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Horizon Global Corp - Quarter Report: 2022 September (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)  

 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2022
OR

 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from                  to                  .
Commission file number 001-37427
HORIZON GLOBAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
 
47-3574483
(IRS Employer
Identification No.)
47912 Halyard Drive, Suite 100
Plymouth, Michigan 48170
(Address of principal executive offices, including zip code)
(734) 656-3000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueHZNNew York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x    No o.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer ☒
Non-accelerated filer o
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐    No  
As of November 4, 2022, the number of outstanding shares of the Registrant’s common stock was 27,732,762 shares.



HORIZON GLOBAL CORPORATION
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1


Forward-Looking Statements
This Quarterly Report on Form 10-Q may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements 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 outcome of the Company’s review of strategic alternatives; the impact of the COVID-19 pandemic on the Company’s business, results of operations, financial condition and liquidity, including, without limitation, supply chain and logistics issues and inflationary pressures; interest rate volatility; liabilities and restrictions imposed by the Company’s debt instruments, including the Company’s ability to comply with the applicable financial covenants related thereto or obtain any necessary amendments or waivers with respect to such financial covenants; market demand; competitive factors; supply constraints and shipping disruptions; material, logistics and energy costs, including the increased material costs resulting from the COVID-19 pandemic; inflation and deflation rates; the impact the conflict between Russia and Ukraine has on our business, financial condition or future results, including the duration and scope of such conflict, its impact on disruptions and inefficiencies in our supply chain and our ability to procure certain raw materials, as well as on our energy supply in Europe; technology factors; litigation; government and regulatory actions including the impact of any tariffs, quotas, or surcharges; the Company’s accounting policies; future trends; general economic and currency conditions, including recessionary conditions and volatile interest rates; various conditions specific to the Company’s business and industry; the success of the Company’s action plan, including the actual amount of savings and timing thereof; the success of the Company’s business improvement initiatives in Europe-Africa, including the amount of savings and timing thereof; the Company’s exposure to product liability claims from customers and end users, and the costs associated therewith; factors affecting the Company’s business that are outside of its control, including natural disasters and severe weather conditions (including those caused by climate change), global health pandemics, accidents and governmental actions; our ability to regain and remain in compliance with the New York Stock Exchange’s (“NYSE”) continued listing requirements; our ability to continue as a going concern; and other risks that are discussed in Part I, Item 1A, “Risk Factors.” in the Company’s Annual Report on Form 10-K for the twelve months ended December 31, 2021. The risks described in the Company’s Annual Report on Form 10-K 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.
The cautionary statements set forth above should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. We caution readers not to place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect the Company. 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 of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as otherwise required by law.
We disclose important factors that could cause our actual results to differ materially from our expectations implied by our forward-looking statements under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in the Company’s Annual Report on Form 10-K for the twelve months ended December 31, 2021. These cautionary statements qualify all forward-looking statements attributed to us or persons acting on our behalf. When we indicate that an event, condition or circumstance could or would have an adverse effect on us, we mean to include effects upon our business, financial and other conditions, results of operations, prospects and ability to service our debt.

2


PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

HORIZON GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited—dollars in thousands, except per share data)
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Net sales$148,970 $196,540 $511,050 $617,850 
Cost of sales(132,320)(157,780)(453,470)(491,240)
Gross profit16,650 38,760 57,580 126,610 
Selling, general and administrative expenses(25,270)(32,430)(90,070)(102,170)
Operating (loss) profit(8,620)6,330 (32,490)24,440 
Interest expense(10,230)(6,970)(26,210)(21,000)
Loss on debt extinguishment of Replacement Term Loan— — — (11,650)
Other expense, net(5,760)(1,720)(14,610)(5,940)
Loss before income tax(24,610)(2,360)(73,310)(14,150)
Income tax expense(1,070)(410)(1,750)(2,810)
Net loss(25,680)(2,770)(75,060)(16,960)
Less: Net loss attributable to noncontrolling interest(220)(300)(720)(970)
Net loss attributable to Horizon Global$(25,460)$(2,470)$(74,340)$(15,990)
Net loss per share:
Basic$(0.92)$(0.09)$(2.70)$(0.59)
Diluted$(0.92)$(0.09)$(2.70)$(0.59)

The accompanying notes are an integral part of these condensed consolidated financial statements.
3


HORIZON GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited—dollars in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net loss$(25,680)$(2,770)$(75,060)$(16,960)
Other comprehensive loss, net of tax:
Foreign currency translation and other(1,950)(1,650)(2,340)(4,070)
Total other comprehensive loss, net of tax(1,950)(1,650)(2,340)(4,070)
Total comprehensive loss(27,630)(4,420)(77,400)(21,030)
Less: Comprehensive loss attributable to noncontrolling interest(210)(300)(710)(970)
Comprehensive loss attributable to Horizon Global$(27,420)$(4,120)$(76,690)$(20,060)

The accompanying notes are an integral part of these condensed consolidated financial statements.


4


HORIZON GLOBAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited—dollars in thousands)
September 30, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$7,760 $11,780 
Restricted cash5,380 5,490 
Receivables, net75,600 80,720 
Inventories155,600 162,830 
Prepaid expenses and other current assets17,080 12,340 
Total current assets261,420 273,160 
Property and equipment, net66,200 71,610 
Operating lease right-of-use assets34,360 37,810 
Other intangibles, net41,410 48,910 
Deferred income taxes1,520 1,750 
Other assets5,140 5,680 
Total assets$410,050 $438,920 
Liabilities and Shareholders' Deficit
Current liabilities:
Short-term borrowings and current maturities, long-term debt$74,450 $3,780 
Accounts payable106,730 102,190 
Short-term operating lease liabilities10,600 11,010 
Accrued liabilities41,660 44,870 
Total current liabilities233,440 161,850 
Gross long-term debt235,110 297,070 
Unamortized debt issuance costs and discount(26,020)(26,520)
Long-term debt209,090 270,550 
Redeemable preferred stock, $0.01 par: Authorized 100,000,000 shares; Issued and outstanding: 41,000 and 0 shares at September 30, 2022 and December 31, 2021, respectively
42,320 — 
Deferred income taxes1,800 1,920 
Long-term operating lease liabilities30,680 35,930 
Other long-term liabilities8,390 8,920 
Total liabilities525,720 479,170 
Commitments and Contingencies
Shareholders' deficit:
Common stock, $0.01 par: Authorized 400,000,000 shares; 28,419,268 shares issued and 27,732,762 outstanding at September 30, 2022, and 27,973,153 shares issued and 27,286,647 outstanding at December 31, 2021
280 270 
Common stock warrants issued, outstanding and exercisable for 10,206,146 and 9,231,146 shares of common stock at September 30, 2022 and December 31, 2021, respectively
28,050 25,010 
Paid-in capital169,910 170,990 
Treasury stock, at cost: 686,506 shares at September 30, 2022 and December 31, 2021
(10,000)(10,000)
Accumulated deficit(284,590)(210,250)
Accumulated other comprehensive loss(12,050)(9,710)
Total Horizon Global shareholders' deficit(108,400)(33,690)
Noncontrolling interest(7,270)(6,560)
Total shareholders' deficit(115,670)(40,250)
Total liabilities and shareholders' deficit$410,050 $438,920 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


HORIZON GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited—dollars in thousands)
Nine Months Ended September 30,
20222021
Cash Flows from Operating Activities:
Net loss$(75,060)$(16,960)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation9,980 11,710 
Amortization of intangible assets3,260 4,220 
Amortization of original issuance discount and debt issuance costs7,560 8,010 
Deferred income taxes290 730 
Non-cash compensation (income) expense(420)2,590 
Paid-in-kind dividends and interest1,170 650 
Redeemable preferred stock redemption costs160 — 
Loss on debt extinguishment of Replacement Term Loan— 11,650 
Increase in receivables(4,120)(12,360)
Increase in inventories(160)(52,700)
Increase in prepaid expenses and other assets(5,890)(1,910)
Increase in accounts payable and accrued liabilities18,070 11,820 
Other, net8,140 1,910 
Net cash used for operating activities(37,020)(30,640)
Cash Flows from Investing Activities:
Capital expenditures(12,020)(14,730)
Other, net30 20 
Net cash used for investing activities(11,990)(14,710)
Cash Flows from Financing Activities:
Proceeds from Revolving Credit Facility, net of issuance costs24,510 28,680 
Repayments of borrowings on Revolving Credit Facility(12,160)(8,000)
Proceeds from Senior Term Loan, net of issuance costs118,200 75,300 
Repayments of borrowings on Replacement Term Loan, including transaction fees— (94,940)
Repayments of borrowings on Convertible Notes(85,000)— 
Proceeds from borrowings on credit facilities2,230 2,870 
Repayments of borrowings on credit facilities(3,460)(1,960)
Proceeds from issuance of common stock warrants3,040 16,300 
Proceeds from exercise of common stock warrants— 420 
Other, net(930)(650)
Net cash provided by financing activities46,430 18,020 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1,550)(510)
Cash, Cash Equivalents and Restricted Cash:
Decrease for the period(4,130)(27,840)
At beginning of period17,270 50,690 
At end of period$13,140 $22,850 
Supplemental disclosure of cash flow information:
Cash paid for interest$17,110 $16,130 
Cash paid for taxes, net of refunds$1,190 $2,010 

The accompanying notes are an integral part of these condensed consolidated financial statements.
6


HORIZON GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(unaudited—dollars in thousands)
Common StockCommon Stock WarrantsPaid-in CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive (Loss) IncomeTotal Horizon Global Shareholders' Equity (Deficit)Noncontrolling InterestTotal Shareholders' Equity (Deficit)
Balances at January 1, 2022$270 $25,010 $170,990 $(10,000)$(210,250)$(9,710)$(33,690)$(6,560)$(40,250)
Net loss— — — — (26,680)— (26,680)(270)(26,950)
Other comprehensive income, net of tax— — — — — 4,990 4,990 — 4,990 
Shares surrendered upon vesting of employee stock compensation awards to cover tax obligations— — (640)— — — (640)— (640)
Non-cash compensation expense10 — 1,250 — — — 1,260 — 1,260 
Issuance of common stock warrants— 3,040 — — — — 3,040 — 3,040 
Amounts reclassified from AOCI— — — — — (3,100)(3,100)— (3,100)
Balances at March 31, 2022280 28,050 171,600 (10,000)(236,930)(7,820)(54,820)(6,830)(61,650)
Net loss— — — — (22,200)— (22,200)(230)(22,430)
Other comprehensive loss, net of tax— — — — — (2,280)(2,280)— (2,280)
Non-cash compensation expense— — 800 — — — 800 — 800 
Balances at June 30, 2022280 28,050 172,400 (10,000)(259,130)(10,100)(78,500)(7,060)(85,560)
Net loss— — — — (25,460)— (25,460)(220)(25,680)
Other comprehensive (loss) income, net of tax— — — — — (2,010)(2,010)10 (2,000)
Shares surrendered upon vesting of employees stock compensation awards to cover tax obligations— — (20)— — — (20)— (20)
Non-cash compensation income— — (2,470)— — — (2,470)— (2,470)
Amounts reclassified from AOCI— — — — — 60 60 — 60 
Balances at September 30, 2022$280 $28,050 $169,910 $(10,000)$(284,590)$(12,050)$(108,400)$(7,270)$(115,670)

Common StockCommon Stock WarrantsPaid-in CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive LossTotal Horizon Global Shareholders' Equity (Deficit)Noncontrolling InterestTotal Shareholders' Equity (Deficit)
Balances at January 1, 2021$260 $9,510 $166,610 $(10,000)$(178,530)$(6,540)$(18,690)$(5,160)$(23,850)
Net loss— — — — (14,810)— (14,810)(340)(15,150)
Other comprehensive loss, net of tax— — — — — (2,290)(2,290)— (2,290)
Shares surrendered upon vesting of employee stock compensation awards to cover tax obligations— — (650)— — — (650)— (650)
Non-cash compensation expense— — 960 — — — 960 — 960 
Issuance of common stock warrants— 16,300 — — — — 16,300 — 16,300 
Exercise of common stock warrants10 (800)1,210 — — — 420 — 420 
Balances at March 31, 2021270 25,010 168,130 (10,000)(193,340)(8,830)(18,760)(5,500)(24,260)
Net income (loss)— — — — 1,290 — 1,290 (330)960 
Other comprehensive loss, net of tax— — — — — (130)(130)— (130)
Shares surrendered upon vesting of employee stock compensation awards to cover tax obligations— — 10 — — — 10 — 10 
Non-cash compensation expense— — 930 — — — 930 — 930 
Balances at June 30, 2021270 25,010 169,070 (10,000)(192,050)(8,960)(16,660)(5,830)(22,490)
Net loss— — — — (2,470)— (2,470)(300)(2,770)
Other comprehensive loss, net of tax— — — — — (1,650)(1,650)— (1,650)
Shares surrendered upon vesting of employees stock compensation awards to cover tax obligations— — (10)— (10)— (10)
Non-cash compensation expense— — 990 — — — 990 — 990 
Balances at September 30, 2021$270 $25,010 $170,050 $(10,000)$(194,520)$(10,610)$(19,800)$(6,130)$(25,930)

The accompanying notes are an integral part of these condensed consolidated financial statements.
7


