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

 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended SeptemberJune 30, 20202021
or


 
TRANSITION REPORT PURSUANT TO SECTION 13 orOR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from                  to                  .
Commission file number 001-37427
HORIZON GLOBAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
 
47-3574483
(IRS Employer
Identification No.)
47912 Halyard Drive, Suite 100
Plymouth, Michigan 48170
(Address of principal executive offices, including zip code)
(734) 656-3000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueHZNNew York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x    No o.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer ☒
Non-acceleratedAccelerated filer o
Non-accelerated filer ☒Smaller reporting company ☒Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes  No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No  
As of November 2, 2020,July 30, 2021, the number of outstanding shares of the Registrant’s common stock was 26,219,23227,286,647 shares.



HORIZON GLOBAL CORPORATION
Index
 
   
  
   
   
  
  
  
  
 
  
 
  
  
  
  
  
  
  
 

1


Forward-Looking Statements
This Quarterly Report on Form 10-Q may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date they are made and give our current expectations or forecasts of future events. These forward-looking statements can be identified by the use of forward-looking words, such as “may,” “could,” “should,” “estimate,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “target,” “plan” or other comparable words, or by discussions of strategy that may involve risks and uncertainties.
These forward-looking statements are subject to numerous assumptions, risks and uncertainties which could materially affect our business, financial condition or future results including, but not limited to, risks and uncertainties with respect to: the impact of the novel coronavirus (COVID-19)COVID-19 pandemic on the Company’s business, results of operations, financial condition and liquidity; the Company’s ability to regain compliance with the New York Stock Exchange’s continued listing standards; the Company’s debt,liquidity, including, the Company’s ability to refinance any debt on commercially reasonable terms or at all;without limitation, supply chain and logistics issues; liabilities and restrictions imposed by the Company’s debt instruments;instruments, including the Company’s ability to comply with the applicable financial covenants related thereto; market demand; competitive factors; supply constraints;constraints and shipping disruptions; material, logistics and energy costs;costs, including the increased material costs resulting from the COVID-19 pandemic; 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 the Company’s business improvement initiatives in Europe-Africa, including the amount of savings and timing thereof; the Company’s exposure to product liability claims from customers and end users, and the costs associated therewith; the Company’s ability to meet its covenants in the agreements governing its debt; factors affecting the Company’s business that are outside of its control, including natural disasters, pandemics, including the current COVID-19 pandemic, accidents and governmental actions; and other risks that are discussed in Part I, Item 1A, “Risk Factors.” in the Company’s Annual Report on Form 10-K for the yeartwelve months ended December 31, 2019, as well as in Item 1A, “Risk Factors.” of this Quarterly Report on Form 10-Q and in the Company’s other periodic reports filed with the Securities and Exchange Commission .2020. The risks described in the Company’s Annual Report on Form 10-K and other periodic reports are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deemed to be immaterial also may materially adversely affect our business, financial position and results of operations or cash flows.
The cautionary statements set forth above should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. We caution readers not to place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect the Company. We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statement to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as otherwise required by law.
We disclose important factors that could cause our actual results to differ materially from our expectations implied by our forward-looking statements under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in the Company’s Annual Report on Form 10-K for the yeartwelve months ended December 31, 2019.2020. These cautionary statements qualify all forward-looking statements attributed to us or persons acting on our behalf. When we indicate that an event, condition or circumstance could or would have an adverse effect on us, we mean to include effects upon our business, financial and other conditions, results of operations, prospects and ability to service our debt.

