SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549



(Mark One)
x		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, ~~2018~~2019
or
o		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

2600 W. Big Beaver Road, Suite 555

Troy, Michigan 48084

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 x	Non-accelerated filer o	Smaller reporting company o	Emerging growth company x

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. Yes x No o

HORIZON GLOBAL CORPORATION

Forward-Looking Statements

This ~~report~~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 Company’s ~~integration of the Westfalia Group (“Westfalia Group” consists of Westfalia-Automotive Holding GmbH~~leverage; liabilities and ~~TeIJs Holding B.V.); leverage; liabilities~~restrictions imposed by the Company’s debt instruments; market demand; competitive factors; supply constraints; material and energy costs; 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; 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 our 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; the Company’s ability to meet its covenants in the agreements governing its debt; or the Company’s ability to maintain compliance with the New York Stock Exchange’s continued listing standards and other risks that are discussed in Item 1A, “Risk Factors” ~~and~~ in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. The risks described in our Annual Report and elsewhere in this report 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 ~~undo~~undue reliance on the statements, which speak only as of the date of this report. 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 report 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 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report. 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.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

HORIZON GLOBAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited—dollars in thousands)

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

HORIZON GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME (LOSS)~~OPERATIONS

(unaudited—dollars in thousands, except ~~for~~share and per share ~~amounts)~~data)

HORIZON GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(unaudited—dollars in thousands)

HORIZON GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited—dollars in thousands)

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

HORIZON GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

~~Nine Months Ended September 30, 2018~~

(unaudited—dollars in thousands)

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~(unaudited)~~

1. Nature of Operations and Basis of Presentation

Horizon Global Corporation (“Horizon,” “Horizon Global,” “we,” or the “Company”) is a global designer, manufacturer and distributor of a wide variety of high quality, custom-engineered towing, trailering, cargo management and other related accessories. These products are designed to support original equipment manufacturers (“OEMs”) and original equipment ~~suppliers~~servicers (“OESs”) (collectively, “OEs”), aftermarket and retail customers within the agricultural, automotive, construction, horse/livestock, industrial, marine, military, recreational, trailer and utility markets. The Company groups its ~~operating segments~~business into ~~reportable~~operating segments by the region in which sales and manufacturing efforts are focused. ~~The~~As a result of the Company’s ~~reportable~~sale of its Horizon Asia-Pacific operating segment (“APAC”), the Company’s operating segments are Horizon Americas ~~Horizon Europe-Africa,~~ and Horizon ~~Asia-Pacific.~~Europe-Africa. See Note ~~10,~~17, “Segment Information,” for further information on each of the Company’s ~~reportable~~operating segments. Historical information has been retrospectively adjusted to reflect the classification of APAC as discontinued operations. Discontinued operations are further discussed in Note 3, “Discontinued Operations”.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “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 year ended December 31, ~~2017.~~2018. 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 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.

2. New Accounting Pronouncements

Accounting pronouncements recently adopted

In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, “Compensation - Stock Compensation (Topic 718)” (“ASU 2018-07”). ASU 2018-07 expands the scope of Accounting Standard Codification (“ASC”) 718 to include all share-based payment arrangements related to the acquisition of goods and services from both ~~nonemployees~~non-employees and employees. ASU 2018-07 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 with early adoption permitted. The Company ~~is in process of assessing the impact of the adoption of~~adopted ASU 2018-07 on January 1, 2019, and there was no impact on the Company’s condensed consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”). ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the “2017 Tax Act”). ASU 2018-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. It must be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate from the 2017 Tax Act is recognized. The Company adopted the standard in the third quarter of 2018 and the impact of the adoption of ASU 2018-02 is approximately a $0.9 million increase to accumulated deficit, a $0.3 million decrease to paid-in capital, and a $0.6 million decrease to accumulated other comprehensive income.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”). ASU 2017-12 eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires, for qualifying hedges, the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also modifies the accounting for components excluded from the assessment of hedge effectiveness, eases documentation and assessment requirements and modifies certain disclosure requirements. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted and should be applied on a modified retrospective basis. The Company ~~is in the process of assessing the impact of the adoption of~~adopted ASU 2017-12 on ~~the condensed consolidated financial statements.~~

In May 2017, the FASB issued ASU 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 amends the scope of modification accounting for share-based payment arrangements and provides guidance on when an entity would be required to apply modification accounting. This guidance is effective for all entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted and should be applied on a prospective basis. The Company adopted ASU 2017-09 on January 1, ~~2018, on a prospective basis,~~2019, and there was no impact on the ~~condensed consolidated financial statements.~~

~~In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a~~

~~HORIZON GLOBAL CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

Business” (“ASU 2017-01”). ASU 2017-01 provides clarification on the definition of a business and adds guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance is effective for public entities for fiscal years beginning after December 15, 2017, including interim periods within those annual periods, and should be applied on a prospective basis. As of January 1, 2018, ASU 2017-01 became effective for the Company for any new acquisitions (or disposals), and there was no impact on the condensed consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory” (“ASU 2016-16”). ASU 2016-16 provides an amendment to the accounting guidance related to the recognition of income tax consequences of an intra-entity transfer of an asset other than inventory. Under the new guidance, an entity is required to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Under the current guidance, the income tax effects are deferred until the asset has been sold to an outside party. The Company adopted ASU 2016-16 on January 1, 2018, on a modified retrospective basis, and there was no impact on the condensed consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)” (“ASU 2016-15”). ASU 2016-15 was issued to reduce differences in practice with respect to how specific transactions are classified in the statement of cash flows. This guidance is effective for public entities for fiscal years beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted and should be applied on a retrospective basis. The Company adopted ASU 2016-15 on January 1, 2018, and there was no impact on theCompany’s condensed consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which supersedes the ~~leases~~lease requirements in “Leases (Topic 840).” The objective of this update is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. ~~The FASB has subsequently issued an additional ASU that provides entities with an additional (and optional) transition method to adopt the new leases standard.~~ Under this ~~new transition method, an entity initially applies~~guidance, lessees are required to recognize on the ~~new~~balance sheet a lease liability and a right-of-use (“ROU”) asset for all leases, ~~standard~~with the exception of short-term leases with terms of twelve months or less. The lease liability represents the lessee’s obligation to make lease payments arising from a lease and will be measured as the present value of the lease payments. The ROU asset represents the lessee’s right to use a specified asset for the lease term, and will be measured at the ~~adoption date~~lease liability amount, adjusted for lease prepayment, lease incentives received and ~~recognizes a cumulative-effect adjustment to~~ the opening balance of retained earnings in the period of adoption. The amendments also provide lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the revenue guidance (Topic 606) and certain criteria are met. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. The Company is in the process of assessing the impact of the adoption of ASU 2016-02 on the condensed consolidated financial statements. The Company expects the impact to the condensed consolidated balance sheet to be significant. The Company plans to elect the practical expedients upon transition that will retain the lease classification andlessee’s initial direct ~~costs for any leases that exist prior to adoption of the standard. Horizon will not reassess whether any contracts entered into prior to adoption are leases.~~ costs.

The Company has ~~formed a cross-functional implementation team and is in~~elected the ~~process~~package of ~~cataloging its existing~~practical expedients, excluding the lease ~~contracts and evaluating changes~~term hindsight, as permitted by the transition guidance. The Company has made an accounting policy election to ~~its systems to implement~~exempt leases with an initial term of twelve months or less from balance sheet recognition. Instead, short-term leases will be expensed over the ~~new guidance.~~lease term.

~~Accounting Standards Update 2014-09~~

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09” or “Topic 606”). ASU 2014-09 supersedes most of the existing guidance on revenue recognition in ASC Topic 605, “Revenue Recognition” (“Topic 605”), and establishes a broad principle that would require an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted ~~Topic 606 as of~~the standard on January 1, ~~2018 using~~2019, by applying the modified retrospective method without restatement of comparative periods' financial information, as permitted by the transition ~~method.~~guidance. The ~~comparative information has not been restated and continues to be reported under~~standard had a material impact on the accounting standards in effect for those periods. The Company did not record a cumulative adjustment related to the adoption of ASU 2014-09, and the effects of adoption were not significant. See Note 3, “~~Revenues,” for further information.~~

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~(unaudited)~~

Company’s condensed consolidated balance sheet, but did not have a material impact on its condensed consolidated statements of operations and cash flows. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while the Company’s accounting for finance leases remained substantially unchanged.

See Note 12 “Leases,” for the impact of the adoption which resulted in the recognition of ROU assets and corresponding lease liabilities.

3. ~~Revenues~~Discontinued Operations

~~Revenue Recognition~~On September 19, 2019, the Company completed the sale of its subsidiaries that comprised APAC to Hayman Pacific BidCo Pty Ltd., an affiliate of Pacific Equity Partners, for $209.6 million in net cash proceeds after payment of transaction costs, in a net debt free sale. The sale resulted in the recognition of a gain of $180.5 million, of which $17.3 million was related to the cumulative translation adjustment that was reclassified to earnings, which is reflected within the income from discontinued operations, net of taxes line of the condensed consolidated statement of operations.

The Company classified APAC assets and liabilities as held-for-sale as of December 31, 2018 in the accompanying condensed consolidated balance sheet and has classified APAC’s operating results and the gain on the sale as discontinued operations in the accompanying condensed consolidated statement of operations for all periods presented in accordance with ASC 205, “Discontinued Operations.” Prior to being classified as held-for-sale, APAC was included as a separate operating segment.

The following tables ~~present~~presents the Company’s ~~net sales disaggregated by major sales channel for the three and nine months ended September 30, 2018:~~results from discontinued operations:

Three Months Ended September 30, 2018
Horizon Americas Horizon Europe-Africa Horizon
Asia-Pacific Total
(dollars in thousands)
Net Sales
Automotive OEM $ 20,320
$ 40,650
$ 5,740
$ 66,710
Automotive OES 1,700
12,600
15,190
29,490
Aftermarket 38,470
19,980
6,170
64,620
Retail 29,600
—
2,860
32,460
Industrial 11,160
—
3,850
15,010
E-commerce 13,750
1,290
—
15,040
Other 510
4,000
—
4,510
Total $ 115,510
$ 78,520
$ 33,810
$ 227,840



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(dollars in thousands)						(dollars in thousands)
Net sales	$	29,750		$	33,810		$	92,300		$	101,760
Cost of sales	(22,250		)	(24,720		)	(68,530		)	(76,250		)
Selling, general and administrative expenses	(3,050		)	(3,130		)	(9,580		)	(10,510		)
Interest expense	(80		)	(60		)	(310		)	(210		)
Other expense. net	(210		)	(470		)	(400		)	(1,800		)
Income before income tax expense	4,160			5,430			13,480			12,990
Income tax expense	(1,900		)	(1,320		)	(4,450		)	(3,320		)
Gain on sale of discontinued operations	$	180,490		$	—		$	180,490		$	—
Income from discontinued operations, net of tax	$	182,750		$	4,110		$	189,520		$	9,670

Nine Months Ended September 30, 2018
Horizon Americas Horizon Europe-Africa Horizon
Asia-Pacific Total
(dollars in thousands)
Net Sales
Automotive OEM $ 60,320
$ 134,930
$ 18,250
$ 213,500
Automotive OES 4,230
39,980
45,170
89,380
Aftermarket 96,700
65,180
19,210
181,090
Retail 96,330
—
8,050
104,380
Industrial 31,680
—
11,080
42,760
E-commerce 29,340
3,880
—
33,220
Other 1,210
12,450
—
13,660
Total $ 319,810
$ 256,420
$ 101,760
$ 677,990

Revenue is recognized when obligations under the terms of a contract with the Company’s customers are satisfied; generally, this occurs with the transfer of control of its towing, trailering, cargo management and other related accessory products. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring its products. Sales, value add, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. The Company’s payment terms vary by the type and location of its customers and the products offered. The term between invoicing and when payment is due is not significant.

For the majority of the Company’s sales arrangements, the Company deems control to transfer at a single point in time and recognizes revenue when it ships products from its manufacturing facilities to its customers. Once a product has shipped, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the asset. The Company considers control to transfer upon shipment because the Company has a present right to payment at that time, the customer has legal title to the asset, and the customer has significant risks and rewards of ownership of the asset.

For certain sales arrangements within the automotive OEM and automotive OES sales channels, the Company deems control to transfer over time, and recognizes revenue as products are manufactured, when the terms of the arrangement include both a right

The following tables presents the Company’s assets and liabilities held for sale:

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~(unaudited)~~

to payment and contractual restrictions against the alternative use of its products. For revenue recognized over time, the Company estimates the amount of revenue earned at a given point during the production cycle based on certain costs factors such as raw materials and labor, incurred to date, plus a reasonable profit. The Company believes this method, which is the cost-to-cost input method, best estimates the revenue recognizable for these arrangement. At September 30, 2018, the aggregate amount of the transaction prices allocated to remaining performance obligations was not material, and the Company will recognize this revenue as the manufacturing of the products is completed, which is expected to occur over the next 12 months.

Provisions for customer volume rebates, product returns, discounts and allowances are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded. Such provisions are calculated using historical averages adjusted for any expected changes due to current business conditions. Consideration given to customers for cooperative advertising is recognized as a reduction of revenue as there is no distinct good or service received in return for the advertising. The Company uses the most likely amount method to estimate variable consideration. Adjustments to estimates of variable consideration for previously recognized revenue were insignificant during the three and nine months ended September 30, 2018.

~~Contract Balances~~

The timing of revenue recognition, billings and cash collections and payments results in billed accounts receivable, unbilled receivables (contract assets), and deferred revenues (contract liabilities).

Revenue recognized over time gives rise to contract assets, which represent revenue recognized but unbilled. The Company’s sales arrangements satisfied over time create contract assets when revenue is recognized as the products are manufactured, as payment is not contractually required until the products have shipped. Contract assets in these arrangements are reclassified to accounts receivable upon shipment. At September 30, 2018, total opening and closing balances of contract assets were not material.

Contract liabilities are comprised of customer payments received or due in advance of the Company’s performance. At September 30, 2018, total opening and closing balances of deferred revenue were not material. The Company recognizes deferred revenue as net sales after the Company has transferred control of the products to the customer and all revenue recognition criteria is met. For the three and nine months ended September 30, 2018, the total amount of revenue recognized from revenue deferred in prior periods was not material.

Additionally, the Company monitors the aging of uncollected billings and adjusts its accounts receivable allowance on a quarterly basis, as necessary, based upon its evaluation of the probability of collection. The adjustments made by the Company due to the write-off of uncollectible amounts have been immaterial for all periods presented. At September 30, 2018 and December 31, 2017, the Company’s accounts receivable, net of reserves were $122.3 million and $91.8 million, respectively.

~~Practical Expedients~~

The Company elects the practical expedient to expense costs incurred to obtain a contract with a customer when the amortization period would have been one year or less. These costs include sales commissions as the Company has determined annual compensation is commensurate with annual sales activities.

The Company elects the practical expedient that does not require the Company to adjust consideration for the effects of a significant financing component when the period between shipment of its products and customer’s payment is one year or less.

~~4. Facility Closures~~

~~Solon, Ohio and Mosinee, Wisconsin~~



	December 31, 2018
	(dollars in thousands)
Assets
Current assets:
Receivables, net of allowance for doubtful accounts	$	13,170
Inventories	21,490
Prepaid expenses and other current assets	1,420
Total current assets	36,080
Non-current assets:
Property and equipment, net	15,780
Goodwill	8,160
Other intangibles, net	8,650
Deferred income taxes	2,030
Other assets	170
Total non-current assets	34,790
Assets held-for-sale	$	70,870
Liabilities
Current liabilities:
Accounts payable	$	20,780
Accrued liabilities	7,300
Total current liabilities	28,080
Non-current liabilities:
Deferred income taxes	1,530
Other long-term liabilities	210
Total non-current liabilities	1,740
Total liabilities held-for-sale	$	29,820

In the first quarter of 2018, the Company announced plans to close its facility in Solon, Ohio along with an engineering center in Mosinee, Wisconsin. The activities at these locations have been consolidated and moved to the headquarters of the Horizon Americas segment, located in Plymouth, Michigan. As of September 30, 2018, the Company vacated the Solon, Ohio and Mosinee, Wisconsin facilities. The Company is party to lease agreements for these facilities for which it has non-cancellable future rental obligations. The Company exited the facilities during the third quarter of 2018, and recorded a liability of approximately $1.5 million within accrued liabilities and other long-term liabilities in the Company’s condensed consolidated balance sheets as of September 30, 2018. The lease agreements expire in 2019 and 2022, respectively.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~(unaudited)~~

4. Revenues

Revenue Recognition

The Company disaggregates revenue from contracts with customers by major sales channel. The Company determined that disaggregating revenue into these categories best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The Automotive OEM channel represents sales to automotive vehicle manufacturers. The Automotive OES channel primarily represents sales to automotive vehicle dealerships. The Aftermarket channel represents sales to automotive installers and warehouse distributors. The Retail channel represents sales to direct-to-consumer retailers. The Industrial channel represents sales to non-automotive manufacturers and dealers of agricultural equipment, trailers, and other custom assemblies. The E-Commerce channel represents sales to direct-to-consumer retailers who utilize the internet to purchase the Company’s products. 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 following tables present the Company’s net sales by major sales channel:



	Three Months Ended September 30, 2019
	Horizon Americas		Horizon Europe-Africa		Total
	(dollars in thousands)
Net Sales
Automotive OEM	$	21,050	$	43,200	$	64,250
Automotive OES	1,960		16,510		18,470
Aftermarket	26,920		19,840		46,760
Retail	26,600		—		26,600
Industrial	7,650		780		8,430
E-commerce	12,040		560		12,600
Other	—		740		740
Total	$	96,220	$	81,630	$	177,850



	Three Months Ended September 30, 2018
	Horizon Americas		Horizon Europe-Africa		Total
	(dollars in thousands)
Net Sales
Automotive OEM	$	20,320	$	40,650	$	60,970
Automotive OES	1,700		12,600		14,300
Aftermarket	38,470		19,980		58,450
Retail	29,600		—		29,600
Industrial	11,160		—		11,160
E-commerce	13,750		1,290		15,040
Other	510		4,000		4,510
Total	$	115,510	$	78,520	$	194,030

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



	Nine Months Ended September 30, 2019
	Horizon Americas		Horizon Europe-Africa		Total
	(dollars in thousands)
Net Sales
Automotive OEM	$	64,970	$	137,900	$	202,870
Automotive OES	5,380		45,840		51,220
Aftermarket	79,910		56,200		136,110
Retail	88,230		—		88,230
Industrial	23,860		2,340		26,200
E-commerce	38,300		1,650		39,950
Other	20		3,570		3,590
Total	$	300,670	$	247,500	$	548,170



	Nine Months Ended September 30, 2018
	Horizon Americas		Horizon Europe-Africa		Total
	(dollars in thousands)
Net Sales
Automotive OEM	$	60,320	$	134,930	$	195,250
Automotive OES	4,230		39,980		44,210
Aftermarket	96,700		65,180		161,880
Retail	96,330		—		96,330
Industrial	31,680		—		31,680
E-commerce	29,340		3,880		33,220
Other	1,220		12,460		13,680
Total	$	319,820	$	256,430	$	576,250

During the ~~second quarter of 2018, the Company finalized workforce consolidation plans related to the facility closures. There were no severance~~three and ~~other employee-related costs incurred in the three months ended September 30, 2018 and approximately $3.4 million of severance and other employee-related costs in the~~ nine months ended September 30, ~~2018.~~2019 and 2018, adjustments to estimates of variable consideration for previously recognized revenue were insignificant. At September 30, 2019 and December 31, 2018, total opening and closing balances of contract assets and deferred revenue were not material.

5. Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the nine months ended September 30, ~~2018~~2019 are summarized as follows:

Horizon Americas Horizon Europe-Africa Horizon
Asia-Pacific Total
(dollars in thousands)
Balance at December 31, 2017
Goodwill $ 5,280
$ 126,160
$ 6,750
$ 138,190
Accumulated impairment losses —
—
—
—
Net beginning balance 5,280
126,160
6,750
138,190
Impairment —
(124,660 ) —
(124,660 )
Foreign currency translation and other (970 ) (1,500 ) (650 ) (3,120 )
Balance at September 30, 2018 $ 4,310
$ —
$ 6,100
$ 10,410



(dollars in thousands)	Horizon Americas

Balance at December 31, 2018	$	4,500
Foreign currency translation	(300		)
Balance at September 30, 2019	$	4,200

Due to the impairment indicators noted above, the Company also performed an interim impairment assessment of indefinite-lived intangible assets in the first quarter of 2018 in the Horizon Europe-Africa reportable segment. Based on the results of our analyses, there were certain trade names where the estimated fair values approximated the carrying values. Key assumptions used in the analysis were discount rates of 13.5% to 16.0% and royalty rates ranging from 0.5% to 1.0%.

During the second quarter of 2018, the Company continued to experience a decline in market capitalization. Additionally, the Europe-Africa reporting unit did not perform in-line with forecasted results driven by an unfavorable shift in volume to lower margin channels as well as increased commodity costs, which negatively impacted margins. Further, the expected benefits of shifting production to lower cost manufacturing sites have not been realized. As a result, an indicator of impairment was identified during the second quarter of 2018. The Company performed an interim quantitative assessment as of June 30, 2018, utilizing a combination of the income and market approaches. The income approach was weighted 75%, while the market approach was weighted 25%. The results of the quantitative analysis performed indicated the carrying value of the reporting unit exceeded the fair value of the reporting unit by $54.6 million and, accordingly, an impairment was recorded. Key assumptions used in the analysis were a discount rate of 14.0%, a terminal growth rate of 2.5% and EBITDA margin.

Due to the impairment indicators noted above, the Company performed an interim impairment assessment for indefinite-lived intangible assets within the Horizon Europe-Africa reportable segment, for which the gross carrying amounts totaled approximately $12.1 million as of June 30, 2018. Based on the results of the Company’s analyses, it was determined that the carrying values of the Westfalia and Terwa trade names exceeded their fair values by $1.1 million and, accordingly, an impairment was recorded. Key assumptions used in the analysis were discount rates of 15.0% and royalty rates ranging from 0.5% to 1.0%.

During the third quarter of 2018, the Europe-Africa reporting unit continued to underperform in relation to forecasted results driven by increased commodity costs and the failure to realize benefits from previously implemented synergy plans. The Company performed an interim quantitative assessment as of August 31, 2018, utilizing a combination of the income and market approaches. The income approach was weighted 75%, while the market approach was weighted 25%. The results of the quantitative analysis performed indicated the carrying value of the reporting unit exceeded fair value and, accordingly, an impairment of $26.6 million was recorded. Key assumptions used in the analysis were a discount rate of 13.5%, a terminal growth rate of 2.5% and EBITDA margin.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~(unaudited)~~

Due to impairment indicators noted above, the Company performed an interim impairment assessment for indefinite-lived intangible assets within the Europe-Africa reportable segment as of August 31, 2018, for which the gross carrying amounts totaled approximately $10.9 million as of September 30, 2018. Based on the results of the Company’s analyses, the carrying value of the trademarks approximated fair value. Key assumptions used in the analysis were discount rates of 14.5%, and royalty rates ranging from 0.5% to 1.0%.

The gross carrying amounts and accumulated amortization of the Company’s other intangibles ~~as of September 30, 2018 and December 31, 2017~~ are summarized ~~below. The Company amortizes these assets over periods ranging from two to 20 years.~~as follows.


	September 30, 2018					December 31, 2017					As of September 30, 2019
Intangible Category by Useful Life	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(dollars in thousands)										(dollars in thousands)
Finite-lived intangible assets:
Customer relationships, 2 – 20 years	$	178,240	$	(126,170	)	$	180,850	$	(121,750	)
Technology and other, 3 – 15 years	21,200		(15,930		)	19,950		(15,260		)
Trademark/Trade names, 1 - 8 years	730		(230		)	730		(190		)
Customer relationships (2 – 20 years)											$	162,940	$	(129,020	)	$	33,920
Technology and other (3 – 15 years)											20,590		(14,630		)	5,960
Trademark/Trade names (1 – 8 years)											150		(150		)	—
Total finite-lived intangible assets	200,170		(142,330		)	201,530		(137,200		)	183,680		(143,800		)	39,880
Trademark/Trade names, indefinite-lived	24,090		—			25,900		—			20,470		—			20,470
Total other intangible assets	$	224,260	$	(142,330	)	$	227,430	$	(137,200	)	$	204,150	$	(143,800	)	$	60,350



	As of December 31, 2018
Intangible Category by Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(dollars in thousands)
Finite-lived intangible assets:
Customer relationships (2 – 20 years)	$	168,230	$	(124,510	)	$	43,720
Technology and other (3 – 15 years)	20,490		(15,400		)	5,090
Trademark/Trade names (1 – 8 years)	150		(150		)	—
Total finite-lived intangible assets	188,870		(140,060		)	48,810
Trademark/Trade names, indefinite-lived	20,590		—			20,590
Total other intangible assets	$	209,460	$	(140,060	)	$	69,400

On March 1, 2019, the Company entered into an agreement of sale of certain business assets in its Europe-Africa operating segment, via a share and asset sale (the “Sale”). Under the terms of the Sale, effective March 1, 2019, the Company disposed of certain non-automotive business assets that operated using the Terwa brand for $5.5 million, which included a $0.5 million note receivable. The Sale resulted in a $3.6 million loss recorded in Other expense, net in the condensed consolidated statements of operations, including a $3.0 million reduction of net intangibles related to customer relationships.

Amortization expense related to intangible assets as included in the accompanying condensed consolidated statements of ~~income (loss)~~operations is summarized as follows:

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Inventories consist of the following components:

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~(unaudited)~~

7. Property and Equipment, Net

Property and equipment, net consists of the following components:

September 30,
2018 December 31,
2017
(dollars in thousands)
Land and land improvements $ 460
$ 480
Buildings 23,730
23,370
Machinery and equipment 163,470
162,830
187,660
186,680
Less: Accumulated depreciation 82,290
73,660
Property and equipment, net $ 105,370
$ 113,020

~~As discussed in See Note~~5, ~~“Goodwill and other intangible assets,”~~ the Company identified indicators of impairment in its Horizon Europe-Africa reporting unit. As a result, the Company performed an impairment test for long-lived assets in accordance with Accounting Standards Codification (“ASC”) 360, “Property, Plant and Equipment”, as of August 31, 2018. The test did not result in an impairment of long-lived assets. There were no indicators of impairment identified in the Horizon Americas or Horizon Asia-Pacific reporting units.



	September 30, 2019			December 31, 2018
	(dollars in thousands)
Land and land improvements	$	440		$	460
Buildings	20,460			18,680
Machinery and equipment	120,840			121,230
	141,740			140,370
Accumulated depreciation	(63,070		)	(53,870		)
Property and equipment, net	$	78,670		$	86,500

Depreciation expense included in the accompanying condensed consolidated statements of ~~income (loss)~~operations is as follows:

8. Accrued and Other Long-term Liabilities

Accrued liabilities consist of the following components:



	September 30, 2019		December 31, 2018
	(dollars in thousands)
Customer incentives	$	12,700	$	9,990
Customer claims	10,370		14,130
Accrued compensation	8,890		5,680
Accrued professional services	3,940		4,380
Restructuring	2,450		7,530
Deferred purchase price	750		3,400
Short-term tax liabilities	750		1,130
Cross currency swap	—		1,610
Other	13,170		10,670
Total accrued liabilities	$	53,020	$	58,520

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other long-term liabilities consist of the following components:



	September 30, 2019		December 31, 2018
	(dollars in thousands)
Long-term tax liabilities	$	6,220	$	6,270
Deferred purchase price	2,440		30
Restructuring	1,980		2,580
Other	10,130		10,870
Total other long-term liabilities	$	20,770	$	19,750

The Company’s long-term debt consists of the following:

ABL Facility

In February 2019, the Company amended its existing revolving credit facility (the “ABL Facility”) to permit the Company to enter into the Senior Term Loan Agreement (as defined below) and make certain indebtedness, asset sale, investment and restricted payment baskets covenants more restrictive.