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Operations and Basis of Presentation
Horizon Global Corporation and its consolidated subsidiaries (“Horizon Global,” “we,” “our,” or the “Company”) are a designer, manufacturer and distributor of a wide variety of high quality, custom-engineered towing, trailering, cargo management and other related accessory products in the North American, European and African markets. These products are designed to support aftermarket, automotive original equipment manufacturers (“automotive OEMs”) and automotive original equipment servicers (“automotive OESs”) (collectively, “OEs”), retail, e-commerce and industrial customers within the agricultural, automotive, construction, horse/livestock, industrial, marine, military, recreational, trailer and utility markets. The Company groups its business into operating segments generally by the region in which sales and manufacturing efforts are focused. The Company’s operating segments are Horizon Americas and Horizon Europe-Africa. See Note 13, Segment Information, for further information on the Company’s operating segments.
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the twelve months ended December 31, 2021. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements. It is management’s opinion that these condensed consolidated financial statements contain all adjustments, including adjustments of a normal and recurring nature, necessary for a fair presentation of financial position and results of operations. Results of operations for interim periods are not necessarily indicative of results for the full year.
The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates, judgments, and assumptions also affect the reported amounts of revenues and expenses during the reporting periods. The Company believes estimates, judgments and assumptions made when accounting for items and matters such as, but not limited to, the allowance for doubtful accounts, sales incentives, sales returns, impairment assessment of indefinite-lived intangible assets, recoverability of long-lived assets, income taxes (including deferred taxes and uncertain tax positions), stock compensation, the assessment of lower of cost or net realizable value on inventory, useful lives assigned to long-lived assets, depreciation and amortization, estimates related to lease liability and operating lease right-of-use (“ROU”) asset valuations, estimated future unrecoverable lease costs, legal and product liability matters, valuation of debt instruments and warrants, assets and obligations related to employee benefits, and the respective allocation methods, are reasonable based on information available at the time they are made. To the extent there are differences between these estimates and actual results, our consolidated financial statements may be materially affected.
Discussion of Going Concern
The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
8


HORIZON GLOBAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has a history of recurring net operating losses and cash outflows from operations. In addition, the Company currently projects it will not generate sufficient cash flows from operations, or have access to other sources of liquidity, to sustain its operating needs or to meet the Company's obligations as they become due over the twelve-month period subsequent to the date of the filing of this Quarterly Report on Form 10-Q. In addition, as of September 30, 2022, the Company was in compliance with all applicable covenants in agreements governing its debt. However, based on the Company’s projected financial performance for the twelve-month period subsequent to the date of the filing of this Quarterly Report on Form 10-Q, the Company currently projects that it will not be in compliance with a financial covenant under the Company’s Senior Term Loan Credit Agreement, as defined in Note 7, Long-term Debt, as of March 31, 2023, which would result in an event of default. Such a default would allow the lender under the Senior Term Loan Credit Agreement to accelerate the maturity of the debt, which carries a balance of $225.0 million as of September 30, 2022, making it due and payable at that time. This would, in turn, result in a cross-default of the Company’s Revolving Credit Facility, as defined in Note 7, Long-term Debt, which carries a balance of $70.4 million as of September 30, 2022. Further, if the Company’s independent registered public accounting firm includes an explanatory paragraph, other than for debt maturing within one year, regarding the Company’s ability to continue as a going concern in its report on the Company’s financial statements for the twelve months ending December 31, 2022, this would be an event of default under the Company’s Senior Term Loan Credit Agreement and also result in a cross-default of the Revolving Credit Facility at the time the Company’s financial statements for the twelve months ending December 31, 2022 are filed with the SEC. The Company does not currently have sufficient cash on hand, liquidity or projected future cash flows to repay these outstanding amounts upon an event of default. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.
In response to these conditions, the Company has undertaken a review of strategic alternatives for the business, which could involve a sale of a portion or the entirety of the business. The Company has also undertaken discussions with its lender to amend the terms of its financial covenant under the Senior Term Loan Credit Agreement. The Company has a history of successfully amending and extending credit agreements with its current lenders. The process of undertaking such activities is actively ongoing, however, there can be no assurances that this process will result in the completion of any transaction or other alternative that would alleviate such conditions. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.
The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
2. New Accounting Pronouncements
As of September 30, 2022, there have been no new accounting pronouncements recently issued or adopted that have had or are reasonably likely to have a material impact on the Company’s condensed consolidated financial statements.
3. Inventories
Inventories consist of the following components:
 September 30,
2022
December 31,
2021
 (dollars in thousands)
Finished goods$87,950 $85,770 
Work in process13,660 15,570 
Raw materials53,990 61,490 
Total$155,600 $162,830 

9


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Property and Equipment, Net
Property and equipment, net consists of the following components:
 September 30,
2022
December 31,
2021
 (dollars in thousands)
Land and land improvements$410 $480 
Buildings and building improvements18,950 22,210 
Machinery and equipment129,380 135,110 
Gross property and equipment148,740 157,800 
Accumulated depreciation(82,540)(86,190)
Total$66,200 $71,610 
During the three and nine months ended September 30, 2022, depreciation expense was $3.2 million and $10.0 million, respectively. During the three and nine months ended September 30, 2021, depreciation expense was $4.0 million and $11.7 million, respectively.
5. Other Intangible Assets
Gross carrying amounts and accumulated amortization of other intangible assets are as follows:
September 30, 2022
Intangible Category by Useful LifeGross Carrying AmountAccumulated AmortizationNet Carrying Amount
(dollars in thousands)
Finite-lived intangible assets:
Customer relationships (2 – 20 years)
$157,570 $(137,980)$19,590 
Technology and other (3 – 15 years)
23,280 (21,040)2,240 
Sub-total180,850 (159,020)21,830 
Trademark/Trade names, indefinite-lived19,580 — 19,580 
Total$200,430 $(159,020)$41,410 

December 31, 2021
Intangible Category by Useful LifeGross Carrying AmountAccumulated AmortizationNet Carrying Amount
(dollars in thousands)
Finite-lived intangible assets:
Customer relationships (2 – 20 years)
$162,390 $(137,420)$24,970 
Technology and other (3 – 15 years)
23,870 (20,830)3,040 
Sub-total186,260 (158,250)28,010 
Trademark/Trade names, indefinite-lived20,900 — 20,900 
Total$207,160 $(158,250)$48,910 

During the three and nine months ended September 30, 2022, amortization expense related to other intangible assets was $1.1 million and $3.3 million, respectively. During the three and nine months ended September 30, 2021, amortization expense related to other intangible assets was $1.3 million and $4.2 million, respectively.
10


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Accrued and Other Long-term Liabilities
Accrued liabilities consist of the following components:
September 30,
2022
December 31,
2021
(dollars in thousands)
Customer incentives$14,640 $13,030 
Accrued compensation8,120 7,520 
Accrued interest3,630 3,430 
Customer claims2,850 2,900 
Accrued transportation costs2,830 5,600 
Short-term tax liabilities2,560 3,530 
Litigation settlements960 1,290 
Accrued professional services850 1,700 
Other5,220 5,870 
Total$41,660 $44,870 
Other long-term liabilities consist of the following components:
 September 30,
2022
December 31,
2021
 (dollars in thousands)
Litigation settlements$1,180 $1,820 
Customer incentives230 — 
Long-term tax liabilities130 130 
Other6,850 6,970 
Total$8,390 $8,920 
11


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Long-term Debt
Long-term debt consists of the following components:
 September 30,
2022
December 31,
2021
 (dollars in thousands)
Revolving Credit Facility$70,400 $58,050 
Senior Term Loan225,000 100,000 
Convertible Notes— 125,000 
Bank facilities, finance leases and other long-term debt14,160 17,800 
Gross debt309,560 300,850 
Less:
Short-term borrowings and current maturities, long-term debt74,450 3,780 
   Gross long-term debt235,110 297,070 
Unamortized debt issuance costs and discount:
Unamortized debt issuance costs and original issuance discount on Senior Term Loan(26,020)(22,170)
Unamortized debt issuance costs and discount on Convertible Notes— (4,350)
   Total(26,020)(26,520)
Long-term debt$209,090 $270,550 
Revolving Credit Facility
In March 2020, the Company, as guarantor, entered into a Loan and Security Agreement (the “Loan Agreement”) with Eclipse Business Capital LLC, formerly known as Encina Business Credit, LLC, as agent for the lenders party thereto, and Horizon Global Americas Inc. and Cequent Towing Products of Canada Ltd., as borrowers (the “ABL Borrowers”). The Loan Agreement provides for an asset-based revolving credit facility (the “Revolving Credit Facility”) in the maximum aggregate principal amount of $75.0 million subject to customary borrowing base limitations contained therein, and may be increased at the ABL Borrowers’ request in increments of $5.0 million, up to a maximum of five times over the life of the Revolving Credit Facility, for a total increase of up to $25.0 million. The Loan Agreement has been amended on several occasions that, among other things, increased the maximum credit available under the Revolving Credit Facility to $95.0 million. All outstanding borrowings on the Loan Agreement mature on March 13, 2024.
Effective March 31, 2022, the Company entered into an amendment to the Loan Agreement (the “Eighth Amendment”) that temporarily increased the Company’s ability to borrow against receivables and in-transit inventory as well as inventory located in the Company’s Mexico facilities, which was initially effective through June 30, 2022. On June 30, 2022, the Loan Agreement was amended to extend the effective date of the temporary borrowing capacity through September 30, 2022, and was subsequently amended on September 26, 2022 (the “Tenth Amendment”) to extend the effective date through January 16, 2023. The Eighth Amendment also replaced the London Interbank Offered Rate (“LIBOR”) based interest rate with the Adjusted Term Secured Overnight Financing Rate (“SOFR”). As a result of the Eighth Amendment, interest on loans under the Loan Agreement is payable in cash at the interest rate of SOFR plus 4.00% per annum, subject to a 1.00% SOFR floor. The Tenth Amendment amended the interest rate such that beginning September 30, 2022, the interest rate on all loans under the Loan Agreement is SOFR plus 4.50% to 5.00% per annum, subject to a 1.00% SOFR floor and certain conditions defined in the Loan Agreement.
The Tenth Amendment also provides the Company an additional $5.0 million of availability above the customary borrowing base limitations, which is effective through November 16, 2022, at which point it will be reduced to $2.5 million through December 16, 2022, and expire thereafter. Pursuant to the terms of the Tenth Amendment, the Company entered into a cash dominion triggering period that permits the agent under the Loan Agreement to use the Company’s cash receipts to repay outstanding borrowings under the Revolving Credit Facility. The Company will remain in dominion until its availability under the Revolving Credit Facility exceeds the dominion threshold in the Loan Agreement for 20 consecutive calendar days. As a result of the cash dominion triggering event, all outstanding borrowings on the Loan Agreement are included in short-term borrowings and current maturities, long-term debt in the accompanying condensed consolidated balance sheets.
12


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the three and nine months ended September 30, 2022, the Company recognized $0.1 million and $0.3 million of amortization of debt issuance costs, respectively, and during the three and nine months ended September 30, 2021, the Company recognized $0.1 million and $0.4 million of amortization of debt issuance costs, respectively, in interest expense in the accompanying condensed consolidated statements of operations.
As of September 30, 2022 and December 31, 2021, there was $0.6 million and $0.8 million of unamortized debt issuance costs, respectively, included in other assets in the accompanying condensed consolidated balance sheets.
As of September 30, 2022 and December 31, 2021, the Company had $9.7 million and $27.4 million of availability, respectively, under the Revolving Credit Facility.
As of September 30, 2022 and December 31, 2021, the Company had $3.2 million and $2.1 million of letters of credit issued and outstanding, respectively, under the Revolving Credit Facility with no cash collateral requirement. As of September 30, 2022 and December 31, 2021, the Company also had $4.1 million and $4.2 million of other letters of credit issued and outstanding, respectively, under the Revolving Credit Facility with a cash collateral requirement. The cash collateral requirement is 105% of the outstanding letters of credit. As of September 30, 2022 and December 31, 2021, the Company had cash collateral of $4.9 million. Cash collateral is included in restricted cash in the accompanying condensed consolidated balance sheets.
Senior Term Loan Credit Agreement
In February 2021, the Company entered into a credit agreement (the “Senior Term Loan Credit Agreement”) with Atlantic Park Strategic Capital Fund, L.P. (“Atlantic Park”), as administrative agent and collateral agent, and the lenders party thereto. The Senior Term Loan Credit Agreement provided for an initial term loan facility (the “2021 Senior Term Loan”) in the aggregate principal amount of $100.0 million, all of which was borrowed by the Company and was used to repay the Company’s former term loan. The Senior Term Loan Credit Agreement also provided for a delayed draw term loan facility in the aggregate principal amount of up to $125.0 million, which was available to be drawn by the Company in up to three separate borrowings through June 30, 2022.
In February 2022, the Company entered into an amendment to its Senior Term Loan Credit Agreement with Atlantic Park. The amendment provided for a $35.0 million delayed draw facility, which the Company borrowed in full (the “February 2022 Delayed Draw Term Loan”) under the Company’s existing delayed draw term loan facility and allowed the net proceeds to be used for working capital purposes and to fund low-cost country expansion in the Company’s Horizon Europe-Africa operating segment.
The Company accounted for the February 2022 Delayed Draw Term Loan as a debt modification in accordance with guidance in Accounting Standards Codification (“ASC”) 470-50, “Modifications and Extinguishments”.
In connection with the February 2022 Delayed Draw Term Loan, the Company issued warrants (“Senior Term Loan Amendment Warrants”) to Atlantic Park to purchase up to 975,000 shares of the Company’s common stock, with an exercise price of $9.00 per share. On May 24, 2022, shareholders approved the proposal to issue common shares upon the exercise of the warrants, making the Senior Term Loan Amendment Warrants exercisable at any time prior to February 10, 2027.
In accordance with guidance in ASC 480, Distinguishing Liabilities from Equity” (“ASC 480”), and ASC 815, “Derivatives and Hedging”, the February 2022 Delayed Draw Term Loan and Senior Term Loan Amendment Warrants issued are each freestanding instruments and proceeds were allocated to each instrument on a relative fair value basis of $31.9 million and $3.1 million, respectively.
The Senior Term Loan Amendment Warrants are not within the scope of ASC 480 and do not meet the criteria for liability classification. However, the Senior Term Loan Amendment Warrants are determined to be indexed to the Company’s common stock and meet the requirements for equity classification pursuant to ASC 815-40, “Derivatives and Hedging - Contracts in Entity’s Own Equity”. The $3.1 million allocated to the Senior Term Loan Amendment Warrants was determined using an option pricing method and is recorded in common stock warrants in the accompanying condensed consolidated balance sheets.
13