2


PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements
HORIZON GLOBAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited—dollars in thousands)
September 30,
2020
December 31,
2019
June 30, 2021December 31, 2020
AssetsAssetsAssets
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$39,810 $11,770 Cash and cash equivalents$24,680 $44,970 
Restricted cashRestricted cash5,840 Restricted cash5,510 5,720 
Receivables, netReceivables, net106,650 71,680 Receivables, net116,240 87,420 
InventoriesInventories107,120 136,650 Inventories144,360 115,320 
Prepaid expenses and other current assetsPrepaid expenses and other current assets9,910 8,570 Prepaid expenses and other current assets12,100 11,510 
Total current assetsTotal current assets269,330 228,670 Total current assets302,890 264,940 
Property and equipment, netProperty and equipment, net73,670 75,830 Property and equipment, net73,520 74,090 
Operating lease right-of-use assetsOperating lease right-of-use assets47,380 45,770 Operating lease right-of-use assets40,400 47,310 
GoodwillGoodwill3,120 4,350 Goodwill3,360 
Other intangibles, netOther intangibles, net56,510 60,120 Other intangibles, net54,890 58,230 
Deferred income taxesDeferred income taxes390 430 Deferred income taxes1,280 1,280 
Other assetsOther assets7,630 5,870 Other assets6,410 7,280 
Total assetsTotal assets$458,030 $421,040 Total assets$479,390 $456,490 
Liabilities and Shareholders' EquityLiabilities and Shareholders' EquityLiabilities and Shareholders' Equity
Current liabilities:Current liabilities:Current liabilities:
Short-term borrowings and current maturities, long-term debtShort-term borrowings and current maturities, long-term debt$8,740 $4,310 Short-term borrowings and current maturities, long-term debt$11,990 $14,120 
Accounts payableAccounts payable97,170 78,450 Accounts payable111,940 99,520 
Short-term operating lease liabilitiesShort-term operating lease liabilities11,750 9,880 Short-term operating lease liabilities11,130 12,180 
Accrued liabilitiesAccrued liabilities59,890 48,850 Accrued liabilities59,750 59,100 
Total current liabilitiesTotal current liabilities177,550 141,490 Total current liabilities194,810 184,920 
Gross long-term debtGross long-term debt259,020 236,550 Gross long-term debt284,040 251,960 
Unamortized debt issuance costs and discountUnamortized debt issuance costs and discount(23,380)(31,500)Unamortized debt issuance costs and discount(31,460)(20,570)
Long-term debtLong-term debt235,640 205,050 Long-term debt252,580 231,390 
Deferred income taxesDeferred income taxes3,400 4,040 Deferred income taxes4,080 3,130 
Long-term operating lease liabilitiesLong-term operating lease liabilities48,070 48,070 Long-term operating lease liabilities39,410 46,340 
Other long-term liabilitiesOther long-term liabilities15,460 13,790 Other long-term liabilities11,000 14,560 
Total liabilitiesTotal liabilities480,120 412,440 Total liabilities501,880 480,340 
Contingencies (See Note 13)
Contingencies (See Note 10)Contingencies (See Note 10)00
Shareholders' equity:Shareholders' equity:Shareholders' equity:
Preferred stock, $0.01 par: Authorized 100,000,000 shares; Issued and outstanding: NaNnePreferred stock, $0.01 par: Authorized 100,000,000 shares; Issued and outstanding: NaNnePreferred stock, $0.01 par: Authorized 100,000,000 shares; Issued and outstanding: NaNne
Common stock, $0.01 par: Authorized 400,000,000 shares; 26,902,439 shares issued and 26,215,933 outstanding at September 30, 2020, and 26,073,894 shares issued and 25,387,388 outstanding at December 31, 2019260 250 
Common stock warrants exercisable for 5,993,539 and 6,487,674 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively9,800 10,610 
Common stock, $0.01 par: Authorized 400,000,000 shares; 27,970,998 shares issued and 27,284,492 outstanding at June 30, 2021, and 27,089,673 shares issued and 26,403,167 outstanding at December 31, 2020Common stock, $0.01 par: Authorized 400,000,000 shares; 27,970,998 shares issued and 27,284,492 outstanding at June 30, 2021, and 27,089,673 shares issued and 26,403,167 outstanding at December 31, 2020270 260 
Common stock warrants issued, outstanding and exercisable for 9,231,146 and 5,815,039 shares of common stock at June 30, 2021 and December 31, 2020, respectivelyCommon stock warrants issued, outstanding and exercisable for 9,231,146 and 5,815,039 shares of common stock at June 30, 2021 and December 31, 2020, respectively25,010 9,510 
Paid-in capitalPaid-in capital165,910 163,240 Paid-in capital169,070 166,610 
Treasury stock, at cost: 686,506 shares at September 30, 2020 and December 31, 2019(10,000)(10,000)
Treasury stock, at cost: 686,506 shares at June 30, 2021 and December 31, 2020Treasury stock, at cost: 686,506 shares at June 30, 2021 and December 31, 2020(10,000)(10,000)
Accumulated deficitAccumulated deficit(173,120)(141,970)Accumulated deficit(192,050)(178,530)
Accumulated other comprehensive lossAccumulated other comprehensive loss(10,190)(9,790)Accumulated other comprehensive loss(8,960)(6,540)
Total Horizon Global shareholders' (deficit) equity(17,340)12,340 
Total Horizon Global shareholders' deficitTotal Horizon Global shareholders' deficit(16,660)(18,690)
Noncontrolling interestNoncontrolling interest(4,750)(3,740)Noncontrolling interest(5,830)(5,160)
Total shareholders' (deficit) equity(22,090)8,600 
Total shareholders' deficitTotal shareholders' deficit(22,490)(23,850)
Total liabilities and shareholders' equityTotal liabilities and shareholders' equity$458,030 $421,040 Total liabilities and shareholders' equity$479,390 $456,490 

