Horizon Global (NYSE: HZN) reported its second-quarter results on Aug. 7th. Investors had already been provided with a sneak peek at the towing and trailering company's results in mid-July after management announced that it was expanding its ability to borrow by $50 million. The company's second-quarter results were largely in line with those updated projections, and management reaffirmed that its turnaround remains on track. However, the year-over-year numbers did not look pretty.
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Horizon Global Q2: The raw results
Adjusted operating profit
Adjusted net income
Adjusted earnings per share
Data source: Horizon Global.
What happened this quarter?
Sales plunged 22% in the Americas, which is Horizon's largest geographic segment. The huge decline was blamed on a slower-than-expected ramp-up of a new distribution center in Kansas City. Management stated that $23 million in orders were past due at the quarter end. This number was reduced to $17 million as of Aug. 5th.
Sales in Europe were up 5%, but that was mostly a result of currency movements. On a currency-neutral basis, sales were down 2%.
Sales in Asia-Pacific grew 19% thanks to last year's acquisition of Best Bars.
The company recorded yet another noncash goodwill impairment charge related to its Europe-Africa segment. This quarter's charge was $55.7 million.
Margins remained weak across the income statement.
Mark Zeffiro resigned from his role as CEO of the company in May. Carl Bizon is serving as interim president and CEO while a search begins for a new leader.
The previously announced acquisition of Brink has been canceled.
Management also provided investors with an update on how the company is executing against its turnaround plan:
Facilities located in Wisconsin and Ohio have been closed.
The salaried workforce in the U.S. was reduced by 30%.
The company reaffirmed $3 to $5 million in cost savings this year and $10 to $12 million at a full-year run rate.
What management had to say
Interim CEO Carl Bizon kept his commentary focused on the positive actions that were made during the period to get the business back on track:
We made key senior management changes, including the naming of new leadership for our Company and its two largest operating segments; we terminated the Brink acquisition; and, just last week, we announced a successful amendment of our term loan agreement, which included securing an incremental $50 million to address short-term liquidity needs.
Bizon reaffirmed that the company is focused on fixing its problems and working hard to lay the foundation for future growth. He also stated that he is encouraged by the progress that was made during the quarter in the Americas, though he openly acknowledges that there is "a good deal of work yet to be done in Europe."
Horizon's stock jumped by double digits in early-morning trading after the results were released. The move could serve as a modest signal that the market believes that the company's problems are fixable and that management's plan of action seems achievable.
Bizon's final commentary in the earnings release remain focused on his long-term confidence in the business:
Great brands, great products, excellent quality, strong customer relationships, experienced and committed team members and solid end markets will lead us past these near-term challenges and position our Company for long-term success.
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