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Debt issuance costs of $0.5 million and original issuance discount of $1.1 million were incurred in connection with the February 2022 Delayed Draw Term Loan. During the nine months ended September 30, 2022, the $0.5 million of debt issuance costs were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. The $1.1 million original issuance discount was allocated to each instrument on a relative fair value basis. The $1.0 million allocated to the February 2022 Delayed Draw Term Loan will be amortized into interest expense over the contractual term of the loan using the effective interest method and the $0.1 million allocated to the Senior Term Loan Amendment Warrants was recorded as a reduction of equity.
The Company determined the fair value of the February 2022 Delayed Draw Term Loan using a discount rate build up approach. The debt discount of $3.1 million created by the relative fair value allocation of the equity component is being amortized as additional non-cash interest expense using the effective interest method over the contractual term of the loan. The debt discount is recorded as a reduction of long-term debt in the accompanying condensed consolidated balance sheets.
In June 2022, the Company borrowed the remaining $90.0 million under the Company’s existing delayed draw term loan facility (the “June 2022 Delayed Draw Term Loan”). The proceeds of the June 2022 Delayed Draw Term Loan were used by the Company to repay $85.0 million of principal and $1.7 million of accrued interest on the Company’s Convertible Notes, as defined below, which matured on July 1, 2022. Original issuance discount of $2.7 million was incurred in connection with the June 2022 Delayed Draw Term Loan and will be amortized into interest expense over the contractual term of the loan using the effective interest method.
Following the full draw on the delayed draw term loans, the February 2022 Delayed Draw Term Loan, the June 2022 Delayed Draw Term Loan and the 2021 Senior Term Loan are collectively referred to as the Senior Term Loan. Interest on the Senior Term Loan is payable in cash on a monthly or quarterly basis, at the election of the Company, at the interest rate of LIBOR plus 7.50% per annum, subject to a 1.00% LIBOR floor. All outstanding borrowings under the Senior Term Loan Credit Agreement mature on February 2, 2027.
During the three and nine months ended September 30, 2022, the Company recognized $1.1 million and $3.0 million of amortization of debt issuance and discount costs, respectively. During the three and nine months ended September 30, 2021 the Company recognized $0.7 million and $1.8 million of amortization of debt issuance and discount costs, respectively. Amortization of debt issuance and discount costs is included in interest expense in the accompanying condensed consolidated statements of operations.
Convertible Notes
In February 2017, the Company completed a public offering of 2.75% Convertible Senior Notes (the “Convertible Notes”) in an aggregate principal amount of $125.0 million. During the second quarter of 2022, the Company issued Series B Preferred Stock, as defined below, in exchange for $40.0 million of the outstanding principal balance of the Convertible Notes. On July 1, 2022, the proceeds of the June 2022 Delayed Draw Term Loan were used to repay $85.0 million of principal and $1.7 million of accrued interest on the Convertible Notes.
During the three and nine months ended September 30, 2022, the Company recognized interest expense of $0.8 million and $6.4 million, respectively, and during the three and nine months ended September 30, 2021, the Company recognized interest expense of $2.6 million and $7.9 million, respectively, in the accompanying condensed consolidated statements of operations. The interest expense recognized consists of contractual interest coupon, amortization of debt discount and amortization of debt issuance costs.
Replacement Term Loan
As a result of the Company’s entering into the Senior Term Loan Credit Agreement in the first quarter of 2021, the Company’s former term loan (the “Replacement Term Loan”) was terminated and is no longer in effect. As of September 30, 2022 and December 31, 2021, the Company had no aggregate principal outstanding and no unamortized debt issuance and discount costs.
During the three and nine months ended September 30, 2022, the Company recognized no amortization of debt issuance costs and no paid-in-kind (“PIK”) interest. During the three and nine months ended September 30, 2021, the Company recognized no amortization of debt issuance costs and $0.4 million amortization of debt issuance costs, respectively, in interest expense in the accompanying condensed consolidated statements of operations. During the three and nine months ended September 30, 2021, the Company recognized no PIK interest and $0.7 million of PIK interest, respectively, in interest expense in the accompanying condensed consolidated statements of operations.
14


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Redeemable Preferred Stock
In February 2022, the Company executed a commitment letter with Corre Partners Management, LLC, acting on behalf of certain investment funds for which it acts as investment manager (collectively, the “Corre Funds”), to issue, solely at the Company’s option, up to $40.0 million of a new series of the Company’s preferred stock, the proceeds of which could be used by the Company to repay a portion of the Company’s Convertible Notes and for working capital and general corporate purposes.
In June 2022, the Company entered into a Preferred Stock Purchase Agreement (the “Purchase Agreement”) with the Corre Funds pursuant to which the Corre Funds purchased 40,000 shares of the Company’s Series B Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), in exchange for $40.0 million aggregate principal amount of the Company’s Convertible Notes, which were cancelled by the Company. Pursuant to the terms of the Purchase Agreement, the Company also issued the Corre Funds an additional 1,000 shares of Series B Preferred Stock in satisfaction of its obligation to pay Corre Funds a commitment fee pursuant to the terms of the commitment letter. During the nine months ended September 30, 2022, the Company recognized the $1.0 million commitment fee in other expense, net in the accompanying condensed consolidated statements of operations.
The Series B Preferred Stock accrue dividends in kind at a rate of 11.0% per annum, subject to increase to a maximum of 16.0% per annum upon the occurrence of certain events, including if the Series B Preferred Stock is not redeemed on or prior to the first anniversary of a repayment of the Senior Term Loan or refinancing of borrowings outstanding under the Senior Term Loan Credit Agreement. Dividends on each share of Series B Preferred Stock accrue based on the liquidation value of the Series B Preferred Stock, which is the stated value of $1,000 per share plus accrued and unpaid dividends (the “Liquidation Value”).
The Series B Preferred Stock is subject to voluntary redemption by the Company at its option and subject to mandatory redemption upon the first to occur of a change in control and the one-year anniversary of the maturity of the Senior Term Loan, which is February 2, 2028. The redemption price with respect to each share of Series B Preferred Stock is payable in cash and is equal to (i) 102.0% of the Liquidation Value if the redemption occurs on or before December 31, 2022, (ii) 105.0% of the Liquidation Value if the redemption occurs after December 31, 2022 but on or before December 31, 2023 and (iii) 106.0% of the Liquidation Value if the redemption occurs after December 31, 2023; provided that, in any event, the cash consideration a holder of Series B Preferred Stock will be entitled to receive from the Company (including the redemption price commitment fees, dividends and other distributions) will be no less than 110.0% of the consideration paid to the Company in connection with the purchase of such Series B Preferred Stock.
The Series B Preferred Stock will be convertible into shares of the Company’s common stock, par value $0.01 per share, at the option of the Corre Funds and subject to shareholder approval, if the Company’s total net leverage ratio (as defined in the Senior Term Loan Credit Agreement), commencing with the fiscal quarter ending March 31, 2023, exceeds 6.50 to 1.00 or all of the outstanding Series B Preferred Stock is not redeemed on or before the earlier of the 91st day after a repayment of the Senior Term Loan and February 10, 2025. If the Series B Preferred Stock becomes convertible, each share of Series B Preferred Stock would be convertible into a number of shares of the Company’s common stock equal to the conversion value divided by 90% of the volume-weighted average price of the common stock over a period of 30 trading days prior to such conversion, with the conversion value being equal to (i) 102.0% of the Liquidation Value if the conversion occurs on or before December 31, 2022, (ii) 105.0% of the Liquidation Value if the conversion occurs after December 31, 2022 but on or before December 31, 2023 and (iii) 106.0% of the Liquidation Value if the conversion occurs after December 31, 2023.
In accordance with guidance in ASC 480, the Series B Preferred Stock met the definition of a mandatorily redeemable financial instrument and criteria for liability classification and is recorded in redeemable preferred stock in the accompanying condensed consolidated balance sheets. The Company determined the fair value of the Series B Preferred Stock to be $41.0 million. The Series B Preferred Stock will be accreted up to its mandatory redemption value and into interest expense using the effective interest method.
During the three and nine months ended September 30, 2022, the Company recognized dividends in kind of $1.1 million and $1.2 million in interest expense, respectively, in the accompanying condensed consolidated statements of operations. During the three and nine months ended September 30, 2022, the Company recognized debt redemption costs of $0.2 million in interest expense in the accompanying condensed consolidated statements of operations.
15


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Leases
The Company leases certain facilities, automobiles and equipment under non-cancellable operating leases. Our leases have remaining lease terms of one to seven years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheets; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.
Supplemental information for the Company’s leases is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
 (dollars in thousands)
Operating lease cost$3,430 $3,040 $10,670 $10,670 

Nine Months Ended September 30,
 20222021
Operating cash flows from operating leases$10,260 $9,980 
ROU assets obtained in exchange for operating lease obligations$2,850 $910 

 September 30,
2022
December 31,
2021
Weighted average remaining lease term (years)4.75.1
Weighted average discount rate8.3 %8.4 %
10. Earnings (Loss) per Share
Basic earnings (loss) per share is computed using net income (loss) attributable to Horizon Global and the number of weighted average shares outstanding. Diluted earnings (loss) per share is computed using net income (loss) attributable to Horizon Global and the number of weighted average shares outstanding, adjusted to give effect to the assumed exercise of outstanding stock options and warrants, vesting of restricted shares outstanding, and conversion of the Convertible Notes, where dilutive to earnings per share.
16


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A reconciliation of the numerator and the denominator of basic income (loss) per share attributable to Horizon Global and diluted income (loss) per share attributable to Horizon Global is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(dollars in thousands, except for per share amounts)
Numerator:
Net loss$(25,680)$(2,770)$(75,060)$(16,960)
Less: Net loss attributable to noncontrolling interest(220)(300)(720)(970)
Net loss attributable to Horizon Global$(25,460)$(2,470)$(74,340)$(15,990)
Denominator:
Weighted average shares outstanding, basic27,676,025 27,286,600 27,551,405 27,019,554 
Dilutive effect of common stock equivalents— — — — 
Weighted average shares outstanding, diluted27,676,025 27,286,600 27,551,405 27,019,554 
Basic loss per share attributable to Horizon Global$(0.92)$(0.09)$(2.70)$(0.59)
Diluted loss per share attributable to Horizon Global$(0.92)$(0.09)$(2.70)$(0.59)
As a result of the net loss for the three and nine months ended September 30, 2022 and three and nine months ended September 30, 2021, the effect of certain dilutive securities was excluded from the computation of weighted average diluted shares outstanding, as inclusion would have resulted in anti-dilution. A summary of these anti-dilutive common stock equivalents are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Number of options18,961 18,961 18,961 18,961 
Exercise price of options
$9.20 - $11.02
$9.20 - $11.02
$9.20 - $11.02
$9.20 - $11.02
Restricted stock units2,464,742 1,761,463 2,238,974 1,863,498 
Convertible Notes— 5,005,000 3,318,333 5,005,000 
Convertible Notes warrants5,005,000 5,005,000 5,005,000 5,005,000 
Common stock warrants10,206,146 9,231,146 10,059,717 8,810,164 

17


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Equity Awards
Horizon Global employees, non-employee directors and certain consultants participate in the Horizon Global Corporation 2020 Equity and Incentive Compensation Plan (the “Horizon 2020 Plan”). The Horizon 2020 Plan authorizes the Compensation Committee of the Horizon Global Board of Directors to grant stock options (including “incentive stock options” as defined in Section 422 of the U.S. Internal Revenue Code), appreciation rights, restricted shares, restricted stock units, performance shares, performance stock units, cash incentive awards, dividend equivalents and certain other awards based upon terms and conditions described in the Horizon 2020 Plan. The Company generally awards grants on an annual basis.
During the nine months ended September 30, 2022, the Company granted restricted stock units (“RSUs”) and performance stock units (“PSUs”) to certain key employees and non-employee directors. The grant date fair values for the RSUs and PSUs are based on the closing trading price of the Company’s common stock on the date of grant. The RSUs vest ratably over a three-year period, while the PSUs cliff vest after a three-year period, upon achieving the performance criteria. The performance criteria for the PSUs is based on the Company’s three-year cumulative EBITDA.
During the three and nine months ended September 30, 2022, the Company recognized $(2.5) million and $(0.4) million of non-cash stock compensation income, respectively, related to RSUs and PSUs and for the three and nine months ended September 30, 2021, the Company recognized $0.9 million and $2.6 million of non-cash stock compensation expense, respectively, related to RSUs and PSUs. Non-cash stock compensation is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.
12. Shareholders’ Equity
Common Stock Warrants
In February 2022, in connection with the February 2022 Delayed Draw Term Loan, the Company issued the Senior Term Loan Amendment Warrants to purchase up to 975,000 shares of the Company’s common stock, with an exercise price of $9.00 per share. See Note 7, Long-term Debt, for additional information.
During the nine months ended September 30, 2022, no warrants were exercised. During the nine months ended September 30, 2021, a related-party entity, JKI Holdings, LLC, an entity owned by the chair of our board of directors, exercised in full the warrants that it originally received in connection with warrants issued in March 2019, and paid the exercise price in cash and received 278,283 shares of common stock.
13. Segment Information
The Company groups its business into operating segments generally by the region in which sales and manufacturing efforts are focused, which are grouped on the basis of similar product, market and operating factors. Each operating segment has discrete financial information evaluated regularly by the Company’s chief operating decision maker in determining resource allocation and assessing performance. The Company reports the results of its business in two operating segments: Horizon Americas and Horizon Europe-Africa. Horizon Americas is comprised of the Company’s North American operations. Horizon Europe-Africa is comprised of the Company’s European and South African operations. See below for further information regarding the types of products and services provided within each operating segment and the disaggregation of sales channels within each operating segment.
Horizon Americas - A market leader in the design, manufacture and distribution of a wide variety of high-quality, custom engineered towing, trailering and cargo management products and related accessories. These products are designed to support aftermarket, automotive OEMs, automotive OESs, industrial and retail customers in the agricultural, automotive, construction, industrial, marine, military, recreational vehicle, trailer and utility end markets. Products include vehicle trailer hitches, brake controllers, cargo management, heavy-duty towing products, jacks and couplers, protection/securing systems, trailer structural and electrical components, tow bars, vehicle roof racks and additional accessories.
Horizon Europe‑Africa - With a product offering similar to Horizon Americas, Horizon Europe-Africa focuses its sales and manufacturing efforts in the Europe and Africa regions of the world.
18