In March 2019, the Company amended the ABL Facility to permit the Company to enter into the Second Lien Term Loan Agreement (as defined below) and provide for certain other modifications of the ABL Facility. In particular, the ABL Facility was modified to increase the interest rate by 1.0%, reduce the total facility size to $90.0 million and limit the ability to incur additional indebtedness in the future.

In September 2019, the Company amended its existing ABL Facility to provide consent for the sale of APAC, provide consent for the Company’s prepayment of First Lien Term Loan, as discussed below, and increase the existing block by $5.0 million to a total block of $10.0 million, making the effective facility size $80.0 million.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~(unaudited)~~

The ABL Facility consists of (i) a U.S. sub-facility, in an aggregate principal amount of up to $85.0 million (subject to availability under a U.S.-specific borrowing base) (the “U.S. Facility”), (ii) a Canadian sub-facility, in an aggregate principal amount of up to $2.0 million (subject to availability under a Canadian-specific borrowing base) (the “Canadian Facility”), and (iii) a U.K. sub-facility in an aggregate principal amount of up to $3.0 million (subject to availability under a U.K.-specific borrowing base) (the “U.K. Facility”). All facilities under the ABL Facility mature on June 30, 2020 and are presented in “short-term borrowings and current maturities, long-term debt” in the accompanying September 30, 2019 condensed consolidated balance sheet.

The Company incurred debt issuance costs of approximately $0.5 million in connection with the September 2019 amendment of the ABL Facility. These debt issuance costs will be amortized into interest expense over the contractual term of the loan. The Company recognized $0.3 million and $0.8 million of amortization of debt issuance costs for the three and nine months ended September 30, 2019, respectively, and $0.1 million and $0.4 million for the three and nine months ended September 30, 2018, respectively which are included in the accompanying condensed consolidated statements of operations. There were $2.0 million and $0.8 million of unamortized debt issuance costs included in other assets in the accompanying condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively. There was $19.7 million and $61.6 million outstanding under the ABL Facility as of September 30, 2019 and December 31, 2018, respectively, with a weighted average interest rate of 7.0% and 4.4%, respectively. Total letters of credit issued under the ABL Facility at September 30, 2019 and December 31, 2018 were $7.8 million and $3.4 million, respectively. The Company had $44.5 million and $10.3 million of availability under the ABL Facility as of September 30, 2019 and December 31, 2018, respectively.

First Lien Term Loan (formerly “Term Loan”)

In February 2019, the Company amended and restated the existing term loan agreement (the “First Lien Term Loan Agreement”) to permit the Company to enter into the Senior Term Loan Agreement and tightened certain indebtedness, asset sale, investment and restricted payment baskets.

In March 2019, the Company amended the existing term loan agreement (“Sixth Term Amendment”) to permit the Company to enter into the Second Lien Term Loan Agreement, amend certain financial covenants to make them less restrictive and make certain other affirmative and negative covenants more restrictive.

The Sixth Term Amendment also added a fixed charge coverage covenant starting with fiscal quarter ending March 31, 2020, a minimum liquidity covenant of $15.0 million starting March 31, 2019, and a maximum capital expenditure covenant of $15.0 million for 2019 and $25.0 million annually thereafter. The interest rate on the First Lien Term Loan Agreement was also amended to add 3.0% paid-in-kind interest in addition to the existing cash pay interest.

In May 2019, the Company entered into the seventh amendment to credit agreement (the “Seventh Term Amendment”) to amend the First Lien Term Loan Agreement, which extended its $100.0 million prepayment requirement from on or before March 31, 2020, to on or before May 15, 2020.

In September 2019, the Company amended the existing First Lien Term Loan Agreement (“Eighth Term Amendment”) to provide consent for the sale of the Company’s APAC segment, provide consent for the Company to meet its prepayment obligation of the First Lien Term Loan, remove prepayment penalties and make certain negative covenants less restrictive. In September 2019, the Company paid down a portion of its First Lien Term Loan’s outstanding principal plus fees and paid-in-kind interest in the amount of $172.9 million.

Pursuant to the Eighth Term Amendment, the prior first lien leverage covenant was eliminated and replaced with the secured net leverage ratio starting with the fiscal quarter ending December 31, 2020 as follows:

December 31, 2020: 6.00 to 1.00

March 31, 2021: 6.00 to 1.00

June 30, 2021 and each fiscal quarter ending thereafter: 5.00 to 1.00

In accordance with ASC 470-50, “Modifications and Extinguishments,” the Company recorded approximately $0.7 million of issuance costs in selling, general and administrative expense in the accompanying condensed consolidated statements of operations during the nine months endedSeptember 30, 2019 and wrote off approximately $5.2 million of debt issuance costs due to the modification of the First Lien Term Loan for the September 19, 2019 amendment, which were recorded to selling, general and administrative expense within the accompanying condensed consolidated statements of operations.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company recorded approximately $5.2 million and $8.7 million of unamortized debt issuance costs to interest expense for the three and nine months ended September 30, 2019, respectively, due to the extinguishment of debt for certain lenders in the loan syndicate in connection with the Sixth, Seventh and Eighth Term Amendments.

The Company recognized approximately $1.7 million and $4.4 million of amortization of debt issuance and discount cost for the three and nine months ended September 30, 2019, respectively, and $0.6 million and $1.4 million for the three and nine months ended September 30, 2018, respectively, which is included in the accompanying condensed consolidated statements of operations.

The Company recognized $3.0 million of paid-in-kind interest on the First Lien Term Loan for the nine months ended September 30, 2019. The Company had an aggregate principal amount outstanding of $25.0 million and $190.5 million as of September 30, 2019 and December 31, 2018, respectively, under the First Lien Term Loan bearing interest at 8.1% and 8.8%, respectively.

All of the indebtedness under the First Lien Term Loan is and will be guaranteed by the Company’s existing and future material domestic subsidiaries and is and will be secured by substantially all of the assets of the Company and such guarantors.

Senior Term Loan Agreement

In February 2019, the Company entered into a Credit Agreement (the “Senior Term Loan Agreement”) with Cortland Capital Markets Services LLC, as administrative agent and collateral agent, and the lenders party thereto. The Senior Term Loan Agreement provided for a short-term loan facility in the aggregate principal amount of $10.0 million, all of which was borrowed by the Company. Certain of the lenders under the Company’s First Lien Term Loan Agreement were the lenders under the Senior Term Loan Agreement.

The Senior Term Loan Agreement required the Company to obtain additional financing in amounts and on terms acceptable to the lenders. The Senior Term Loan Agreement was repaid on March 15, 2019, in conjunction with the additional financing further detailed below. The Company incurred debt issuance costs of approximately $0.5 million in connection with the Senior Term Loan Agreement, which were recorded to selling, general and administrative expense within the accompanying condensed consolidated statements of operations.

Second Lien Term Loan Agreement

In March 2019, the Company entered into a Credit Agreement (the “Second Lien Term Loan Agreement”) with Cortland Capital Markets Services LLC, as administrative agent and collateral agent, and Corre Partners Management L.L.C., as representative of the lenders, and the lenders party thereto. The Second Lien Term Loan Agreement provides for a term loan facility in the aggregate principal amount of $51.0 million and matures on September 30, 2021. The interest on the Second Lien Term Loan may be paid, at the Company’s election, in cash, at the customary eurocurrency rate plus a margin of 10.50% per annum, or in-kind, at the customary eurocurrency rate plus a margin of 11.50%. The Second Lien Term Loan Agreement is secured by a second lien on substantially the same collateral as the First Lien Term Loan and is subject to various affirmative and negative covenants including a secured net leverage ratio tested quarterly further detailed below.

In September 2019, the Company amended the existing Second Lien Term Loan Agreement (“Second Lien Amendment”) to remove the prepayment requirement related to the use of APAC sale proceeds and made certain negative covenants less restrictive. Pursuant to the Second Lien Amendment, the prior first lien leverage covenant was eliminated and replaced with the secured net leverage ratio starting with the fiscal quarter ending December 31, 2020, as outlined in the above section, First Lien Term Loan.

The proceeds, net of applicable fees, of the Second Lien Term Loan Agreement were used to repay all amounts outstanding under the Senior Term Loan Agreement and to provide additional liquidity and working capital for the Company.

Pursuant to the Second Lien Term Loan Agreement, the Company was required to issue 6.25 million detachable warrants to purchase common stock of the Company, which can be exercised on a cashless basis over a five-year term with an exercise price of $1.50 per share. 3,601,902 warrants were issued in March 2019, and the Company also issued 90,667 shares of Series A Preferred Stock in the interim that were convertible into additional warrants upon receipt of shareholder approval of the issuance of such additional warrants and the shares of common stock issuable upon exercise thereof. Upon receipt of such shareholder approval on June 25, 2019, the 90,667 shares of Series A Preferred Stock were converted into 2,952,248 warrants.

In accordance with guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”), and ASC 815, “Derivatives and Hedging” (“ASC 815”), the (i) Second Lien Term Loan; (ii) Series A Preferred Stock, and (iii) warrants are all freestanding

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

instruments and proceeds were allocated to each instrument on March 15, 2019 on a relative fair value basis: (i) $40.3 million; (ii) $5.3 million and (iii) $5.4 million, respectively.

The Series A Preferred Stock was not within the scope of ASC 480-10 and did not meet the criteria for liability classification. The Series A Preferred Stock was classified as temporary equity as of March 31, 2019, as the Series A Preferred Stock was entitled to receive two times its liquidation value in cash upon occurrence of a liquidation or deemed liquidation event, which is outside the control of the Company. After receipt of shareholder approval at the Company’s annual meeting of shareholders on June 25, 2019, the Series A Preferred Stock was automatically converted into 2,952,248 warrants and $5.3 million was reclassified to Common stock warrants within Shareholders’ equity in the Company’s condensed consolidated balance sheet. The warrants also do not meet the criteria for liability classification under ASC 480. However, the warrants meet the definition of a derivative under ASC 815, are determined to be indexed to the Company’s common stock and meet the requirements for equity classification pursuant to ASC 815-40.

The Company determined the fair value of the Second Lien Term Loan using a discount rate build up approach. The fair values of the Series A Preferred Stock and warrants were determined using an option pricing method. The debt discount of $10.7 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.

Debt issuance costs of approximately $3.8 million and original issuance discount of approximately $1.0 million were incurred in connection with entry into the Second Lien Term Loan Agreement. The debt issuance and original issuance discount costs will be amortized into interest expense over the contractual term of the loan using the effective interest method. The Company had total unamortized debt issuance and discount costs of $13.8 million, all of which are recorded as a reduction of the debt balance on the Company’s accompanying condensed consolidated balance sheet as of September 30, 2019. The Company recognized $4.6 million of paid-in-kind interest on its Second Lien Term Loan for the nine months ended September 30, 2019.

Convertible Notes

OnIn February 1, 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. Interest is payable on January 1 and July 1 of each year, beginning on July 1, 2017. The Convertible Notes are convertible into 5,005,000 shares of the Company’s common stock, based on an initial conversion price of $24.98 per share. The Convertible Notes will mature on July 1, 2022 unless earlier converted.

The Convertible Notes are convertible at the option of the holder (i) during any calendar quarter beginning after March 31, 2017, if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five business days after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day of such period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (iii) upon the occurrence of specified corporate events; and (iv) on or after January 1, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date. During the third quarter of 2018, no conditions allowing holders of the Convertible Notes to convert have been met. Therefore, the Convertible Notes were not convertible during the third quarter of 2018 and are classified as long-term debt. Should conditions allowing holders of the Convertible Notes to convert be met in a future quarter, the Convertible Notes will be convertible at their holders’ option during the immediately following quarter. As of September 30, 2018, the if-converted value of the Convertible Notes did not exceed the principal value of those Convertible Notes.

Upon conversion by the holders, the Company may elect to settle such conversion in shares of its common stock, cash, or a combination thereof. Because the Company may elect to settle conversion in cash, the Company separated the Convertible Notes into their liability and equity components by allocating the issuance proceeds to each of those components in accordance with ASC 470-20, “Debt-Debt with Conversion and Other Options.” The Company first determined the fair value of the liability component by estimating the value of a similar liability that does not have an associated equity component. The Company then deducted that amount from the issuance proceeds to arrive at a residual amount, which represents the equity component. The Company accounted for the equity component as a debt discount (with an offset to paid-in capital in excess of par value). The debt discount created by the equity component is being amortized as additional non-cash interest expense using the effective interest method over the contractual term of the Convertible Notes ending on July 1, 2022.

The Company allocated offering costs of $3.9 million to the debt and equity components in proportion to the allocation of proceeds to the components, treating them as debt issuance costs and equity issuance costs, respectively. The debt issuance costs of $2.9 million are being amortized as additional non-cash interest expense using the effective interest method over the contractual term of the Convertible Notes. The Company presents debt issuance costs as a direct deduction from the carrying value of the liability component. The carrying value of the liability component at September 30, 2018 and December 31, 2017 was $99.4 million and $95.1 million, respectively, including total unamortized debt discount and debt issuance costs of $25.6 million and $29.9 million, respectively. The $1.0 million portion of offering costs allocated to equity issuance costs was charged to paid-in capital. The carrying amount of the equity component was $20.0 million at September 30, 2018 and December 31, 2017, respectively, net of issuance costs and taxes.

Interest expense recognized relating to the contractual interest coupon, amortization of debt discount and amortization of debt issuance costs on the Convertible Notes included in the accompanying condensed consolidated statements of income (loss) are as follows:

Three months ended
September 30, Nine months ended
September 30,
2018 2017 2018 2017
(dollars in thousands)
Contractual interest coupon on convertible debt $ 880
$ 880
$ 2,610
$ 2,310
Amortization of debt issuance costs $ 130
$ 130
$ 400
$ 350
Amortization of "equity discount" related to debt $ 1,290
$ 1,190
$ 3,860
$ 3,180

~~The estimated fair value of the Convertible Notes based on a market approach as of September 30, 2018 was approximately $94.1~~

~~HORIZON GLOBAL CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

~~million~~, which represents a Level 2 valuation. The estimated fair value was determined based on the estimated or actual bids and offers of the Convertible Notes in an over-the-counter market on the last business day of the period.

In connection with the issuance of the Convertible Notes, the Company entered into convertible note hedge transactions (the “Convertible Note Hedges”) in privately negotiated transactions with certain of the underwriters or their affiliates (in this capacity, the “option counterparties”). The Convertible Note Hedges provide the Company with the option to acquire, on a net settlement basis, 5,005,000 shares of its common stock, which is equal to the number of shares of common stock that notionally underlie the Convertible Notes, at a strike price of $24.98, which corresponds to the conversion price of the Convertible Notes. The Convertible Note Hedges have an expiration date that is the same as the maturity date of the Convertible Notes, subject to earlier exercise. The Convertible Note Hedges have customary anti-dilution provisions similar to the Convertible Notes. The Convertible Note Hedges have a default settlement method of net-share settlement but may be settled in cash or shares, depending on the Company’s method of settlement for conversion of the corresponding Convertible Notes. If the Company exercises the Convertible Note Hedges, the shares of common stock it will receive from the option counterparties to the Convertible Note Hedges will cover the shares of common stock that it would be required to deliver to the holders of the converted Convertible Notes in excess of the principal amount thereof. The aggregate cost of the Convertible Note Hedges was $29.0 million (or $7.5 million net of the total proceeds from the Warrants sold, as discussed below), before the allocation of issuance costs of approximately $0.7 million. The Convertible Note Hedges are accounted for as equity transactions in accordance with ASC 815-40, “Derivatives and Hedging-Contracts in

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Entity’s own Equity.”

In connection with the issuance of the Convertible Notes, the Company also sold net-share-settled warrants (the “Warrants”) in privately negotiated transactions with the option counterparties for the purchase of up to 5,005,000 shares of its common stock at a strike price of $29.60 per share, for total proceeds of $21.5 million, before the allocation of $0.6 million of issuance costs. The Company also recorded the Warrants within shareholders’ equity in accordance with ASC 815-40. The Warrants have customary anti-dilution provisions similar to the Convertible Notes. As a result of the issuance of the Warrants, the Company will experience dilution to its diluted earnings per share if its average closing stock price exceeds $29.60 for any fiscal quarter. The Warrants expire on various dates from October 2022 through February 2023 and must be net-settled in shares of the Company’s common stock. Therefore, upon exercise of the Warrants, the Company will issue shares of its common stock to the purchasers of the Warrants that represent the value by which the price of the common stock exceeds the strike price stipulated within the particular warrant agreement.

~~ABL Facility~~

~~On December 22, 2015, the Company entered into that certain Amended~~Covenant and Restated Loan Agreement among the Company, Horizon Global Americas Inc. (f/k/a Cequent Performance Products, Inc., successor by merger to Cequent Consumer Products, Inc.) (“HGA”), Cequent UK Limited, Cequent Towing Products of Canada Ltd., certain other subsidiaries of the Company party thereto as guarantors, the lenders party thereto and Bank of America, N.A., as agent for the lenders (the “ABL Loan Agreement”), under which the lenders party thereto agreed to provide the Company and certain of its subsidiaries with a committed asset-based revolving credit facility (the “ABL Facility”) providing for revolving loans up to an aggregate principal amount of $99.0 million.Liquidity Matters

The ABL Loan Agreement establishes (i) a U.S. sub-facility, in an aggregate principal amount of up to $94.0 million (subject to availability under a U.S.-specific borrowing base) (the “U.S. Facility”), (ii) a Canadian sub-facility, in an aggregate principal amount of up to $2.0 million (subject to availability under a Canadian-specific borrowing base) (the “Canadian Facility”), and (iii) a U.K. sub-facility in an aggregate principal amount of up to $3.0 million (subject to availability under a U.K.-specific borrowing base) (the “U.K. Facility”). The ABL Facility ~~also includes a $20.0 million U.S. letter of credit sub-facility, which~~ matures on June 30, ~~2020.~~

~~Borrowings under~~2020, and as of September 30, 2019, had an outstanding balance of $19.7 million. The Company believes it has sufficient liquidity to operate its business. However, today it does not have the cash or liquidity to pay off the ABL Facility ~~bear interest,~~ at the Company’s election, at either (i) with respect to the U.S. Facility and the U.K. Facility, (a) the Base Rate (as defined per the ABL Loan Agreement, the “Base Rate”) plus the Applicable Margin (as defined per the ABL Loan Agreement “Applicable Margin”), or (b) the London Interbank Offered Rate (“LIBOR”) plus the Applicable Margin, and (ii) with respect to the Canadian Facility, (a) the Base Rate plus the Applicable Margin, or (b) the Canadian Prime Rate (as defined per the ABL Loan Agreement).

The Company incurs fees with respect to the ABL Facility, including (i) an unused line fee of 0.25% times the amount by which the revolver commitments exceed the average daily revolver usage during any month, (ii) facility fees equal to the applicable margin in effect for (a) LIBOR Revolving Loans (as defined per the ABL Loan Agreement), with respect to the U.S. Facility and the U.K. Facility or (b) Canadian BA Rate Loans (as defined per the ABL Loan Agreement), with respect to the Canadian Facility,

~~HORIZON GLOBAL CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

~~times the average daily stated amount of letters of credit, (iii) a fronting fee equal to 0.125% per annum on the stated amount of each letter of credit, and (iv) customary administrative fees.~~

All of the indebtedness of the U.S. Facility is and will be guaranteed by the Company’s existing and future material domestic subsidiaries and is and will be secured by substantially all of the assets ofmaturity. If the Company ~~and such guarantors. In connection with~~cannot generate sufficient cash from operations to make the ~~ABL Loan Agreement, HGA and certain other subsidiaries of the Company party to the ABL Loan Agreement entered~~aforementioned payment at maturity, or enter into ~~a foreign facility guarantee and collateral agreement (the “Foreign Collateral Agreement”)~~new or additional financing arrangements, it may result in order to secure and guarantee the obligation under the Canadian Facility and the U.K. Facility. Under the Foreign Collateral Agreement, HGA and the other subsidiaries of the Company party thereto granted a lien on certain of their assets to Bank of America, N.A., as the agent for the lenders and other secured parties under the Canadian Facility and U.K. Facility.

The ABL Loan Agreement contains customary negative covenants, and does not include any financial maintenance covenants other than a springing minimum fixed charge coverage ratio of at least 1.00 to 1.00 on a trailing twelve-month basis, which will be tested only upon the occurrence of an event of default ~~or certain other conditions as specified in the agreement. At September 30, 2018, the Company was in compliance with its financial covenants contained in the ABL Facility.~~

~~Debt issuance costs of approximately $2.5 million were incurred in connection with the entry into and amendment~~because of the ABL Facility. These debt issuance costs will be amortized into interest expense over the contractual term of the loan. The Company recognized $0.1 million and $0.4 million of amortization of debt issuance costs for the three and nine months ended September 30, 2018, respectively, and $0.1 million and $0.4 million for the three and nine months ended September 30, 2017, respectively, which are included in the accompanying condensed consolidated statements of income (loss). There were $0.9 million and $1.3 million of unamortized debt issuance costs included in other assets in the accompanying condensed consolidated balance sheets as of September 30, 2018 and December 31, 2017, respectively.

There were $47.6 million and $10.0 million outstanding under the ABL Facility as of September 30, 2018 and December 31, 2017, respectively, with a weighted average interest rate of 3.9% and 3.6%, respectively. Total letters of credit issued were approximately $3.4 million and $6.3 million at September 30, 2018 and December 31, 2017, respectively. The Company had $40.4 million and $58.5 million in availability under the ABL Facility as of September 30, 2018 and December 31, 2017, respectively.

~~Term Loan~~

On June 30, 2015, the Company entered into a Credit Agreement among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A. (the “Term Loan Agreement”) under which the Company borrowed an aggregate of $200.0 million (“Original Term B Loan”), which matures on June 30, 2021. On September 19, 2016, the Company entered into the First Amendmentinability to the Credit Agreement (“Term Loan Amendment”), which amended the Original Term B Loan to provide for incremental commitments in an aggregate principal amount of $152.0 million (“2016 Incremental Term Loans”) that were extended to the Company on October 3, 2016. The Original Term B Loan and 2016 Incremental Term Loans are collectively referred to as “Term B Loan”. On March 31, 2017, the Company entered into the 2017 Replacement Term Loan Agreement Amendment (Third Amendment to Credit Agreement) (the “2017 Replacement Term Loan Amendment”); the Term Loan Agreement, as amended by the Term Loan Amendment, the 2017 Replacement Term Loan Amendment and as otherwise amended prior to July 1, 2018, the “Amended Term Loan Agreement”), which replaced the Term B Loan to provide for a new term loan commitment (the “2017 Replacement Term Loan”). The proceeds from the 2017 Replacement Term Loan were used to repay in full the outstanding principal amount of the Term B Loan. As a result of the 2017 Replacement Term Loan Amendment, the interest rate was reduced by 1.5% per annum.

The Amended Term Loan Agreement permits the Company to request incremental term loan facilities, subject to certain conditions, in an aggregate principal amount, together with the aggregate principal amount of incremental equivalent debt incurred by the Company, of up to $75.0 million, plus an additional amount such that the Company’s pro forma first lien net leverage ratio (as defined in the term loan agreement) would not exceed 3.50 to 1.00 as a result of the incurrence thereof.

Borrowings under the 2017 Replacement Term Loan bore interest, at the Company’s election, at either (i) the Base Rate plus 3.5% per annum, or (ii) LIBOR, with a 1% floor, plus 4.5% per annum. Principal payments required under the Term B Loan were $1.9 million due each calendar quarter beginning June 2017.

During the first quarter of 2017, the Company used a portion of the net proceeds from the Convertible Notes offering as described above, along with proceeds from the Common Stock Offering as described in Note 12, ~~“Earnings per Share”~~, to prepay a total of $177.0 million of the Term B Loan. In accordance with ASC 470, “Debt - Modifications and Extinguishments”, the prepayment was determined to be an extinguishment of the existing debt. As a result, the pro-rata share of the unamortized debt issuance costs

~~HORIZON GLOBAL CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

and original issuance discount related to the prepayment, aggregating to $4.6 million, was recorded as a loss on the extinguishment of debt in the condensed consolidated statements of income (loss). The remaining unamortized debt issuance costs and original issuance discount, including $2.4 million of additional transactions fees incurred in connection to the 2017 Replacement Term Loan Amendment, was approximately $6.1 million. Both the aggregate debt issuance costs and the original issue discount will be amortized into interest expense over the remaining life of the Term B Loan. The Company recognized approximately $0.6 million and $1.4 million of amortization of debt issuance cost and original issue discount for the three and nine months ended September 30, 2018, respectively, and $0.4 million and $1.2 million for the three and nine months ended September 30, 2017, respectively, which is included in the accompanying condensed consolidated statements of income (loss). The Company had an aggregate principal amount outstanding of $193.1 million and $149.6 million as of September 30, 2018 and December 31, 2017, respectively, under the Amended Term Loan Agreement bearing interest at 8.2% and 6.1%, respectively. The Company had $8.1 million and $4.9 million as of September 30, 2018 and December 31, 2017, respectively, of unamortized debt issuance costs and original issue discount,meet all of ~~which are recorded as a reduction of the debt balance on the Company’s condensed consolidated balance sheets.~~

The Company’s Term B Loan traded at approximately 97.8% and 101.4% of par value as of September 30, 2018 and December 31, 2017, respectively. The valuation of the Term B Loan was determined based on Level 2 inputsits obligations under ~~the fair value hierarchy.~~

On February 16, 2018, the Company entered into an amendment to the 2017 Replacement Term Loan (the “February 2018 Replacement Term Loan Amendment”), which would have replaced the 2017 Replacement Term Loan to provide for a new term loan commitment in an original aggregate principal amount of $385.0 million (the “2018 Replacement Term Loan”). The proceeds from the 2018 Replacement Term Loan were to be used to (i) repay in full the outstanding principal amount of the existing term loans, (ii) to consummate the acquisition of Brink International B.V. and its subsidiaries (collectively, the “Brink Group”) and pay a portion of the acquisition consideration thereof and the fees and expenses incurred in connection therewith, and (iii) for general corporate purposes. On June 14, 2018, the Company and H2 Equity Partners mutually agreed to terminate the Brink Group acquisition agreement. As part of the termination agreement, the Company agreed to pay a break fee of approximately $5.5 million to H2 Equity Partners and incurred $0.8 million and $5.7 million of transaction fees during the three and nine months ended September 30, 2018, respectively, which are all included in selling, general and administrative expenses in the condensed consolidated statements of income (loss). There were no financing fees incurred during the three months ended September 30, 2018. During the nine months ended September 30, 2018, the Company incurred $5.1 million of financing costs in connection with the pursuit of the Brink Group acquisition which are included in other expense, net in the condensed consolidated statements of income (loss). Due to the termination of the Brink Group acquisition, the February 2018 Replacement Term Loan Amendment was not effective.

On July 31, 2018, the Company entered into the Fourth Amendment to Credit Agreement (the “Fourth Amendment”; the Amended Term Loan Agreement, as amended by the Fourth Amendment, the “2018 Term Loan Agreement”). The Fourth Amendment provided for additional borrowings of $50.0 million (the “2018 Incremental Term Loan”; the 2017 Replacement Term Loan as increased by the 2018 Incremental Term Loan, the “2018 Term B Loan”) that were used to pay outstanding balances under the ABL Loan Agreement, pay fees and expenses in connection with the amendment and for general corporate purposes. Borrowings under the 2018 Term B Loan bear interest, at the Company’s election, at either (i) the Base Rate plus 5.0% per annum, or (ii) LIBOR, with a 1.0% floor, plus 6.0% per annum. Principal payments required under the 2018 Term B Loan are $2.6 million due each calendar quarter beginning September 2018. Under the 2018 Term Loan Agreement, commencing with the fiscal year ended December 31, 2017, and for each fiscal year thereafter, the Company is required to make prepayments of outstanding amounts under the Term B Loan in an amount up to 75.0% of the Company’s excess cash flow for such fiscal year, as defined in the 2018 Term B Loan, subject to adjustments based on the Company’s leverage ratio and optional prepayments of term loans and certain other indebtedness.