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


HORIZON GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited—dollars in thousands, except share and per share data)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
Net sales$201,630 $177,850 $485,370 $548,170 
Cost of sales(158,260)(149,560)(397,700)(460,010)
Gross profit43,370 28,290 87,670 88,160 
Selling, general and administrative expenses(34,820)(41,100)(93,680)(113,140)
Net gain (loss) on dispositions of property and equipment10 50 (80)1,500 
Operating profit (loss)8,560 (12,760)(6,090)(23,480)
Other income (expense), net690 (1,640)(1,430)(6,610)
Interest expense(7,560)(24,120)(23,970)(50,270)
Income (loss) from continuing operations before income tax1,690 (38,520)(31,490)(80,360)
Income tax (expense) benefit(100)1,020 (170)2,330 
Net income (loss) from continuing operations1,590 (37,500)(31,660)(78,030)
Income (loss) from discontinued operations, net of tax182,750 (500)189,520 
Net income (loss)1,590 145,250 (32,160)111,490 
Less: Net loss attributable to noncontrolling interest(340)(260)(1,010)(840)
Net income (loss) attributable to Horizon Global$1,930 $145,510 $(31,150)$112,330 
Net income (loss) per share attributable to Horizon Global:
Basic:
Continuing operations$0.07 $(1.47)$(1.19)$(3.05)
Discontinued operations7.21 (0.02)7.50 
Total$0.07 $5.74 $(1.21)$4.45 
Diluted:
Continuing operations$0.06 $(1.47)$(1.19)$(3.05)
Discontinued operations7.21 (0.02)7.50 
Total$0.06 $5.74 $(1.21)$4.45 
Weighted average common shares outstanding:
Basic25,939,741 25,329,492 25,651,789 25,267,310 
Diluted33,329,106 25,329,492 25,651,789 25,267,310 

 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Net sales$222,120 $120,490 $421,310 $283,740 
Cost of sales(174,830)(102,440)(333,460)(239,440)
Gross profit47,290 18,050 87,850 44,300 
Selling, general and administrative expenses(35,960)(26,020)(69,740)(58,950)
Operating profit (loss)11,330 (7,970)18,110 (14,650)
Other expense, net(1,990)(450)(4,220)(2,120)
Loss on debt extinguishment(11,650)
Interest expense(6,980)(8,220)(14,030)(16,410)
Income (loss) from continuing operations before income tax2,360 (16,640)(11,790)(33,180)
Income tax expense(1,400)(80)(2,400)(70)
Net income (loss) from continuing operations960 (16,720)(14,190)(33,250)
Loss from discontinued operations, net of income tax(500)
Net income (loss)960 (16,720)(14,190)(33,750)
Less: Net loss attributable to noncontrolling interest(330)(380)(670)(670)
Net income (loss) attributable to Horizon Global$1,290 $(16,340)$(13,520)$(33,080)
Net income (loss) per share attributable to Horizon Global:
Basic:
Continuing operations$0.05 $(0.64)$(0.50)$(1.28)
Discontinued operations(0.02)
Total$0.05 $(0.64)$(0.50)$(1.30)
Diluted:
Continuing operations$0.04 $(0.64)$(0.50)$(1.28)
Discontinued operations(0.02)
Total$0.04 $(0.64)$(0.50)$(1.30)
Weighted average common shares outstanding:
Basic27,022,652 25,618,793 26,883,818 25,509,794 
Diluted32,747,203 25,618,793 26,883,818 25,509,794 