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company’s operating segment activity is as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
 (dollars in thousands)
Net Sales
Horizon Americas$79,220 $115,850 $292,080 $354,060 
Horizon Europe-Africa69,750 80,690 218,970 263,790 
Total$148,970 $196,540 $511,050 $617,850 
Operating (Loss) Profit
Horizon Americas$(3,500)$12,400 $(6,410)$41,000 
Horizon Europe-Africa(2,940)(150)(8,730)2,550 
Corporate(2,180)(5,920)(17,350)(19,110)
Total$(8,620)$6,330 $(32,490)$24,440 

Disaggregation of Sales
The Company disaggregates net sales from contracts with customers by major sales channel. The Company determined that disaggregating its net sales into these categories best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The aftermarket channel represents sales to automotive installers and warehouse distributors. The automotive OEM channel represents sales to automotive vehicle manufacturers. The automotive OES channel primarily represents sales to automotive vehicle dealerships. The retail channel represents sales to direct-to-consumer retailers. The e-commerce channel represents sales to retailers whose customers utilize the Internet to purchase the Company’s products. The industrial channel represents sales to non-automotive manufacturers and dealers of agricultural equipment, trailers, and other custom assemblies. The other channel represents sales that do not fit into a category described above and these sales are considered ancillary to the Company’s core operating activities.
The Company’s net sales by segment and disaggregated by major sales channel are as follows:
Three Months Ended September 30, 2022
Horizon AmericasHorizon Europe-AfricaTotal
(dollars in thousands)
Net Sales
Aftermarket$14,860 $14,690 $29,550 
Automotive OEM27,190 37,460 64,650 
Automotive OES2,020 14,480 16,500 
Retail20,330 — 20,330 
E-commerce7,430 2,200 9,630 
Industrial7,390 260 7,650 
Other— 660 660 
Total$79,220 $69,750 $148,970 
19


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three Months Ended September 30, 2021
Horizon AmericasHorizon Europe-AfricaTotal
(dollars in thousands)
Net Sales
Aftermarket$35,390 $22,400 $57,790 
Automotive OEM24,690 34,590 59,280 
Automotive OES3,570 20,790 24,360 
Retail26,460 — 26,460 
E-commerce16,970 1,950 18,920 
Industrial8,770 480 9,250 
Other— 480 480 
Total$115,850 $80,690 $196,540 
Nine Months Ended September 30, 2022
Horizon AmericasHorizon Europe-AfricaTotal
(dollars in thousands)
Net Sales
Aftermarket$66,980 $51,050 $118,030 
Automotive OEM76,780 113,660 190,440 
Automotive OES10,170 44,690 54,860 
Retail67,860 — 67,860 
E-commerce41,480 6,810 48,290 
Industrial28,810 910 29,720 
Other— 1,850 1,850 
Total$292,080 $218,970 $511,050 
Nine Months Ended September 30, 2021
Horizon AmericasHorizon Europe-AfricaTotal
(dollars in thousands)
Net Sales
Aftermarket$107,640 $70,950 $178,590 
Automotive OEM74,860 127,340 202,200 
Automotive OES11,670 56,820 68,490 
Retail81,650 — 81,650 
E-commerce51,220 5,340 56,560 
Industrial27,020 1,660 28,680 
Other— 1,680 1,680 
Total$354,060 $263,790 $617,850 
20


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. Income Taxes
At the end of each interim reporting period, the Company makes an estimate of the annual effective income tax rate. Tax items included in the annual effective income tax rate are pro-rated for the full year and tax items discrete to a specific quarter are included in the effective income tax rate for that quarter. Effective tax rates vary from period to period as separate calculations are performed for those countries where the Company's operations are profitable and whose results continue to be tax-effected and for those countries where full deferred tax valuation allowances exist and are maintained. In determining the estimated annual effective tax rate, the Company analyzes various factors, including but not limited to, forecasts of projected annual earnings, taxing jurisdictions in which the pretax income and/or pretax losses will be generated, and available tax planning strategies.
During the three and nine months ended September 30, 2022, the effective income tax rate was (4.3)% and (2.4)%, respectively. During the three and nine months ended September 30, 2021, the effective income tax rate was (17.4)% and (19.9)%, respectively. The differences in the effective tax rate compared to the statutory tax rate are attributable to the valuation allowance recorded in the U.S. and several foreign jurisdictions, which resulted in no income tax benefit recognized for jurisdictional pretax losses, and therefore, are excluded from the estimated effective tax rate.
The Company evaluates the realizability of its deferred tax assets on a quarterly basis. In completing this evaluation, the Company considers all available evidence in order to determine whether, based on the weight of the evidence, a valuation allowance is necessary. Full valuation allowances that are recorded for deferred tax assets in the U.S. and certain foreign jurisdictions will be maintained until sufficient positive evidence exists to reduce or eliminate them. The factors considered by management in its determination of the probability of the realization of the deferred tax assets include, but are not limited to, recent historical financial results, historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences, and tax planning strategies. If, based upon the weight of available evidence, it is more likely than not the deferred tax assets will not be realized, a valuation allowance is recorded. The Company has recently experienced pre-tax losses. As of September 30, 2022, the Company believes that it is more likely than not that the recorded deferred tax assets will be realized.
15. Other Expense, Net
Other expense, net consists of the following components:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(dollars in thousands)
Foreign currency loss$(5,240)$(1,370)$(9,400)$(3,020)
Customer early pay discounts(570)(280)(1,230)(780)
Net gain (loss) on disposition of business40 — (3,050)(2,230)
Series B commitment fee— — (1,000)— 
Other, net10 (70)70 90 
Total$(5,760)$(1,720)$(14,610)$(5,940)

21


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition contains forward-looking statements regarding industry outlook and our expectations regarding the performance of our business. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under the heading “Forward-Looking Statements,” at the beginning of this Quarterly Report on Form 10-Q. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
You should read the following discussion together with the Company’s reports on file with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the twelve months ended December 31, 2021 (See Item 1A. Risk Factors).
Overview
Headquartered in Plymouth, Michigan, Horizon Global Corporation and its consolidated subsidiaries (“Horizon Global,” “we,” “our,” or the “Company”) are a leading designer, manufacturer and distributor of a wide variety of high-quality, custom-engineered towing, trailering, cargo management and other related accessory products in the North American, European and African markets, primarily servicing the aftermarket, automotive original equipment manufacturers (“automotive OEMs”) and automotive original equipment servicers (“automotive OESs”) (collectively, “OEs”), retail, e-commerce and industrial channels, supporting our customers generally through a regional service and delivery model.
Critical factors affecting our ability to succeed include:
Our ability to realize the expected future economic benefits resulting from the changes made to our manufacturing operations, distribution footprint and management team in recent years, including the implementation of operational improvement initiatives, which are continuously ongoing to support margin expansion;
Our ability to continue to manage our liquidity, including continuing to service our debt obligations and comply with the applicable financial covenants thereto, especially given our recent debt refinancing activities and capital structure alignment to support business growth and our long-term strategic plan;
Our ability to quickly and cost-effectively introduce new products to our customers and end-user market with a resulting streamlined customer service model and improved operating margins;
Our ability to continue to successfully launch new products and customer programs to expand or realign our geographic coverage or distribution channels and realize desired operating efficiencies and product line or customer content penetration;
Our ability to efficiently manage our cost structure via global supply base management, internal sourcing and/or purchasing of materials, freight and logistics management, selective outsourcing of support functions, working capital management and a global approach to leverage our administrative functions; and
Our ability to manage liquidity and other economic and business uncertainties that may result in future business disruption, including inflation and deflation rates, interest rate volatility, the ongoing global semiconductor shortage, rising energy costs, as well as transportation and other logistic constraints.
If we are unable to do any of the foregoing successfully, our financial condition and results of operations could be materially and adversely impacted.
Horizon Global reports its business in two operating segments: Horizon Americas and Horizon Europe-Africa. See Note 13, Segment Information, included in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” within this Quarterly Report on Form 10-Q for further description of the Company’s operating segments.
Shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost and are included in cost of sales in our condensed consolidated statements of operations. Other shipping and handling expenses, which primarily relate to Horizon Americas’ distribution network, are included in selling, general and administrative expenses in our condensed consolidated statements of operations.
22



Supplemental Analysis and Segment Information
Non-GAAP Financial Measures
The Company’s management utilizes Adjusted EBITDA as the key measure of company and segment performance and for planning and forecasting purposes, as management believes this measure is most reflective of the operational profitability or loss of the Company and its operating segments and provides management and investors with information to evaluate the operating performance of its business and is representative of its performance used to measure certain of its financial covenants, further discussed in the Liquidity and Capital Resources section below. Adjusted EBITDA should not be considered a substitute for results prepared in accordance with U.S. GAAP and should not be considered an alternative to net income attributable to Horizon Global, which is the most directly comparable financial measure to Adjusted EBITDA that is prepared in accordance with U.S. GAAP. Adjusted EBITDA, as determined and measured by Horizon Global, should also not be compared to similarly titled measures reported by other companies. The Company also uses operating profit (loss) to measure stand-alone segment performance.
Adjusted EBITDA is defined as net income (loss) attributable to Horizon Global before interest expense, income taxes, depreciation and amortization, and before certain items, as applicable, such as severance, restructuring, relocation and related business disruption costs, gains (losses) on extinguishment of debt, impairment of goodwill and other intangibles, non-cash stock compensation, certain product liability and litigation claims, acquisition and integration costs, gains (losses) on business divestitures and other assets, debt issuance costs, board transition support and non-cash unrealized foreign currency remeasurement costs.
Adjusted EBITDA for our operating segments for the three months ended September 30, 2022 is as follows:
Three Months Ended September 30, 2022
Horizon AmericasHorizon Europe-AfricaCorporateConsolidated
(dollars in thousands)
Net loss attributable to Horizon Global$(25,460)
Net loss attributable to noncontrolling interest(220)
Net loss$(25,680)
Interest expense10,230 
Income tax expense1,070 
Depreciation and amortization4,300 
EBITDA$(2,610)$(4,490)$(2,980)$(10,080)
Net loss attributable to noncontrolling interest— 220 — 220 
Severance200 40 10 250 
Restructuring, relocation and related business disruption costs90 20 220 330 
Non-cash stock compensation— — (2,470)(2,470)
Loss (gain) on business divestitures and other assets580 20 (30)570 
Unrealized foreign currency remeasurement costs370 3,950 920 5,240 
Adjusted EBITDA$(1,370)$(240)$(4,330)$(5,940)







23



Adjusted EBITDA for our operating segments for the three months ended September 30, 2021 is as follows:
Three Months Ended September 30, 2021
Horizon AmericasHorizon Europe-AfricaCorporateConsolidated
(dollars in thousands)
Net loss attributable to Horizon Global$(2,470)
Net loss attributable to noncontrolling interest(300)
Net income$(2,770)
Interest expense6,970 
Income tax expense410 
Depreciation and amortization5,210 
EBITDA$14,050 $2,030 $(6,260)$9,820 
Net loss attributable to noncontrolling interest— 300 — 300 
Severance50 — — 50 
Restructuring, relocation and related business disruption costs60 30 10 100 
Non-cash stock compensation— — 880 880 
Loss on business divestitures and other assets300 10 10 320 
Debt issuance costs— 70 100 170 
Unrealized foreign currency remeasurement costs(10)950 400 1,340 
Adjusted EBITDA$14,450 $3,390 $(4,860)$12,980 
24


Segment and Other Supplemental Information
A summary of operating segment and other supplemental financial information for the three months ended September 30, 2022 and 2021 is as follows:
Three Months Ended September 30,ChangeConstant Currency Change
2022As a Percentage of Net Sales2021As a Percentage of Net Sales$%$%
(dollars in thousands)
Net Sales
Horizon Americas$79,220 53.2 %$115,850 58.9 %$(36,630)(31.6 %)$(36,620)(31.6 %)
Horizon Europe-Africa69,750 46.8 %80,690 41.1 %(10,940)(13.6 %)520 0.6 %
Total$148,970 100.0 %$196,540 100.0 %$(47,570)(24.2 %)$(36,100)(18.4 %)
Gross Profit
Horizon Americas$11,780 14.9 %$29,310 25.3 %$(17,530)(59.8 %)$(17,520)(59.8 %)
Horizon Europe-Africa4,870 7.0 %9,450 11.7 %(4,580)(48.5 %)(3,770)(39.9 %)
Total$16,650 11.2 %$38,760 19.7 %$(22,110)(57.0 %)$(21,290)(54.9 %)
Selling, General and Administrative Expenses
Horizon Americas$15,280 19.3 %$16,910 14.6 %$(1,630)(9.6 %)$(1,620)(9.6 %)
Horizon Europe-Africa7,810 11.2 %9,600 11.9 %(1,790)(18.6 %)(510)(5.3 %)
Corporate2,180 N/A5,920 N/A(3,740)(63.2 %)(3,740)(63.2 %)
Total$25,270 17.0 %$32,430 16.5 %$(7,160)(22.1 %)$(5,870)(18.1 %)
Operating (Loss) Profit
Horizon Americas$(3,500)(4.4)%$12,400 10.7 %$(15,900)(128.2 %)$(15,900)(128.2 %)
Horizon Europe-Africa(2,940)(4.2)%(150)(0.2)%(2,790)(1,860.0 %)(3,260)(2,173.3 %)
Corporate(2,180)N/A(5,920)N/A3,740 63.2 %3,740 63.2 %
Total$(8,620)(5.8)%$6,330 3.2 %$(14,950)(236.2 %)$(15,420)(243.6 %)
Capital Expenditures
Horizon Americas$80 0.1 %$2,170 1.9 %$(2,090)(96.3 %)$(2,090)(96.3 %)
Horizon Europe-Africa3,010 4.3 %2,620 3.2 %390 14.9 %1,250 47.7 %
Corporate— N/A— N/A— — %— — %
Total$3,090 2.1 %$4,790 2.4 %$(1,700)(35.5 %)$(840)(17.5 %)
Depreciation of Property and Equipment and Amortization of Intangibles
Horizon Americas$1,890 2.4 %$1,990 1.7 %$(100)(5.0 %)$(100)(5.0 %)
Horizon Europe-Africa2,380 3.4 %3,180 3.9 %(800)(25.2 %)(410)(12.9 %)
Corporate30 N/A40 N/A(10)(25.0 %)(10)(25.0 %)
Total$4,300 2.9 %$5,210 2.7 %$(910)(17.5 %)$(520)(10.0 %)
Adjusted EBITDA
Horizon Americas$(1,370)(1.7)%$14,450 12.5 %$(15,820)(109.5 %)N/AN/A
Horizon Europe-Africa(240)(0.3)%3,390 4.2 %(3,630)(107.1 %)N/AN/A
Corporate(4,330)N/A(4,860)N/A530 10.9 %N/AN/A
Total$(5,940)(4.0)%$12,980 6.6 %$(18,920)(145.8 %)N/AN/A
25



