134,475  
   

Appendix II

Horizon Global Corporation
Reconciliation of Reported Revenue Growth
to Constant Currency Basis
(Unaudited)
 
Three months ended Six months ended
June 30, 2016 June 30, 2016
  Horizon     Horizon  
North Horizon North Horizon
Consolidated America International Consolidated America International
Revenue growth as reported 5.8 % 8.7 % (2.2 )% 4.3 % 6.9 % (2.9 )%
Less: currency impact (1.3 )% % (4.9 )% (2.0 )% % (7.6 )%
Revenue growth at constant currency 7.1 % 8.7 % 2.7 % 6.3 % 6.9 % 4.7 %
       
Appendix III
Horizon Global Corporation
LTM Bank EBITDA as Defined in Credit Agreement
(Unaudited – dollars in thousands)
 
Less: Add:
Year Ended Twelve Months
December 31, Six Months Ended Six Months Ended Ended June 30,
2015 June 30, 2015 June 30, 2016 2016
Net income $ 8,300 $ 3,680 $ 9,520 $ 14,140
Bank stipulated adjustments:
Interest expense, net (as defined) 8,810 240 8,500 17,070
Income tax expense (benefit) (1,280 ) 3,180 (260 ) (4,720 )
Depreciation and amortization 17,080 8,800 8,630 16,910
Non-cash compensation expense(1) 2,530 1,270 1,830 3,090
Other non-cash expenses or losses 11,350 10,930 900 1,320
Non-recurring expenses or costs (as defined)(2) 5,000 3,530 4,250 5,720
Impairment of intangible assets 2,280 2,280
Interest-equivalent costs associated with any Specified Vendor
Receivables Financing
900   330   530   1,100  
Consolidated Bank EBITDA, as defined $ 52,690   $ 31,960   $ 36,180   $ 56,910  
 
June 30, 2016
Total Consolidated Indebtedness(4) $ 178,110
Consolidated Bank EBITDA, as defined 56,910
Actual leverage ratio 3.13 x
Covenant requirement 5.25 x
       
Less: Add:
Year Ended Twelve Months
December 31, Six Months Ended Six Months Ended Ended June 30,
2014 June 30, 2014 June 30, 2015 2015
Net income $ 15,350 $ 13,200 $ 3,680 $ 5,830
Bank stipulated adjustments:
Interest expense, net (as defined) 720 360 240 600
Income tax expense 5,240 4,190 3,180 4,230
Depreciation and amortization 18,930 9,740 8,800 17,990
Non-cash compensation expense(1) 2,660 1,570 1,270 2,360
Other non-cash expenses or losses 15,260 8,620 10,930 17,570
Non-recurring expenses or costs (as defined)(2) 4,440 2,440 3,530 5,530
Acquisition integration costs(3) 90 60 30
Interest-equivalent costs associated with any Specified Vendor
Receivables Financing
870   320   330   880
Consolidated Bank EBITDA, as defined $ 63,560   $ 40,500   $ 31,960   $ 55,020
 
June 30, 2015
Total Consolidated Indebtedness(4) $ 210,370
Consolidated Bank EBITDA, as defined 55,020
Actual leverage ratio 3.82 x
Covenant requirement 5.25 x

______________

(1)   Non-cash compensation expenses resulting from the grant of
restricted shares of common stock and common stock options. Includes
amounts allocated by former parent company.
 
(2) Under our credit agreement, costs and expenses related to cost
savings projects, including restructuring and severance expenses,
are not to exceed $5 million in any fiscal year and $15 million in
aggregate, commencing on or after January 1, 2015.
 
(3) Costs and expenses arising from the integration of any business
acquired not to exceed $7.5 million in any fiscal year $20 million
in the aggregate.
 
(4)

“Total Consolidated Indebtedness” refers to the sum of “long-term
debt” and “current maturities, long-term debt” less domestic cash
of $16.1 million and $1.5 million as of June 30, 2016 and 2015,
respectively.

 

Appendix IV

 

Horizon Global Corporation

LTM Reconciliation

(Unaudited – dollars in millions)

 

The following provides a reconciliation of results for the twelve months
ended June 30, 2016 and 2015.

Contacts

Horizon Global Corporation
Maria C. Duey
Vice President,
Corporate Development & Investor Relations
(248) 593-8810
mduey@horizonglobal.com

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