All of the indebtedness under the 2018 Term B Loan is and will be guaranteed by the Company’s existing and future material domestic subsidiaries and is and will be secured by substantially all of the assets of the Company and such guarantors. The 2018 Term Loan Agreement contains customary negative covenants, and also contains a financial maintenance covenant which requires the Company to maintain a net leverage ratio, as defined in the agreement, not exceeding 7.00 to 1.00 on the last day of each fiscal quarter commencing with the fiscal quarter ending on June 30, 2018 and ending, and including, the fiscal quarter ending on December 31, 2018; 6.50 to 1.00 on the last day of the fiscal quarter ending March 31, 2019; 5.00 to 1.00 on the last day of the fiscal quarter ending June 30, 2019; 4.75 to 1.00 on the last day of the fiscal quarter ending September 30, 2019; and on the last day of each fiscal quarter thereafter, 4.50 to 1.00. At September 30, 2018, the Company was in compliance with its financial covenants under the Term B Loan.

~~HORIZON GLOBAL CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

~~Covenant and Liquidity Matters~~

In 2018, the Company experienced a combination of increased distribution costs and constrained shipments from the Americas distribution network primarily resulting from the transfer of aftermarket shipping volume from Dallas, TX to Kansas City, KS. Since amending our Term Loan on July 31, 2018, our Europe-Africa segment has continued to underperform. Additionally, our new leadership team in Europe has performed an initial assessment of our business in that segment, resulting in reduced expectations through the remainder of 2018. Primarily due to these factors as well as costs associated with remediating these factors, the Company has increased draws on our ABL and experienced a decline in Bank EBITDA. Based on our results for the quarter-ended September 30, 2018 and our current forecast for the next twelve months, LTM Bank EBITDA will likely underperform management’s expectations at the time we entered into the Fourth Amendment. In addition, total debt is expected to be higher than our projections at the time we entered into the Fourth Amendment. As a result, we do not expect to comply with the 7.00 to 1.00 net leverage ratio covenant in our 2018 Term Loan Agreement for the quarter-ending December 31, 2018, which absent an amendment or waiver, would constitute a default when reported.credit agreements. Such a default, if not cured, would allow the lenders to accelerate the maturity of the debt, making it due and payable at that ~~time.~~ time, which would result in a cross default of other debt obligations.

The Company is in ~~active discussions~~compliance with ~~the administrative agent for the Term Loan lenders regarding the modification~~all of covenant terms through the periods that will be impacted on an LTM basis by the factors described above and the Company believes it is probable that the Company will obtain an amendment modifying the covenant terms prior to triggering a default.

~~Bank facilities~~

On July 3, 2017, the Company’s Australian subsidiaries entered into an agreement (collectively, the “Australian Loans”) to provide for revolving borrowings with an aggregate principal amount of approximately $29.6 million. The Australian Loans include two sub-facilities: (i) Facility A, with a borrowing capacity of $18.7 million that matures on July 3, 2020 and (ii) Facility B, with a borrowing capacity of $10.8 million that matured on July 3, 2018. There were $5.9 million and $6.6 million outstanding under the Australian Loansits financial covenants as of September 30, ~~2018 and December 31, 2017, respectively.~~

Borrowings under Facility A bear interest at the Bank Bill Swap Bid Rate (“BBSY”) plus a margin determined based on the most recent net leverage ratio (as defined per the Australian credit agreement). The margin is to be determined on the first day of the period as follows: (i) 1.10% per annum if the net leverage ratio is less than 1.50 to 1.00; (ii) 1.20% per annum if the net leverage ratio is less than 2.00 to 1.00 and (iii) 1.30% if the net leverage ratio is less than 2.50 to 1.00. Borrowings under Facility B bear interest at the BBSY plus a margin of 0.9% per annum.

The Australian Loans contain financial covenants, which require the Company’s Australian subsidiaries to maintain: (i) a net leverage ratio not exceeding 2.50 to 1.00 during the period commencing on the date of the agreement and ending on the first anniversary of the date of the agreement; and 2.00 to 1.00 thereafter; (ii) a working capital coverage ratio (as defined per the Australian credit agreement) greater than 1.75 to 1.00 at all times; and (iii) a gearing ratio (defined as the ratio of senior debt to senior debt plus equity) not to exceed 50%. At September 30, 2018, the Company was in compliance with its financial covenants under the Australian Loans.2019.

910. Derivative Instruments

Foreign Currency Exchange Rate Risk

As of September 30, ~~2018~~2019, the Company was party to forward contracts to hedge changes in foreign currency exchange rates with notional amounts of approximately ~~$20.5~~$3.9 million. The Company uses foreign currency forward contracts to mitigate the risk associated with fluctuations in currency rates impacting cash flows related to certain payments for contract manufacturing in its lower-cost manufacturing facilities. The foreign currency forward contracts hedge currency exposure between the Mexican peso and the U.S. dollar and ~~the U.S. dollar and the Australian dollar and~~ mature at specified monthly settlement dates through ~~June~~December 2019. At inception, the Company designated the foreign currency forward contracts as cash flow hedges. Upon the performance of contract manufacturing or purchase of certain inventories the Company de-designates the foreign currency forward contract.

On October 4, 2016, the Company entered into a cross currency swap arrangement to hedge changes in foreign currency exchange rates. As of September 30, 2018, the notional amount of the cross currency swap was approximately $110.8 million. The Company uses the cross currency swap to mitigate the risk associated with fluctuations in currency rates impacting cash flows related to a non-U.S. denominated intercompany loan of €110.0 million. The cross currency swap hedges currency exposure between the Euro and the U.S. dollar and matures on January 3, 2019. The Company makes quarterly principal payments of €1.4 million, plus

~~HORIZON GLOBAL CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

interest at a fixed rate of 5.4% per annum, in exchange for $1.5 million, plus interest at a fixed rate of 7.2% per annum. At inception, the Company designated the cross currency swap as a cash flow hedge. Changes in the currency rate result in reclassification of amounts from accumulated other comprehensive income (loss) to earnings to offset the re-measurement gain or loss on the non-U.S. denominated intercompany loan.

On August 16, 2017, the Company’s Australian subsidiary entered into a cross currency swap arrangement to hedge changes in foreign currency exchange rates. As of September 30, 2018, the notional amount of the cross currency swap was approximately $3.9 million. The Australian subsidiary uses the cross currency swap to mitigate the risk associated with fluctuations in currency rates related to a non-functional currency intercompany loan of NZ$10.0 million. The floating-to-floating cross currency swap hedges currency exposure between the New Zealand dollar and the Australian dollar and matures on June 30, 2020. The Australian subsidiary makes quarterly principal payments of NZ$0.8 million, plus interest at the 3-month Bank Bill Benchmark Rate ("BKBM") in New Zealand plus a margin of 0.31% per annum, in exchange for A$0.8 million, plus interest at the three-month BBSY in Australia per annum. At inception, the cross currency swap was not designated as a hedging instrument.

Financial Statement Presentation

~~As of~~ ~~September 30, 2018~~ ~~and~~ ~~December 31, 2017, the~~The fair value carrying amount of the Company’s derivative instruments were recorded as follows:


		Asset / (Liability) Derivatives							Asset / (Liability) Derivatives
	Balance Sheet Caption	September 30, 2018			December 31, 2017			Balance Sheet Caption	September 30, 2019		December 31, 2018
		(dollars in thousands)							(dollars in thousands)
Derivatives designated as hedging instruments
Foreign currency forward contracts	Prepaid expenses and other current assets	$	1,350		$	—		Prepaid expenses and other current assets	$	220	$	1,910
Foreign currency forward contracts	Accrued liabilities	—			(670		)
Cross currency swap	Accrued liabilities	(2,330		)	—
Cross currency swap	Other long-term liabilities	—			(7,830		)	Accrued liabilities	—		(2,480		)
Total derivatives designated as hedging instruments		(980		)	(8,500		)		220		(570		)
Derivatives not designated as hedging instruments
Foreign currency forward contracts	Prepaid expenses and other current assets	260			110			Prepaid expenses and other current assets	100		70
Foreign currency forward contracts	Accrued liabilities	—			(90		)
Cross currency swap	Other assets	40			90
Total derivatives de-designated as hedging instruments		300			110				100		70
Total derivatives		$	(680	)	$	(8,390	)		$	320	$	(500	)

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~(unaudited)~~

The following table summarizes the amount of gain recognized in AOCI on derivatives (net of tax):



	Amount of Gain Recognized in AOCI on Derivatives (net of tax)
	As of September 30,		As of December 31,
	2019		2018
	(dollars in thousands)
Derivatives classified as cash flow hedges:
Foreign currency forward contracts	$	220	$	1,870
Cross currency swap	$	—	$	90

The following tables summarize the ~~gain or loss recognized in accumulated other comprehensive income (loss) (“AOCI”) as of September 30, 2018 and December 31, 2017 and the~~ amounts reclassified from AOCI into ~~earnings and the amounts recognized directly into earnings for the three and nine months ended September 30, 2018 and 2017:~~earnings:



	Nine months ended September 30,
	2019						2018
	Cost of sales			Interest expense			Cost of sales			Interest expense
	(dollars in thousands)
Total Amounts of Expense Line Items Presented in the Statement of Operations in Which the Effects of Cash Flow Hedges are Recorded	$	(460,010	)	$	(50,270	)	$	(472,120	)	$	(19,580	)
Amount of Gain Reclassified from AOCI into Earnings
Derivatives classified as cash flow hedges:
Foreign currency forward contracts	$	1,550		$	—		$	590		$	—
Cross currency swap	$	—		$	900		$	—		$	4,000

Over the next 12 months, the Company expects to reclassify approximately ~~$1.4~~$0.2 million of pre-tax deferred gains, related to the foreign currency forward contracts, from AOCI to cost of sales as contract manufacturing and inventory purchases are settled. Over the next 12 months, the Company expects to reclassify approximately $1.6 million of pre-tax deferred losses, related to the cross currency swap, from AOCI to other expense, net as an offset to the re-measurement gains or losses on the non-U.S. denominated intercompany loan.

~~Derivatives not designated as hedging instruments~~

The gain or loss resulting from the change in fair value on de-designated forward contracts is reported within cost of sales on the Company’s condensed consolidated statements of income (loss). There were $0.1 million of losses on de-designated derivatives for the three months ended September 30, 2018 and there were $0.1 million of losses on de-designated derivatives for the nine months ended September 30, 2018. There were no gains or losses on de-designated derivatives for the three months ended September 30, 2017 and $0.1 million of gains on de-designated derivatives for the nine months ended September 30, 2017. The gain or loss resulting from the change in fair value on the floating-to-floating cross currency swap is recorded within other expense, net on the Company’s condensed consolidated statements of income (loss). There were no gains or losses and $0.1 million of losses on this cross currency swap for the three and nine months ended September 30, 2018, respectively.

During May 2018, the Company entered into foreign currency option contracts known as zero-cost collars with an aggregate notional amount of €63.4 million to hedge changes in foreign currency related to the cash portion of the purchase price of the pending acquisition of the Brink Group; the acquisition was later terminated as described in Note 8 ~~“Long-term Debt.”~~ During June 2018, these zero-cost collar arrangements matured, resulting in a loss of $1.2 million which is included within other expense, net in the Company’s condensed consolidated statements of income (loss) for the nine months ended September 30, 2018. There was no gain or loss for the three months ended September 30, 2018.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~(unaudited)~~

Fair Value Measurements

The fair value of the Company’s derivatives are estimated using an income approach based on valuation techniques to convert future amounts to a single, discounted amount. The Company’s derivatives are recorded at fair value in its condensed consolidated balance sheets and are valued using pricing models that are primarily based on market observable external inputs, including spot and forward currency exchange rates, benchmark interest rates, and discount rates consistent with the instrument’s tenor, and consider the impact of the Company’s own credit risk, if any. Changes in counterparty credit risk are also considered in the valuation of derivative financial instruments. Fair value measurements and the fair value hierarchy level for the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018 are shown ~~below.~~below:

Frequency Asset / (Liability) Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3)
(dollars in thousands)
September 30, 2018
Foreign currency forward contracts Recurring $ 1,610
$ —
$ 1,610
$ —
Cross currency swaps Recurring $ (2,290 ) $ —
$ (2,290 ) $ —
December 31, 2017
Foreign currency forward contracts Recurring $ (650 ) $ —
$ (650 ) $ —
Cross currency swaps Recurring $ (7,740 ) $ —
$ (7,740 ) $ —

10~~. Segment Information~~

The Company groups its operating segments into reportable segments by the region in which sales and manufacturing efforts are focused. 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 three reportable segments: Horizon Americas, Horizon Europe‑Africa, and Horizon Asia‑Pacific. Horizon Americas is comprised of the Company’s North American and South American operations. Horizon Europe‑Africa reportable segment is comprised of the European and South African operations, while Horizon Asia‑Pacific is comprised of the Australia, Thailand, and New Zealand operations. See below for further information regarding the types of products and services provided within each reportable 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 OEMs, OESs, aftermarket and retail customers in the agricultural, automotive, construction, industrial, marine, military, recreational vehicle, trailer and utility end markets. Products include brake controllers, cargo management, heavy-duty towing products, jacks and couplers, protection/securing systems, trailer structural and electrical components, tow bars, vehicle roof racks, vehicle trailer hitches and additional accessories.

~~Horizon Europe‑Africa -~~ ~~With a product offering similar to Horizon Americas, Horizon Europe‑Africa focuses its sales and manufacturing efforts in Europe and Africa.~~

~~Horizon Asia‑Pacific -~~ ~~With a product offering similar to Horizon Americas, Horizon Asia‑Pacific focuses its sales and manufacturing efforts in the Asia-Pacific region of the world.~~



	Frequency	Asset / (Liability)			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
		(dollars in thousands)
September 30, 2019
Foreign currency forward contracts	Recurring	$	320		$	—	$	320		$	—
December 31, 2018
Foreign currency forward contracts	Recurring	$	1,980		$	—	$	1,980		$	—
Cross currency swaps	Recurring	$	(2,480	)	$	—	$	(2,480	)	$	—

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~(unaudited)~~

~~Segment~~11. Restructuring

The Company’s restructuring activities are undertaken as necessary to execute management’s strategy and streamline operations, consolidate and take advantage of available capacity and resources, and ultimately achieve productivity improvements and net cost reductions. The Company's restructuring charges consist primarily of employee costs (principally severance and/or termination benefits) and facility closure and other costs.

To the extent these programs involve voluntary separations, no liabilities are generally recorded until offers to employees are accepted. If employees are involuntarily terminated, a liability is generally recorded at the communication date. Estimates of restructuring charges are based on information available at the time such charges are recorded. Related charges are recorded in cost of sales and selling, general and administrative expenses.

The following table provides a summary of the Company’s consolidated restructuring liabilities and related activity isfor each type of exit cost as ~~follows:~~of and for the nine months ended September 30, 2019:

Three months ended
September 30, Nine months ended
September 30,
2018 2017 2018 2017
(dollars in thousands)
Net Sales
Horizon Americas $ 115,510
$ 115,460
$ 319,810
$ 351,400
Horizon Europe-Africa 78,520
87,950
256,420
253,070
Horizon Asia-Pacific 33,810
36,710
101,760
92,520
Total $ 227,840
$ 240,120
$ 677,990
$ 696,990
Operating Profit (Loss)
Horizon Americas $ 7,270
$ 10,930
$ 4,730
$ 38,840
Horizon Europe-Africa (31,370 ) 2,680
(132,150 ) 5,950
Horizon Asia-Pacific 5,960
5,880
15,020
13,240
Corporate (5,800 ) (6,200 ) (28,950 ) (21,160 )
Total $ (23,940 ) $ 13,290
$ (141,350 ) $ 36,870



	Employee Costs			Facility Closure and Other Costs			Total
	(dollars in thousands)
Balance at January 1, 2019	$	4,990		$	5,120		$	10,110
Payments and other⁽¹⁾	(3,810		)	$	(1,870	)	(5,680		)
Balance at September 30, 2019	$	1,180		$	3,250		$	4,430

⁽¹⁾Other consists primarily of changes in the liability balance due to foreign currency translation in addition to reversals of charges.

The $4.4 million restructuring liability at September 30, 2019 includes $2.4 million of accrued liabilities and $2.0 million of other long-term liabilities.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Leases

The Company leases certain facilities, automobiles and equipment under non-cancellable operating leases. Our leases have remaining lease terms of one year to twelve 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.

Most leases include one or more options to renew. The exercise of lease renewal options is typically at the Company’s sole discretion; therefore, the majority of renewals to extend the lease terms are not included in the Company’s ROU assets and lease liabilities as they are not reasonably certain of exercise. The Company regularly evaluates the renewal options and when they are reasonably certain of exercise, the Company includes the renewal period in the lease term. The Company combines lease and non-lease components which are accounted for as a single lease component as the Company has elected the practical expedient to group lease and non-lease components for all leases.

As most of the Company’s leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. The Company has a centrally managed treasury function; therefore, based on the applicable lease terms and the current economic environment, the Company applies a portfolio approach by reporting segment for determining the incremental borrowing rate.

Operating lease cost was $4.3 million and $13.3 million for the three and nine months ended September 30, 2019, respectively. Operating cash flows from operating leases were $4.6 million and $14.3 million for the three and nine months ended September 30, 2019, respectively. ROU assets obtained in exchange for operating lease obligations were $0.2 million and $15.0 million for the three and nine months ended September 30, 2019, respectively. The weighted average remaining term of these leases was approximately 6.7 years and the weighted average discount rate used to measure lease liabilities was approximately 8.7%.

In September 2019, the Company ceased use of its Troy, Michigan headquarters office lease. In conjunction with the lease abandonment, the Company accelerated the recognition of expense of its ROU asset and wrote it off, which resulted in a $4.3 million charge recorded in selling, general and administrative expense in the accompanying condensed consolidated statements of operations during the three and nine months endedSeptember 30, 2019.

Maturities of lease liabilities were as follows as of September 30, 2019:



Years ending December 31,	Operating Leases
	(dollars in thousands)
2019	$	4,990
2020	14,120
2021	13,180
2022	11,270
2023	9,000
2024 and thereafter	29,900
Total lease payments	82,460
Less imputed interest	(21,720		)
Present value of lease liabilities	$	60,740

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Minimum payments for operating leases having initial or remaining non-cancellable lease terms in excess of one year at December 31, 2018, under ASC 840, are summarized below. This historical information has been retrospectively adjusted to reflect the removal of discontinued operations. Discontinued operations are further discussed in Note 3, “Discontinued Operations”.



December 31,	Minimum Payments
	(dollars in thousands)
2019	$	12,380
2020	11,350
2021	10,120
2022	7,350
2023	4,350
Thereafter	12,480
Total	$	58,030

~~11.~~13. Contingencies

During the fourth quarter of 2018, the Company was notified by two OEM customers of potential claims related to product sold by Horizon Europe-Africa arising from potentially faulty components provided by a third party supplier. The claims resulted from the failure of products not functioning to specifications, but the claims do not allege any damage and only seek replacement of the product. During the first quarter of 2019, one of the claims resulted in a recall campaign, while the manner in which the other claim will be resolved was pending. The Company performed an assessment of the facts and circumstances for all asserted and unasserted claims and considered all factors including the Company’s recall insurance. Based on this assessment through March 31, 2019, the Company determined the probable range of the liability to be between $16.8 million and $20.0 million, with no amount within that range a better estimate than any other amount. As a result, the Company recorded a liability of $16.8 million and an asset of $11.1 million, which resulted in a $4.3 million charge during the first quarter of 2019.

On November 6, 2019, the Company reached a commercial settlement with an OEM customer that settles the exposure for certain claims related to the potentially faulty components for $5.5 million. Based on the facts and circumstances, the Company has determined that this settlement is a type I subsequent event which was recorded in its consolidated financial statements during the third quarter of 2019. As a result, the Company reduced its exposure related the claim by $4.3 million during the three months ended September 30, 2019.

As of September 30, 2019, the liability is $8.6 million due to ongoing replacement costs of potentially faulty components and is presented in “accrued liabilities” and the asset balance of $5.0 million is presented in “prepaid expenses and other current assets” in the accompanying September 30, 2019 condensed consolidated balance sheet. The asset recorded represents the amount the Company believes is probable of recovery and has appropriate legal basis for recovery in accordance with its recall insurance policy, which is further demonstrated by the recovery of $6.3 million of incurred costs related to the claim during the second and third quarter of 2019. The Company will continue its efforts to seek a reasonable commercial resolution, but we cannot give any assurances that the final resolution of the claims, if adverse to the Company, will not have a material adverse effect to its financial position, results of operations or cash flows.

14. Earnings (Loss) per Share

Basic loss per share is computed using net income (loss) attributable to Horizon Global and the number of weighted average shares outstanding. Diluted 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.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth the 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:



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
	(dollars in thousands, except share and per share data)
Numerator:
Net loss from continuing operations	$	(37,500	)	$	(37,110	)	$	(78,030	)	$	(167,590	)
Income from discontinued operations, net of tax	$	182,750		$	4,110		$	189,520		$	9,670
Less: Net loss attributable to noncontrolling interest	$	(260	)	$	(240	)	$	(840	)	$	(720	)
Net income (loss) attributable to Horizon Global	$	145,510		$	(32,760	)	$	112,330		$	(157,200	)
Denominator:
Weighted average shares outstanding, basic	25,329,492			25,101,847			25,267,310			25,028,072
Dilutive effect of stock-based awards	—			—			—			—
Weighted average shares outstanding, diluted	25,329,492			25,101,847			25,267,310			25,028,072

Basic income (loss) per share attributable to Horizon Global
Continuing Operations	$	(1.47	)	$	(1.47	)	$	(3.05	)	$	(6.67	)
Discontinued Operations	$	7.21		$	0.16		$	7.50		$	0.39
Total	$	5.74		$	(1.31	)	$	4.45		$	(6.28	)
Diluted income (loss) per share attributable to Horizon Global
Continuing Operations	$	(1.47	)	$	(1.47	)	$	(3.05	)	$	(6.67	)
Discontinued Operations	$	7.21		$	0.16		$	7.50		$	0.39
Total	$	5.74		$	(1.31	)	$	4.45		$	(6.28	)

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Due to losses from continuing operations for the three and nine months ended September 30, 2019 and 2018, the effect of certain dilutive securities were 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 is provided in the table below:



	Three months ended September 30,		Nine months ended September 30,
	2019	2018	2019	2018
Number of options	53,321	220,726	61,184	285,538
Exercise price of options	$9.20 - $11.29	$9.20 - $11.29	$9.20 - $11.29	$9.20 - $11.29
Restricted stock units	1,524,778	629,507	1,101,855	685,286
Convertible Notes	5,005,000	5,005,000	5,005,000	5,005,000
Convertible Notes warrants	5,005,000	5,005,000	5,005,000	5,005,000
Second Lien Term Loan warrants	6,545,479	—	3,671,607	—

For purposes of determining diluted income (loss) per share, the Company has elected a policy to assume that the principal portion of the Convertible Notes, as described in Note 9, “Long-term Debt,” is settled in cash and the conversion premium is settled in shares. Therefore, the Company has adopted a policy of calculating the diluted income (loss) per share effect of the Convertible Notes using the treasury stock method. As a result, the dilutive effect of the Convertible Notes is limited to the conversion premium, which is reflected in the calculation of diluted loss per share as if it were a freestanding written call option on the Company’s shares. Using the treasury stock method, the Warrants issued in connection with the issuance of the Convertible Notes are considered to be dilutive when they are in the money relative to the Company’s average common stock price during the period. The Convertible Note Hedges purchased in connection with the issuance of the Convertible Notes are always considered to be anti-dilutive and therefore do not impact the Company’s calculation of diluted income (loss) per share.

15. Equity Awards

Description of the Plan

Horizon employees and non-employee directors participate in the Horizon Global Corporation 2015 Equity and Incentive Compensation Plan (as amended and restated, the “Horizon 2015 Plan”). The Horizon 2015 Plan authorizes the Compensation Committee of the Horizon Board of Directors to grant stock options (including “incentive stock options” as defined in Section 422 of the U.S. Internal Revenue Code), restricted shares, restricted stock units, performance shares, performance stock units, cash incentive awards, and certain other awards based on or related to ~~the Company’s~~our common stock to Horizon employees and non-employee directors. No more than 4.4 million Horizon common shares may be delivered under the Horizon 2015 Plan.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options

The following table summarizes Horizon stock option activity from December 31, ~~2017~~2018 to September 30, ~~2018:~~2019:


	Number of Stock Options		Weighted Average Exercise Price		Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value		Number of Stock Options		Weighted Average Exercise Price		Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2017	338,349		$	10.38
Outstanding at December 31, 2018								92,967		$	10.40
Granted	—		—					—		—
Exercised	—		—					—		—
Canceled, forfeited	(225,676	)	10.37					(39,646	)	10.31
Expired	—		—					—		—
Outstanding at September 30, 2018	112,673		$	10.39	6.6	$	—
Outstanding at September 30, 2019								53,321		$	10.43	5.8	$	—

As of September 30, ~~2018,~~2019, the unrecognized compensation cost related to stock options is immaterial. For the three and nine months ended September 30, 2019 and 2018, the stock-based compensation expense recognized by the Company related to stock options was immaterial. ~~For the three and nine months ended September 30, 2017, the Company recognized approximately $0.1 million and $0.3 million of stock-based compensation expense related to stock options, respectively.~~ There was no aggregate intrinsic value of the outstanding options at September 30, ~~2018.~~2019. Stock-based compensation expense is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of ~~income (loss).~~

~~HORIZON GLOBAL CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

InDuring the first nine months of 2019, the Company granted an aggregate of 1,527,322 restricted stock units and performance stock units to certain key employees. The total grants consisted of: (i) 353,592 time-based restricted stock units that vest on May 15, 2020; (ii) 5,000 time-based restricted stock units that vest on May 15, 2021; (iii) 411,373 time-based restricted stock units that vest on March 19, 2022 and (iv) 757,357 market-based performance stock units that vest on March 19, 2022 (the “2019 PSUs”).

During 2018, the Company granted an aggregate of ~~466,763~~477,963 restricted stock units and performance stock units to certain key employees and non-employee directors. The total grants consisted of: (i) 5,680 time-based restricted stock units that vested on July 1, 2018; (ii) 43,799 time-based restricted stock units that vest ratably on (1) March 1, 2019, (2) March 1, 2020 and (3) March 1, 2021; (iii) 101,204 time-based restricted stock units that vest ratably on (1) March 1, 2019, (2) March 1, 2020, (3) March 1, 2021 and (4) March 1, 2022; (iv) 145,003 market-based performance stock units that vest on March 1, 2021 (the “2018 PSUs”); (v) 43,416 time-based restricted stock units that vest on March 1, 2021; (vi) 17,575 time-based restricted stock units that vest on May 8, 2019; (vii) 84,210 time-based restricted stock units that ~~vest~~vested on May 15, 2018; (viii) 11,404 time-based restricted stock units that vest on May 15, 2020; ~~and~~ (ix) 14,472 time-based restricted stock units that vest on August 1, ~~2020.~~

During 2017, the Company granted an aggregate of 185,423 restricted stock units and performance stock units to certain key employees and non-employee directors. The total grants consisted of: (i) 22,449 time-based restricted stock units that vest ratably on (1) March 1, 2018, (2) March 1, 2019 and (3) March 1, 2020; (ii) 50,416 time-based restricted stock units that vest ratably on (1) March 1, 2018, (2) March 1, 2019, (3) March 1, 2020 and (4) March 1, 2021; (iii) 72,865 market-based performance stock units that vest on March 1, 2020 (the “2017 PSUs”); (iv) 33,426(x) 8,400 time-based restricted stock units that vest on ~~July~~October 1, ~~2018,~~2020, and ~~(v) 6,267~~(xi) 2,800 time-based restricted stock units that vest on ~~July 1, 2019.~~December 3, 2020.