Results of Operations
Three Months Ended September 30, 2022 Compared with Three Months Ended September 30, 2021
Consolidated net sales decreased $47.5 million, or 24.2%, to $149.0 million during the three months ended September 30, 2022, as compared to $196.5 million during the three months ended September 30, 2021. Net sales for Horizon Americas decreased $36.6 million, driven primarily by lower sales volumes in the aftermarket sales channel, partially offset by customer pricing recovery initiatives put in place in response to commodity and input cost increases. Net sales for Horizon Europe-Africa decreased $10.9 million, driven primarily by lower sales volumes in the aftermarket and automotive OES sales channels and $11.5 million of unfavorable currency translation, partially offset by customer pricing recovery initiatives put in place in response to commodity and input cost increases.
Gross profit margin (gross profit as a percentage of net sales) was 11.2% and 19.7% during the three months ended September 30, 2022 and 2021, respectively. The decline in gross profit margin is primarily due to lower net sales in Horizon Americas and Horizon Europe-Africa as detailed above and is inclusive of a significant mix shift from higher margin sales channels to lower margin sales channels, and is net of customer pricing recoveries discussed above. The decline was also driven by unfavorable cost performance, primarily attributable to unfavorable material, supply chain and other manufacturing input costs associated with global macroeconomic factors experienced during the third quarter of 2022.
Selling, general and administrative (“SG&A”) expenses decreased $7.2 million, primarily attributable to $3.4 million lower non-cash stock compensation, coupled with favorable distribution center lease, operating and support costs as well as currency translation in Horizon Americas and Horizon Europe-Africa, respectively.
Operating margin (operating (loss) profit as a percentage of net sales) was (5.8)% and 3.2% during the three months ended September 30, 2022 and 2021, respectively. Operating profit declined $14.9 million to an operating loss of $8.6 million during the three months ended September 30, 2022, as compared to an operating profit of $6.3 million during the three months ended September 30, 2021. The changes in operating profit and operating margin were primarily due to the gross profit performance decline detailed above.
Other expense, net increased $4.1 million to $5.8 million during the three months ended September 30, 2022, as compared to $1.7 million during the three months ended September 30, 2021, primarily attributable to $3.9 million of higher foreign currency loss during the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.
Interest expense increased $3.2 million to $10.2 million during the three months ended September 30, 2022, as compared to $7.0 million during the three months ended September 30, 2021, primarily as a result of the Company’s amendments to its Senior Term Loan Credit Agreement, as defined below, which resulted in additional borrowings in the first and second quarters of 2022 and increased interest expense for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021. The increased interest expense is also attributable to paid-in-kind dividends and redemption costs associated with the Company’s redeemable preferred stock, which was issued in June 2022. Refer to Note 7, Long-term Debt and Note 8, Redeemable Preferred Stock in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” included within this Quarterly Report on Form 10-Q for additional information of the Company’s long-term debt and redeemable preferred stock.
The effective income tax rate for the three months ended September 30, 2022 and 2021 was (4.3)% and (17.4)%, respectively. The effective income tax rate for both periods is attributable to the Company’s valuation allowance recorded in the U.S. and several foreign jurisdictions, which resulted in no income tax benefit recognized for jurisdictional pretax losses, and therefore, are excluded from the estimated effective tax rate.
Net loss increased $22.9 million to $25.7 million during the three months ended September 30, 2022, compared to net loss of $2.8 million during the three months ended September 30, 2021. The change in net loss was attributable to the operational results detailed above.
See below for a discussion of operating results by segment.
26


Horizon Americas
Net sales by sales channel, in thousands, for Horizon Americas are as follows:
Three Months Ended September 30,Change
20222021$%
Net Sales
Aftermarket$14,860 $35,390 $(20,530)(58.0)%
Automotive OEM27,190 24,690 2,500 10.1 %
Automotive OES2,020 3,570 (1,550)(43.4)%
Retail20,330 26,460 (6,130)(23.2)%
E-commerce7,430 16,970 (9,540)(56.2)%
Industrial7,390 8,770 (1,380)(15.7)%
Total$79,220 $115,850 $(36,630)(31.6)%
Net sales decreased $36.6 million, or 31.6%, to $79.2 million during the three months ended September 30, 2022, as compared to $115.9 million during the three months ended September 30, 2021, primarily attributable to lower sales volumes in the aftermarket, e-commerce, and retail sales channels, driven by customers using existing inventories to satisfy consumer demand as well as material availability constraints. The decrease in net sales was partially offset by $10.9 million of customer pricing recoveries, primarily in the aftermarket, OE, retail and e-commerce sales channels, to recover increased material and input costs. The decrease was also partially offset by a $2.2 million reduction in sales returns and allowances.
Horizon Americas’ gross profit decreased $17.5 million, or 59.8%, to $11.8 million, or 14.9% of net sales, during the three months ended September 30, 2022, as compared to $29.3 million, or 25.3% of net sales, during the three months ended September 30, 2021. The decrease in gross profit and gross profit margin reflects the changes in net sales detailed above, inclusive of a significant mix shift from higher margin sales channels to lower margin sales channels, and is net of customer pricing recoveries discussed above. Gross profit and gross profit margin were also negatively impacted in the third quarter of 2022 by a continuation of elevated material, supply chain and other manufacturing input costs attributable to significant commodity and logistics cost increases in the Company’s supply chain due to global macroeconomic factors. These global macroeconomic factors impacted business performance and were not able to be fully passed through to our customers during the third quarter of 2022, given there is generally a delay in such recoveries due to market pressures and restrictions within certain customer contracts.
SG&A expenses decreased $1.6 million to $15.3 million, or 19.3% of net sales, during the three months ended September 30, 2022, as compared to $16.9 million, or 14.6% of net sales, during the three months ended September 30, 2021. The decrease in SG&A expenses is primarily attributable to $1.2 million lower distribution center lease, operating and support costs.
Horizon Americas’ operating profit decreased $15.9 million to an operating loss of $3.5 million, or (4.4)% of net sales, during the three months ended September 30, 2022, as compared to an operating profit of $12.4 million, or 10.7% of net sales, during the three months ended September 30, 2021. The decline in operating profit and operating margin were primarily due to the operational results detailed above.
Horizon Americas’ Adjusted EBITDA was $(1.4) million during the three months ended September 30, 2022, as compared to Adjusted EBITDA of $14.5 million during the three months ended September 30, 2021. Adjusted EBITDA declined due to the operational results detailed above.
27


Horizon Europe-Africa
Net sales by sales channel, in thousands, for Horizon Europe-Africa are as follows:
Three Months Ended September 30,Change
20222021$%
Net Sales
Aftermarket$14,690 $22,400 $(7,710)(34.4)%
Automotive OEM37,460 34,590 2,870 8.3 %
Automotive OES14,480 20,790 (6,310)(30.4)%
E-commerce2,200 1,950 250 12.8 %
Industrial260 480 (220)(45.8)%
Other660 480 180 37.5 %
Total$69,750 $80,690 $(10,940)(13.6)%
Net sales decreased $10.9 million, or 13.6%, to $69.8 million during the three months ended September 30, 2022, as compared to $80.7 million, during the three months ended September 30, 2021, primarily attributable to lower sales volumes in the aftermarket and automotive OES sales channels driven primarily by material availability constraints. The decrease includes $11.5 million of unfavorable currency translation. The decrease was partially offset by $8.4 million of customer pricing recoveries, primarily in the aftermarket and OE sales channels, to recover increased material and input costs.
Horizon Europe-Africa’s gross profit decreased $4.6 million, or 48.5%, to $4.9 million, or 7.0% of net sales, during the three months ended September 30, 2022, as compared to $9.5 million, or 11.7% of net sales, during the three months ended September 30, 2021. The decrease in gross profit and gross profit margin reflects the changes in net sales detailed above, coupled with the unfavorable impact of increased material, supply chain and other manufacturing input costs, net of customer pricing recoveries. Gross profit and gross profit margin were also negatively impacted in the third quarter of 2022 by the inability to flex costs efficiently driven by lower sales volumes. The input cost increases were not able to be fully passed through to our customers during the third quarter of 2022, given there is generally a delay in such recoveries due to market pressures and restrictions within certain customer contracts.
SG&A expenses decreased $1.8 million to $7.8 million, or 11.2% of net sales, during the three months ended September 30, 2022, as compared to $9.6 million, or 11.9% of net sales, during the three months ended September 30, 2021. The decrease in SG&A expenses is primarily attributable to $1.3 million of favorable currency translation.
Horizon Europe-Africa’s operating profit decreased $2.7 million to an operating loss of $2.9 million, or (4.2)% of net sales, during the three months ended September 30, 2022, as compared to an operating loss of $0.2 million, or (0.2)% of net sales, during the three months ended September 30, 2021. The decline in operating profit and operating margin were primarily due to the operational results detailed above.
Horizon Europe-Africa’s Adjusted EBITDA was $(0.2) million during the three months ended September 30, 2022, as compared to Adjusted EBITDA of $3.4 million during the three months ended September 30, 2021. Adjusted EBITDA declined due to the operational results detailed above.
Corporate Expenses
Corporate expenses included in operating loss decreased $3.7 million to $2.2 million during the three months ended September 30, 2022, as compared to $5.9 million during the three months ended September 30, 2021. The decrease was primarily attributable to $3.4 million lower non-cash stock compensation and other insignificant changes to Corporate expenses.
Corporate Adjusted EBITDA was $(4.3) million during the three months ended September 30, 2022, as compared to Adjusted EBITDA of $(4.9) million during the three months ended September 30, 2021. The change in Adjusted EBITDA was primarily due to the other insignificant changes in Corporate expenses referenced above.
28


The following table summarizes Adjusted EBITDA for our operating segments for the nine months ended September 30, 2022:
Nine Months Ended September 30, 2022
Horizon AmericasHorizon Europe-AfricaCorporateConsolidated
(dollars in thousands)
Net loss attributable to Horizon Global$(74,340)
Net loss attributable to noncontrolling interest(720)
Net loss$(75,060)
Interest expense26,210 
Income tax expense1,750 
Depreciation and amortization13,240 
EBITDA$(2,250)$(8,220)$(23,390)$(33,860)
Net loss attributable to noncontrolling interest— 720 — 720 
Severance200 90 470 760 
Restructuring, relocation and related business disruption costs470 60 240 770 
Non-cash stock compensation— — (420)(420)
Loss (gain) on business divestitures and other assets1,270 (60)3,130 4,340 
Debt issuance costs— — 1,860 1,860 
Unrealized foreign currency remeasurement costs90 7,150 2,180 9,420 
Adjusted EBITDA$(220)$(260)$(15,930)$(16,410)

The following table summarizes Adjusted EBITDA for our operating segments for the nine months ended September 30, 2021:
Nine Months Ended September 30, 2021
Horizon AmericasHorizon Europe-AfricaCorporateConsolidated
(dollars in thousands)
Net loss attributable to Horizon Global$(15,990)
Net loss attributable to noncontrolling interest(970)
Net loss$(16,960)
Interest expense21,000 
Income tax expense2,810 
Depreciation and amortization15,930 
EBITDA$43,230 $10,860 $(31,310)$22,780 
Net loss attributable to noncontrolling interest— 970 — 970 
Severance50 — — 50 
Restructuring, relocation and related business disruption costs(780)50 (30)(760)
Loss on debt extinguishment— — 11,650 11,650 
Non-cash stock compensation— — 2,590 2,590 
Loss on business divestitures and other assets3,020 — 10 3,030 
Debt issuance costs— 70 290 360 
Unrealized foreign currency remeasurement costs260 1,900 820 2,980 
Adjusted EBITDA$45,780 $13,850 $(15,980)$43,650 
29