The accompanying notes are an integral part of these condensed consolidated financial statements.
4


HORIZON GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited—dollars in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Net income (loss)$1,590 $145,250 $(32,160)$111,490 
Other comprehensive income (loss), net of tax:
Foreign currency translation and other1,900 (1,320)(400)(30)
Derivative instruments(440)(1,720)
Total other comprehensive income (loss), net of tax1,900 (1,760)(400)(1,750)
Total comprehensive income (loss)3,490 143,490 (32,560)109,740 
Less: Comprehensive loss attributable to noncontrolling interest(340)(250)(1,010)(830)
Comprehensive income (loss) attributable to Horizon Global$3,830 $143,740 $(31,550)$110,570 

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Net income (loss)$960 $(16,720)$(14,190)$(33,750)
Other comprehensive (loss) income, net of tax:
Foreign currency translation and other(130)2,040 (2,420)(2,300)
Total other comprehensive (loss) income, net of tax(130)2,040 (2,420)(2,300)
Total comprehensive income (loss)830 (14,680)(16,610)(36,050)
Less: Comprehensive loss attributable to noncontrolling interest(330)(380)(670)(670)
Comprehensive income (loss) attributable to Horizon Global$1,160 $(14,300)$(15,940)$(35,380)

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

5


HORIZON GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited—dollars in thousands)
Nine Months Ended September 30,Six Months Ended June 30,
2020201920212020
Cash Flows from Operating Activities:Cash Flows from Operating Activities:Cash Flows from Operating Activities:
Net (loss) income$(32,160)$111,490 
Less: (Loss) income from discontinued operations(500)189,520 
Net lossNet loss$(14,190)$(33,750)
Less: Net loss from discontinued operationsLess: Net loss from discontinued operations(500)
Net loss from continuing operationsNet loss from continuing operations(31,660)(78,030)Net loss from continuing operations(14,190)(33,250)
Adjustments to reconcile net loss from continuing operations to net cash provided by (used for) operating activities:
Net loss (gain) on dispositions of property and equipment80 (1,500)
Adjustments to reconcile net loss from continuing operations to net cash (used for) provided by operating activities:Adjustments to reconcile net loss from continuing operations to net cash (used for) provided by operating activities:
DepreciationDepreciation11,110 11,980 Depreciation7,750 7,100 
Amortization of intangible assetsAmortization of intangible assets5,040 4,800 Amortization of intangible assets2,970 3,430 
Write off of operating lease assets4,250 
Loss on debt extinguishmentLoss on debt extinguishment11,650 
Amortization of original issuance discount and debt issuance costsAmortization of original issuance discount and debt issuance costs11,450 18,570 Amortization of original issuance discount and debt issuance costs5,400 8,100 
Deferred income taxesDeferred income taxes(820)(3,390)Deferred income taxes1,120 10 
Non-cash compensation expenseNon-cash compensation expense2,190 1,790 Non-cash compensation expense1,710 1,320 
Paid-in-kind interestPaid-in-kind interest6,280 7,620 Paid-in-kind interest650 3,660 
Increase in receivablesIncrease in receivables(35,170)(4,680)Increase in receivables(30,630)(16,780)
Decrease in inventories30,100 1,920 
(Increase) decrease in inventories(Increase) decrease in inventories(31,350)19,270 
Increase in prepaid expenses and other assetsIncrease in prepaid expenses and other assets(4,080)(2,770)Increase in prepaid expenses and other assets(440)(2,890)
Increase (decrease) in accounts payable and accrued liabilities29,800 (15,560)
Increase in accounts payable and accrued liabilitiesIncrease in accounts payable and accrued liabilities15,960 13,460 
Other, netOther, net(130)(10,800)Other, net1,780 1,470 
Net cash provided by (used for) operating activities for continuing operations24,190 (65,800)
Net cash (used for) provided by operating activities for continuing operationsNet cash (used for) provided by operating activities for continuing operations(27,620)4,900 
Cash Flows from Investing Activities:Cash Flows from Investing Activities:Cash Flows from Investing Activities:
Capital expendituresCapital expenditures(8,090)(8,460)Capital expenditures(9,940)(5,450)
Net proceeds from sale of business214,570 
Net proceeds from disposition of property and equipment70 1,470 
Net cash (used for) provided by investing activities for continuing operations(8,020)207,580 
Other, netOther, net10 70 
Net cash used for investing activities for continuing operationsNet cash used for investing activities for continuing operations(9,930)(5,380)
Cash Flows from Financing Activities:Cash Flows from Financing Activities:Cash Flows from Financing Activities:
Proceeds from borrowings on credit facilitiesProceeds from borrowings on credit facilities6,440 13,780 Proceeds from borrowings on credit facilities2,190 6,290 
Repayments of borrowings on credit facilitiesRepayments of borrowings on credit facilities(3,330)(6,520)Repayments of borrowings on credit facilities(1,300)(1,210)
Proceeds from Second Lien Term Loan, net of issuance costs35,520 
Repayments of borrowings on First Lien Term Loan, inclusive of transaction costs(173,430)
Proceeds from Senior Term Loan, net of issuance costsProceeds from Senior Term Loan, net of issuance costs75,300 
Repayments of borrowings on Replacement Term Loan, including transaction feesRepayments of borrowings on Replacement Term Loan, including transaction fees(94,940)
Proceeds from Revolving Credit Facility, net of issuance costsProceeds from Revolving Credit Facility, net of issuance costs54,680 Proceeds from Revolving Credit Facility, net of issuance costs20,000 54,680 
Repayments of borrowings on Revolving Credit FacilityRepayments of borrowings on Revolving Credit Facility(28,300)Repayments of borrowings on Revolving Credit Facility(19,180)
Proceeds from ABL revolving debt, net of issuance costsProceeds from ABL revolving debt, net of issuance costs8,000 68,790 Proceeds from ABL revolving debt, net of issuance costs8,000 
Repayments of borrowings on ABL revolving debtRepayments of borrowings on ABL revolving debt(27,920)(112,510)Repayments of borrowings on ABL revolving debt(27,920)
Proceeds from Paycheck Protection Program LoanProceeds from Paycheck Protection Program Loan8,670 Proceeds from Paycheck Protection Program Loan8,670 
Proceeds from issuance of Series A Preferred Stock5,340 
Proceeds from issuance of Warrants5,380 
Proceeds from issuance of common stock warrantsProceeds from issuance of common stock warrants16,300 
Proceeds from exercise of common stock warrantsProceeds from exercise of common stock warrants420 
Other, netOther, net(320)(10)Other, net(640)(10)
Net cash provided by (used for) financing activities for continuing operations17,920 (163,660)
Net cash provided by financing activities for continuing operationsNet cash provided by financing activities for continuing operations17,330 29,320 
Discontinued Operations:Discontinued Operations:Discontinued Operations:
Net cash (used for) provided by discontinued operating activities(500)11,430 
Net cash used for discontinued investing activities(1,120)
Net cash provided by discontinued financing activities
Net cash (used for) provided by discontinued operations(500)10,310 
Net cash used for discontinued operationsNet cash used for discontinued operations(500)
Effect of exchange rate changes on cash, cash equivalents and restricted cashEffect of exchange rate changes on cash, cash equivalents and restricted cash290 280 Effect of exchange rate changes on cash, cash equivalents and restricted cash(280)(110)
Cash, Cash Equivalents and Restricted Cash:Cash, Cash Equivalents and Restricted Cash:Cash, Cash Equivalents and Restricted Cash:
Increase (decrease) for the period33,880 (11,290)
(Decrease) increase for the period(Decrease) increase for the period(20,500)28,230 
At beginning of periodAt beginning of period11,770 27,650 At beginning of period50,690 11,770 
At end of periodAt end of period$45,650 $16,360 At end of period$30,190 $40,000 
Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:
Cash paid for interestCash paid for interest$4,990 $19,730 Cash paid for interest$10,860 $4,370 
Cash paid for taxes, net of refundsCash paid for taxes, net of refunds$990 $480 Cash paid for taxes, net of refunds$1,430 $440 