The performance criteria for the market-based performance stock units is based on the Company’s total shareholder return (“TSR”) relative to the TSR of the common stock of a pre-defined industry peer group. For the 2019 PSUs, TSR is measured over a period beginning January 1, 2019 and ending December 31, 2021. For the 2018 PSUs, TSR is measured over a period beginning January 1, 2018 and ending December 31, 2020. ~~For the 2017 PSUs, TSR is measured over a period beginning January 1, 2017 and ending December 31, 2019.~~ TSR is calculated as the Company’s average closing stock price for the 20-trading days at the end of the performance period plus Company dividends, divided by the Company’s average closing stock price for the 20-trading days prior to the start of the performance period. Depending on the performance achieved, the amount of shares earned can vary from 0% of the target award to a maximum of 200% of the target award. The Company estimated the grant-date fair value of the awards subject to a market condition using a Monte Carlo simulation model, using the following weighted-average assumptions: risk-free interest rate of ~~2.34%~~2.43% and ~~1.52%~~2.34% for the ~~2018~~2019 PSUs and ~~2017~~2018 PSUs, respectively, and annualized volatility of ~~37.4%~~84.1% and ~~38.5%~~37.4% for the ~~2018~~2019 PSUs and ~~2017~~2018 PSUs, respectively. Due to the lack of adequate stock price history of Horizon common stock during 2018, the ~~expected~~ volatility iswas based on the ~~historical volatility of the common stock~~median of the peer group. In 2019, the Company had sufficient historical data that was used to calculate the volatility. The grant date fair value of the ~~performance~~performance stock units ~~were~~were $3.69 and $7.08 ~~and~~ ~~$18.41~~ for the 2019 PSUs and 2018 PSUs, ~~and 2017 PSUs,~~ respectively.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The grant date fair value of restricted ~~shares~~stock units is expensed over the vesting period. Restricted ~~share~~stock unit fair values are based on the closing trading price of the Company’s common stock on the date of grant. Changes in the number of restricted shares outstanding for the period ended September 30, ~~2018~~2019 were as follows:

As of September 30, ~~2018~~2019, there was ~~$2.4~~$4.1 million in unrecognized compensation costs related to unvested restricted ~~shares~~stock units that is expected to be recognized over a weighted-average period of 2.0 years.

The Company recognized approximately ~~$0.1~~$0.9 million and ~~$1.5~~$1.8 million of stock-based compensation expense related to restricted shares during the three and nine months ended September 30, ~~2018,~~2019, respectively, and approximately ~~$0.9~~$0.1 million and ~~$2.5~~$1.5 million during the three and nine months ended September 30, ~~2017, respectively.~~2018. Stock-based compensation expense is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of ~~income (loss).~~

operations.

~~HORIZON GLOBAL CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

~~12. Earnings per Share~~

On February 1, 2017, the Company completed an underwritten public offering of 4.6 million shares of common stock, which includes the exercise in full by the underwriters of their option to purchase 0.6 million shares of common stock, at a public offering price of $18.50 per share (the “Common Stock Offering”). Proceeds from the Common Stock Offering were approximately $79.9 million, net of underwriting discounts, commissions, and offering-related transaction costs.

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. Due to net losses for the three and nine months ended September 30, 2018, the effect of potentially dilutive securities had an anti-dilutive effect and therefore were excluded from the computation of diluted loss per share.

The following table sets forth the reconciliation of the numerator and the denominator of basic earnings per share attributable to Horizon Global and diluted earnings (loss) per share attributable to Horizon Global for the three and nine months ended September 30, 2018 and 2017:

Three months ended
September 30, Nine months ended
September 30,
2018 2017 2018 2017
(dollars in thousands, except for per share amounts)
Numerator:
Net income (loss) attributable to Horizon Global $ (32,760 ) $ 6,890
$ (157,200 ) $ 17,290
Denominator:
Weighted average shares outstanding, basic 25,101,847
24,948,410
25,028,072
24,728,643
Dilutive effect of stock-based awards —
430,842
—
426,157
Weighted average shares outstanding, diluted 25,101,847
25,379,252
25,028,072
25,154,800

Basic earnings (loss) per share attributable to Horizon Global $ (1.31 ) $ 0.28
$ (6.28 ) $ 0.70
Diluted earnings (loss) per share attributable to Horizon Global $ (1.31 ) $ 0.27
$ (6.28 ) $ 0.69

The effect of certain common stock equivalents were excluded from the computation of weighted average diluted shares outstanding for the three and nine months ended September 30, 2018 and 2017, as inclusion would have resulted in anti-dilution. A summary of these anti-dilutive common stock equivalents is provided in the table below:

Three months ended
September 30, Nine months ended
September 30,
2018 2017 2018 2017
Number of options 220,726
—
285,538
—
Exercise price of options $9.20 - $11.29
—
$9.20 - $11.29
—
Restricted stock units 629,507
—
685,286
57,118
Convertible Notes 5,005,000
5,005,000
5,005,000
4,418,333
Warrants 5,005,000
5,005,000
5,005,000
4,418,333

~~For purposes of determining diluted earnings per share, the Company has elected a policy to assume that the principal portion of the Convertible Notes, as described in Note 8, “Long-term Debt~~,” is settled in cash and the conversion premium is settled in shares. Therefore, the Company has adopted a policy of calculating the diluted earnings per share effect of the Convertible Notes using the treasury stock method. As a result, the dilutive effect of the Convertible Notes is limited to the conversion premium, which is

~~HORIZON GLOBAL CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

reflected in the calculation of diluted earnings per share as if it were a freestanding written call option on the Company’s shares. Using the treasury stock method, the Warrants issued in connection with the issuance of the Convertible Notes are considered to be dilutive when they are in the money relative to the Company’s average common stock price during the period. The Convertible Note Hedges purchased in connection with the issuance of the Convertible Notes are always considered to be anti-dilutive and therefore do not impact the Company’s calculation of diluted earnings (loss) per share.

~~13.~~16. Shareholders’ Equity

The Company is authorized to issue 100,000,000 shares of preferred stock, par value of $0.01 per share. There were no preferred shares outstanding at September 30, ~~2018~~2019 or December 31, ~~2017.~~2018.

The Company is authorized to issue 400,000,000 shares of common stock, par value of $0.01 per share. At September 30, ~~2018,~~2019, there were ~~25,798,745~~26,073,894 shares of common stock issued and ~~25,112,239~~25,387,388 shares of common stock outstanding. At December 31, ~~2017,~~2018, there were ~~25,625,571~~25,866,747 shares of common stock issued and ~~24,939,065~~25,180,241 shares of common stock outstanding.

~~Share Repurchase Program~~Common Stock Warrants

In ~~April 2017,~~connection with the ~~Board~~Second Lien Term Loan the Company entered into in March 2019, the Company became obligated to issue 6.25 million detachable warrants to purchase common stock of ~~Directors authorized~~the Company, which can be exercised on a ~~share repurchase program~~cashless basis over a five year term with an exercise price of ~~up to 1.5 million~~$1.50 per share.

The Company also issued 90,667 shares of Series A Preferred Stock in March 2019 in connection with the ~~Company’s issued~~Second Lien Term Loan that were convertible into additional warrants upon receipt of shareholder approval of the issuance of such additional warrants and ~~outstanding~~the shares of common stock ~~during the period beginning on May 5, 2017 and ending May 5, 2020 (the “Share Repurchase Program”).~~issuable upon exercise thereof. The ~~Share Repurchase Program provides for share purchases~~Series A Preferred Stock was presented as Temporary equity in the ~~open market or otherwise, depending~~March 31, 2019 condensed consolidated balance sheet. Upon receipt of such shareholder approval on ~~share price, market conditions and other factors, as determined by~~June 25, 2019, the ~~Company. In addition, the Company’s ABL Loan Agreement and Term B Loan place certain limitations on the Company’s ability to repurchase its common stock.~~90,667 shares of Series A Preferred Stock were converted into 2,952,248 warrants. See Note 9, “Long-term Debt,” for additional information. As of September 30, ~~2018, cumulative~~2019, warrants to purchase 6,487,674 shares ~~purchased totaled 686,506 at an average purchase price per share~~ of ~~$14.55, excluding commissions. The repurchased shares are presented as treasury~~common stock ~~at cost, on the condensed consolidated balance sheets.~~were issued and remain outstanding.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accumulated Other Comprehensive Income (“AOCI”)

Changes in AOCI by component, net of tax, for the nine months ended September 30, ~~2018~~2019 are summarized as follows:

Derivative Instruments Foreign Currency Translation Total
(dollars in thousands)
Balance at December 31, 2017 $ (310 ) $ 10,880
$ 10,570
Net unrealized gains (losses) arising during the period ^(a)
6,850
(4,330 ) 2,520
Less: Net realized losses reclassified to net loss ^(b)
3,890
—
3,890
Net current-period change 2,960
(4,330 ) (1,370 )
Balance at September 30, 2018 $ 2,650
$ 6,550
$ 9,200



	Derivative Instruments			Foreign Currency Translation			Total
	(dollars in thousands)
Balance at January 1, 2019	$	1,960		$	5,800		$	7,760
Net unrealized gains arising during the period	730			(30		)	700
Less: Net realized gains reclassified to net loss	2,450			—			2,450
Amounts reclassified from AOCI	(20		)	(17,240		)	(17,260		)
Net current-period change	(1,740		)	(17,270		)	(19,010		)
Balance at September 30, 2019	$	220		$	(11,470	)	$	(11,250	)

Changes in AOCI by component, net of tax, for the nine months ended September 30, 2018 are summarized as follows:



	Derivative Instruments			Foreign Currency Translation			Total
	(dollars in thousands)
Balance at January 1, 2018	$	(310	)	$	10,880		$	10,570
Net unrealized gains (losses) arising during the period ^(a)	6,850			(4,330		)	2,520
Less: Net realized losses reclassified to net loss ^(b)	3,890			—			3,890
Net current-period change	2,960			(4,330		)	(1,370		)
Balance at September 30, 2018	$	2,650		$	6,550		$	9,200

__________________________

^(a)Derivative instruments, net of income tax expense of $(1.3) million. See Note 9,10, “Derivative Instruments,” for further details.

^(b)Derivative instruments, net of income tax ~~benefit~~expense of $0.9 million. See Note 9,10, “Derivative Instruments,” for further details.

17. Segment Information

The Company groups its business into operating segments 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 and South American operations. Horizon Europe-Africa is comprised of the European and South African operations. See below for further information regarding the types of products and services provided within each operating segment.

Previously, the Company had three reportable segments. However, as a result of its sale in the third quarter of 2019, we have removed APAC as a separate operating segment and its results are presented as a discontinued operation in the accompanying condensed consolidated financial statements. Historical information has been retrospectively adjusted to reflect these changes. Please see Note 3, “Discontinued Operations,” for additional information.

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 OEMs, OESs, aftermarket and retail customers in the agricultural, automotive, construction, industrial, marine, military, recreational vehicle, trailer and utility end markets. Products include brake controllers, cargo management, heavy-duty towing products, jacks and couplers, protection/securing systems, trailer structural and electrical components, tow bars, vehicle roof racks, vehicle trailer hitches and additional accessories.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~(unaudited)~~

~~Changes~~Horizon Europe‑Africa - With a product offering similar to Horizon Americas, Horizon Europe-Africa focuses its sales and manufacturing efforts in ~~AOCI by component, net~~the Europe and Africa regions of ~~tax, for~~ the ~~nine months ended September 30, 2017 are summarized as follows:~~world.

The following table presents the Company’s operating segment activity:

Derivative Instruments Foreign Currency Translation Total
(dollars in thousands)
Balance at December 31, 2016 $ (930 ) $ (7,410 ) $ (8,340 )
Net unrealized gains (losses) arising during the period ^(a)
(7,950 ) 15,500
7,550
Less: Net realized losses reclassified to net loss ^(b)
(8,120 ) —
(8,120 )
Net current-period change 170
15,500
15,670
Balance at September 30, 2017 $ (760 ) $ 8,090
$ 7,330

~~__________________________~~

^(a)~~Derivative instruments, net of income tax benefit of $5.2 million. See Note 9, “Derivative Instruments,” for further details.~~

^(b)~~Derivative instruments, net of income tax benefit of $4.8 million. See Note 9, “Derivative Instruments,” for further details.~~



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
	(dollars in thousands)
Net Sales
Horizon Americas	$	96,220		$	115,510		$	300,670		$	319,820
Horizon Europe-Africa	81,630			78,520			247,500			256,430
Total	$	177,850		$	194,030		$	548,170		$	576,250
Operating Profit (Loss)
Horizon Americas	$	(2,230	)	$	7,270		$	5,760		$	4,730
Horizon Europe-Africa	1,730			(31,370		)	120			(132,150		)
Corporate	(12,260		)	(5,800		)	(29,360		)	(28,950		)
Total	$	(12,760	)	$	(29,900	)	$	(23,480	)	$	(156,370	)

~~14.~~18. 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, available tax planning strategies and estimated domestic tax impacts attributable to the 2017 Tax Cuts and Jobs Act (the “Tax Act”).

The ~~estimate used~~effective income tax rate from continuing operations was 2.6% and 2.9% for the three and nine months ended September 30, 2019, respectively. The difference between the effective tax rate and the U.S. statutory tax rate of 21% primarily relates to the valuation allowance recorded in ~~providing~~the U.S. and several foreign jurisdictions, which results in no income tax benefit recognized for jurisdictional pretax losses. For the three and nine months ended September 30, 2018, the effective income ~~taxes~~tax rates were 3.7% and 8.6%, respectively.

As a result of the Company’s sale of APAC, the Company recorded $30.3 million tax expense, which is presented in income from discontinued operations, net of tax, in the accompanying condensed consolidated statements of operations for three and nine month ended September 30, 2019. During the third quarter of 2019, the Company recognized the benefit of a worthless stock deduction for one of its German subsidiaries. A tax benefit was recorded to fully offset the $30.3 million expense recognized on ~~a year-to-date basis may change~~sale, which is presented in ~~subsequent interim periods.~~income from discontinued operations, net of tax, in the accompanying condensed consolidated statements of operations for three and nine month ended September 30, 2019. The Company ~~has experienced overall pre-tax losses. In light~~believes that it is more likely than not that the Company will realize the income tax benefit of this worthless stock deduction in 2019, to the ~~losses,~~extent of tax expense associated with the Company’s sale of APAC.

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 against deferred tax assets in the U.S. and applicable foreign countries 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, tax planning strategies and projected future impacts attributable to the Tax Act. If, based upon the weight of available evidence,

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

it is more likely than not the deferred tax assets will not be realized, a valuation allowance is recorded. As of September 30, ~~2018,~~2019, the Company believes that it is more likely than not that the recorded deferred tax assets will be realized. The Company has recently experienced pre-tax losses. If the Company continues to experience losses, management may determine a valuation allowance against ~~the~~certain of its deferred tax assets is ~~necessary, which would result in significant tax expense in the period recognized, as well as subsequent periods.~~necessary.

HORIZON GLOBAL CORPORATION

The effective income tax rate was 0.3% and 7.3% for the three and nine months ended September 30, 2018, respectively. For the three and nine months ended September 30, 2017, the effective income tax rates were (1.9)% and (25.7)%, respectively. The higher effective income tax rate in 2018 is driven by a decrease in tax benefits related to the release of certain unrecognized tax positions and the impairment of goodwill related to the Horizon Europe-Africa segment which does not result in the recognition of a tax benefit.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. Other Expense, Net

Other ~~Matters~~

The 2017 Tax Act was enacted on December 22, 2017. The 2017 Tax Act reduces the U.S. federal corporate income tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. The Company is applying the guidance in SEC Staff Accounting Bulletin No. 118 when accounting for the enactment-date effectsexpense, net consists of the ~~2017 Tax Act.~~following components:

At September 30, 2018, the Company has not completed its accounting for all of the tax effects of the 2017 Tax Act nor has the Company recognized any significant adjustments to the provisional amounts recorded at December 31, 2017. In all cases, the Company will continue to make and refine its calculations, primarily regarding the Transition Tax, as additional analysis is completed. Horizon’s estimates may also be affected as it gains a more thorough understanding of the tax law. These changes could be material to income tax expense.



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
	(dollars in thousands)
Loss on sale of business	$	—		$	—		$	(3,630	)	$	—
Foreign currency gain / (loss)	(1,180		)	(530		)	(1,800		)	(1,070		)
Customer pay discounts	(300		)	(610		)	(1,220		)	(1,400		)
Accretion arising from lease recovery	(30		)	(50		)	(100		)	(200		)
Brazil acquisition indemnification asset	—			(290		)	—			(1,410		)
Brink acquisition ticking fee	—			—			—			(5,130		)
Other	(130		)	440			140			1,800
Total	$	(1,640	)	$	(1,040	)	$	(6,610	)	$	(7,410	)

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 report. 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, as well as our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 (See Item 1A. Risk Factors).

Overview

~~We are~~Horizon Global Corporation (“Horizon,” “Horizon Global,” “we,” or the “Company”) is a leading designer, manufacturer and distributor of a wide variety of high-quality, custom-engineered towing, trailering, cargo management and other related accessory products on a global basis, primarily serving the automotive aftermarket, retail and OEoriginal equipment manufacturers (“OEMs”) and original equipment servicers (“OESs”) (collectively, “OEs”) channels. The Company supports its customers within the agricultural, automotive, construction, horse/livestock, industrial, marine, military, recreational, trailer and utility markets primarily through a regional service model.

~~Our~~Horizon Global reports its business ~~is comprised of three reportable~~in two operating segments: Horizon Americas ~~Horizon Europe-Africa,~~ and Horizon ~~Asia-Pacific. Horizon Americas has operations~~Europe-Africa. See Note 17, “Segment Information,” included in North and South America, and we believe has been a leader in towing and trailering-related products sold through retail, aftermarket, OE, e-commerce and industrial channels. Horizon Europe-Africa and Horizon Asia-Pacific focus their sales and manufacturing efforts outside of North and South America. Horizon Europe-Africa operates primarily in Germany, France, the United Kingdom, Romania, and South Africa, while Horizon Asia-Pacific operates primarily in Australia, Thailand, and New Zealand. We believe Horizon Europe-Africa and Horizon Asia-Pacific have been leaders in towing related products sold through the OE and aftermarket channels in their regions.

~~Our products are used in two primary categories across the world: commercial applications, or “Work”~~Part I, Item 1, “Notes to Condensed Consolidated Financial Statements, ~~and recreational activities, or “Play”. Some~~” within this quarterly report on Form 10-Q for further description of the markets in our Work category include agricultural, automotive, construction, fleet, industrial, marine, military, mining and municipalities. Some of the markets in our Play category include equestrian, power sports, recreational vehicle, specialty automotive, truck accessory and other specialty towing applications.

~~Key Factors and Risks Affecting Our Reported Results.~~ Our products are sold into a diverse set of end-markets; the primary applications relate to automotive accessories for light and recreational vehicles. Purchases of automotive accessory parts are discretionary and we believe demand is driven by macro-economic factors including (i) employment trends, (ii) consumer sentiment and (iii) fuel prices, among others. We believe all of these metrics impact both our Work- and Play-related sales. In addition, we believe the Play-related sales are more sensitive to changes in these indices, given the Play-related sales tend to be more directly related to disposable income levels. In general, recent decreases in unemployment and fuel prices, coupled with increases in consumer sentiment, are positive trends for our businesses.Company’s operating segments.

Critical factors affecting our ability to succeed include: ~~our~~

Our ability to realize the expected economic benefits of ~~structural realignment of~~the changes made to our manufacturing ~~facilities~~ and ~~business units; our~~distribution footprint and management team during 2018 and 2019

Our ability to quickly and cost-effectively introduce new ~~products; our~~products

Our ability to ~~acquire and~~continue to integrate acquired companies or products that ~~supplement~~have historically supplemented existing product lines, add new distribution channels and expand our geographic ~~coverage; our~~coverage and realize desired operating efficiencies

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Our ability to manage our cost structure more efficiently via supply base management, internal sourcing and/or purchasing of materials, selective outsourcing and/or purchasing of support functions, working capital management, and leverage of our administrative functions.

If we are unable to do any of the foregoing successfully, our financial condition and results of operations could be materially and adversely impacted.

We experience some seasonality in our business. Sales of towing and trailering products in the northern hemisphere, where we generate the majority of our sales, are generally stronger in the second and third calendar quarters, as trailer OEs, distributors and retailers acquire product for the spring and summer selling seasons. Our growing businesses in the southern hemisphere are stronger in the first and fourth calendar quarters. We do not consider order backlog to be a material factor in our businesses.

We are sensitive to price movements in our raw materials supply base. Our largest material purchases are for steel, copper, and aluminum. We also consume a significant amount of energy via utilities in our facilities. Historically, when we have experienced increasing costs of steel, we have successfully worked with our suppliers to manage cost pressures and disruptions in supply. Price increases used to offset inflation or a disruption of supply in core materials have generally been successful, although sometimes delayed. Increases in price for these purposes represent a risk in execution.

We report shipping and handling expenses associated with ~~our~~ Horizon ~~Americas reportable segment’s~~Americas’ distribution network as an element of selling, general and administrative expenses in our ~~condensed~~ consolidated statements of ~~income (loss).~~operations. As such, gross margins for ~~the~~ Horizon Americas ~~reportable segment~~ may not be comparable to those of ~~our~~ Horizon Europe-Africa, ~~and Horizon Asia-Pacific segments,~~ which primarily rely on third-party distributors, for which all costs are included in cost of sales.

~~Goodwill impairment~~

We assess goodwill and indefinite-lived intangible assets for impairment at the reporting unit level on an annual basis as of October 1, after the annual forecasting process is complete. More frequent evaluations may be required if we experience changes in our business climate or as a result of other triggering events that take place. If the carrying value exceeds fair value, the asset is considered impaired and is reduced to fair value.

In the fourth quarter of 2017, we experienced a significant decline in our market capitalization. Further, the Horizon Europe-Africa reporting unit did not perform in-line with expectations during the fourth quarter, driven by a delayed closure and additional costs incurred relating to closing facilities in the United Kingdom and Sweden, delayed realization of price increases and inefficiencies transferring production to lower cost manufacturing sites. Because of the decline in market capitalization and fourth quarter results, we identified an indicator of impairment in the fourth quarter. As a result, we performed an interim quantitative assessment as of December 31, 2017, utilizing a combination of the income and market approaches, which were weighted evenly. The results of the quantitative analysis performed indicated the fair value of the reporting unit exceeded the carrying value by approximately 1.0%. Key assumptions used in the analysis were a discount rate of 13.0%, a terminal growth rate of 2.5% and EBITDA margin.

During the first quarter of 2018, the Company continued to experience a decline in market capitalization. Additionally, the Europe-Africa reporting unit did not perform in-line with forecasted results driven by a shift in volume to lower margin programs as well as increased commodity costs, which negatively impacted margins. As a result, an indicator of impairment was identified during the first quarter of 2018. The Company performed an interim quantitative assessment as of March 31, 2018, utilizing a combination of the income and market approaches, which were weighted evenly. The results of the quantitative analysis performed indicated the carrying value of the reporting unit exceeded the fair value of the reporting unit by $43.4 million and, accordingly, an impairment was recorded. Key assumptions used in the analysis were a discount rate of 13.5%, a terminal growth rate of 2.5% and EBITDA margin. The primary factors leading to the decline in value from the analysis performed at December 31, 2017 were a reduction in expected future cash flows, in part due to the Company re-evaluating its forecasted results and an increase in the discount rate, which is based on the segment’s weighted average cost of capital (“WACC”). Additionally, there was a decline in the value of the market approach due to a decrease in the market multiple used based on a decline seen with selected guideline companies. The decline in expected future cash flows resulted from a reduction of forecasted volumes on a significant OE program. While we have made up the lost volume, this has resulted in a reduced margin. Further, the business continued to be negatively impacted by rising input costs with a delayed ability to recover through price increases as well as inefficiencies with transferring production to lower cost facilities.

During the second quarter of 2018, the Company’s market capitalization decreased by approximately 27.7%. Additionally, the Europe-Africa reporting unit did not perform in-line with forecasted results driven by a shift in volume to lower margin channels, continued increase in commodity costs and the failure to realize benefits from certain margin improvement initiatives. As a result, an indicator of impairment was identified during the second quarter of 2018. The Company performed an interim quantitative assessment as of June 30, 2018, utilizing a combination of the income and market approaches. The income approach was weighted 75%, while the market approach was weighted 25%. The results of the quantitative analysis performed indicated the carrying value of the reporting unit exceeded the fair value of the reporting unit by $54.6 million and, accordingly, an impairment was recorded. Key assumptions used in the analysis were a discount rate of 14.0%, a terminal growth rate of 2.5% and EBITDA margin. The primary factors leading to the decline in value from the analysis performed at March 31, 2018 were a reduction in expected future cash flows, in part due to the Company re-evaluating its forecasted results and an increase in the discount rate, which is based on the segment’s WACC. Additionally, there was a decline in the value of the market approach due to a decrease in the market multiple used based on a decline seen with selected guideline companies. The decline in expected future cash flows resulted from a reduction in forecasted revenues, particularly in the higher margin aftermarket channel. Further, the business continued to be negatively impacted by rising commodity costs with a delayed ability to recover through price increases and the benefits of transferring production to lower cost facilities have not been realized. It is expected that additional restructuring expenses will be incurred in the near-term to generate the margins expected from this business.

Based on the results of the quantitative test, we performed sensitivity analysis around the key assumptions used in the analysis, the results of which were: a) a 100 basis point decline in EBITDA margin used to determine expected future cash flows would have resulted in an additional impairment of approximately $24.0 million and b) a 50 basis point increase in the discount rate would have resulted in an additional impairment of approximately $7.0 million.

During the third quarter of 2018, the Europe-Africa reporting unit continued to underperform in relation to forecasted results. The primary factors were the continued pressure from increased commodity costs, as well as production inefficiencies and higher supply chain costs related to our European production realignment. A new management team was put in place in the region early in the third quarter, and as a result of their review of the business the Company re-evaluated the forecasted results for the reporting unit which resulted in a reduction in the expected future cash flows. As a result, an indicator of impairment was identified during the third quarter of 2018 and an interim impairment assessment was performed as of August 31, 2018, using a combination of the income and market approaches. The results of the quantitative analysis performed indicated the carrying value of the reporting unit exceeded the fair value of the reporting unit and, accordingly, an impairment of $26.6 million was recorded, which represented the remaining balance of goodwill in the reporting unit. Key assumptions used in the analysis were a discount rate of 13.5%, a terminal growth rate of 2.5% and EBITDA margin.

~~Indefinite-lived intangible asset impairment test~~

Due to the impairment indicators noted above, we performed an interim impairment assessment for indefinite-lived intangible assets within the Horizon Europe-Africa reportable segment, for which the gross carrying amounts totaled approximately $12.1 million as of June 30, 2018. Based on the results of the Company’s analyses, it was determined that the carrying values of the Westfalia and Terwa trade names exceeded their fair values by $1.1 million and, accordingly, an impairment was recorded. Key assumptions used in the analysis were discount rates of 15.0% and royalty rates ranging from 0.5% to 1.0%.

The Company performed an interim impairment assessment for indefinite-lived intangible assets within the Europe-Africa reportable segment as of August 31, 2018, for which the gross carrying amounts totaled approximately $10.9 million as of September 30, 2018. Based on the results of the Company’s analyses, carrying value of the reporting unit approximated fair value. Key assumptions used in the analysis were discount rates of 14.5%, and royalty rates ranging from 0.5% to 1.0%. Based on the results of the quantitative test, we performed sensitivity analysis around the key assumptions used in the analysis, the results of which were: a) a 50 basis point increase in the discount rate used during our testing would not have resulted in any impairment and b) a 25 basis point decrease in the royalty rates used during our testing would have resulted in an impairment of approximately $5.0 million to our trade names.