The following table summarizes financial information for our operating segments for the nine months ended September 30, 2022 and 2021:
Nine Months Ended September 30,ChangeConstant Currency Change
2022As a Percentage
of Net Sales
2021As a Percentage
of Net Sales
$%$%
(dollars in thousands)
Net Sales
Horizon Americas$292,080 57.2 %$354,060 57.3 %$(61,980)(17.5)%$(61,980)(17.5)%
Horizon Europe-Africa218,970 42.8 %263,790 42.7 %(44,820)(17.0)%(19,020)(7.2)%
Total$511,050 100.0 %$617,850 100.0 %$(106,800)(17.3)%$(81,000)(13.1)%
Gross Profit
Horizon Americas$41,880 14.3 %$93,660 26.5 %$(51,780)(55.3)%$(51,790)(55.3)%
Horizon Europe-Africa15,700 7.2 %32,950 12.5 %(17,250)(52.4)%(15,380)(46.7)%
Total$57,580 11.3 %$126,610 20.5 %$(69,030)(54.5)%$(67,170)(53.1)%
Selling, General and Administrative Expenses
Horizon Americas$48,290 16.5 %$52,660 14.9 %$(4,370)(8.3)%$(4,370)(8.3)%
Horizon Europe-Africa24,430 11.2 %30,400 11.5 %(5,970)(19.6)%(3,130)(10.3)%
Corporate17,350 N/A19,110 N/A(1,760)(9.2)%(1,760)(9.2)%
Total$90,070 17.6 %$102,170 16.5 %$(12,100)(11.8)%$(9,260)(9.1)%
Operating (Loss) Profit
Horizon Americas$(6,410)(2.2)%$41,000 11.6 %$(47,410)(115.6)%$(47,420)(115.7)%
Horizon Europe-Africa(8,730)(4.0)%2,550 1.0 %(11,280)(442.4)%(12,250)(480.4)%
Corporate(17,350)N/A(19,110)N/A1,760 9.2 %1,760 9.2 %
Total$(32,490)(6.4)%$24,440 4.0 %$(56,930)(232.9)%$(57,910)(236.9)%
Capital Expenditures
Horizon Americas$1,100 0.4 %$6,550 1.8 %$(5,450)(83.2)%$(5,440)(83.1)%
Horizon Europe-Africa10,920 5.0 %8,180 3.1 %2,740 33.5 %4,070 49.8 %
Corporate— N/A— N/A— — %— — %
Total$12,020 2.4 %$14,730 2.4 %$(2,710)(18.4)%$(1,370)(9.3)%
Depreciation of Property and Equipment and Amortization of Intangibles
Horizon Americas$5,770 2.0 %$5,680 1.6 %$90 1.6 %$90 1.6 %
Horizon Europe-Africa7,390 3.4 %10,110 3.8 %(2,720)(26.9)%(1,870)(18.5)%
Corporate80 N/A140 N/A(60)(42.9)%(60)(42.9)%
Total$13,240 2.6 %$15,930 2.6 %$(2,690)(16.9)%$(1,840)(11.6)%
Adjusted EBITDA
Horizon Americas$(220)(0.1)%$45,780 12.9 %$(46,000)(100.5)%N/AN/A
Horizon Europe-Africa(260)(0.1)%13,850 5.3 %(14,110)(101.9)%N/AN/A
Corporate(15,930)N/A(15,980)N/A50 0.3 %N/AN/A
Total$(16,410)(3.2)%$43,650 7.1 %$(60,060)(137.6)%N/AN/A
30


Results of Operations

Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021
Consolidated net sales decreased $106.8 million, or 17.3%, to $511.1 million during the nine months ended September 30, 2022, as compared to $617.9 million during the nine months ended September 30, 2021. Net sales for Horizon Americas decreased $62.0 million, driven primarily by lower sales volumes in the aftermarket and retail sales channels, partially offset by customer pricing recovery initiatives put in place in response to commodity and input cost increases. Net sales for Horizon Europe-Africa decreased $44.8 million, driven primarily by lower sales volumes in the aftermarket and OE sales channels and $25.8 million of unfavorable currency translation, partially offset by customer pricing recovery initiatives put in place in response to commodity and input cost increases.
Gross profit margin was 11.3% and 20.5% during the nine months ended September 30, 2022 and 2021, respectively. The decline in gross profit margin is primarily due to lower net sales in Horizon Americas and Horizon Europe-Africa as detailed above and is inclusive of a significant mix shift from higher margin sales channels to lower margin sales channels, and is net of customer pricing recoveries discussed above. The decline was also driven by unfavorable cost performance, primarily attributable to unfavorable material, supply chain and other manufacturing input costs associated with global macroeconomic factors during 2022.
SG&A expenses decreased $12.1 million, primarily attributable to $3.0 million lower non-cash stock compensation, coupled with $2.5 million lower personnel and other variable compensation costs across the Company as well as favorable currency translation in Horizon Europe-Africa.
Operating margin was (6.4)% and 4.0% during the nine months ended September 30, 2022 and 2021, respectively. Operating profit declined $56.9 million to an operating loss of $32.5 million during the nine months ended September 30, 2022, from an operating profit of $24.4 million during the nine months ended September 30, 2021. The changes in operating profit and operating margin were primarily due to the gross profit performance decline detailed above.
Other expense, net increased $8.7 million to $14.6 million during the nine months ended September 30, 2022, as compared to $5.9 million during the nine months ended September 30, 2021, primarily attributable to $6.4 million of higher foreign currency loss during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. The increase was also due to a $1.0 million commitment fee per the terms of the commitment letter associated with the Company’s redeemable preferred stock, during the nine months ended September 30, 2022.
Interest expense increased $5.2 million to $26.2 million during the nine months ended September 30, 2022, as compared to $21.0 million during the nine months ended September 30, 2021, primarily as a result of the Company’s amendments to its Senior Term Loan Credit Agreement, which resulted in additional borrowings in the first and second quarters of 2022 and increased interest expense for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021. The increased interest expense is also attributable to paid-in-kind dividends and redemption costs associated with the Company’s redeemable preferred stock, which was issued in June 2022. Refer to Note 7, Long-term Debt and Note 8, Redeemable Preferred Stock in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” included within this Quarterly Report on Form 10-Q for additional information of the Company’s long-term debt and redeemable preferred stock.
The effective income tax rate for the nine months ended September 30, 2022 and 2021 was (2.4)% and (19.9)%, respectively. The effective income tax rate for both periods is attributable to the Company’s valuation allowance recorded in the U.S. and several foreign jurisdictions, which resulted in no income tax benefit recognized for jurisdictional pretax losses, and therefore, are excluded from the estimated effective tax rate.
Net loss increased $58.1 million, to $75.1 million during the nine months ended September 30, 2022, compared to a net loss of $17.0 million during the nine months ended September 30, 2021. The change in net loss was attributable to the operational results detailed above.
See below for a discussion of operating results by segment.
31


Horizon Americas
Net sales by sales channel, in thousands, for Horizon Americas are as follows:
Nine Months Ended September 30,Change
20222021$%
Net Sales
Aftermarket$66,980 $107,640 $(40,660)(37.8)%
Automotive OEM76,780 74,860 1,920 2.6 %
Automotive OES10,170 11,670 (1,500)(12.9)%
Retail67,860 81,650 (13,790)(16.9)%
E-commerce41,480 51,220 (9,740)(19.0)%
Industrial28,810 27,020 1,790 6.6 %
Total$292,080 $354,060 $(61,980)(17.5)%
Net sales decreased $62.0 million, or 17.5%, to $292.1 million during the nine months ended September 30, 2022, as compared to $354.1 million during the nine months ended September 30, 2021, primarily attributable to lower sales volumes in the aftermarket and retail sales channels driven by customers using existing inventories to satisfy consumer demand as well as material availability constraints. The decrease in net sales was partially offset by $40.4 million of customer pricing recoveries, primarily in the aftermarket, OE, retail and e-commerce sales channels, to recover increased material and input costs. The decrease was also partially offset by a $6.8 million reduction in sales returns and allowances.
Horizon Americas’ gross profit decreased $51.8 million, or 55.3%, to $41.9 million, or 14.3% of net sales, during the nine months ended September 30, 2022, as compared to $93.7 million, or 26.5% of net sales, during the nine months ended September 30, 2021. The decrease in gross profit and gross profit margin reflects the changes in net sales detailed above, inclusive of a significant mix shift from higher margin sales channels to lower margin sales channels, and is net of customer pricing recoveries discussed above. Gross profit and gross profit margin were also negatively impacted in the first three quarters of 2022 by a continuation of elevated material, supply chain and other manufacturing input costs attributable to significant commodity and logistics cost increases in the Company’s supply chain due to global macroeconomic factors. These global macroeconomic factors impacted business performance and were not able to be fully passed through to our customers in the first three quarters of 2022, given there is generally a delay in such recoveries due to market pressures and restrictions within certain customer contracts.
SG&A expenses decreased $4.4 million to $48.3 million, or 16.5% of net sales during the nine months ended September 30, 2022, as compared to $52.7 million, or 14.9% of net sales, during the nine months ended September 30, 2021. The decrease in SG&A expenses is primarily attributable to the following:
$1.7 million lower distribution center lease, operating and support costs; and
$1.5 million lower personnel and other variable compensation costs.
Horizon Americas’ operating profit decreased $47.4 million to an operating loss of $6.4 million, or (2.2)% of net sales, during the nine months ended September 30, 2022, as compared to an operating profit of $41.0 million, or 11.6% of net sales, during the nine months ended September 30, 2021. The decline in operating profit and operating margin were primarily due to the operational results detailed above.
Horizon Americas’ Adjusted EBITDA was $(0.2) million during the nine months ended September 30, 2022, as compared to Adjusted EBITDA of $45.8 million during the nine months ended September 30, 2021. Adjusted EBITDA declined due to the operational results detailed above.
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Horizon Europe-Africa
Net sales by sales channel, in thousands, for Horizon Europe-Africa are as follows:
Nine Months Ended September 30,Change
20222021$%
Net Sales
Aftermarket$51,050 $70,950 $(19,900)(28.0)%
Automotive OEM113,660 127,340 (13,680)(10.7)%
Automotive OES44,690 56,820 (12,130)(21.3)%
E-commerce6,810 5,340 1,470 27.5 %
Industrial910 1,660 (750)(45.2)%
Other1,850 1,680 170 10.1 %
Total$218,970 $263,790 $(44,820)(17.0)%
Net sales decreased $44.8 million, or 17.0%, to $219.0 million during the nine months ended September 30, 2022, as compared to $263.8 million during the nine months ended September 30, 2021, primarily attributable to lower sales volumes in the aftermarket and OE sales channels driven primarily by supply chain disruptions resulting in OEM customer production schedule changes as well as material availability constraints. The decrease also includes $25.8 million of unfavorable currency translation. The decrease was partially offset by $23.0 million of customer pricing recoveries, primarily in the aftermarket and OE sales channels, to recover increased material and input costs.
Horizon Europe-Africa’s gross profit decreased $17.3 million, or 52.4%, to $15.7 million, or 7.2% of net sales, during the nine months ended September 30, 2022, from $33.0 million, or 12.5% of net sales, during the nine months ended September 30, 2021. The decrease in gross profit and gross profit margin reflects the changes in net sales detailed above, coupled with the unfavorable impact of increased material, supply chain and other manufacturing input costs, and is net of customer pricing recoveries. Gross profit and gross profit margin were also negatively impacted in the first three quarters of 2022 by the inability to flex costs efficiently resulting from OEM customer production schedule changes. The input cost increases were not able to be fully passed through to our customers during the first three quarters of 2022, given there is generally a delay in such recoveries due to market pressures and restrictions within certain customer contracts.
SG&A decreased $6.0 million to $24.4 million, or 11.2% of net sales during the nine months ended September 30, 2022, as compared to $30.4 million, or 11.5% of net sales, during the nine months ended September 30, 2021. The decrease in SG&A expenses is primarily attributable to the following:
$2.8 million of favorable currency translation; and
$0.9 million of lower outside professional fees and other administrative costs.
Horizon Europe-Africa’s operating profit decreased $11.3 million to an operating loss of $8.7 million, or (4.0)% of net sales during the nine months ended September 30, 2022, as compared to an operating profit of $2.6 million, or 1.0% of net sales, during the nine months ended September 30, 2021. The decline in operating profit and operating margin were primarily due to the operational results detailed above.
Horizon Europe-Africa’s Adjusted EBITDA was $(0.3) million during the nine months ended September 30, 2022, as compared to Adjusted EBITDA of $13.9 million during the nine months ended September 30, 2021. Adjusted EBITDA declined due to the operational results detailed above.
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Corporate Expenses
Corporate expenses included in operating loss decreased $1.7 million to $17.4 million during the nine months ended September 30, 2022, as compared to $19.1 million during the nine months ended September 30, 2021. The decrease was primarily attributable to the following:
$3.0 million lower non-cash stock compensation; partially offset by:
$0.6 million higher costs incurred related to professional service fees and other costs associated with new debt issuance, amendments, and modifications and related structure changes.
Corporate Adjusted EBITDA was $(15.9) million during the nine months ended September 30, 2022, as compared to Adjusted EBITDA of $(16.0) million during the nine months ended September 30, 2021. The change in Adjusted EBITDA was driven by insignificant changes to Corporate expenses.
34