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


HORIZON GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(unaudited—dollars in thousands)
Common StockCommon Stock WarrantsPaid-in CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Horizon Global Shareholders' Equity (Deficit)Noncontrolling InterestTotal Shareholders' Equity (Deficit)Common StockCommon Stock WarrantsPaid-in CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive (Loss)Total Horizon Global Shareholders' Equity (Deficit)Noncontrolling InterestTotal Shareholders' Equity (Deficit)
Balance at January 1, 2020$250 $10,610 $163,240 $(10,000)$(141,970)$(9,790)$12,340 $(3,740)$8,600 
Balances at January 1, 2021Balances at January 1, 2021$260 $9,510 $166,610 $(10,000)$(178,530)$(6,540)$(18,690)$(5,160)$(23,850)
Net lossNet loss— — — — (16,740)— (16,740)(290)(17,030)Net loss— — — — (14,810)— (14,810)(340)(15,150)
Other comprehensive loss, net of taxOther comprehensive loss, net of tax— — — — — (4,340)(4,340)— (4,340)Other comprehensive loss, net of tax— — — — — (2,290)(2,290)— (2,290)
Shares surrendered upon vesting of employees share based payment awards to cover tax obligationsShares surrendered upon vesting of employees share based payment awards to cover tax obligations— — (60)— — — (60)— (60)Shares surrendered upon vesting of employees share based payment awards to cover tax obligations— — (650)— — — (650)— (650)
Non-cash compensation expenseNon-cash compensation expense— — 420 — — — 420 — 420 Non-cash compensation expense— — 960 — — — 960 — 960 
Balances at March 31, 2020250 10,610 163,600 (10,000)(158,710)(14,130)(8,380)(4,030)(12,410)
Net loss— — — — (16,340)— (16,340)(380)(16,720)
Other comprehensive income, net of tax— — — — — 2,040 2,040 — 2,040 
Issuance of common stock warrantsIssuance of common stock warrants— 16,300 — — — — 16,300 — 16,300 
Exercise of common stock warrantsExercise of common stock warrants10 (800)1,210 — — — 420 — 420 
Balances at March 31, 2021Balances at March 31, 2021270 25,010 168,130 (10,000)(193,340)(8,830)(18,760)(5,500)(24,260)
Net income (loss)Net income (loss)— — — — 1,290 — 1,290 (330)960 
Other comprehensive loss, net of taxOther comprehensive loss, net of tax— — — — — (130)(130)— (130)
Shares surrendered upon vesting of employees share based payment awards to cover tax obligationsShares surrendered upon vesting of employees share based payment awards to cover tax obligations— — 50 — — — 50 — 50 Shares surrendered upon vesting of employees share based payment awards to cover tax obligations— — 10 — — — 10 — 10 
Non-cash compensation expenseNon-cash compensation expense— — 900 — — — 900 — 900 Non-cash compensation expense— — 930 — — — 930 — 930 
Balances at June 30, 2020250 10,610 164,550 (10,000)(175,050)(12,090)(21,730)(4,410)(26,140)
Net income— — — — 1,930 — 1,930 (340)1,590 
Other comprehensive income, net of tax— — — — — 1,900 1,900 — 1,900 
Shares surrendered upon vesting of employees share based payment awards to cover tax obligations— — (310)— — — (310)— (310)
Non-cash compensation expense— — 870 — — — 870 — 870 
Exercise of stock warrants10 (810)800 — — — — 
Balances at September 30, 2020$260 $9,800 $165,910 $(10,000)$(173,120)$(10,190)$(17,340)$(4,750)$(22,090)
Balances at June 30, 2021Balances at June 30, 2021$270 $25,010 $169,070 $(10,000)$(192,050)$(8,960)$(16,660)$(5,830)$(22,490)