Segment Information and Supplemental Analysis

Previously, the Company had three reportable segments. However, as a result of the divestiture of Horizon Asia-Pacific (“APAC”) in the third quarter of 2019, we have removed APAC as a separate operating segment and its results are presented as a discontinued operation. Historical information has been retrospectively adjusted to reflect these changes. Please see Note 3, “Discontinued Operations,” and Note 17, “Segment Information” for additional information.

The following table summarizes financial information for our ~~reportable~~operating segments for the three months ended September 30, 2019 (“3Q19”) and 2018 ~~and~~ ~~2017~~(“3Q18”):



	Three months ended September 30,										Change					Constant Currency Change
	2019			As a Percentage of Net Sales		2018			As a Percentage of Net Sales		$			%		$			%
	(dollars in thousands)
Net Sales
Horizon Americas	$	96,220		54.1	%	$	115,510		59.5	%	$	(19,290	)	(16.7	%)	$	(19,280	)	(16.7	%)
Horizon Europe-Africa	81,630			45.9	%	78,520			40.5	%	3,110			4.0	%	6,990			8.9	%
Total	$	177,850		100.0	%	$	194,030		100.0	%	$	(16,180	)	(8.3	%)	$	(12,290	)	(6.3	%)
Gross Profit
Horizon Americas	$	17,270		17.9	%	$	27,780		24.0	%	$	(10,510	)	(37.8	%)	$	(10,460	)	(37.7	%)
Horizon Europe-Africa	11,020			13.5	%	6,750			8.6	%	4,270			63.3	%	4,800			71.1	%
Total	$	28,290		15.9	%	$	34,530		17.8	%	$	(6,240	)	(18.1	%)	$	(5,660	)	(16.4	%)
Selling, General and Administrative Expenses
Horizon Americas	$	19,500		20.3	%	$	20,460		17.7	%	$	(960	)	(4.7	%)	$	(940	)	(4.6	%)
Horizon Europe-Africa	9,330			11.4	%	11,370			14.5	%	(2,040		)	(17.9	%)	(1,600		)	(14.1	%)
Corporate	12,270			6.9	%	5,850			3.0	%	6,420			109.7	%	N/A			N/A
Total	$	41,100		23.1	%	$	37,680		19.4	%	$	3,420		9.1	%	$	(2,540	)	15.8	%
Operating Profit (Loss)
Horizon Americas	$	(2,230	)	(2.3	)%	$	7,270		6.3	%	$	(9,500	)	(130.7	%)	$	(9,480	)	(130.4	%)
Horizon Europe-Africa	1,730			2.1	%	(31,370		)	(40.0	)%	33,100			(105.5	%)	33,200			(105.8	%)
Corporate	(12,260		)	(6.9	)%	(5,800		)	(3.0	)%	(6,460		)	111.4	%	N/A			N/A
Total	$	(12,760	)	(7.2	)%	$	(29,900	)	(15.4	)%	$	17,140		(57.3	%)	$	23,720		22.0	%

⁽¹⁾Corporate calculated as a percentage of total net sales.

Three months ended September 30,
2018
As a Percentage
of Net Sales
2017
As a Percentage
of Net Sales
(dollars in thousands)
Net Sales
Horizon Americas $ 115,510
50.7 % $ 115,460
48.1 %
Horizon Europe-Africa 78,520
34.5 % 87,950
36.6 %
Horizon Asia-Pacific 33,810
14.8 % 36,710
15.3 %
Total $ 227,840
100.0 % $ 240,120
100.0 %
Gross Profit
Horizon Americas $ 27,780
24.0 % $ 34,230
29.6 %
Horizon Europe-Africa 6,750
8.6 % 14,370
16.3 %
Horizon Asia-Pacific 9,090
26.9 % 9,820
26.8 %
Total $ 43,620
19.1 % $ 58,420
24.3 %
Selling, General and Administrative Expenses
Horizon Americas $ 20,470
17.7 % $ 23,420
20.3 %
Horizon Europe-Africa 11,470
14.6 % 11,720
13.3 %
Horizon Asia-Pacific 3,160
9.3 % 3,910
10.7 %
Corporate 5,820
N/A
6,080
N/A
Total $ 40,920
18.0 % $ 45,130
18.8 %
Operating Profit (Loss)
Horizon Americas $ 7,270
6.3 % $ 10,930
9.5 %
Horizon Europe-Africa (31,370 ) (40.0 )% 2,680
3.0 %
Horizon Asia-Pacific 5,960
17.6 % 5,880
16.0 %
Corporate (5,800 ) N/A
(6,200 ) N/A
Total $ (23,940 ) (10.5 )% $ 13,290
5.5 %
Depreciation and Amortization
Horizon Americas $ 2,080
1.8 % $ 2,630
2.3 %
Horizon Europe-Africa 2,920
3.7 % 2,520
2.9 %
Horizon Asia-Pacific 1,240
3.7 % 1,250
3.4 %
Corporate 90
N/A
70
N/A
Total $ 6,330
2.8 % $ 6,470
2.7 %

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 income (loss) to measure stand alone segment performance.

Adjusted EBITDA is defined as net income 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, impairment of goodwill and other intangibles, non-cash stock compensation, certain product liability recall and litigation claims, acquisition and integration costs, gains (losses) on business divestitures and other assets, board transition support and non-cash unrealized remeasurement costs.

The following table summarizes ~~financial information~~Adjusted EBITDA for our ~~reportable~~operating segments for ~~the nine months ended September 30, 2018 and 2017:~~3Q19:

Nine months ended September 30,
2018 As a Percentage
of Net Sales 2017 As a Percentage
of Net Sales
(dollars in thousands)
Net Sales
Horizon Americas $ 319,810
47.2 % $ 351,400
50.4 %
Horizon Europe-Africa 256,420
37.8 % 253,070
36.3 %
Horizon Asia-Pacific 101,760
15.0 % 92,520
13.3 %
Total $ 677,990
100.0 % $ 696,990
100.0 %
Gross Profit
Horizon Americas $ 73,750
23.1 % $ 105,780
30.1 %
Horizon Europe-Africa 30,380
11.8 % 42,070
16.6 %
Horizon Asia-Pacific 25,510
25.1 % 23,630
25.5 %
Total $ 129,640
19.1 % $ 171,480
24.6 %
Selling, General and Administrative Expenses
Horizon Americas $ 68,970
21.6 % $ 67,050
19.1 %
Horizon Europe-Africa 36,760
14.3 % 36,120
14.3 %
Horizon Asia-Pacific 10,520
10.3 % 10,390
11.2 %
Corporate 28,970
N/A
21,050
N/A
Total $ 145,220
21.4 % $ 134,610
19.3 %
Operating Profit (Loss)
Horizon Americas $ 4,730
1.5 % $ 38,840
11.1 %
Horizon Europe-Africa (132,150 ) (51.5 )% 5,950
2.4 %
Horizon Asia-Pacific 15,020
14.8 % 13,240
14.3 %
Corporate (28,950 ) N/A
(21,160 ) N/A
Total $ (141,350 ) (20.8 )% $ 36,870
5.3 %
Depreciation and Amortization
Horizon Americas $ 6,280
2.0 % $ 8,020
2.3 %
Horizon Europe-Africa 8,520
3.3 % 6,570
2.6 %
Horizon Asia-Pacific 3,650
3.6 % 3,150
3.4 %
Corporate 260
N/A
200
N/A
Total $ 18,710
2.8 % $ 17,940
2.6 %



	Three months ended September 30, 2019
	Horizon Americas			Horizon Europe-Africa			Corporate			Consolidated
	(dollars in thousands)
Net income attributable to Horizon Global										$	145,510
Net loss attributable to noncontrolling interest										(260		)
Net income										145,250
Interest expense										24,120
Income tax benefit										(1,020		)
Depreciation and amortization										6,250
EBITDA	(940		)	1,380			174,160			174,600
Net loss attributable to noncontrolling interest	—			260			—			260
Income from discontinued operations, net of tax	—			—			(182,750		)	(182,750		)
Severance	—			—			1,620			1,620
Restructuring, relocation and related business disruption costs	(200		)	—			4,250			4,050
Non-cash stock compensation	—			—			850			850
(Gain) loss on business divestitures and other assets	320			—			(1,320		)	(1,000		)
Product liability and litigation claims	820			(4,270		)	—			(3,450		)
Debt issuance costs	—			—			530			530
Unrealized remeasurement costs	240			650			300			1,190
Other (income) expense, net	310			2,720			(1,980		)	1,050
Adjusted EBITDA	$	550		$	740		$	(4,340	)	$	(3,050	)

The following table summarizes Adjusted EBITDA for our operating segments for 3Q18:



	Three months ended September 30, 2018
	Horizon Americas		Horizon Europe-Africa			Corporate			Consolidated
	(dollars in thousands)
Net loss attributable to Horizon Global									$	(32,760	)
Net loss attributable to noncontrolling interest									(240		)
Net loss									(33,000		)
Interest expense									7,590
Income tax benefit									(1,420		)
Depreciation and amortization									5,090
EBITDA	8,030		(31,560		)	1,790			(21,740		)
Net loss attributable to noncontrolling interest	—		230			—			230
Income from discontinued operations, net of tax	—		—			(4,110		)	(4,110		)
Severance	660		—			—			660
Restructuring, relocation and related business disruption costs	4,220		1,370			—			5,590
Impairment of goodwill and other intangibles	—		26,640			—			26,640
Non-cash stock compensation	—		—			230			230
Acquisition and integration costs	—		70			1,130			1,200
(Gain) loss on business divestitures and other assets	650		—			—			650
Unrealized remeasurement costs	110		530			(110		)	530
Other (income) expense, net	570		2,650			(3,290		)	(70		)
Adjusted EBITDA	$	14,240	$	(70	)	$	(4,360	)	$	9,810

Results of Operations Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018 ~~Compared with Three Months Ended September 30, 2017~~

~~Overall,~~Consolidated net sales decreased ~~approximately $12.3~~$16.2 million, or ~~5.1%~~8.3%, to ~~$227.8~~$177.9 million in ~~the three months ended September 30, 2018,~~3Q19, as compared with ~~$240.1~~$194.0 million in 3Q18. As noted in the ~~three months ended September 30, 2017, primarily driven by lower net sales in our Horizon Europe-Africa and Horizon Asia-Pacific reportable segments. The~~following segment results discussions, the decrease in net sales ~~of $9.4 million in our Horizon Europe-Africa reportable segment and $2.9 million in our Horizon Asia-Pacific reportable segment were~~was primarily attributable to ~~the decline~~a decrease in net sales in Horizon Americas of $19.3 million primarily attributable to lower shipping volumes in ~~existing OE programs as well as unfavorable~~the aftermarket, retail and e-commerce sales channels, partially offset by an increase in net sales of $3.1 million in Horizon Europe-Africa. After adjusting for currency ~~exchange~~translation impacts, Horizon Europe-Africa net sales were up $7.0 million primarily attributable to higher volumes in ~~our Horizon Asia-Pacific reportable segment.~~the automotive OEM and automotive OES sales channels.

Gross profit margin (gross profit as a percentage of net sales) ~~approximated 19.1%~~was 15.9% and ~~24.3%~~17.8% for ~~the three months ended September 30, 2018~~3Q19 and ~~2017,~~3Q18, respectively. Negatively impacting gross profit margin were unfavorable ~~input~~ costs and operating inefficiencies in Horizon Americas, driven by tariff costs and the timing and inability to fully recover operating input cost increases through customer pricing actions, partially offset by favorable margins in Europe-Africa primarily driven by favorable currency translation between the U.S. dollar and euro.

Selling, general and administrative (“SG&A”) expenses increased ~~commodity~~$3.4 million primarily attributable to $5.3 million of lease abandonment and ~~freight~~leasehold improvement charges related to the Company’s departure from its headquarters lease, partially offset by back office and support costs savings in ~~both our~~ Horizon Americas and Horizon Europe-Africa ~~reportable segments.~~as a result of prior year restructuring and business rationalization projects.

Operating ~~profit~~ margin (operating profit (loss) as a percentage of net sales) ~~approximated 10.5%~~was (7.2)% and ~~5.5%~~(15.4)% in ~~the three months ended September 30, 2018~~3Q19 and ~~2017,~~3Q18, respectively. Operating ~~profit decreased approximately $37.2~~loss improved by $17.1 million to an operating loss of ~~$23.9~~$12.8 million in ~~the three months ended September 30, 2018,~~3Q19, from an operating ~~profit~~loss of ~~$13.3~~$29.9 million in ~~the three months ended September 30, 2017,~~3Q18, primarily ~~due the~~attributable to a goodwill impairment charge of ~~goodwill totaling~~ approximately $26.6 million in ~~our~~ Horizon Europe-Africa, ~~reportable segment. In addition,~~offset by lower net sales ~~levels~~ and ~~higher commodity and freight costs negatively impacted operating~~gross profit.

Other expense, net increased $0.6 million to $1.6 million in 3Q19, as compared to $1.0 million in 3Q18 primarily attributable to $0.7 million of additional foreign currency loss in 3Q19.

Interest expense increased ~~approximately $2.2~~$16.5 million to ~~$7.7~~$24.1 million in ~~the three months ended September 30, 2018,~~3Q19, compared to ~~$5.5~~$7.6 million in 3Q18. Interest expense increased because of $50.0 million of additional borrowings on the ~~three months ended September 30, 2017~~First Lien Term Loan (as defined below) in July 2018 and $51.0 million of additional borrowings on the Second Lien Term Loan (as defined below) in March 2019, which resulted in higher borrowings as ~~a result of an increase in utilization of our revolving credit facilities, increased borrowings and an increased~~well as higher interest ~~rate on our Term B Loan that occurred early in the third quarter of 2018.~~

~~Other expense, net remained relatively consistent at $1.5 million in the three months ended September 30, 2018, as~~rates compared to ~~$1.3~~3Q18. In addition, the Company recorded $5.2 million ~~in the three months ended September 30, 2017.~~of unamortized debt issuance costs due to its debt refinancing and modifications.

The effective income tax rate for ~~the three months ended September 30, 2018~~continuing operations for 3Q19 and ~~2017~~3Q18 was ~~0.3%~~2.6% and ~~1.9%~~3.7%, respectively. The ~~higher~~lower effective income tax rate in ~~the three months ended September 30, 2018~~3Q19 is ~~driven by~~primarily attributable to a decrease in tax benefits related to the ~~release~~year-end 2018 recognition of certain ~~unrecognized~~jurisdictional valuation allowances including the U.S., offset by certain aspects of U.S. tax ~~positions and the impairment of goodwill related to our Horizon Europe-Africa reportable segment which does not result~~reform, resulting in ~~the recognition of~~ a decreased 2019 tax benefit.

Net ~~income~~loss from continuing operations decreased ~~approximately $39.6~~by $0.4 million to a net loss of ~~$33.0~~$37.5 million in ~~the three months ended September 30, 2018,~~3Q19, compared to a net loss from ~~net income~~continuing operations of ~~$6.6~~$37.1 million in 3Q18 related to the ~~three months ended September 30, 2017. The decrease~~operating results discussed above.

Income from discontinued operations, net of tax is primarily attributable to the $180.5 million gain that was recognized when the Company completed the sale of APAC during 3Q19. As a result, APAC has been presented as discontinued operations in ~~net income was~~our condensed consolidated financial statements in accordance with FASB ASC No. 205, Discontinued Operations. See Note 3, “Discontinued operations,” 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 ~~result of a $37.2 million decrease in operating income, driven primarily by the impairment of goodwill in the third quarter of 2018, lower sales levels and higher commodity and freight costs.~~Company’s discontinued operations.

See below for a discussion of operating results by segment.

Horizon ~~Americas.~~Americas

Net sales ~~were substantially unchanged~~by sales channel, in ~~the three months ended September 30, 2018,~~thousands, for Horizon Americas during 3Q19 and 3Q18 are as follows:



	Three months ended September 30,				Change
	2019		2018		$			%
Net Sales
Automotive OEM	$	21,050	$	20,320	$	730		3.6	%
Automotive OES	1,960		1,700		260			15.3	%
Aftermarket	26,920		38,470		(11,550		)	(30.0	)%
Retail	26,600		29,600		(3,000		)	(10.1	)%
Industrial	7,650		11,160		(3,510		)	(31.5	)%
E-commerce	12,040		13,750		(1,710		)	(12.4	)%
Other	—		510		(510		)	N/A
Total	$	96,220	$	115,510	$	(19,290	)	(16.7	)%

Net sales decreased $19.3 million to $96.2 million in 3Q19, as compared to ~~the three months ended September 30, 2017. Net~~$115.5 million in 3Q18, primarily attributable to a $20.7 million decrease due to lower sales ~~increased $5.1 million~~volumes from softening in demand primarily in the aftermarket, ~~channel~~retail and ~~$1.0~~industrial channels, and a $2.4 million increase in sales returns and allowances. The net sales decrease was partially offset by $4.3 million in ~~the industrial channel as past due orders with warehouse distributors~~2019 pricing increases, which were implemented to recover increased material and ~~trailer manufactures accumulated~~input costs and offset higher import tariffs, which took effect during ~~the start-up of the Kansas City distribution center~~2018 and were ~~substantially shipped in the period. Net sales in our automotive OE channel~~ increased approximately $0.7 million primarily as a result of increased volume on existing programs. Our increases in these channels were offset by a decline in net sales of $6.7 million in the retail channel primarily due to the impacts of inventory constraints with our Asian vendors. The sale of the Broom and Brush product line during ~~the fourth quarter of 2017 further reduced net sales in the retail channel.~~2019.

Horizon Americas’ gross profit decreased ~~approximately $6.5~~by $10.5 million to $17.3 million in 3Q19 compared to $27.8 million 3Q18. The decrease in gross profit margin reflects the changes in sales detailed above. Additionally, gross profit was impacted by the following:


–	$3.3 million unfavorable material input costs primarily related to higher freight and tariff costs


–	$3.0 million unfavorable manufacturing costs; and


–	$3.0 million higher scrap costs and inventory reserves; partially offset by


–	$2.7 million of prior-year comparable period restructuring and footprint rationalization projects and related cost inefficiencies that did not reoccur; and


–	$2.4 million in lower outbound freight costs

SG&A expenses decreased $1.0 million to $19.5 million, or ~~24.0%~~20.3% of net sales, in the three months ended September 30, 2018, from approximately $34.2 million, or 29.6% of net sales, in the three months ended September 30, 2017. Gross profit margin was negatively impacted by $4.8 million of unfavorable input costs, including higher commodity costs in advance of pricing actions, and higher freight costs caused in part by reduced carrier capacity. Further contributing to a decline in gross profit margin was $0.6 million of costs related to fines and penalties due to lower fulfillment rates and $1.3 million of costs associated with closures of our Solon, Ohio and Mosinee, Wisconsin shared service and engineering facilities. Additionally, $0.7 million of outside service provider and expedited freight costs were incurred related to the paintline upgrade in our Mexico manufacturing facility completed in the fourth quarter of 2017, for which certain OE customer acceptance is pending. The remainder of the change is primarily the result of favorable manufacturing costs.

~~Selling, general and administrative expenses decreased approximately $2.9 million~~3Q19, as compared to $20.5 million, or 17.7% of net sales, in 3Q18. The decrease in SG&A expenses was attributable to the ~~three months ended September 30, 2018, as compared to $23.4~~following:


–	$3.5 million in prior-year comparable period organizational restructuring efforts and costs that did not reoccur, partially offset by


–	$1.6 million additional professional fees and litigation claims; and


–	$0.8 million increased allowance for doubtful accounts

Horizon Americas’ had an operating loss of $2.2 million, or ~~20.3%~~(2.3)% of net sales, in ~~the three months ended September 30, 2017. Contributing~~3Q19, which decreased $9.5 million compared to the decrease in selling, general and administrative expenses were $1.3 million of benefits related to organizational restructuring efforts substantially completed during the second quarter, $0.8 million in reduced legal costs and $0.8 million of lower amortization as certain customer relationships have fully amortized.

~~Horizon Americas’~~an operating profit of $7.3 million, or 6.3% of net sales, ~~reflects a decline of $3.7 million~~ in ~~the three months ended September 30, 2018, as compared to an operating profit of $10.9 million, or 9.5% of net sales, in the three months ended September 30, 2017.~~3Q18. Operating profit and operating ~~profit~~ margin decreased primarily due to ~~unfavorable commodity prices in advance of pricing actions, higher freight~~the decreased net sales and additional operating costs ~~and costs incurred for ongoing operational improvement projects.~~discussed above.

Horizon ~~Europe-Africa.~~Europe-Africa

Net sales ~~decreased approximately $9.4~~by sales channel, in thousands, for Horizon Europe-Africa during 3Q19 and 3Q18 are as follows:



	Three months ended September 30,				Change
	2019		2018		$				%
Net Sales
Automotive OEM	$	43,200	$	40,650	$	2,550			6.3	%
Automotive OES	16,510		12,600		3,910				31.0	%
Aftermarket	19,840		19,980		(140		)		(0.7	)%
Industrial	780		—		780			��	N/A
E-commerce	560		1,290		(730		)		(56.6	)%
Other	740		4,000		(3,260		)		(81.5	)%
Total	$	81,630	$	78,520	$	3,110			4.0	%

Net sales increased by $3.1 million, or ~~10.7%~~4.0%, to $81.6 million in 3Q19 compared to $78.5 million in the three months ended September 30, 2018, compared to $88.0 million in the three months ended September 30, 2017, primarily due to a decrease of $6.7 million in the automotive OE channel due in part to abnormally high sales on a program with a major customer in the third quarter of 2017, and lower demand on existing programs. Net sales in the aftermarket channel decreased $2.4 million primarily due to constrained product availability as a result of our production shift to our Braşov, Romania production facility. 3Q18.Net sales were ~~also~~ impacted by ~~approximately $1.1~~$3.9 million of unfavorable foreign currency translation, primarily driven by the ~~euro. The remainder~~weakening of the ~~change~~euro in relation to the U.S. dollar. After adjusting for currency translation impacts, net sales were up $7.0 million. The increase is primarily ~~a result~~related to higher sales volumes in the Automotive OEM and Automotive OES channels, partially offset by $3.1 million decrease related to the Company’s divestiture of ~~lower sales~~its non-automotive business in ~~our non-automotive businesses.~~the first quarter of 2019.

Horizon Europe-Africa’s gross profit ~~decreased approximately $7.6~~increased by $4.3 million, or 63.3%, to $11.0 million, or 13.5% of net sales, in 3Q19, compared to $6.8 million, or 8.6% of net sales, in 3Q18. The increase in gross profit margin reflects the ~~three months ended September 30, 2018, from approximately $14.4~~changes in sales detailed above. In addition, gross profit was impacted by the following:


–	$4.3 million favorable expense recovery related to the settlement of potential product liability claims (see Note 13, “Contingencies”) with one OEM customer

SG&A expenses decreased by $2.0 million to $9.3 million, or ~~16.3%~~11.4% of net sales, in ~~the three months ended September 30, 2017, partially due~~3Q19, as compared to lower sales volumes. Gross profit margin was negatively impacted by unfavorable commodity costs in advance of pricing actions, production inefficiencies and higher supply chain costs related to our European production realignment over the last nine months.

~~Selling, general and administrative expenses decreased approximately $0.2 million to $11.5~~$11.4 million, or ~~14.6%~~14.5% of net sales, in 3Q18. The increase in SG&A expenses was primarily attributable to the ~~three months ended September 30, 2018, as compared~~following:


–	$1.3 million of additional costs incurred in the prior-year period related to restructuring and footprint rationalization projects that did not reoccur; and


–	$0.7 million reduction in personnel and compensation costs

Horizon Europe-Africa’s operating profit (loss) increased by $33.1 million to ~~$11.7~~an operating profit of $1.7 million, or ~~13.3%~~2.1% of net sales, in ~~the three months ended September 30, 2017. The decrease is primarily attributable to lower people costs driven by a decrease in incentive compensation.~~

~~Horizon Europe-Africa’s operating loss increased approximately $34.1 million~~3Q19, as compared to an operating loss of $31.4 million, or ~~40.0%~~(40.0)% of net sales, in ~~the three months ended September 30, 2018,~~3Q18, partially as compared to an operating profit of $2.7 million, or 3.0% of net sales, in the three months ended September 30, 2017, primarily due to the impairment of goodwill of approximately $26.6 million. The remaindera result of the ~~decrease is primarily due to unfavorable commodity costs which have not been fully recovered through pricing actions, manufacturing inefficiencies and higher freight costs.~~

~~Horizon Asia-Pacific.~~ Net sales decreased approximately $2.9 million, or 7.9%, to $33.8 million in the three months ended September 30, 2018, compared to $36.7 million in the three months ended September 30, 2017 due to unfavorable currency exchange of $2.1 million, as the Australian and New Zealand dollar weakened in relation to the U.S. dollar and a small decline in volumes in existing programs in our businesses in Thailand.

Horizon Asia-Pacific’s gross profit decreased approximately $0.7 million to $9.1 million, or 26.9% of net sales, in the three months ended September 30, 2018, from approximately $9.8 million, or 26.8% of net sales, in the three months ended September 30, 2017. Gross profit marginoperating performance discussed above. In addition, operating loss was ~~negatively~~ impacted by ~~unfavorable currency exchange negatively impacting purchases denominated~~a $26.6 million goodwill impairment charge recorded in ~~Thai baht and U.S. dollars and a decline in volumes in existing programs in our businesses in Thailand, partially offset by efficiencies realized in Thailand and cost recoveries in Australia.~~

Selling, general and administrative expenses decreased approximately $0.8 million to $3.2 million, or 9.3% of net sales, in the three months ended September 30, 2018, as compared to $3.9 million, or 10.7% of net sales, in the three months ended September 30, 2017, primarily due to costs incurred in the third quarter of 2017 related to the acquisition of Best Bars that did not reoccur in 2018, as well as favorable effects of currency exchange.

Horizon Asia-Pacific’s operating profit increased approximately $0.1 million to $6.0 million, or 17.6% of net sales, in the three months ended September 30, 2018, as compared to $5.9 million, or 16.0% of net sales, in the three months ended September 30, 2017, remaining relatively flat quarter-over-quarter as ongoing operational improvements were mostly offset by unfavorable currency exchange.3Q18.