Liquidity and Capital Resources
Our capital and working capital requirements are funded through a combination of cash on hand, cash flows from operations, and various borrowings and factoring arrangements described below. As of September 30, 2022 and December 31, 2021, we had $5.0 million and $8.2 million, respectively, of cash and cash equivalents held at foreign subsidiaries. There may be country specific regulations, which may restrict or result in increased costs in the repatriation of these funds.
In March 2020, the Company, as guarantor, entered into a Loan and Security Agreement (the “Loan Agreement”) with Eclipse Business Capital LLC, formerly known as Encina Business Credit, LLC, as agent for the lenders party thereto, and Horizon Global Americas Inc. and Cequent Towing Products of Canada Ltd., as borrowers (the “ABL Borrowers”). The Loan Agreement provides for an asset-based revolving credit facility (the “Revolving Credit Facility”) in the maximum aggregate principal amount of $75.0 million subject to customary borrowing base limitations contained therein, and may be increased at the ABL Borrowers’ request in increments of $5.0 million, up to a maximum of five times over the life of the Revolving Credit Facility, for a total increase of up to $25.0 million. The Loan Agreement has been amended on several occasions that, among other things, increased the maximum credit available under the Revolving Credit Facility to $95.0 million. As of September 30, 2022, we had availability of $9.7 million under the Revolving Credit Facility and $2.8 million of cash and cash equivalents in the United States.
As of September 30, 2022 and December 31, 2021, total cash and availability was $17.5 million and $39.2 million, respectively. We define cash and availability as cash and cash equivalents and amounts of cash accessible but undrawn from credit facilities.
Our ability to fund our working capital needs, debt payments and other obligations, including borrowing base limitations under our Revolving Credit Facility, depends on our future operating performance and cash flow and many factors outside of our control, including the costs of raw materials, the state of the automotive accessories market and other macroeconomic conditions.
Discussion of Going Concern
The Company’s condensed consolidated financial statements contained elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has a history of recurring net operating losses and cash outflows from operations. In addition, the Company currently projects it will not generate sufficient cash flows from operations, or have access to other sources of liquidity, to sustain its operating needs or to meet the Company's obligations as they become due over the twelve-month period subsequent to the date of the filing of this Quarterly Report on Form 10-Q. In addition, as of September 30, 2022, the Company was in compliance with all applicable covenants in agreements governing its debt. However, based on the Company’s projected financial performance for the twelve-month period subsequent to the date of the filing of this Quarterly Report on Form 10-Q, the Company currently projects that it will not be in compliance with a financial covenant under the Company’s Senior Term Loan Credit Agreement as of March 31, 2023, which would result in an event of default. Such a default would allow the lender under the Senior Term Loan Credit Agreement to accelerate the maturity of the debt, which carries a balance of $225.0 million as of September 30, 2022, making it due and payable at that time. This would, in turn, result in a cross-default of the Company’s Revolving Credit Facility, which carries a balance of $70.4 million as of September 30, 2022. Further, if the Company’s independent registered public accounting firm includes an explanatory paragraph, other than for debt maturing within one year, regarding the Company’s ability to continue as a going concern in its report on the Company’s financial statements for the twelve months ending December 31, 2022, this would be an event of default under the Company’s Senior Term Loan Credit Agreement and also result in a cross-default of the Revolving Credit Facility at the time the Company’s financial statements for the twelve months ending December 31, 2022 are filed. The Company does not currently have sufficient cash on hand, liquidity or projected future cash flows to repay these outstanding amounts upon an event of default. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.
In response to these conditions, the Company has undertaken a review of strategic alternatives for the business, which could involve a sale of a portion or the entirety of the business. The Company has also undertaken discussions with its lender to amend the terms of its financial covenant under the Senior Term Loan Credit Agreement. The Company has a history of successfully amending and extending credit agreements with its current lenders. The process of undertaking such activities is actively ongoing, however, there can be no assurances that this process will result in the completion of any transaction or other alternative that would alleviate such conditions. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.
35


The condensed consolidated financial statements contained elsewhere in this Quarterly Report on Form 10-Q do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
Cash Flows - Operating Activities
Net cash used for operating activities during the nine months ended September 30, 2022 and 2021 was $37.0 million and $30.6 million, respectively.
During the nine months ended September 30, 2022, we used $44.9 million in cash flows, based on the reported net loss of $75.1 million and after considering the effects of non-cash items related to depreciation, amortization of intangible assets, amortization of original issuance discount and debt issuance costs, deferred income taxes, non-cash compensation expense, paid-in-kind dividends and interest, redeemable preferred stock redemption costs, and other, net. During the nine months ended September 30, 2021, we generated $24.5 million in cash flows, based on the reported net loss of $17.0 million and after considering the effects of similar non-cash items previously described, in addition to the loss on debt extinguishment of the Company’s former term loan during the first quarter of 2021.
Changes in operating assets and liabilities sourced $7.9 million and used $55.2 million of cash during the nine months ended September 30, 2022 and 2021, respectively. The increase in cash sourced from operating assets and liabilities is primarily attributable to the lower net sales activity in 2022 and the resulting affect on accounts receivables, inventories and accounts payable.
Cash Flows - Investing Activities
Net cash used for investing activities during the nine months ended September 30, 2022 and 2021 was $12.0 million and $14.7 million, respectively.
During the nine months ended September 30, 2022 and 2021, capital expenditures were $12.0 million and $14.7 million, respectively, related to growth, capacity and productivity-related projects within Horizon Americas and Horizon Europe-Africa. The net decrease in capital expenditures during the nine months ended September 30, 2022 is attributable to lower spending in Horizon Americas, partially offset by increased capital expenditures in Horizon Europe-Africa to support growth and capacity expenditures associated with our planned low-cost country expansion.
Cash Flows - Financing Activities
Net cash provided by financing activities was $46.4 million and $18.0 million during the nine months ended September 30, 2022 and 2021, respectively.
During the nine months ended September 30, 2022 and 2021, net proceeds from the Revolving Credit Facility, net of issuance costs, were $12.4 million and $20.7 million, respectively.
During the nine months ended September 30, 2022, proceeds from borrowings on our term loan, net of issuance costs, and related issuance of common stock warrants were $118.2 million and $3.0 million, respectively. During the nine months ended September 30, 2021, proceeds from our term loan, net of issuance costs, and related issuance of common stock warrants were $75.3 million and $16.3 million, respectively. During the nine months ended September 30, 2022, repayments of borrowings on our Convertible Notes, as defined below, were $85.0 million. During the nine months ended September 30, 2021, repayments of borrowings on our former term loan, including transaction fees, were $94.9 million.
Factoring Arrangements
We have factoring arrangements with financial institutions to sell certain accounts receivable. During the nine months ended September 30, 2022 and 2021, total receivables sold under certain non-recourse factoring arrangements were $206.9 million and $225.1 million, respectively. We utilize factoring arrangements as part of our working capital needs. The costs of participating in these arrangements are immaterial to our results. Refer to Note 3, Summary of Significant Accounting Policies, in Item 8, “Financial Statements and Supplementary Data,” included within our Annual Report on Form 10-K for the twelve months ended December 31, 2021, for additional information.
36


