Horizon Global has reported fourth quarter and full-year financial results for 2018, showing that net sales for the year were $850 million, down 4.8 percent.
“This past year, we took considerable steps to improve operational performance, reset the business in the U.S., and establish a foundation for top- and bottom-line growth in 2019 and beyond,” said Carl Bizon, president and CEO. “As interim CEO and then permanent CEO since October, we made impactful changes to our leadership team, including new leaders in Europe-Africa, and, most recently, the addition of Barry Steele as our new permanent CFO. We completed the action plan for the Americas and are now delivering efficiently from our primary U.S. distribution center in Kansas City, with past due orders in the Americas decreased to less than $6 million at the end of 2018 from $8.5 million at the end of the third quarter and a seasonal peak of $26 million.”
In the Horizon Americas, fourth quarter net sales decreased 19.7 percent, with this decrease attributable to higher volume shipments in 2017 related to a year-end sales promotion program that was not repeated in 2018, higher customer sales allowances, higher retail penalties and the 2017 divestiture of the Broom and Brush business.
On a constant currency basis, net sales decreased 19.3 percent. During 2018, the Americas reported an operating loss of $11.6 million as compared to operating profit of $5.2 million in 2017. The 2018 result included special items including $5.8 million in retail penalties and restructuring expenses of $2.1 million. During 2017, there were no retail fines and penalties and restructuring charges were only $1.1 million. Adjusting for these expenses, adjusted operating loss in 2018 was $3.7 million compared with adjusted operating profit of $6.6 million in 2017.
This decrease in adjusted operating profit was due to the lower sales, higher freight and material costs not recaptured by pricing increases and higher labor costs in the Kansas City distribution center during 2018 and a benefit in 2017 from the reversal in accrued bonuses. These were partially offset by headcount and other expense reduction initiatives.
“In Europe-Africa,” Bizon continued, “new leadership is making meaningful progress on a series of business improvement initiatives intended to significantly impact operations for improved long-term performance in the region. These business improvement initiatives will take time and attention to complete, but, in the end, we believe they will optimize operations, improve product quality, and reduce costs. A major focus remains on supply chain and logistics to improve the overall efficiency of our operations. We remain optimistic about our team’s ability to drive positive momentum in the segment over time.”
In Horizon Europe-Africa, fourth quarter net sales decreased 8.3 percent which included unfavorable currency translation. On a constant currency basis, net sales decreased by 5.3 percent, mainly due to soft aftermarket sales particularly in the U.K. where Brexit has eroded consumer spending.
Operating loss during 2018 was $16.5 million compared to $7.7 million during 2017. The 2018 loss included $4.2 million in special items compared to $3.2 million during 2017. Special items during 2018 mainly included restructuring expense of $1.8 million and impairment of intangible assets of $1 million whereas special items during 2017 mainly included $1.9 million in severance costs and $900,000 in restructuring.
On an adjusted basis, the operating loss was $12.3 million and $4.6 million for 2018 and 2017, respectively. The higher adjusted operating loss was driven by settlements of legacy Westfalia claims, higher input costs such as freight and unfavorable revenue mix.
“We are optimistic regarding our outlook for the year, although we are experiencing a slow start to the prime spring and summer selling season in the U.S. due to cold and wet weather conditions impacting numerous industries,” said Bizon. “With our new financing in place, providing the liquidity and capital flexibility we need to execute our business plan, we have a stronger foundation from which to operate in the coming year. Our senior leadership team is now fully transitioned with the addition of a permanent CFO, and we are operating as one team with one goal to complete the operational turnaround at Horizon Global.”