Corporate ~~Expenses.~~Expenses Corporate expenses included in operating ~~profit (loss) decreased approximately $0.4~~loss increased $6.5 million to $12.3 million in 3Q19, as compared to $5.8 million expense in 3Q18, primarily attributable to $5.3 million of lease abandonment and leasehold improvement charges related to the Company’s departure from its headquarters lease, coupled with $1.6 million of severance costs related to the separation agreement reached with our former chief executive officer.~~three~~

The following table summarizes financial information for our operating segments for the nine months ended September 30, ~~2018, as compared to $6.2 million in the three~~2019 (“3Q19 YTD”) and nine months ended September ~~30, 2017 due to lower incentive compensation primarily~~2018(“3Q18 YTD”):



	Nine months ended September 30,										Change					Constant Currency Change
	2019			As a Percentage of Net Sales		2018			As a Percentage of Net Sales		$			%		$			%
	(dollars in thousands)
Net Sales
Horizon Americas	$	300,670		54.8	%	$	319,820		55.5	%	$	(19,150	)	(6.0	)%	$	(18,670	)	(5.8	)%
Horizon Europe-Africa	247,500			45.2	%	256,430			44.5	%	(8,930		)	(3.5	)%	7,440			2.9	%
Total	$	548,170		100.0	%	$	576,250		100.0	%	$	(28,080	)	(4.9	)%	$	(11,230	)	(1.9	)%
Gross Profit
Horizon Americas	$	62,080		20.6	%	$	73,750		23.1	%	$	(11,670	)	(15.8	)%	$	(11,480	)	(15.6	)%
Horizon Europe-Africa	26,080			10.5	%	30,380			11.8	%	(4,300		)	(14.2	)%	(2,730		)	(9.0	)%
Total	$	88,160		16.1	%	$	104,130		18.1	%	$	(15,970	)	(15.3	)%	$	(14,210	)	(13.6	)%
Selling, General and Administrative Expenses
Horizon Americas	$	56,360		18.7	%	$	68,730		21.5	%	$	(12,370	)	(18.0	)%	$	(12,210	)	(17.8	)%
Horizon Europe-Africa	27,410			11.1	%	36,480			14.2	%	(9,070		)	(24.9	)%	(7,190		)	(19.7	)%
Corporate	29,370			5.4	%	29,000			5.0	%	370			1.3	%	N/A			N/A
Total	$	113,140		20.6	%	$	134,210		23.3	%	$	(21,070	)	(15.7	)%	$	(19,400	)	(1.2	)%
Operating Profit (Loss)
Horizon Americas	$	5,760		1.9	%	$	4,730		1.5	%	$	1,030		21.8	%	$	1,060		22.4	%
Horizon Europe-Africa	120			—	%	(132,150		)	(51.5	%)	132,270			(100.1	)%	132,060			(99.9	)%
Corporate	(29,360		)	(5.4	)%	(28,950		)	(5.0	%)	(410		)	1.4	%	N/A			N/A
Total	$	(23,480	)	(4.3	)%	$	(156,370	)	(27.1	%)	$	132,890		(85.0	)%	$	133,120		0.1	%

⁽¹⁾Corporate calculated as a ~~result~~percentage of ~~the separation of~~total net sales.

The following table summarizes Adjusted EBITDA for our ~~former CEO, partially offset by additional expenses related to the termination of the Brink Group acquisition.~~operating segments for 3Q19 YTD:



	Nine months ended September 30, 2019
	Horizon Americas			Horizon Europe-Africa			Corporate			Consolidated
	(dollars in thousands)
Net income attributable to Horizon Global										$	112,330
Net loss attributable to noncontrolling interest										(840		)
Net income										111,490
Interest expense										50,270
Income tax benefit										(2,330		)
Depreciation and amortization										16,790
EBITDA	10,100			(3,770		)	169,890			176,220
Net loss attributable to noncontrolling interest	—			840			—			840
Income from discontinued operations, net of tax	—			—			(189,520		)	(189,520		)
Severance	(200		)	10			1,620			1,430
Restructuring, relocation and related business disruption costs	1,110			(1,410		)	4,250			3,950
Non-cash stock compensation	—			—			1,820			1,820
(Gain) loss on business divestitures and other assets	1,280			3,630			—			4,910
Board transition support	—			—			1,450			1,450
Product liability and litigation claims	820			50			—			870
Debt issuance costs	—			—			2,660			2,660
Unrealized remeasurement costs	160			1,210			440			1,810
Other (income) expense, net	730			8,140			(7,120		)	1,750
Adjusted EBITDA	$	14,000		$	8,700		$	(14,510	)	$	8,190

The following table summarizes Adjusted EBITDA for our operating segments for 3Q18 YTD:



	Nine months ended September 30, 2018
	Horizon Americas		Horizon Europe-Africa			Corporate			Consolidated
	(dollars in thousands)
Net loss attributable to Horizon Global									$	(157,200	)
Net loss attributable to noncontrolling interest									(720		)
Net loss									(157,920		)
Interest expense									19,580
Income tax benefit									(15,770		)
Depreciation and amortization									15,070
EBITDA	7,260		(132,630		)	(13,670		)	(139,040		)
Net loss attributable to noncontrolling interest	—		720			—			720
Income from discontinued operations, net of tax	—		—			(9,670		)	(9,670		)
Severance	5,010		1,560			2,750			9,320
Restructuring, relocation and related business disruption costs	11,830		2,820			—			14,650
Impairment of goodwill and other intangibles	—		125,770			—			125,770
Non-cash stock compensation	—		—			1,440			1,440
Acquisition and integration costs	—		1,390			16,130			17,520
(Gain) loss on business divestitures and other assets	1,490		—			—			1,490
Unrealized remeasurement costs	110		750			200			1,060
Other (income) expense, net	2,160		8,310			(10,710		)	(240		)
Adjusted EBITDA	$	27,860	$	8,690		$	(13,530	)	$	23,020

Results of OperationsNine Months Ended September 30, ~~2018~~2019 Compared with Nine Months Ended September 30, ~~2017~~2018

Overall, net sales decreased ~~approximately $19.0~~$28.1 million, or ~~2.7%~~4.9%, to ~~$678.0~~$548.2 million for ~~the nine months ended September 30, 2018,~~3Q19 YTD, as compared with ~~$697.0~~$576.3 million in 3Q18 YTD. As noted in the ~~nine months ended September 30, 2017, primarily driven by a~~following segment results discussions, the decrease in net sales ~~in our Horizon Americas reportable segment which~~ was partially offset by higher net sales in our Horizon Europe-Africa and Horizon Asia-Pacific reportable segments. The decrease in net sales in our Horizon Americas reportable segment of approximately $31.6 million was driven by challenges transitioning to a new distribution facility in Kansas City. This decrease was partially offset by higher net sales of approximately $3.4 million in our Horizon Europe-Africa reportable segment, driven by favorable currency exchange, and by an increase of $9.2 million in our Horizon Asia-Pacific reportable segment,primarily attributable to a ~~regional bolt-on acquisition completed~~decrease in ~~the third quarter~~Horizon Americas and Horizon Europe-Africa of ~~2017.~~$19.2 million and $8.9 million, respectively.

Gross profit margin (gross profit as a percentage of sales) approximated ~~19.1%~~16.1% and ~~24.6%~~18.1% for ~~the nine months ended September 30, 2018~~3Q19 YTD and ~~2017,~~3Q18 YTD, respectively. Negatively impacting gross profit margin were unfavorable ~~input~~ costs driven by ~~increased commodity~~tariff costs and ~~freight costs~~the timing and inability to fully recover operating input cost increases through customer pricing actions in ~~both our~~ Horizon Americas and ~~Horizon~~unfavorable net sales and cost mix in Europe-Africa, ~~reportable segments.~~primarily driven by unfavorable currency translation in 3Q19 YTD compared to 3Q18 YTD.

Operating ~~profit~~ margin (operating ~~profit~~loss as a percentage of sales) approximated ~~20.8%~~(4.3)% and ~~5.3%~~(27.1)% for ~~the nine months ended September 30, 2018~~3Q19 YTD and ~~2017,~~3Q18 YTD, respectively. Operating ~~profit~~loss decreased ~~approximately $178.2~~$132.9 million to an operating loss of ~~$141.4~~$23.5 million for ~~the nine months ended September 30, 2018,~~3Q19 YTD, compared to an operating ~~profit~~loss of ~~$36.9~~$156.4 million for ~~the nine months ended September 30, 2017,~~3Q18 YTD, primarily due to the impairment of goodwill and intangible assets totaling approximately $125.8 million in our Horizon Europe-Africa ~~reportable segment.~~operating segment in 3Q18 YTD. In addition, ~~lower sales levels in our Horizon Americas reportable segment and~~ higher commodity ~~and freight~~ costs in Horizon Americas and Horizon Europe-Africa ~~reportable~~operating segments negatively impacted operating profit. ~~The remainder of the decline is primarily attributable to costs incurred with the terminated acquisition of the Brink Group.~~

~~Interest expense increased approximately $3.1~~SG&A expenses decreased $21.1 million to $19.8 million, for the nine months ended September 30, 2018, as compared to $16.7 million for the nine months ended September 30, 2017, as a result of an increase in utilization of our revolving credit facilities, increased borrowings and an increased interest rate on our Term B Loan that occurred early in the third quarter of 2018.

~~Other expense, net increased approximately $6.7 million to $9.2 million for the nine months ended September 30, 2018 compared to $2.6 million for the nine months ended September 30, 2017,~~ primarily due to ~~financing~~realized savings from prior-year restructuring and business rationalization projects.

Other income (expense), net decreased $0.8 million to $6.6 million for 3Q19 YTD compared to $7.4 million for 3Q18 YTD, primarily due to prior-year period costs in connection with the ~~pursuit~~termination of the Brink Group acquisition ~~which was expected~~of $5.1 million, partially offset by a $3.6 million loss on sale related to ~~close~~the Company’s divestiture of non-automotive business assets in Europe-Africa in the ~~second~~first quarter of ~~2018; however,~~2019.

Interest expense increased $30.7 million, to $50.3 million, for 3Q19 YTD, as compared to $19.6 million for 3Q18 YTD. Interest expense increased because of $50.0 million of additional borrowings on the ~~parties~~First Lien Term Loan in July 2018 and $51.0 million of additional borrowings on the Second Lien Term Loan in March 2019, which resulted in higher borrowings as well as higher interest rates compared to 3Q18 YTD. In addition, the ~~acquisition agreement mutually agreed~~Company recorded $8.7 million of unamortized debt issuance costs due to ~~terminate the transaction.~~its debt refinancing and modifications.

The effective income tax ~~rates~~rate for ~~the nine months ended September 30, 2018~~3Q19 YTD and ~~2017~~3Q18 YTD was ~~7.3%~~2.9% and ~~25.7%~~8.6%, respectively. The ~~higher~~lower effective income tax rate ~~in the nine months ended September 30, 2018 is driven by a~~for 3Q19 YTD was primarily attributable to an decrease in tax benefits related to the ~~release~~year-end 2018 recognition of certain ~~unrecognized~~jurisdictional valuation allowances including the U.S., offset by certain aspects of U.S. tax ~~positions and the impairment of goodwill related to our Horizon Europe-Africa reportable segment which does not result~~reform, resulting in ~~the recognition of~~ a decreased 2019 tax benefit.

Net ~~income~~loss from continuing operations decreased by ~~approximately $174.3~~$89.6 million, to a net loss of ~~$157.9~~$78.0 million for ~~the nine months ended September 30, 2018,~~3Q19 YTD, compared to a net ~~income~~loss of ~~$16.4~~$167.6 million for ~~the nine months ended September 30, 2017.~~3Q18 YTD. The decrease is ~~primarily the result of~~attributable to a ~~$178.2~~$132.9 million decrease in operating ~~profit,~~loss, primarily driven by the impairment of goodwill and intangible assets ~~which~~in 3Q18 YTD.

Income from discontinued operations, net of tax is primarily attributable to the $180.5 million gain that was ~~partially offset by~~recognized when the Company completed the sale of its Horizon Asia-Pacific operating segment (“APAC”) during 3Q 2019. As a ~~$4.6 million loss~~result, APAC has been presented as discontinued operations in our condensed consolidated financial statements in accordance with FASB ASC No. 205, Discontinued Operations. See Note 3, “Discontinued operations,” 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 ~~extinguishment of debt during 2017 that did not reoccur in 2018.~~Company’s discontinued operations.

See below for a discussion of operating results by segment.

Horizon ~~Americas.~~Americas

Net sales by sales channel, in thousands, for Horizon Americas during 3Q19 YTD and 3Q18 YTD are as follows:



	Nine months ended September 30,				Change
	2019		2018		$			%
Net Sales
Automotive OEM	$	64,970	$	60,320	$	4,650		7.7	%
Automotive OES	5,380		4,230		1,150			27.2	%
Aftermarket	79,910		96,700		(16,790		)	(17.4	)%
Retail	88,230		96,330		(8,100		)	(8.4	)%
Industrial	23,860		31,680		(7,820		)	(24.7	)%
E-commerce	38,300		29,340		8,960			30.5	%
Other	20		1,220		(1,200		)	N/A
Total	$	300,670	$	319,820	$	(19,150	)	(6.0	)%

Net sales decreased ~~approximately $31.6~~$19.1 million ~~or 9.0%,~~to $300.7 million in 3Q19 YTD, as compared to $319.8 million in ~~the nine months ended September 30, 2018, as compared~~3Q18 YTD, primarily attributable to ~~$351.4~~a $24.5 million ~~in the nine months ended September 30, 2017. Our aftermarket and retail channels were negatively impacted by delivery delays out of our Kansas City distribution facility~~decrease due to ~~challenges implementing processes and a warehouse management system coupled with reduced carrier capacity. Net~~lower sales ~~decreased $15.8 million~~volumes from softening in demand primarily in the aftermarket, ~~channel~~retail and ~~$15.0~~industrial channels, partially offset by an increase in volumes in the E-commerce and automotive OEM sales channels, as well as a $4.7 million increase in sales returns and allowances. The net sales decrease was partially offset by $11.2 million in ~~our retail channel. Contributing further~~2019 pricing increases, which were implemented to ~~the decline in net sales in the retail channel~~recover increased material and input costs and offset higher import tariffs, which took effect during 2018 and were ~~$10.5 million in lower net sales due to the sale of the Broom and Brush product line that occurred~~increased during the fourth quarter of 2017. Net sales in our automotive OE channel decreased approximately $1.1 million primarily as a result of lower demand due to unplanned downtime at a significant customer. Net sales in our industrial channel increased $0.3 million as increased demand from trailer manufacturers more than offset the unfavorable effects of transitioning to the Kansas City distribution facility.2019.

Horizon Americas’ gross profit decreased ~~approximately $32.0~~$11.7 million to $62.1 million in 3Q19 YTD, as compared to $73.8 million in 3Q18 YTD. The decrease in gross profit margin reflects the changes in sales detailed above. Additionally, gross profit was impacted by the following:


–	$9.1 million unfavorable material input costs primarily related to higher freight and tariff costs


–	$8.5 million unfavorable manufacturing costs; and


–	$4.6 million higher scrap costs and inventory reserves; partially offset by


–	$8.0 million of prior-year comparable period restructuring and footprint rationalization projects and related cost inefficiencies that did not reoccur; and


–	$3.6 million in lower outbound freight costs

SG&A expenses decreased $12.4 million to $56.4 million, or ~~23.1%~~18.7% of net sales in ~~the nine months ended September 30, 2018,~~3Q19 YTD, as compared to ~~$105.8~~$68.7 million, or ~~30.1%~~21.5% of net sales, in ~~the nine months ended September 30, 2017. Negatively impacting gross profit margin~~3Q18 YTD. The decrease in SG&A expenses was $13.1 million of unfavorable input costs, including higher commodity costs in advance of pricing actions, and higher freight costs caused in part by reduced carrier capacity. Further contributing to a decline in gross profit margin was approximately $3.7 million of costs related to fines and penalties due to lower fulfillment rates and $2.4 million of costs associated with closures of our Solon, Ohio and Mosinee, Wisconsin shared serviced and engineering facilities. Gross profit margin was negatively impacted by $1.9 million of outside service provider and expedited freight costs were incurred

~~related~~attributable to the paintline upgrade in our Mexico manufacturing facility completed in the fourth quarter of 2017, for which certain OE customer acceptance is pending. The remainder of the change is primarily a result of unfavorable market channel mix and lower sales levels.following:


–	$8.8 million decrease related to prior-year organizational restructuring efforts and business footprint rationalization that did nor reoccur;


–	$4.0 million of lower personnel and compensation costs; and


–	$1.4 million of lower sales and marketing costs

~~Selling, general and administrative expenses~~Horizon Americas’ operating profit increased ~~approximately $1.9~~$1.0 million to ~~$69.0~~an operating profit of $5.8 million, or ~~21.6%~~1.9% of net sales, in ~~the nine months ended September 30, 2018,~~3Q19 YTD, as compared to $67.1 million, or 19.1% of net sales, in the nine months ended September 30, 2017, primarily due to approximately $3.0 million of costs associated with a project to optimize our distribution footprint, $5.3 million of costs, including severance, associated with the aforementioned facility closures, and costs related to other organizational restructuring efforts. Partially offsetting these increases were $1.8 million of lower incentive compensation and $2.2 million of lower amortization as certain customer relationships have fully amortized.

~~Horizon Americas’~~an operating profit ~~decreased approximately $34.1 million to an operating loss~~ of $4.7 million, or 1.5% of net sales, in ~~the nine months ended September 30, 2018, as compared to an operating profit of $38.8 million, or 11.1% of net sales, in the nine months ended September 30, 2017.~~3Q18 YTD. Operating profit and operating ~~profit~~ margin ~~decreased~~increased primarily due to impacts of the prior-year comparable period organizational restructuring efforts and business footprint rationalization efforts, partially offset by the lower net sales ~~levels~~ and ~~unfavorable commodity~~additional operating costs ~~in advance of pricing actions, higher freight costs, and costs incurred for ongoing operational improvement projects.~~discussed above.

Horizon ~~Europe-Africa.~~Europe-Africa

Net sales ~~increased approximately $3.4~~by sales channel, in thousands, for Horizon Europe-Africa during 3Q19 YTD and 3Q18 YTD are as follows:



	Nine months ended September 30,				Change
	2019		2018		$			%
Net Sales
Automotive OEM	$	137,900	$	134,930	$	2,970		2.2	%
Automotive OES	45,840		39,980		5,860			14.7	%
Aftermarket	56,200		65,180		(8,980		)	(13.8	)%
Industrial	2,340		—		2,340			N/A
E-commerce	1,650		3,880		(2,230		)	(57.5	)%
Other	3,570		12,460		(8,890		)	(71.3	)%
Total	$	247,500	$	256,430	$	(8,930	)	(3.5	)%

Net sales decreased $8.9 million, or ~~1.3%~~3.5%, to $247.5 million in 3Q19 YTD, as compared to $256.4 million in 3Q18 YTD, primarily driven by the ~~nine~~ ~~months ended September 30, 2018, as compared to $253.1 million in the nine months ended September 30, 2017, primarily due to favorable currency exchange~~weakening of ~~approximately $16.4 million as~~ the euro ~~strengthened~~ in relation to the U.S. dollar. ~~Negatively impacting~~After considering currency impact, net sales increased $7.4 million. The increase was ~~a decrease~~primarily attributable to increased automotive OEM and OES sales volumes, partially offset by lower aftermarket shipping volumes related to softer demand and the $8.9 million impact of ~~$5.7 million~~the Company’s sale of its non-automotive business in the aftermarket channel due to constrained product availability as a result of our production shift to our Braşov, Romania production facility, and customer rationalization efforts. Net sales in the automotive OE channel increased $7.2 million primarily due to higher volume with existing customers in the secondfirst quarter of ~~2018. The remainder of the change is due to lower sales in our non-automotive businesses.~~2019.

Horizon Europe-Africa’s gross profit decreased ~~approximately $11.7~~$4.3 million to $26.1 million, or 10.5% of net sales in 3Q19 YTD, from $30.4 million, or 11.8% of net sales, in 3Q18 YTD. The decrease in gross profit margin reflects the ~~nine~~ ~~months ended September 30, 2018,~~changes in sales detailed above, which is attributable to a sales mix shift from ~~approximately $42.1~~higher margin aftermarket sales to lower margin OE sales. In addition, gross profit was impacted by the following:


–	$1.9 million unfavorable material input and freight costs, partially offset by


–	$5.8 million favorable currency exchange due to the change of the Euro in relation to the U.S. dollar

SG&A expenses decreased $9.1 million to $27.4 million, or ~~16.6%~~11.1% of net sales in the nine months ended September 30, 2017. Gross profit margin was negatively impacted by unfavorable commodity costs in advance of pricing actions, production inefficiencies and higher supply chain costs related3Q19 YTD, as compared to ~~our European production realignment over the last nine months. Partially offsetting these decreases was approximately $2.2 million of favorable currency exchange.~~

~~Selling, general and administrative expenses increased approximately $0.6 million to $36.8~~$36.5 million, or ~~14.3%~~14.2% of net sales, in 3Q18 YTD. The decrease in SG&A expenses was primarily attributable to the ~~nine~~ ~~months ended September 30, 2018, as compared~~following:


–	$4.1 million of additional costs incurred in the prior-year comparable period related to restructuring and footprint rationalization projects primarily related to the shift in production to our Brasov, Romania production facility; and


–	$1.9 million favorable currency exchange due to the change of the Euro in relation to the U.S. dollar;


–	$1.9 million reduction in functional support and personnel costs due to lower headcount;


–	$1.0 million reduction in selling and warehouse expense primarily attributable to personnel costs

Horizon Europe-Africa’s operating profit (loss) increased approximately $132.3 million to ~~$36.1 million,~~an operating profit of approximately $120.0 thousand, or ~~14.3%~~0.05% of net sales in ~~the~~ ~~nine~~ ~~months ended September 30, 2017. Unfavorable foreign currency exchange of approximately $2.3 million was offset by lower people costs, driven by a decrease in incentive compensation.~~

~~Horizon Europe-Africa’s operating profit decreased approximately $138.1 million~~3Q19 YTD, as compared to an operating loss of ~~approximately~~ $132.2 million, or ~~(51.5)%~~51.5% of net sales, in ~~the~~ ~~nine~~ ~~months ended September 30, 2018, as compared to an operating profit of $6.0 million, or 2.4% of net sales, in the nine months ended September 30, 2017,~~3Q18 YTD, primarily due to the impairment of goodwill and ~~trademark and trade names~~intangible assets of approximately $125.8 ~~million. The remainder of~~million in the ~~decrease is due to unfavorable commodity costs which have not been fully recovered through pricing actions, manufacturing inefficiencies and higher freight costs.~~prior-year comparable period, coupled with operational results described above.

~~Horizon Asia-Pacific.~~ Net sales increased approximately $9.2 million, or 10.0%, to $101.8 million in the nine months ended September 30, 2018, compared to $92.5 million in the nine months ended September 30, 2017. A regional bolt-on acquisition contributed an increase of $10.1 million in net sales, partially offset by a decline in volumes in existing programs in our businesses in Thailand.

Horizon Asia-Pacific’s gross profit increased approximately $1.9 million to $25.5 million, or 25.1% of net sales, in the nine months ended September 30, 2018, from approximately $23.6 million, or 25.5% of net sales, in the nine months ended September 30, 2017. The improvement in gross profit was driven by the increased sales volume from the aforementioned acquisition along with the results of productivity initiatives in Thailand, partially offset by unfavorable currency exchange driven by the weakening Australian and New Zealand dollars against both the U.S. dollar and Thai baht.

Selling, general and administrative expenses remained relatively consistent at approximately $10.5 million, or 10.3% of net sales, in the nine months ended September 30, 2018, as compared to $10.4 million, or 11.2% of net sales, in the nine months ended September 30, 2017.

Horizon Asia-Pacific’s operating profit increased approximately $1.8 million to $15.0 million, or 14.8% of net sales, in the nine months ended September 30, 2018, as compared to $13.2 million, or 14.3% of net sales, in the nine months ended September 30, 2017, primarily due to increased volumes from the aforementioned acquisition.

Corporate ~~Expenses.~~Expenses Corporate expenses included in operating ~~profit (loss)~~ loss increased approximately ~~$7.8~~$0.4 million to ~~$29.0~~$29.4 million for ~~the~~ ~~nine months ended September 30, 2018~~,3Q19 YTD from ~~$21.2~~$29.0 million for ~~the~~ ~~nine months ended September 30, 2017~~.3Q18 YTD. The increase ~~between years is~~was primarily attributable to ~~approximately~~the $5.3 million of lease abandonment and leasehold improvement charges related to the Company’s termination of its headquarters lease, an additional $5.8 million in additional professional fees and other costs related to the Company new debt issuance, amendments, consents and related structure changes entered into during 3Q 19 YTD. Offsetting the increase was $11.0 million of expenses related to the prior-year termination of the Brink Group acquisition, which includes a $5.5 million break fee. Further increasing corporate expenses was approximately $2.8 million of severance costs associated with the previously announced termination of the Company’s Chief Executive Officer. Partially offsetting these increases were $2.6 million of costs incurred in 2017, related to the integration of the Westfalia Group, which did not ~~reoccur in 2018. The remainder of the change was a result of lower incentive compensation.~~reoccur.

Liquidity and Capital Resources

Our capital and working capital requirements are funded through a combination of cash flows from operations, cash on hand and various borrowings and factoring arrangements described below, including our asset-based revolving credit facility (“ABL ~~Facility. We utilize intercompany loans and equity contributions to fund our worldwide operations.~~Facility”). See Note 8,9, “Long-term Debt” included in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” within this quarterly report on Form 10-Q. As of September 30, ~~2018~~2019, and December 31, ~~2017,~~2018, there was ~~$21.0~~$13.5 million and ~~$23.7~~$26.1 million, respectively, of cash held at foreign subsidiaries. There may be country specific regulations that may restrict or result in increased costs in the repatriation of these funds.

Based on our current and anticipated levels of operations and the condition in our markets and industry, we believe that our cash on hand, cash flow from operations and availability under our ABL Facility will enable us to meet our working capital, capital expenditures, debt service and other funding requirements. Our ability to fund our working capital needs, debt payments and other obligations, and to comply with financial covenants, including borrowing base limitations under our ABL 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 financial and economic conditions and other factors. Any future acquisitions, joint ventures or other similar transactions will likely require additional capital and there can be no assurance that any such capital will be available to us on acceptable terms, if at all.

In 2018, the Company experienced a combination of increased distribution costs and constrained shipments from the Americas distribution network, primarily resulting from the ~~transfer~~start-up of ~~aftermarket shipping volume from Dallas, TX to~~its new Kansas City, KS. Since amending our Term Loan on July 31, 2018, our Europe-Africa segment has continued to underperform. Additionally, our new leadership team in Europe has performed an initial assessment of our business in that segment, resulting in reduced expectations through the remainder of 2018. Primarily dueKansas aftermarket and retail distribution center. Due to these factors, as well as costs associated with remediating these factors, during the first quarter of 2019, the Company ~~has increased draws~~entered into a Senior Term Loan Agreement (“Bridge Loan”) of $10.0 million and a Second Lien Term Loan (“Second Lien Term Loan”) of $51.0 million to repay the Bridge Loan, and amended the First Lien Term Loan (“Sixth Term Amendment”) to amend certain financial covenants to provide for relief based on ~~our ABL and experienced a decline in Bank EBITDA. Based on our results for~~ the ~~quarter-ended September 30,~~Company’s 2018 and ~~our current forecast for~~2019 budget and make certain other affirmative and negative covenants more restrictive. In the ~~next twelve months, LTM Bank EBITDA will likely underperform management’s expectations at~~second quarter of 2019, the ~~time we~~Company entered into the ~~Fourth Amendment. In addition, total debt is expected~~Seventh Term Amendment (as defined below) to ~~be higher than our projections at~~amend the ~~time we entered into the Fourth Amendment. As a result, we do not expect to comply with the 7.00 to 1.00 net leverage ratio covenant in our 2018~~First Lien Term Loan ~~Agreement for the quarter-ending December~~agreement to extend its $100.0 million prepayment requirement from on or before March 31, ~~2018, which absent an amendment~~2020 to on or ~~waiver, would constitute a default when reported. Such a default, if not cured, would allow the lenders to accelerate the maturity~~before May 15, 2020. Because of the ~~debt, making it due~~Sixth, Seventh, and ~~payable at that time. The~~Eighth Term Amendments, the Company is in ~~active discussions~~compliance with ~~the administrative agent~~all of its financial covenants as of September 30, 2019. Refer to Item 1, “Condensed Consolidated Financial Statements,” included within this Quarterly Report on Form 10-Q for the Term Loan lenders regarding the modification of covenant terms through the periods that will be impacted on an LTM basis by the factors described above and the Company believes it is probable that the Company will obtain an amendment modifying the covenant terms prior to triggering a default.additional information.