Our Debt and Other Commitments
Revolving Credit Facility
We and certain of our subsidiaries are party to the asset-based Revolving Credit Facility governed by the Loan Agreement. The Revolving Credit Facility provides $95.0 million of funding on a revolving basis, subject to borrowing base availability, and matures on March 13, 2024. As of September 30, 2022, there was $70.4 million outstanding on the Revolving Credit Facility.
Effective March 31, 2022, we entered into an amendment to the Loan Agreement (the “Eighth Amendment”) that temporarily increased our ability to borrow against receivables and in-transit inventory as well as inventory located in the our Mexico facilities, which was initially effective through June 30, 2022. On June 30, 2022, the Loan Agreement was amended to extend the effective date of the temporary borrowing capacity through September 30, 2022, and was subsequently amended on September 26, 2022 (the “Tenth Amendment”) to extend the effective date through January 16, 2023. The Eighth Amendment also replaced the London Interbank Offered Rate (“LIBOR”) based interest rate with the Adjusted Term Secured Overnight Financing Rate (“SOFR”). As a result of the Eighth Amendment, interest on loans under the Loan Agreement is payable in cash at the interest rate of SOFR plus 4.00% per annum, subject to a 1.00% SOFR floor. The Tenth Amendment amended the interest rate such that beginning September 30, 2022, the interest rate on all loans under the Loan Agreement is SOFR plus 4.50% to 5.00% per annum, subject to a 1.00% SOFR floor and certain conditions defined in the Loan Agreement.
The Tenth Amendment also provides us an additional $5.0 million of availability above the customary borrowing base limitations, which is effective through November 16, 2022, at which point it will be reduced to $2.5 million through December 16, 2022, and expire thereafter. Pursuant to the terms of the Tenth Amendment, we entered into a cash dominion triggering period that permits the agent under the Loan Agreement to use our cash receipts to repay outstanding borrowings under the Revolving Credit Facility. We will remain in dominion until our availability under the Revolving Credit Facility exceeds the dominion threshold in the Loan Agreement for 20 consecutive calendar days.
Senior Term Loan Credit Agreement
We and certain of our subsidiaries, have been or are parties to other long-term credit agreements, including a credit agreement (the “Senior Term Loan Credit Agreement”) that we entered into in February 2021, with Atlantic Park Strategic Capital Fund, L.P. (“Atlantic Park”), as administrative agent and collateral agent, and the lenders party thereto. The Senior Term Loan Credit Agreement provides for an initial term loan facility (the “2021 Senior Term Loan”) in the aggregate principal amount of $100.0 million, all of which was borrowed by the Company and was used to repay our former term loan. The Senior Term Loan Credit Agreement also provided for a delayed draw term loan facility in the aggregate principal amount of up to $125.0 million, which was available to be drawn by the Company in up to three separate borrowings through June 30, 2022. All outstanding borrowings under the Senior Term Loan Credit Agreement mature on February 2, 2027.
In February 2022, we entered into an amendment to our Senior Term Loan Credit Agreement with Atlantic Park. The amendment provided for a $35.0 million delayed draw facility, which we borrowed in full (the “February 2022 Delayed Draw Term Loan”) under our existing delayed draw term loan facility and allowed the net proceeds to be used for working capital purposes and to fund low-cost country expansion in our Horizon Europe-Africa operating segment.
In connection with the February 2022 Delayed Draw Term Loan, we issued warrants (“Senior Term Loan Amendment Warrants”) to Atlantic Park to purchase up to 975,000 shares of our common stock, with an exercise price of $9.00 per share. The Senior Term Loan Amendment Warrants are exercisable at any time prior to February 10, 2027. On May 24, 2022, shareholders approved the proposal to issue common shares upon the exercise of the issued warrants.
In June 2022, we borrowed the remaining $90.0 million under our existing delayed draw term loan facility (the “June 2022 Delayed Draw Term Loan”). The proceeds of the June 2022 Delayed Draw Term Loan were used by the Company to repay $85.0 million of principal and $1.7 million of accrued interest on our Convertible Notes, which matured on July 1, 2022. Following the full draw on the delayed draw term loans, the February 2022 Delayed Draw Term Loan, the June 2022 Delayed Draw Term Loan and the 2021 Senior Term Loan are collectively referred to as the Senior Term Loan. As of September 30, 2022, there was $225.0 million outstanding on the Senior Term Loan bearing cash interest at the interest rate of LIBOR plus 7.50% per annum, subject to a 1.00% LIBOR floor.
Convertible Notes
In February 2017, we completed a public offering of 2.75% Convertible Senior Notes (the “Convertible Notes”) in an aggregate principal amount of $125.0 million. During the second quarter of 2022, we issued Series B Preferred Stock, as defined below, in exchange for $40.0 million of the outstanding principal balance of the Convertible Notes. On July 1, 2022, the proceeds of the June 2022 Delayed Draw Term Loan were used to repay $85.0 million of principal and $1.7 million of accrued interest on the Convertible Notes.
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Series B Preferred Stock
In February 2022, the Company executed a commitment letter with Corre Partners Management, LLC, acting on behalf of certain investment funds for which it acts as investment manager (collectively, the “Corre Funds”), to issue, solely at the Company’s option, up to $40.0 million of a new series of our preferred stock, the proceeds of which would be used by the Company to repay a portion of our Convertible Notes and for working capital and general corporate purposes.
In June 2022, we entered into a Preferred Stock Purchase Agreement (the “Purchase Agreement”) with the Corre Funds pursuant to which the Corre Funds purchased 40,000 shares of our Series B Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), in exchange for $40.0 million aggregate principal amount of our Convertible Notes, which were cancelled by us. Pursuant to the terms of the Purchase Agreement, we also issued the Corre Funds an additional 1,000 shares of Series B Preferred Stock in satisfaction of our obligation to pay Corre Funds a commitment fee pursuant to the terms of the commitment letter described above.
The Series B Preferred Stock accrue dividends in kind at a rate of 11.0% per annum, subject to increase to a maximum of 16.0% per annum upon the occurrence of certain events. The Series B Preferred Stock is subject to voluntary redemption by the Company at our option and subject to mandatory redemption upon the first to occur of a change in control and the one-year anniversary of the maturity of the Senior Term Loan, which is February 2, 2028. The Series B Preferred Stock, after the occurrence of certain events, will be convertible into shares of our common stock, par value $0.01 per share, at Corre’s option and subject to shareholder approval.
Other Matters
We are subject to variable interest rates on our Senior Term Loan Credit Agreement and Revolving Credit Facility. At September 30, 2022, 1-Month LIBOR and 3-Month LIBOR approximated 3.14% and 3.75%, respectively. At September 30, 2022, the Adjusted Term SOFR approximated 2.98%.
In addition to our long-term debt, we have other cash commitments related to leases. For the nine months ended September 30, 2022 and 2021 rent expense on our operating leases was $10.7 million. We expect to continue to utilize leasing as a financing strategy in the future to support our business and operational needs as well as reduce debt levels.
Refer to Note 7, Long-term Debt, Note 8, Redeemable Preferred Stock, and Note 9, Leases, in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” included within this Quarterly Report on Form 10-Q for additional information.
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Consolidated EBITDA
Consolidated EBITDA (defined as “Consolidated EBITDA” in our Senior Term Loan Agreement) is a comparable measure to how the Company assesses performance. As discussed further in the Segment Information and Supplemental Analysis section above, we use certain non-GAAP financial measures to assess performance and measure our covenant compliance in accordance with the Senior Term Loan Agreement, which includes Adjusted EBITDA at the operating segment level. For the measurement of our Senior Term Loan Agreement financial covenants, the definition of Consolidated EBITDA limits the amount of non-recurring expenses or costs including restructuring, moving and severance that can be excluded to $10 million in any cumulative four fiscal quarter period. Similarly, the definition limits the amount of fees, costs and expenses incurred in connection with any proposed asset sale, offering of equity interests or any indebtedness, lender agent fees, and fees in connection with the maintenance and/or forgiveness of the loan from PNC Bank, National Association for $8.7 million, pursuant to the Paycheck Protection Program (the “PPP Loan”) under Division A, Title I of the Coronavirus Aid, Relief and Economic Security Act, in the aggregate, that can be excluded to $8 million in any cumulative four fiscal quarter period.
The reconciliations of net income (loss) attributable to Horizon Global to EBITDA, EBITDA to Adjusted EBITDA and Adjusted EBITDA to Consolidated EBITDA are as follows:
Three Months Ended September 30,Nine Months Ended September 30,Last Twelve Months Ended September 30,
20222021Change20222021Change20222021Change
(dollars in thousands)(dollars in thousands)(dollars in thousands)
Net loss attributable to Horizon Global$(25,460)$(2,470)$(22,990)$(74,340)$(15,990)$(58,350)$(90,070)$(21,400)$(68,670)
Net loss attributable to noncontrolling interest(220)(300)80 (720)(970)250 (1,150)(1,380)230 
Net loss$(25,680)$(2,770)$(22,910)$(75,060)$(16,960)$(58,100)$(91,220)$(22,780)$(68,440)
Interest expense10,230 6,970 3,260 26,210 21,000 5,210 33,180 28,710 4,470 
Income tax expense (benefit)1,070 410 660 1,750 2,810 (1,060)(1,220)1,060 (2,280)
Depreciation and amortization4,300 5,210 (910)13,240 15,930 (2,690)19,310 22,690 (3,380)
EBITDA$(10,080)$9,820 $(19,900)$(33,860)$22,780 $(56,640)$(39,950)$29,680 $(69,630)
Net loss attributable to noncontrolling interest220 300 (80)720 970 (250)1,150 1,380 (230)
EBITDA attributable to Horizon Global$(9,860)$10,120 $(19,980)$(33,140)$23,750 $(56,890)$(38,800)$31,060 $(69,860)
Adjustments pursuant to Senior Term Loan Agreement:
Losses on sale of receivables570 280 290 1,230 780 450 1,410 1,230 180 
Debt extinguishment losses— — — — 11,650 (11,650)— 11,650 (11,650)
Non-cash equity grant expenses(2,470)880 (3,350)(420)2,590 (3,010)510 3,400 (2,890)
Other non-cash expenses or losses5,220 1,400 3,820 12,530 5,320 7,210 13,950 3,840 10,110 
Fees, costs and expenses in connection with the term loan and ABL credit agreements(20)— (20)100 — 100 100 — 100 
Lender agent related professional fees, costs, and expenses(a)
30 30 — 110 130 (20)160 130 30 
Non-recurring expenses or costs(b)
270 250 20 2,850 (570)3,420 4,040 (340)4,380 
Asset sale related fees, costs, and expenses(a)
270 — 270 270 — 270 270 — 270 
Non-cash losses on asset sales50 20 30 100 30 70 1,540 40 1,500 
Debt extinguishment gains— — — — — — (7,530)— (7,530)
Other— — — (40)(30)(10)(40)(40)— 
Adjusted EBITDA$(5,940)$12,980 $(18,920)$(16,410)$43,650 $(60,060)$(24,390)$50,970 $(75,360)
Non-recurring expense limitation(a)(b)
N/AN/AN/AN/AN/AN/AN/AN/AN/A
Other— — — 40 30 10 40 40 — 
Consolidated EBITDA$(5,940)$12,980 $(18,920)$(16,370)$43,680 $(60,050)$(24,350)$51,010 $(75,360)
(a) Fees, costs and expenses incurred in connection with any proposed asset sale, offering of equity interests or any indebtedness, lender agent fees, and fees in connection with the maintenance and/or forgiveness of the PPP Loan are not to, in aggregate, exceed $8 million in adjustments in determining Consolidated EBITDA in any four fiscal quarter period.
(b) Non-recurring expenses or costs including restructuring, moving and severance are not to, in aggregate, exceed $10 million in adjustments in determining Consolidated EBITDA in any four fiscal quarter period.
Credit Rating
The Company’s credit agreements do not require that we maintain a credit rating.
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Outlook
Our business remains susceptible to macroeconomic conditions that may adversely affect our future results, including the current inflationary environment and rising energy prices, increasing interest rates, ongoing global semiconductor shortage, as well as transportation and other logistic constraints. The conflict between Russia and Ukraine also continues to place added constraints on the global automotive supply chain that may adversely impact our business. These factors have contributed to a delay in receiving certain critical components required to fulfill orders by the Company or some of our OE customers, which has resulted in retiming some customer orders to future periods. We also continue to experience elevated costs for certain raw materials, including steel, and while we endeavor to recover incremental input costs through pricing recovery initiatives, the recoveries generally occur over time and are not guaranteed. We continue to monitor these macroeconomic factors and implement mitigating actions where possible, and remain committed to fulfilling customer orders.
We also remain focused on the execution of our business plan and operational improvement initiatives which are continuously ongoing. These initiatives were put in place to streamline and simplify our operations and provide a roadmap to achieve our strategic priorities of margin expansion, liquidity management and organic business growth.
We believe the unique strategic footprint we enjoy in our market space will benefit the Company as our OE customers continue to demonstrate a preference for stronger relationships with few suppliers. We believe our brand recognition, portfolio of product offerings, and existing customer relationships present a long-term opportunity for the Company and provide leverage to see balanced growth in OE, aftermarket and retail businesses. That position and brand recognition allows the Company flexibility to bring our products to market in various channels that we believe provide the Company the ability to leverage our current operational footprint to meet customer demand.
Impact of New Accounting Standards
See Note 2, New Accounting Pronouncements, included in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” within this Quarterly Report on Form 10-Q.
Critical Accounting Policies
Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates that affect both the amounts and timing of the recording of assets, liabilities, net sales and expenses. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, our evaluation of business and macroeconomic trends, and information from other outside sources, as appropriate.
There were no material changes to the items that we disclosed as our critical accounting policies in Item 8, “Financial Statements and Supplementary Data,” in our Annual Report on Form 10-K for the twelve months ended December 31, 2021.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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Item 4. Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Evaluation of disclosure controls and procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by management, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) pursuant to Rule 13a-15 of the Exchange Act. The Company’s disclosure controls and procedures are designed only to provide reasonable assurance that they will meet their objectives. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2022, the Company’s disclosure controls and procedures are effective to provide reasonable assurance that they would meet their objectives.
Changes in Internal Control Over Financial Reporting
During the three months ended September 30, 2022, we implemented an enterprise resource planning system within our Horizon Americas operating segment and Corporate locations. As part of this implementation, we have modified the design and documentation of our internal controls processes and procedures, where appropriate.
Except as described above, there were no changes in the Company’s internal control over financial reporting that occurred during the three months ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are subject to claims and litigation in the ordinary course of business, but we do not believe that any such claim or litigation is likely to have a material adverse effect on our financial position, results of operations, or cash flows. For a description of risks related to various legal proceedings and claims, see the section entitled “Risk Factors,” in our Annual Report on Form 10-K for the twelve months ended December 31, 2021. For additional information regarding legal proceedings, refer to Note 11, Contingencies, in our Annual Report on Form 10-K for the twelve months ended December 31, 2021.
Item 1A. Risk Factors
A discussion of our risk factors, which could materially affect our business, financial condition or future results, can be found in the section entitled “Risk Factors,” in our Annual Report on Form 10-K for the twelve months ended December 31, 2021. which risk factors are supplemented with the disclosure below.
We are currently out of compliance with the New York Stock Exchange’s (“NYSE”) minimum market capitalization and average closing price requirements and are at risk of the NYSE delisting our common stock, which would have an adverse impact on the trading volume, liquidity and market price of our common stock.
On July 25, 2022, we were notified by the NYSE that we were not in compliance with the continued listing standard set forth in Section 802.01B of the NYSE Listed Company Manual because our average market capitalization was less than $50 million over a consecutive 30 trading-day period and our stockholders’ equity was less than $50 million. On September 8, 2022, we submitted a business plan advising the NYSE of definitive actions we are taking to meet the continued listing standards of the NYSE to cure the market capitalization condition, which we expect will ultimately lead to a recovery of our common stock price and market capitalization, and the NYSE accepted our plan.
On November 7, 2022, we were notified by the NYSE that we were not in compliance with the continued listing standard set forth in Section 802.01C of the NYSE Listed Company Manual because, as of November 4, 2022, the average closing price of our common stock fell below $1.00 per share over a period of 30 consecutive trading days. We have six months to regain compliance with the NYSE’s minimum share price requirement. We intend to notify the NYSE within 10 business days of receipt of the notification that we intend to cure this deficiency and return to compliance with the NYSE continued listing requirements.
Additionally, our common stock could also be delisted if our average market capitalization over a consecutive 30 day-trading period is less than $15 million, in which case we would not have an opportunity to cure the deficiency, our common stock would be suspended from trading on the NYSE immediately, and the NYSE would begin the process to delist our common stock, subject to our right to appeal under NYSE rules. We cannot assure you that any appeal we undertake in these or other circumstances will be successful. While we are working to cure this potential deficiency and remain in compliance with this continued listing standard, there can be no assurance that we will be able to cure this potential deficiency or if we will cease to comply with another continued listing standard of the NYSE.
A delisting of our common stock from the NYSE could negatively impact us as it would likely reduce the liquidity and market price of our common stock; reduce the number of investors willing to hold or acquire our common stock; and negatively impact our ability to access equity markets and obtain financing.
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There is substantial doubt about our ability to continue as a going concern.
We have a history of recurring net operating losses and cash outflows from operations. In addition, we currently project we will not generate sufficient cash flows from operations, or have access to other sources of liquidity, to sustain our operating needs or to meet our obligations as they become due over the twelve-month period subsequent to the date of the filing of this Quarterly Report on Form 10-Q. In addition, as of September 30, 2022, we were in compliance with all applicable covenants in agreements governing our debt. However, based on our projected financial performance for the twelve-month period subsequent to the date of the filing of this Quarterly Report on Form 10-Q, we currently project that we will not be in compliance with a financial covenant under the Senior Term Loan Credit Agreement as of March 31, 2023, which would result in an event of default. Such a default would allow the lender under the Senior Term Loan Credit Agreement to accelerate the maturity of the debt, which carries a balance of $225.0 million as of September 30, 2022, making it due and payable at that time. This would, in turn, result in a cross-default of the Revolving Credit Facility, which carries a balance of $70.4 million as of September 30, 2022. Further, if the our independent registered public accounting firm includes an explanatory paragraph, other than for debt maturing within one year, regarding our ability to continue as a going concern in its report on the our financial statements for the twelve months ending December 31, 2022, this would be an event of default under our Senior Term Loan Credit Agreement and also result in a cross-default of the Revolving Credit Facility at the time our financial statements for the twelve months ending December 31, 2022 are filed with the U.S. Securities and Exchange Commission. We do not currently have sufficient cash on hand, liquidity or projected future cash flows to repay these outstanding amounts upon an event of default. These conditions and events raise substantial doubt about our ability to continue as a going concern.
In response to these conditions, we have undertaken a review of strategic alternatives for the business, which could involve a sale of a portion or the entirety of the business. We have also undertaken discussions with our lender to amend the terms of our financial covenant under the Senior Term Loan Credit Agreement. We have a history of successfully amending and extending credit agreements with our current lenders. The process of undertaking such activities is actively ongoing, however, there can be no assurances that this process will result in the completion of any transaction or other alternative that would alleviate such conditions. As a result, we have concluded that management’s plans do not alleviate substantial doubt about our ability to continue as a going concern.
The condensed consolidated financial statements contained elsewhere in this Quarterly Report on Form 10-Q do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
On November 7, 2022, we were notified by the NYSE that we were not in compliance with the continued listing standard set forth in Section 802.01C of the NYSE Listed Company Manual because, as of November 4, 2022, the average closing price of our common stock fell below $1.00 per share over a period of 30 consecutive trading days (the “Bid Price Requirement”). We intend to notify the NYSE within 10 business days of receipt of the notification that we intend to cure this deficiency and return to compliance with the NYSE continued listing requirements.
We have six months to regain compliance with the Bid Price Requirement. In accordance with Section 802.01C of the NYSE Listed Company Manual, we can regain compliance at any time during the six-month cure period (the “Cure Period”) if on the last trading day of any calendar month during the Cure Period we have a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of that month. In the event that at the expiration of the six-month cure period, both a $1.00 closing share price on the last trading day of the Cure Period and a $1.00 average closing share price over the 30 trading-day period ending on the last trading day of the cure period are not attained, the NYSE will commence suspension and delisting procedures. There is no assurance that our common stock will not be delisted from the NYSE.
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The NYSE notice has no immediate impact on the listing of our common stock, which will continue to be listed and traded on the NYSE during the Cure Period, subject to our compliance with the other listing requirements of the NYSE. Our common stock will continue to trade under the symbol “HZN,” but will have an added designation of “.BC” to indicate that we are not currently in compliance with NYSE continued listing standards.
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Item 6. Exhibits.
Exhibits Index:
3.1(b)
3.2(a)
3.3(c)
10.1*
31.1
31.2
32.1
32.2
101.INS
Inline XBRL Instance Document. (not part of filing)
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (embedded within the Inline XBRL document).
(a)Incorporated by reference to the Exhibit filed with our Current Report on Form 8-K filed on February 20, 2019 (File No. 001-37427).
(b)Incorporated by reference to the Exhibit filed with our Quarterly Report on Form 10-Q filed on August 8, 2019 (File No. 001-37427).
(c)Incorporated by reference to the Exhibit filed with our Current Report on Form 8-K filed on June 30, 2022 (File No. 001-37427).

* Certain exhibits and schedules are omitted pursuant to Item 601(a)(5) of Regulation S-K, and the Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted exhibits and schedules upon request.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 HORIZON GLOBAL CORPORATION (Registrant)
/s/ JIAN JAMES ZHOU
Date:November 9, 2022By:
Jian James Zhou
Chief Financial Officer

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