Horizon Global (NYSE: HZN), an international seller of towing and trailering equipment, reported its fourth-quarter earnings results on March 1. Management had previously communicated that a host of issues were going to weigh on the company's Q4 results, and in response, it was forced to rein in its revenue and profit expectations for the full year.
Let's put the company's results under the microscope to see how it did during this challenging period.
Horizon Global Q4: The raw results
|Metric||Q4 2017||Q4 2016||Year-Over-Year Change|
|Revenue||$196.0 million||$183.6 million||6.8%|
|Adjusted operating profit||$4.8 million||($0.5 million)||N/A|
|Adjusted net income||($2.7 million)||($7.7 million)||N/A|
|Adjusted earnings per share||($0.11)||($0.37)||N/A|
What happened this quarter?
- Sales in the Americas dropped 5% largely as a result of delivery delays related to the opening of a new distribution facility and lower order rates among retail customers. But adjusted operating profits from this division actually increased 10% to $6.6 million thanks to lower impairment charges from the company's Brazilian operations.
- Sales in Europe and Africa rose 13%, but the company's adjusted operating loss from the region increased 48% to $4.6 million.
- Acquisitions helped grow revenue in the Asia-Pacific region by 34%. Adjusted operating profit in this segment grew 137% to $5.7 million.
- The adjusted net loss was aided by an $11.9 million tax benefit related to the recent changes to the U.S. tax code.
Here's a look at the headline numbers from the full year 2017:
- Sales grew 37.6% to $893 million, which was at the high end of management's revised guidance.
- Operating profit was $34.8 million.
- Adjusted EPS grew 53% to $0.98. This was ahead of the updated guidance range.
What management had to say
CEO Mark Zeffiro kept his commentary focused on the challenges that the company faced during the quarter: "Our sales and operating profit grew for the year, but the business was unable to overcome the challenges we faced in the fourth quarter. We are disappointed that we did not achieve our full-year guidance."
In an effort to get the company back on track, management announced that it is enacting a business improvement action plan. It calls for management changes in the Americas, facility consolidations, and workforce reductions designed to make the business more efficient. When combined, these moves are expected to deliver an incremental $3 million to $5 million in consolidated cost savings in 2018.
Zeffiro also announced the company's intention to acquire the Brink Group, another towing and trailering equipment manufacturer, during the quarter. Management claims that the buyout will "strengthen our global platform, broaden our customer base, and bring new technology to our product offering."
Management usually provides investors with hard numbers for full guidance, but the recent challenges caused it to be much more vague with expectations for the full year 2018. Specifically, the company is calling for organic revenue growth of 3% to 5%, adjusted dilutive earnings per share to "grow faster than revenue on a constant currency basis," and operating cash flow to "return to normal historical levels."
Zeffiro did his best to reassure investors that he is head-down focused on helping the company achieve operational excellence: "Our global team is focused on addressing these challenges and implementing a targeted action plan, which includes specific initiatives to address our organizational needs to become more efficient, better service customers, grow profitably and build long-term shareholder value."
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