Cash Flows - Operating Activities

Net cash used for operating activities during 3Q19 YTD and 3Q18 YTD was ~~approximately $66.0~~$65.8 million, ~~during the nine months ended September 30, 2018 compared to a use of approximately $2.3~~and $74.5 million, ~~during the nine months ended September 30, 2017.~~respectively. During ~~the nine months ended September 30, 2018,~~3Q19 YTD, the Company used ~~$8.3~~$44.7 million in cash flows, based on the reported net loss of ~~$157.9~~$78.0 million and after considering the effects of non-cash items related to gains and losses on dispositions of property and equipment, depreciation, amortization ~~goodwill and~~of intangible ~~asset impairment,~~assets, write off of operating lease assets, stock compensation, changes in deferred income taxes, amortization of original ~~issue~~issuance discount and debt issuance costs, ~~changes in deferred income taxes, stock compensation,~~paid-in-kind interest, and other, net. During ~~the nine months ended September 30, 2017,~~3Q18 YTD, the Company ~~generated $47.9~~used $21.9 million in cash flows, based on the reported net ~~income~~loss of ~~$16.4~~$167.6 million and after considering the effects of similar non-cash items ~~plus the loss on extinguishment of debt.~~and goodwill impairment.

Changes in operating assets and liabilities used ~~approximately $57.8~~$21.1 million and ~~$50.2~~$52.6 million of cash during ~~the nine months ended September 30, 2018~~3Q19 YTD and ~~2017,~~3Q18 YTD, respectively. Increases in accounts receivable resulted in a net use of cash of ~~$35.1~~$4.7 million and ~~$28.4~~$32.0 million during ~~the nine months ended September 30, 2018~~3Q19 YTD and ~~2017,~~3Q18 YTD, respectively. The ~~use of cash~~increase in accounts receivable for both periods ~~was the~~is a result of the higher sales activity during the second and third quarter compared to the fourth quarter due to the seasonality of ~~our businesses. The increase in 2018 was higher as a larger portion of~~ the ~~sales growth was in our Horizon Americas segment, as opposed to growth in 2017 in our Horizon Europe-Africa segment which factors a large portion of their receivables.~~business.

Changes in inventory resulted in a source of cash of ~~approximately $6.0~~$1.9 million during ~~the nine months ended September 30, 2018~~3Q19 YTD and ~~a use~~source of cash of approximately ~~$7.9~~$5.6 million during ~~the nine months ended September 30, 2017.~~3Q18 YTD. The decrease in inventory during 3Q19 YTD was due to softening of demand at the ~~nine months ended September 30, 2018 is~~start of the typically strong selling season. The decrease in inventory during 3Q18 YTD was due to the seasonality of our ~~business~~. The increase in inventory levels in the nine months ended September 30, 2017 was due to additional inventory built as safety stock in anticipation of the launch of our Kansas City distribution facility and the paintline upgrade in our Reynosa, Mexico facility during the fourth quarter.

business.

Changes in accounts payable and accrued liabilities resulted in a use of cash of ~~approximately $30.1~~$15.6 million during ~~the nine months ended September 30, 2018~~3Q19 YTD and a use of cash of ~~$17.4~~$27.5 million during the nine months ended September 30, 2017. The decrease in accounts payable and accrued liabilities during the nine months ended September 30, 2018 is primarily related to payments made to vendors with funding from the Term B Loan.3Q18 YTD. The use of cash for 3Q19 YTD compared to the ~~nine months ended September 30, 2017~~use of cash during 3Q18 YTD is primarily related to the ~~release~~timing of ~~liabilities related to certain unrecognized tax positions~~purchases and ~~decreases to certain compensation accruals primarily related to bonus~~vendor payments ~~as well as a decrease in liabilities associated with~~within the ~~acquisition of Westfalia from December 31, 2016.~~quarter.

Cash Flows - Investing Activities

Net cash provided by investing activities during 3Q19 YTD was $207.6 million and net cash used for investing activities was $9.9 million during 3Q18 YTD. During 3Q19 YTD, net proceeds from the ~~nine months ended September 30, 2018 and 2017~~sale of APAC was ~~approximately $10.7~~$209.6 million, and ~~$39.0~~net proceeds from the sale of certain non-automotive business assets were $5.0 million. 3Q19 YTD saw lower capital expenditure needs as compared to $9.7 million respectively. During the nine months ended September 30, 2018, we invested approximately $10.8 million in capital expenditures, as we have continued our investment in growth, capacity and productivity-related capital projects. During the nine months ended September 30, 2017, we incurred ~~approximately $20.3 million in capital expenditures on~~during 3Q18 YTD for growth, capacity and productivity-related projects, primarily within the Westfalia ~~Group. Additionally, during the third quarter of 2017, we acquired the assets of Best Bars for total cash consideration of $19.8 million.~~group.

Cash Flows - Financing Activities

Net cash used for financing activities was approximately $163.7 million and net cash provided by financing activities was ~~approximately~~ $74.4 ~~million and $9.6~~ million during the ~~nine months ended September 30, 2018~~3Q19 YTD and ~~2017,~~3Q18 YTD, respectively. During ~~the nine months ended September 30, 2018,~~3Q19 YTD, net proceeds from borrowings on our Second Lien Term B Loan were ~~$45.4~~$35.5 million, net of issuance costs; net repayments on our ABL Facility totaled $43.7 million, while we used cash of $173.4 million for repayments and debt issuance and transaction costs to amend our First Lien Term Loan. During 3Q18 YTD, net borrowings from our ABL Facility totaled $37.6 ~~million, while~~million. During 3Q18 YTD, we used cash of approximately $6.5 million for repayments on our First Lien Term B Loan. During the first nine months of 2017, we received proceeds of $121.1 million from the issuance of our Convertible Notes, net of issuance costs; proceeds of $79.9 million from the issuance of common stock, net of offering costs; proceeds of $20.9 million from the issuance of Warrants, net of issuance costs; and net borrowings from our ABL Facility totaled $20.0 million. Also during the nine months of 2017, we used cash of approximately $187.8 million for repayments on our Term B Loan, $29.7 million for the payments on Convertible Note Hedges, net of issuance costs and $10.0 million for the repurchase of common stock.

Factoring Arrangements

We have factoring arrangements with financial institutions to sell certain accounts receivable under non-recourse agreements. Total receivables sold during the year under the factoring arrangements were approximately ~~$193.3~~$199.2 million and ~~$189.8~~$193.3 million as of September 30, ~~2018~~2019 and ~~2017,~~2018, respectively. We utilize factoring arrangements as part of our ~~financing for~~business funding to meet the Company’s working ~~capital.~~capital needs. The costs of participating in these arrangements are immaterial to our results.

Our Debt and Other Commitments

In March 2019, the Company entered into the Sixth Term Amendment to permit the Company to enter into the Second Lien Term Loan Agreement, amend certain financial covenants to provide for relief based on the Company’s 2018 and 2019 budget and make certain other affirmative and negative covenants more restrictive.

In March 2019, the Company entered into the Second Lien Term Loan Agreement that provides for a term loan facility in the aggregate principal amount of $51.0 million and matures on September 30, 2021. The interest on the Second Lien Term Loan may be paid, at the Company’s election, in cash, at the customary eurocurrency rate plus a margin of 10.50% per annum, or in-kind, at the customary eurocurrency rate plus a margin of 11.50%. The Second Lien Term Loan Agreement is subject to various affirmative and negative covenants including a secured net leverage ratio tested quarterly further detailed below.

The Sixth Term Amendment also added a fixed charge coverage covenant starting with fiscal quarter ending March 31, 2020, a minimum liquidity covenant of $15.0 million effective March 31, 2019, and a maximum capital expenditure covenant of $15.0 million for 2019 and $25.0 million annually thereafter. The interest rate on the First Lien Term Loan Agreement is also amended to add 3.0% paid in kind interest in addition to the existing cash pay interest.

On May 7, 2019, the Company entered into the Seventh Amendment to Credit Agreement (the “Seventh Term Amendment”) to amend the First Lien Term Loan Agreement, which extended its $100.0 million prepayment requirement from on or before March 31, 2020 to on or before May 15, 2020.

In September 2019, the Company amended its existing ABL Facility to provide consent for the sale of APAC, provide consent for the Company’s prepayment of First Lien Term Loan, as discussed below, and increase the existing block by $5.0 million to a total block of $10 million, making the effective facility size $80.0 million.

December 31, 2020: 6.00 to 1.00

March 31, 2021: 6.00 to 1.00

June 30, 2021 and each fiscal quarter ending thereafter: 5.00 to 1.00

We and certain of our subsidiaries are party to the ABL Facility, an asset-based revolving credit facility, that provides for ~~$99.0~~$90.0 million of funding on a revolving basis, subject to borrowing base availability. The ABL Facility matures in June 2020 and bears interest on outstanding balances at variable rates as outlined in the agreement. On June 30, 2015, we entered into a term loan agreement under which we borrowed an aggregate amount of $200 million. On September 19, 2016, we entered into the First Amendment to the Original Term B Loan which provided for incremental commitments in an aggregate principal amount of $152.0 million. On March 31, 2017, we entered into the Third Amendment to the Original Term B Loan, which amended the Term B Loan to provide for a new term loan commitment. On July 31, 2018, the Company entered into the Fourth Amendment to the Term B Loan. The 2018 Incremental Term Loan provided for additional borrowings of $50.0 million that were used to pay outstanding balances under the ABL Loan Agreement, pay fees and expenses in connection with the amendment and for general corporate purposes. Borrowings under the 2018 Incremental Term Loan bear interest, at the Company’s election, at either (i) the Base Rate plus 5.0% per annum, or (ii) LIBOR, with a 1% floor, plus 6.0% per annum. Principal payments required under the 2018 Incremental Term Loan are $2.6 million due each calendar quarter beginning September 2018.

~~Refer to Note 8, “Long-term Debt,” in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” included within this quarterly report on Form 10-Q for additional information.~~

As of September 30, ~~2018,~~2019, approximately ~~$47.6~~$19.7 million was outstanding on the ABL Facility bearing interest at a weighted average rate of ~~3.9%~~7.0% and ~~$193.1~~$25.0 million was outstanding on the First Lien Term B Loan bearing interest at ~~8.2%~~8.1%. The Company had ~~$40.4~~$44.5 million inof availability under the ABL Facility as of September 30, ~~2018.~~2019.

The agreements governing the ABL Facility ~~and Term B Loan~~ contain various negative and affirmative covenants and other requirements affecting us and our subsidiaries, including restrictions on incurrence of debt, liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, asset dispositions, sale-leaseback transactions, hedging agreements, dividends and other restricted payments, transactions with affiliates, restrictive agreements and amendments to charters, bylaws, and other material documents. The ABL Facility does not include any financial maintenance covenants other than a springing minimum fixed charge

coverage ratio of at least 1.00 to 1.00 on a trailing twelve-month basis, which will be tested only upon the occurrence of an event of default or certain other conditions as specified in the agreement. The Term B Loan contains customary negative covenants, and also contains a financial maintenance covenant which requires the Company to maintain a net leverage ratio not exceeding 7.00 to 1.00 through the fiscal quarter ending December 31, 2018, 6.50 to 1.00 through the fiscal quarter ending March 31, 2019; 5.00 to 1.00 through the fiscal quarter ended June 30, 2019; 4.75 to 1.00 through the fiscal quarter ended September 30, 2019; and thereafter, 4.50 to 1.00. At September 30, 2018, the Company was in compliance with its financial covenants in the Term B Loan.

On July 3, 2017, our Australia subsidiary entered into a new agreement to provide for revolving borrowings up to an aggregate amount of $29.6 million. The agreement includes two sub-facilities: (i) Facility A has a borrowing capacity of $18.7 million, matures on July 3, 2020, and is subject to interest at Bank Bill Swap Bid Rate plus a margin determined based on the most recent net leverage ratio; (ii) Facility B has a borrowing capacity of $10.8 million, matured on July 3, 2018 and was subject to interest at Bank Bill Swap Bid Rate plus 0.9% per annum. Borrowings under this arrangement are subject to financial and reporting covenants. Financial covenants include maintaining a net leverage ratio not exceeding 2.50 to 1.00 during the period commencing on the date of the agreement and ending on the first anniversary of the date of the agreement; and 2.00 to 1.00 thereafter; working capital coverage ratio (working capital over total debt) greater than 1.75 to 1.00 and a gearing ratio (senior debt to senior debt plus equity) not exceeding 50%. As of September 30, 2018 we were in compliance with all covenants.

We are subject to variable interest rates on our First Lien Term B Loan and ABL Facility. At September 30, ~~2018, one-Month~~2019, one-month LIBOR and ~~three-Month~~three-month LIBOR approximated ~~2.26%~~2.02% and ~~2.40%,~~2.09% respectively.

In addition to our long-term debt, we have other cash commitments related to leases. We account for these lease transactions as operating leases and ~~annual~~ rent expense related thereto for 3Q19 YTD approximated ~~$20.0 million for the year ended December 31, 2017.~~$13.3 million. We expect to continue to utilize leasing as a financing strategy in the future to meet capital expenditure needs and to reduce debt levels.

The ABL Facility matures on June 30, 2020, and as of September 30, 2019, had an outstanding balance of $19.7 million. The Company believes it has sufficient liquidity to operate its business. However, today it does not have the cash or liquidity to pay off the ABL Facility at maturity. The Company intends to enter into a replacement revolving credit facility prior to the maturity of the ABL Facility. However, there can be no assurance that the company will be able to enter into a replacement revolving credit facility with commercially reasonable terms or at all. If the Company cannot generate sufficient cash from operations to make the aforementioned payment at maturity, or enter into new or additional financing arrangements, it may result in an event of default because of the inability to meet all of its obligations under its credit agreements. Such a default, if not cured, would allow the lenders to accelerate the maturity of the debt, making it due and payable at that time, which would result in a cross default of other debt obligations.

The ~~following~~Company is ~~a reconciliation~~in compliance with all of ~~net loss attributable to Horizon Global,~~its financial covenants as ~~reported, which is a U.S. GAAP measure~~ of ~~our operating results, to Consolidated Bank EBITDA, as defined in our credit agreement, for the twelve months ended~~ September 30, ~~2018. We present Consolidated Bank EBITDA to show our performance under our financial covenants.~~2019.

Less: Add:
Year Ended December 31, 2017 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2018 Twelve Months Ended
September 30, 2018
(dollars in thousands)
Net income (loss) attributable to Horizon Global $ (3,550 ) $ 17,290
$ (157,200 ) $ (178,040 )
Bank stipulated adjustments:
Interest expense, net (as defined) 22,410
16,650
24,920
30,680
Income tax (benefit) expense 9,750
(3,350 ) (12,460 ) 640
Depreciation and amortization 25,340
17,940
18,710
26,110
Extraordinary charges ^(a)
2,520
—
23,000
25,520
Non-cash compensation expense ^(b)
3,630
2,760
1,440
2,310
Other non-cash expenses or losses 2,180
1,050
127,310
128,440
Pro forma EBITDA of permitted acquisition 840
840
—
—
Interest-equivalent costs associated with any Specified Vendor Receivables Financing 1,490
960
1,380
1,910
Debt extinguishment costs 4,640
4,640
—
—
Items limited to a % of consolidated EBITDA^(c):

Non-recurring expenses ^(d)
2,440
1,310
7,500
8,630
Acquisition integration costs ^(e)
11,210
8,230
5,050
8,030
Synergies related to permitted acquisition ^(f)
1,480
1,480

—
Consolidated Bank EBITDA, as defined $ 84,380
$ 69,800
$ 39,650
$ 54,230

September 30, 2018
(dollars in thousands)
Total Consolidated Indebtedness, as defined $ 361,207
Consolidated Bank EBITDA, as defined 54,230
Actual leverage ratio 6.66 x
Covenant requirement 7.00 x

~~______________________~~


~~(a)~~	Extraordinary distribution costs from Q1 and Q2 2018 that were included in special items, but not included as an add back in prior quarter's leverage calculations have been adjusted with the Q3 leverage calculation and are now included as extraordinary items.


~~(b)~~	~~Non-cash compensation expenses resulting from the grant of restricted units of common stock and common stock options.~~

~~(c)~~

Under the Fourth Amendment, the EBITDA limitation for nonrecurring expenses or costs was increased from 25% of Consolidated EBITDA for the period to 45% of Consolidated EBITDA for the period; provided further that such percentage shall be (i) 35% of Consolidated EBITDA on September 30, 2019 and (ii) 25% of Consolidated EBITDA on December 31, 2018 and thereafter. As such, the amounts added to Consolidated Net Income pursuant to items b-d shall not exceed 45% of Consolidated EBITDA, excluding these items, for such period.


~~(d)~~	Under the Amended Term Loan Agreement, cost and expenses related to cost savings projects, including restructuring and severance expenses, are not to exceed $5 million in any fiscal year and $20 million in aggregate, commencing on or after January 1, 2015. The Fourth Amendment has raised the annual cap to $7.5 million in any fiscal year and $25 million in aggregate.


~~(e)~~	Under the 2018 Term Loan Agreement, costs and expenses related to the integration of the Westfalia Group acquisition are not to exceed $10 million in any fiscal year and $30 million in aggregate, or other permitted acquisitions are not to exceed $7.5 million in any fiscal year and $20 million in aggregate.


~~(f)~~	Under the 2018 Term Loan Agreement, the add back for the amount of reasonably identifiable and factually supportable “run rate” cost savings, operating expense reductions, and other synergies cannot exceed $12.5 million for the Westfalia Group acquisition.

Refer to Note 8,9, “Long-term Debt,” in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” included within this quarterly report on Form 10-Q for additional information.

Consolidated EBITDA (defined as “Consolidated EBITDA” in our First Lien Term Loan Agreement and Second Lien Term Loan Agreement, collectively “Term Loan Agreements”) is a comparable measure to how the Company assesses performance. As discussed further in the Segment Information and Supplemental Analysis section of above, we use certain non-GAAP financial measures to assess performance and measure our covenants compliance in accordance with the Term Loan Agreements, which includes Adjusted EBITDA at the operating segment level. For the measurement of our Term Loan Agreements 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 that can be excluded to $5 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 for the three months ended September 30, 2019 and 2018; the nine months ended September 30, 2019 and 2018; and the last twelve months ended September 30, 2019 and 2018, are as follows:



	Three months ended September 30,									Nine months ended September 30,									Last twelve months ended September 30,
	2019			2018			Change			2019			2018			Change			2019			2018			Change
	(dollars in thousands)
Net income (loss) attributable to Horizon Global	$	145,510		$	(32,760	)	$	178,270		$	112,330		$	(157,200	)	$	269,530		$	65,620		$	(178,680	)	$	244,300
Net loss attributable to noncontrolling interest	(260		)	(240		)	(20		)	(840		)	(720		)	(120		)	(1,070		)	(420		)	(650		)
Net income (loss)	145,250			(33,000		)	178,250			111,490			(157,920		)	269,410			64,550			(179,100		)	243,650
Interest expense	24,120			7,590			16,530			50,270			19,580			30,690			58,140			25,240			32,900
Income tax benefit	(1,020		)	(1,420		)	400			(2,330		)	(15,770		)	13,440			1,930			(3,330		)	5,260
Depreciation and amortization	6,250			5,090			1,160			16,790			15,070			1,720			22,300			21,310			990
EBITDA	174,600			(21,740		)	196,340			176,220			(139,040		)	315,260			146,920			(135,880		)	282,800
Net loss attributable to noncontrolling interest	260			240			20			840			720			120			1,070			420			650
Income from discontinued operations, net of tax	(182,750		)	(4,110		)	(178,640		)	(189,520		)	(9,670		)	(179,850		)	(192,690		)	(14,210		)	(178,480		)
EBITDA from continuing operations	(7,890		)	(25,610		)	17,720			(12,460		)	(147,990		)	135,530			(44,700		)	(149,670		)	104,970
Adjustments pursuant to Term Loan Agreements:
Losses on sale of receivables	320			640			(320		)	1,280			1,490			(210		)	1,510			1,730			(220		)
Non-cash equity grant expenses	850			230			620			1,820			1,440			380			1,970			2,030			(60		)
Other non-cash expenses or losses	1,180			27,470			(26,290		)	5,560			128,250			(122,690		)	9,300			128,420			(119,120		)
Term Loans related fees, costs and expenses	—			—			—			2,920			—			2,920			2,920			—			2,920
Lender agent related professional fees, costs, and expenses	760			—			760			760			—			760			760			—			760
Non-recurring expenses or costs (a)	2,890			7,510			(4,620		)	8,480			41,560			(33,080		)	20,570			47,060			(26,490		)
Asset sale related fees, costs, and expenses (b)	(1,320		)	—			(1,320		)	—			—			—			—			—			—
Non-cash losses on asset sales	(50		)	110			(160		)	(150		)	520			(670		)	180			1,330			(1,150		)
Other expense, net	210			(540		)	750			(20		)	(2,250		)	2,230			330			(2,190		)	2,520
Adjusted EBITDA	(3,050		)	9,810			(12,860		)	8,190			23,020			(14,830		)	(7,160		)	28,710			(35,870		)
Non-recurring expense limitation (a) (b)	N/A			N/A			N/A			N/A			(31,560		)	31,560			(10,570		)	(37,060		)	26,490
Other expense, net	(210		)	540			(750		)	20			2,250			(2,230		)	(330		)	2,190			(2,520		)
Consolidated EBITDA	$	(3,260	)	$	10,350		$	(13,610	)	$	8,210		$	(6,290	)	$	14,500		$	(18,060	)	$	(6,160	)	$	(11,900	)

(a) Non-recurring expenses or costs including severance, restructuring and relocation are not to, in aggregate, exceed $10 million in adjustments in determining Consolidated EBITDA in any four fiscal quarter period.

(b) Fees, costs and expenses incurred in connection with any proposed asset sale are not to, in aggregate, exceed $5 million in adjustments in determining Consolidated EBITDA in any four fiscal quarter period.

Credit Rating

We and certain of our outstanding debt obligations are rated by Standard & Poor’s and Moody’s. On June ~~20, 2018,~~14, 2019, Moody’s issued a rating of B2Caa3 for our ~~$160~~$210 million senior secured term loan and a rating of B3C for our corporate family rating. Moody’s also assigned the Company a ~~negative~~stable outlook. On ~~August 8, 2018,~~March 21, 2019, Standard & Poor’s issued a rating of ~~CCC+~~CCC for our ~~$160~~$210 million senior secured term loan, a rating of ~~CCC+~~CCC for our corporate credit rating and a rating of ~~CCC~~CCC- for our Convertible Notes. On August 21, 2019, Standard & Poor’s ~~also assigned~~revised the ~~Company a stable outlook.~~Company’s outlook to developing.

If our credit ratings were to decline, our ability to access certain financial markets may become limited, our cost of borrowings may increase, the perception of us in the view of our customers, suppliers and security holders may worsen and as a result, we may be adversely affected.

Market Risk

We use derivative financial instruments to manage currency risks associated with our procurement activities denominated in currencies other than the functional currency of our subsidiaries and the impact of currency rate volatility on our earnings. As of September 30, ~~2018~~2019, we were party to forward contracts, ~~and cross currency swaps,~~ to hedge changes in foreign currency exchange rates, with notional amounts of approximately ~~$20.5 million and $114.7 million, respectively.~~$3.9 million. See Note 9,10, “Derivative Instruments,” included in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” within this quarterly report on Form 10-Q.

We are also subject to interest risk as it relates to our long-term debt. We may in the future use interest rate swap agreements to fix the variable portion of our debt to manage this risk.

Outlook

Our global business remains susceptible to economic conditions that could adversely affect our results. In the ~~near-term,~~near term, the economies that most significantly affect our demand, including the United States and European Union, ~~and Australia,~~ are expected to continue to grow. ~~The impact of tax reform in the U.S. should continue to drive growth in the near-term; however, the longer-term implications of tax reform on economic growth are not yet fully understood.~~ We have been impacted by recently enacted tariffs on imports from China ~~and seek~~that continued in 3Q19. The Company endeavors to recover incremental input costs through pricing actions, but the recoveries generally occur over time. The impact of potential increases in these ~~incremental costs~~tariffs during 2019 is uncertain, as well as the potential for recoveries through pricing actions. If geopolitical tensions, particularly ~~with respect to~~in East Asia, escalate, it may affect global consumer sentiment affecting the expected economic growth in the ~~near-term.~~near term. Additionally, we face some slowing of the U.K. aftermarket due to the continued uncertainty surrounding Brexit.

Due to its historical performance and liquidity needs, during the first quarter of 2019, the Company entered into the Bridge Loan of $10.0 million and the Second Lien Term Loan of $51.0 million to repay the Bridge Loan and entered into the Sixth Term Amendment to amend certain financial covenants to provide for relief based on the Company’s 2018 and 2019 operating performance and make certain other affirmative and negative covenants more restrictive. In ~~2017, we began experiencing performance issues including: manufacturing inefficiencies in our Reynosa, Mexico manufacturing facility,~~addition, the Company used certain of the proceeds from the 3Q19 sale of APAC to pay down $163.3 million of its First Lien Term Loan, satisfying its $100.0 million prepayment requirement under the First Lien Term Loan. In conjunction with the sale of APAC and pay down of the First Lien Term Loan discussed above, the Company entered into certain amendments and consents from its various lender groups to remove its quarterly principal payment obligation, as well as startup inefficiencies in both our new Kansas City distribution facility in the Americas segment and our Romanian manufacturing facility in the Europe-Africa segment. In response to these challenges, we made organizational changes, enlisted the assistanceamend certain of manufacturing consultants, and identified additional cost reduction projects, including the closure of two non-manufacturing facilities in our Americas segment. We believe the action plan we publicly communicated is substantially complete with respectits financial covenants related to the ~~Americas segment. While we expect~~First Lien Term Loan and Second Lien Term Loan to not be measured until the new leadership in Europe-Africa to enhance the focus on operational improvements, progress is expected to take longer to realize in this segment. In the short-term, the costs associated with executing these initiatives, including severance, unrecoverable lease obligations, and professional service fees, may affect our results and cash flows.

~~In 2018,~~fourth quarter 2020. The 3Q19 amendments discussed above allowed the Company ~~experienced a combination~~to keep $36.3 million of ~~increased distribution costs and constrained shipments~~the proceeds from the ~~Americas distribution network primarily resulting from the transfer~~sale of ~~aftermarket shipping volume from Dallas, TX~~APAC to ~~Kansas City, KS. Since amending~~provide for its liquidity needs. Although we were able to obtain new financing and amendments to our ~~Term Loan~~existing agreements, we remain focused on ~~July 31, 2018,~~maintaining liquidity to fund our Europe-Africa segment has continued to underperform. Additionally, our new leadership team in Europe has performed an initial assessment of our business in that segment, resulting in reduced expectations through the remainder of 2018. Primarily due to these factors as well as costs associated with remediating these factors, the Company has increased draws on our ABL and experienced a decline in Bank EBITDA. Based on our results for the quarter-ended September 30, 2018 and our current forecast for the next twelve months, LTM Bank EBITDA will likely underperform management’s expectations at the time we entered into the Fourth Amendment. In addition, total debt is expected to be higher than our projections at the time we entered into the Fourth Amendment. As a result, we do not expect to comply with the 7.00 to 1.00 net leverage ratio covenant in our 2018 Term Loan Agreement for the quarter-ending December 31, 2018, which absent an amendment or waiver, would constitute a default when reported. Such a default, if not cured, wouldoperations.

~~allow the lenders to accelerate the maturity of the debt, making it due and payable at that time.~~ The Company is in ~~active discussions~~compliance with ~~the administrative agent~~all of its financial covenants as of September 30, 2019. Refer to Item 1, “Condensed Consolidated Financial Statements,” included within this Quarterly Report on Form 10-Q for the Term Loan lenders regarding the modification of covenant terms through the periods that will be impacted on an LTM basis by the factors described above and the Company believes it is probable that the Company will obtain an amendment modifying the covenant terms prior to triggering a default.

We believe the unique global footprint we enjoy in our market space will benefit us as our OE customers continue to demonstrate a preference for stronger relationships with few suppliers. We believe that our strong brand positions, portfolio of product offerings, and existing customer relationships present a long-term opportunity for us.

