Horizon Global Reports Third Quarter Results And Raises Full-Year Guidance

Horizon Global Corporation (NYSE: HZN), one of the world's leading manufacturers of branded towing and trailering equipment, reported third quarter earnings and raised full-year guidance, reflecting a continued focus on execution while advancing key financial priorities.

"The third quarter brought transformational change to Horizon Global as we signed an agreement to acquire Westfalia, a leading European towing company. In conjunction with closing the transaction in early fourth quarter, we incurred an incremental $152 million of term debt. We are already executing on our integration plans and are on track to achieve the $10 million in synergies in 2017 that we previously communicated," said A. Mark Zeffiro, President and Chief Executive Officer of Horizon Global.

"We are pleased with our third quarter 2016 results, which were more in line with our historical segment operating profit distribution than the third quarter of 2015. Our automotive OE and e-commerce channels experienced significant sales gains in the quarter, offset by the softness we are seeing in the retail channel. Segment operating profit improved on lower sales volume as compared to third quarter 2015. On a full-year basis, we are in sight of our goal of 10% adjusted segment operating profit. Our operating cash flow more than doubled last year, allowing us to reduce our leverage ratio to 2.7 times and the lowest it's been since we became a public company," continued Zeffiro.

2016 Third Quarter Segment Highlights

Horizon North America. Net sales decreased 5.1 percent, with strong volume in e-commerce and automotive OE channels, offset by declines in retail, aftermarket and industrial channels. Operating profit increased $2.1 million to $13.3 million, or 12.3 percent of net sales, from $11.2 million, due to improved cost structure and lower input costs. Adjusted operating profit (1) decreased $0.3 million to $14.0 million, or 12.8 percent of net sales, as compared to 12.5 percent in the prior year.

Horizon International. Net sales were up 10.9 percent driven by strong growth in the OE channel, reflecting both new and existing programs. Operating profit increased $2.3 million to $3.5 million, or 8.2 percent of net sales, from $1.2 million, as a result of increased volume and productivity initiatives. Adjusted operating profit (1) increased $2.4 million to $3.6 million, or 8.3 percent of net sales, mostly due to increased volume.

Outlook

The impact of Westfalia operations is not reflected in the guidance below due to the timing of the acquisition and ongoing purchase accounting. Guidance (excluding Westfalia) issued for the year ended December 31, 2016 has been updated as follows:
  • 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

"Margin improvement remains our number one priority, and our results year-to-date reflect our ongoing commitment to achieving a 10 percent total Company operating margin. The Westfalia acquisition will help us move closer to that goal over the next two years. The market shift to SUV's and trucks is driving increased demand for our product set, with our OE business outperforming in the quarter. Our core business model of building strong brands while driving customer value is showing results. Through our efforts in driving lean and productivity initiatives, we achieved a 150 basis point increase in adjusted segment operating margins. We are focused on execution as we integrate Westfalia and lay the foundation for our business beyond today," said Zeffiro.

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