While a strong global economy offers opportunities for growth and cost leverage, we are committed to delivering on our internal projects to drive margin improvement. We believe our internal projects, if executed well, will have a positive impact on our margins in future periods.

~~Our strategic priorities are to improve margins, reduce our leverage, and drive top line growth.~~additional information.

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 financial statements are prepared in accordance with accounting principles generally accepted within the United States of Americas (“U.S. ~~GAAP.~~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.

During the first quarter of ~~2018,~~2019, the Company adopted the U.S. GAAP provisions of Accounting Standards Codification (“ASC”) 842, “Leases” (“ASC ~~606, “Revenue from Contracts with Customers (Topic 606)”~~842”). Refer to Note 2, “New Accounting Pronouncements” and Note 3,12, “~~Revenues”~~Leases” in Part I, Item 1, “~~Notes to the Condensed Consolidated Financial Statements,”~~ ~~included within this quarterly report on Form 10-Q, related to the impact of the adoption on the Company’s financial statements and accounting policies.~~

During the third quarter of 2018, the Company adopted the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. Refer to the “~~Statement of Shareholder’s Equity” and Note 2, “New Accounting Pronouncements” in Part I, Item 1,~~ Notes to the Condensed Consolidated Financial Statements,” included within this quarterly report on Form 10-Q, related to the impact of the adoption on the Company’s financial statements and accounting policies.

Except for accounting policies related to our adoption of ASC ~~606 and ASU 2018-02~~842 in ~~2018,~~2019, there were no material changes to the items that we disclosed as our critical accounting policies in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Emerging Growth Company

The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, establishes a class of company called an “emerging growth company,” which generally is a company whose initial public offering was completed after December 8, 2011 and had total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year. We currently qualify as an emerging growth company.

As an emerging growth company, we are eligible to take advantage of certain exemptions from various reporting requirements that are not available to public reporting companies that do not qualify for this classification, including without limitation the following:


▪	An emerging growth company is exempt from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and financial statements, commonly known as an “auditor discussion and analysis.”


▪	An emerging growth company is not required to hold a nonbinding advisory stockholder vote on executive compensation or any golden parachute payments not previously approved by stockholders.


▪	An emerging growth company is not required to comply with the requirement of auditor attestation of management’s assessment of internal control over financial reporting, which is required for other public reporting companies by Section 404 of the Sarbanes-Oxley Act.


▪	An emerging growth company is eligible for reduced disclosure obligations regarding executive compensation in its periodic and annual reports, including without limitation exemption from the requirement to provide a compensation discussion and analysis describing compensation practices and procedures.


▪	A company that is an emerging growth company is eligible for reduced financial statement disclosure in registration statements, which must include two years of audited financial statements rather than the three years of audited financial statements that are required for other public reporting companies.

For as long as we continue to be an emerging growth company, we expect that we will take advantage of the reduced disclosure obligations available to us as a result of this classification. We will remain an emerging growth company until the earlier of (i) December 31, 2020, the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act; (ii) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion (subject to further adjustment for inflation) or more; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under applicable SEC rules. We expect that we will remain an emerging growth company for the foreseeable future, but cannot retain our emerging growth company status indefinitely and will no longer qualify as an emerging growth company on or before December 31, 2020.

Emerging growth companies may elect to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to “opt out” of such extended transition period, and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for companies that are not “emerging growth companies.” Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are exposed to market risk associated with fluctuations in interest rates, commodity prices, insurable risks due to property damage, employee and liability claims, and other uncertainties in the financial and credit markets, which may impact demand for our products.

We conduct business in various locations throughout the world and are subject to market risk due to changes in the value of foreign currencies. The functional currencies of our foreign subsidiaries are primarily the local currency in the country of domicile. We manage these operating activities at the local level and revenues and costs are generally denominated in local currencies; however, results of operations and assets and liabilities reported in U.S. dollars will fluctuate with changes in exchange rates between the local currencies and the U.S. dollar. A 10% change in average exchange rates versus the U.S. dollar would have resulted in an approximate ~~$36.5~~$25.3 million and ~~$35.3~~$26.3 million change to our net sales for the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

We are exposed to market risk from changes in the interest rates on a significant portion of our outstanding debt. Outstanding balances under our First Lien Term B Loan, at the Company’s election, bear interest at variable rates based on a margin over defined LIBOR. Based on the amount outstanding on the First Lien Term B Loan as of September 30, ~~2018~~2019 and ~~2017,~~2018, a 100 basis point change in LIBOR would result in an approximate ~~$1.9~~$0.3 million and ~~$1.5~~$1.9 million, respectively, to our annual interest expense.

We use derivative financial instruments to manage our currency risks. We are also subject to interest risk as it relates to long-term debt. See Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for details about our primary market risks, and the objectives and strategies used to manage these risks. Also see Note 89, “Long-term Debt,” and Note 910, “Derivative Instruments,” in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” included within this quarterly report on Form 10-Q for additional information.

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, or the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’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 September 30, ~~2018,~~2019, 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, ~~2018,~~2019, 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

Beginning January 1, ~~2018,~~2019, the Company implemented ~~ASU 2014-09, “Revenue from Contracts with Customers~~Accounting Standards Update 2016-02, “Leases (Topic ~~606)~~842)”. ~~Although~~ Topic ~~606 is expected to have an immaterial~~842 had a material impact on the right-of-use assets and corresponding lease liabilities recognized on the Company’s ~~ongoing net income (loss), the~~condensed consolidated balance sheets. The Company did modify and add new controls designed to address risks associated with recognizing ~~revenue~~leases under the new standard. The Company has therefore augmented internal control over financial reporting as follows:


▪	~~Enhanced~~enhanced the risk assessment process to take into account risks associated with the new ~~revenue recognition standard.~~lease standard; and


▪	~~Added~~added controls that address risks associated with the ~~five-step model~~evaluation of all leases for ~~recording revenue,~~balance sheet recognition, including the revision of the Company’s lease contract review controls.

There were no other changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended September 30, ~~2018,~~2019, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

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, ~~and~~ results of operations, or cash flows. For additional information regarding legal proceedings, refer to Note 13, “Contingencies,” included in Item 8, “Financial Statements and Supplementary Data,” within this quarterly report on Form 10-Q.

Item 1A. Risk Factors

A discussion of our risk factors can be found in the section entitled “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, which could materially affect our business, financial condition or future results. There have been no significant changes in our risk factors as disclosed in our ~~2017~~2018 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company’s purchases of its shares of common stock during the third quarter of ~~2018~~2019 were as follows:



Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs ^(a)
~~July~~April 1 - ~~31, 2018~~30, 2019	—		—	813,494
~~August~~May 1 - 31, ~~2018~~2019	—		—	813,494
~~September~~June 1 - 30, ~~2018~~2019	—		—	813,494
Total	—		—

__________________________

^(a) The Company has a share repurchase program that was announced in May 2017 to purchase up to 1.5 million shares of the Company’s common stock. At the end of the third quarter of ~~2018,~~2019, 813,494 shares of common stock remains to be purchased under this program. The share repurchase program expires on May 5, 2020.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~Not applicable.~~None.

Item 6. Exhibits.

Exhibits Index:



~~3.1(a)~~2.1(c)	Share Sale and Purchase Agreement, dated August 16, 2019, by and among certain subsidiaries of Horizon Global Corporation and Hayman Pacific BidCo Pty. Ltd.
3.1(b)	Amended and Restated Certificate of Incorporation of Horizon Global Corporation, as amended.
~~3.2(b)~~3.2(a)	Amended and Restated By-laws of Horizon Global Corporation.
~~10.1(a)~~10.1	~~Fourth~~Amended and Restated Limited Consent and Eighth Amendment to ~~Credit~~Amended and Restated Loan Agreement dated September 19, 2019, by and among Horizon Global Corporation, the other parties thereto, the lenders party thereto and Bank of America, N.A., as ~~of July 31, 2018, to the Term Loan Credit Agreement,~~administrative agent.
10.2	Consent and Amendment dated ~~as of June 30, 2015,~~September 24, 2019, by and among Horizon Global Corporation, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent.
10.3	Consent and Amendment dated September 24, 2019, by and among Horizon Global Corporation, the lenders party thereto and Cortland Capital Market Services LLC, as administrative agent and collateral agent.
10.4	Separation Agreement dated October 2, 2019, between Horizon Global Corporation and Carl S. Bizon.
10.5	Form of Performance Share Units Award Agreement - Signing Grant
31.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase 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 ~~7, 2018~~8, 2019 (File No. 001-37427).
~~(b)~~(c)		Incorporated by reference to the Exhibit filed with our Current Report on Form 8-K filed on ~~March 12, 2018~~September 25, 2019 (File No. 001-37427).

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/ ~~DAVID G. RICE~~JAMIE G.PIERSON

Date:	November ~~8, 2018~~12, 2019	By:	~~David~~Jamie G. ~~Rice~~Pierson Chief Financial Officer

4758



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	HZN	New York Stock Exchange


	September 30, 2018			December 31, 2017
	(unaudited)						September 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	27,310		$	29,570		$	16,360		$	27,650
Receivables, net of reserves of approximately $4.5 million and $3.1 million at September 30, 2018 and December 31, 2017, respectively	122,250			91,770
Receivables, net of allowance for doubtful accounts of approximately $5.0 million and $4.8 million at September 30, 2019 and December 31, 2018, respectively							93,480			95,170
Inventories	161,110			171,500			141,150			152,200
Prepaid expenses and other current assets	11,930			10,950			9,480			8,270
Current assets held-for-sale							—			36,080
Total current assets	322,600			303,790			260,470			319,370
Property and equipment, net	105,370			113,020			78,670			86,500
Operating lease right-of-use assets							56,170			—
Goodwill	10,410			138,190			4,200			4,500
Other intangibles, net	81,930			90,230			60,350			69,400
Deferred income taxes	6,900			4,290			440			660
Non-current assets held-for-sale							—			34,790
Other assets	9,170			11,510			5,700			6,130
Total assets	$	536,380		$	661,030		$	466,000		$	521,350
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities, long-term debt	$	12,530		$	16,710
Short-term borrowings and current maturities, long-term debt							$	24,270		$	13,860
Accounts payable	109,390			138,730			79,440			102,350
Short-term operating lease liabilities							9,850			—
Current liabilities held-for-sale							—			28,080
Accrued liabilities	57,430			53,070			53,020			58,520
Total current liabilities	179,350			208,510			166,580			202,810
Gross long-term debt							214,930			382,220
Unamortized debt issuance costs and discount							(34,200		)	(31,570		)
Long-term debt	342,260			258,880			180,730			350,650
Deferred income taxes	13,600			14,870			8,280			12,620
Long-term operating lease liabilities							50,890			—
Non-current liabilities held-for-sale							—			1,740
Other long-term liabilities	19,000			38,370			20,770			19,750
Total liabilities	554,210			520,630			427,250			587,570
Commitments and contingent liabilities	—			—
Shareholders' equity:
Contingencies (See Note 13)
Shareholders' equity (deficit):
Preferred stock, $0.01 par: Authorized 100,000,000 shares; Issued and outstanding: None	—			—			—			—
Common stock, $0.01 par: Authorized 400,000,000 shares; 25,798,745 shares issued and 25,112,239 outstanding at September 30, 2018, respectively, and 25,625,571 shares issued and 24,939,065 outstanding at December 31, 2017, respectively	250			250
Common stock, $0.01 par: Authorized 400,000,000 shares; 26,073,894 shares issued and 25,387,388 outstanding at September 30, 2019, and 25,866,747 shares issued and 25,180,241 outstanding at December 31, 2018							250			250
Common stock warrants exercisable for 6,487,674 shares issued and outstanding at September 30, 2019; none issued and outstanding at December 31, 2018							10,720			—
Paid-in capital	160,960			159,830			162,760			160,990
Treasury stock, at cost: 686,506 shares at September 30, 2018 and December 31, 2017	(10,000		)	(10,000		)
Treasury stock, at cost: 686,506 shares at September 30, 2019 and December 31, 2018							(10,000		)	(10,000		)
Accumulated deficit	(175,960		)	(18,760		)	(110,390		)	(222,720		)
Accumulated other comprehensive income	9,200			10,570
Total Horizon Global shareholders' equity	(15,550		)	141,890
Accumulated other comprehensive (loss) income							(11,250		)	7,760
Total Horizon Global shareholders' equity (deficit)							42,090			(63,720		)
Noncontrolling interest	(2,280		)	(1,490		)	(3,340		)	(2,500		)
Total shareholders' equity	(17,830		)	140,400
Total shareholders' equity (deficit)							38,750			(66,220		)
Total liabilities and shareholders' equity	$	536,380		$	661,030		$	466,000		$	521,350


	Nine months ended September 30,						Nine months ended September 30,
	2018			2017			2019			2018
Cash Flows from Operating Activities:
Net income (loss)	$	(157,920	)	$	16,370		$	111,490		$	(157,920	)
Adjustments to reconcile net income (loss) to net cash used for operating activities:
Net loss on dispositions of property and equipment	490			330
Less: Net income from discontinued operations							189,520			9,670
Net loss from continuing operations							(78,030		)	(167,590		)

Adjustments to reconcile net loss from continued operations to net cash used for operating activities:
Net (gain) loss on dispositions of property and equipment							(1,500		)	520
Depreciation	12,540			10,280			11,980			9,410
Amortization of intangible assets	6,170			7,660			4,800			5,640
Write off of operating lease assets							4,250			—
Impairment of goodwill and intangible assets	125,770			—			—			125,770
Amortization of original issuance discount and debt issuance costs	6,050			5,090			18,570			6,050
Deferred income taxes	(3,370		)	840			(3,390		)	(3,370		)
Loss on extinguishment of debt	—			4,640
Non-cash compensation expense	1,430			2,760			1,790			1,430
Amortization of purchase accounting inventory step-up	—			420
Paid-in-kind interest							7,620			—
Increase in receivables	(35,120		)	(28,360		)	(4,680		)	(31,950		)
(Increase) decrease in inventories	5,980			(7,920		)
Decrease in prepaid expenses and other assets	1,410			3,490
Increase (decrease) in accounts payable and accrued liabilities	(30,060		)	(17,440		)
Decrease in inventories							1,920			5,630
(Increase) decrease in prepaid expenses and other assets							(2,770		)	1,150
Decrease in accounts payable and accrued liabilities							(15,560		)	(27,450		)
Other, net	590			(480		)	(10,800		)	220
Net cash used for operating activities	(66,040		)	(2,320		)
Net cash used for operating activities for continuing operations							(65,800		)	(74,540		)
Cash Flows from Investing Activities:
Capital expenditures	(10,820		)	(20,270		)	(8,460		)	(9,660		)
Acquisition of businesses, net of cash acquired	—			(19,800		)
Net proceeds from sale of business							214,570			—
Net proceeds from disposition of property and equipment	160			1,080			1,470			(280		)
Net cash used for investing activities	(10,660		)	(38,990		)
Net cash provided by (used for) investing activities for continuing operations							207,580			(9,940		)
Cash Flows from Financing Activities:
Proceeds from borrowings on credit facilities	12,550			36,970			13,780			12,550
Repayments of borrowings on credit facilities	(14,390		)	(41,630		)	(6,520		)	(14,390		)
Proceeds from Term B Loan, net of issuance costs	45,430			—
Repayments of borrowings on Term B Loan, inclusive of transaction costs	(6,490		)	(187,820		)
Proceeds from ABL Revolving Debt	72,430			114,500
Proceeds from Second Lien Term Loan, net of issuance costs							35,520			45,430
Repayments of borrowings on First Lien Term Loan, inclusive of transaction costs							(173,430		)	(6,490		)
Proceeds from ABL Revolving Debt, net of issuance costs							68,790			72,430
Repayments of borrowings on ABL Revolving Debt	(34,830		)	(94,500		)	(112,510		)	(34,830		)
Proceeds from issuance of common stock, net of offering costs	—			79,920
Repurchase of common stock	—			(10,000		)
Proceeds from issuance of Convertible Notes, net of issuance costs	—			121,130
Proceeds from issuance of Warrants, net of issuance costs	—			20,930
Payments on Convertible Note Hedges, inclusive of issuance costs	—			(29,680		)
Proceeds from issuance of Series A Preferred Stock							5,340			—
Proceeds from issuance of Warrants							5,380			—
Other, net	(300		)	(240		)	(10		)	(300		)
Net cash provided by financing activities	74,400			9,580
Net cash (used for) provided by financing activities for continuing operations							(163,660		)	74,400
Discontinued Operations:
Net cash provided by discontinued operating activities							11,430			8,500
Net cash used for discontinued investing activities							(1,120		)	(720		)
Net cash provided by (used for) discontinued financing activities							—			—
Net cash provided by discontinued operations							10,310			7,780
Effect of exchange rate changes on cash	40			1,960			280			40
Cash and Cash Equivalents:
Decrease for the period	(2,260		)	(29,770		)	(11,290		)	(2,260		)
At beginning of period	29,570			50,240			27,650			29,570
At end of period	$	27,310		$	20,470		$	16,360		$	27,310
Supplemental disclosure of cash flow information:
Cash paid for interest	$	13,520		$	10,090		$	19,730		$	13,430
Cash paid for taxes	$	4,340		$	6,110		$	480		$	2,170


	September 30, 2018		December 31, 2017		September 30, 2019		December 31, 2018
	(dollars in thousands)				(dollars in thousands)
Finished goods	$	93,160	$	105,070	$	80,440	$	89,000
Work in process	18,770		16,590		12,880		16,160
Raw materials	49,180		49,840		47,830		47,040
Total inventories	$	161,110	$	171,500	$	141,150	$	152,200


	September 30, 2018		December 31, 2017		September 30, 2019		December 31, 2018
	(dollars in thousands)				(dollars in thousands)
ABL Facility	$	47,600	$	10,000	$	19,660	$	61,570
Term B Loan	193,130		149,620
First Lien Term Loan					25,010		190,520
Second Lien Term Loan					55,060		—
Convertible Notes	125,000		125,000		125,000		125,000
Bank facilities, capital leases and other long-term debt	22,790		25,780		14,470		18,990
	388,520		310,400
Gross debt					239,200		396,080
Less:
Unamortized debt issuance costs and original issuance discount on Term B Loan	8,110		4,940
Unamortized debt issuance costs and discount on the Convertible Notes	25,620		29,870
Current maturities, long-term debt	12,530		16,710		24,270		13,860
Gross long-term debt					214,930		382,220
Less:
Unamortized debt issuance costs and original issuance discount on First Lien Term Loan					790		7,380
Unamortized debt issuance costs and discount on Second Lien Term Loan					13,800		—
Unamortized debt issuance costs and discount on Convertible Notes					19,610		24,190
Unamortized debt issuance costs and discount					34,200		31,570
Long-term debt	$	342,260	$	258,880	$	180,730	$	350,650




Delaware (State or other jurisdiction of incorporation or organization)		47-3574483 (IRS Employer Identification No.)



Part I.	Financial Information

		Forward-Looking Statements	2

	Item 1.	Condensed Consolidated Financial Statements	3

		Condensed Consolidated Balance Sheets as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018	3

		Condensed Consolidated Statements of ~~Income (Loss)~~Operations for the Three and Nine Months Ended September 30, ~~2018~~2019 and ~~2017~~2018	4

		Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss for the Three and Nine Months Ended September 30, ~~2018~~2019 and ~~2017~~2018	5

		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2018~~2019 and ~~2017~~2018	6

		Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018	7

		Notes to Condensed Consolidated Financial Statements	8

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2833

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4353

	Item 4.	Controls and Procedures	4355

Part II.	Other Information

	Item 1.	Legal Proceedings	4556

	Item 1A.	Risk Factors	4556

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4556

	Item 3.	Defaults Upon Senior Securities	4556

	Item 4.	Mine Safety Disclosures	4556

	Item 5.	Other Information	4556

	Item 6.	Exhibits	4657

	Signatures		4758


	Common Stock		Paid-in Capital			Treasury Stock			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Horizon Global Shareholders’ Equity			Noncontrolling Interest			Total Shareholders’ Equity			Common Stock		Common Stock Warrants		Paid-in Capital			Treasury Stock			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Horizon Global Shareholders’ Deficit			Noncontrolling Interest			Total Shareholders’ Deficit
Balance at December 31, 2017, as reported	$	250	$	159,490		$	(10,000	)	$	(17,860	)	$	10,010		$	141,890		$	(1,490	)	$	140,400
Impact of ASU 2018-02	—		340			—			(900		)	560			—			—			—
Balance at December 31, 2017, as restated	250		159,830			(10,000		)	(18,760		)	10,570			141,890			(1,490		)	140,400
Balance at January 1, 2019																								$	250	$	—	$	160,990		$	(10,000	)	$	(222,720	)	$	7,760		$	(63,720	)	$	(2,500	)	$	(66,220	)
Net loss	—		—			—			(57,510		)	—			(57,510		)	(250		)	(57,760		)	—		—		—			—			(25,100		)	—			(25,100		)	(520		)	(25,620		)
Other comprehensive income, net of tax	—		—			—			—			4,680			4,680			10			4,690			—		—		—			—			—			140			140			—			140
Shares surrendered upon vesting of employees' share based payment awards to cover tax obligations	—		(200		)	—			—			—			(200		)	—			(200		)
Shares surrendered upon vesting of employees share based payment awards to cover tax obligations																								—		—		(10		)	—			—			—			(10		)	—			(10		)
Non-cash compensation expense	—		720			—			—			—			720			—			720			—		—		350			—			—			—			350			—			350
Balance at March 31, 2018	250		160,350			(10,000		)	(76,270		)	15,250			89,580			(1,730		)	87,850
Net loss	—		—			—			(66,930		)	—			(66,930		)	(230		)	(67,160		)
Issuance of Warrants																								—		5,380		—			—			—			—			5,380			—			5,380
Balance at March 31, 2019																								250		5,380		161,330			(10,000		)	(247,820		)	7,900			(82,960		)	(3,020		)	(85,980		)
Net Loss																								—		—		—			—			(8,080		)	—			(8,080		)	(60		)	(8,140		)
Other comprehensive income, net of tax																								—		—		—			—			—			(130		)	(130		)	—			(130		)
Non-cash compensation expense																								—		—		590			—			—			—			590			—			590
Issuance of Warrants																								—		5,340		—			—			—			—			5,340			—			5,340
Balance as of June 30, 2019																								250		10,720		161,920			(10,000		)	(255,900		)	7,770			(85,240		)	(3,080		)	(88,320		)
Net income																								—		—		—			—			145,510			—			145,510			(260		)	145,250
Other comprehensive loss, net of tax	—		—			—			—			(6,010		)	(6,010		)	(80		)	(6,090		)	—		—		—			—			—			(1,760		)	(1,760		)	—			(1,760		)
Shares surrendered upon vesting of employees' share based payment awards to cover tax obligations	—		(10		)	—			—			—			(10		)	—			(10		)
Non-cash compensation expense	—		490			—			—			—			490			—			490			—		—		840			—			—			—			840			—			840
Balance at June 30, 2018	250		160,830			(10,000		)	(143,200		)	9,240			17,120			(2,040		)	15,080
Net loss	—		—			—			(32,760		)	—			(32,760		)	(240		)	(33,000		)
Other comprehensive loss, net of tax	—		—			—			—			(40		)	(40		)				(40		)
Shares surrendered upon vesting of employees' share based payment awards to cover tax obligations	—		(90		)	—			—			—			(90		)	—			(90		)
Non-cash compensation expense	—		220			—			—			—			220			—			220
Balance at September 30, 2018	$	250	$	160,960		$	(10,000	)	$	(175,960	)	$	9,200		$	(15,550	)	$	(2,280	)	$	(17,830	)
Amounts reclassified from AOCI																								—		—		—			—			—			(17,260		)	(17,260		)	—			(17,260		)
Balance at September 30, 2019																								$	250	$	10,720	$	162,760		$	(10,000	)	$	(110,390	)	$	(11,250	)	$	42,090		$	(3,340	)	$	38,750



	Horizon Americas			Horizon Europe-Africa			Horizon Asia-Pacific			Total
	(dollars in thousands)
Balance at December 31, 2017
Goodwill	$	5,280		$	126,160		$	6,750		$	138,190
Accumulated impairment losses	—			—			—			—
Net beginning balance	5,280			126,160			6,750			138,190
Impairment	—			(124,660		)	—			(124,660		)
Foreign currency translation and other	(970		)	(1,500		)	(650		)	(3,120		)
Balance at September 30, 2018	$	4,310		$	—		$	6,100		$	10,410


	Amount of Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion, net of tax)						Amount of Gain (Loss) Reclassified from AOCI into Earnings											Three months ended September 30,
							Three months ended September 30,					Nine months ended September 30,						2019						2018
	As of September 30, 2018		As of December 31, 2017			Location of Gain (Loss) Reclassified from AOCI into Earnings (Effective Portion)	2018		2017			2018		2017				Cost of sales			Interest expense			Cost of sales			Interest expense
	(dollars in thousands)						(dollars in thousands)											(dollars in thousands)
Derivatives instruments
Total Amounts of Expense Line Items Presented in the Statement of Operations in Which the Effects of Cash Flow Hedges are Recorded																		$	(149,560	)	$	(24,120	)	$	(159,500	)	$	(7,590	)
Amount of Gain Reclassified from AOCI into Earnings																	Amount of Gain Reclassified from AOCI into Earnings
Derivatives classified as cash flow hedges:																	Derivatives classified as cash flow hedges:
Foreign currency forward contracts	$	1,340	$	(660	)	Cost of sales	$	580	$	620		$	790	$	880			$	350		$	—		$	440		$	—
Cross currency swap	$	1,310	$	270		Other expense, net	$	780	$	(4,100	)	$	4,000	$	(13,840	)		$	—		$	—		$	—		$	780


	Number of Restricted Shares		Weighted Average Grant Date Fair Value		Number of Restricted Shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2017	582,611		$	13.51
Outstanding at December 31, 2018					419,928		$	9.75
Granted	466,763		7.47		1,527,322		3.46
Vested	(210,882	)	12.19		(145,981	)	7.40
Canceled, forfeited	(238,284	)	11.41		(287,829	)	4.02
Outstanding at September 30, 2018	600,208		$	10.11
Outstanding at September 30, 2019					1,513,440		$	4.31



				Less:			Add:
	Year Ended December 31, 2017			Nine Months Ended September 30, 2017			Nine Months Ended September 30, 2018			Twelve Months Ended September 30, 2018
	(dollars in thousands)
Net income (loss) attributable to Horizon Global	$	(3,550	)	$	17,290		$	(157,200	)	$	(178,040	)
Bank stipulated adjustments:
Interest expense, net (as defined)	22,410			16,650			24,920			30,680
Income tax (benefit) expense	9,750			(3,350		)	(12,460		)	640
Depreciation and amortization	25,340			17,940			18,710			26,110
Extraordinary charges ^(a)	2,520			—			23,000			25,520
Non-cash compensation expense ^(b)	3,630			2,760			1,440			2,310
Other non-cash expenses or losses	2,180			1,050			127,310			128,440
Pro forma EBITDA of permitted acquisition	840			840			—			—
Interest-equivalent costs associated with any Specified Vendor Receivables Financing	1,490			960			1,380			1,910
Debt extinguishment costs	4,640			4,640			—			—
Items limited to a % of consolidated EBITDA^(c):
Non-recurring expenses ^(d)	2,440			1,310			7,500			8,630
Acquisition integration costs ^(e)	11,210			8,230			5,050			8,030
Synergies related to permitted acquisition ^(f)	1,480			1,480						—
Consolidated Bank EBITDA, as defined	$	84,380		$	69,800		$	39,650		$	54,230



	September 30, 2018
	(dollars in thousands)
Total Consolidated Indebtedness, as defined	$	361,207
Consolidated Bank EBITDA, as defined	54,230
Actual leverage ratio	6.66		x
Covenant requirement	7.00		x