Common StockCommon Stock WarrantsPaid-in CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Horizon Global Shareholders' Equity (Deficit)Noncontrolling InterestTotal Shareholders' Equity (Deficit)Common StockCommon Stock WarrantsPaid-in CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive (Loss) IncomeTotal Horizon Global Shareholders' Equity (Deficit)Noncontrolling InterestTotal Shareholders' Equity (Deficit)
Balances at January 1, 2019$250 $$160,990 $(10,000)$(222,720)$7,760 $(63,720)$(2,500)$(66,220)
Balances at January 1, 2020Balances at January 1, 2020$250 $10,610 $163,240 $(10,000)$(141,970)$(9,790)$12,340 $(3,740)$8,600 
Net lossNet loss— — — — (16,740)— (16,740)(290)(17,030)
Other comprehensive loss, net of taxOther comprehensive loss, net of tax— — — — — (4,340)(4,340)— (4,340)
Shares surrendered upon vesting of employees share based payment awards to cover tax obligationsShares surrendered upon vesting of employees share based payment awards to cover tax obligations— — (60)— — — (60)— (60)
Non-cash compensation expenseNon-cash compensation expense— — 420 — — — 420 — 420 
Balances at March 31, 2020Balances at March 31, 2020250 10,610 163,600 (10,000)(158,710)(14,130)(8,380)(4,030)(12,410)
Net lossNet loss— — — — (25,100)— (25,100)(520)(25,620)Net loss— — — — (16,340)— (16,340)(380)(16,720)
Other comprehensive income, net of taxOther comprehensive income, net of tax— — — — — 140 140 — 140 Other comprehensive income, net of tax— — — — — 2,040 2,040 — 2,040 
Shares surrendered upon vesting of employees share based payment awards to cover tax obligationsShares surrendered upon vesting of employees share based payment awards to cover tax obligations— — (10)— — — (10)— (10)Shares surrendered upon vesting of employees share based payment awards to cover tax obligations— — 50 — — — 50 — 50 
Non-cash compensation expenseNon-cash compensation expense— — 350 — — — 350 — 350 Non-cash compensation expense— — 900 — — — 900 — 900 
Issuance of Warrants— 5,380 — — — — 5,380 — 5,380 
Balances at March 31, 2019250 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 loss, net of tax— — — — — (130)(130)— (130)
Non-cash compensation expense— — 590 — — — 590 — 590 
Issuance of Warrants— 5,340 — — — — 5,340 — 5,340 
Balance at June 30, 2019250 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— — — — — (1,760)(1,760)— (1,760)
Non-cash compensation expense— — 840 — — — 840 — 840 
Amounts reclassified from AOCI— — — — — (17,260)(17,260)— (17,260)
Balances at September 30, 2019$250 $10,720 $162,760 $(10,000)$(110,390)$(11,250)$42,090 $(3,340)$38,750 
Balances at June 30, 2020Balances at June 30, 2020$250 $10,610 $164,550 $(10,000)$(175,050)$(12,090)$(21,730)$(4,410)$(26,140)

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


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Operations and Basis of Presentation
Horizon Global Corporation and its consolidated subsidiaries (“Horizon,” “Horizon Global,” “we,” or the “Company”) are a globalleading designer, manufacturer and distributor of a wide variety of high quality, custom-engineered towing, trailering, cargo management and other related accessories.accessory products, primarily in the North American, European and African markets. These products are designed to support aftermarket, automotive original equipment manufacturers (“automotive OEMs”) and automotive original equipment servicers (“automotive OESs”) (collectively, “OEs”), aftermarketretail, e-commerce and retailindustrial customers within the agricultural, automotive, construction, horse/livestock, industrial, marine, military, recreational, trailer and utility markets. The Company groups its business into operating segments generally by the region in which sales and manufacturing efforts are focused. As a result of the Company’s sale of its Horizon Asia-Pacific operating segment (“APAC”) in 2019, theThe Company’s operating segments are Horizon Americas and Horizon Europe-Africa. See Note 17,14, Segment Information, for further information on each of the Company’s 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 USU.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 yeartwelve months ended December 31, 2019.2020. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“USU.S. GAAP”) for complete financial statements. It is management’s opinion that these condensed consolidated financial statements contain all adjustments, including adjustments of a normal and recurring nature, necessary for a fair presentation of financial position and results of operations. Results of operations for interim periods are not necessarily indicative of results for the full year.
USU.S. GAAP requires usthe Company to make certain estimates, judgments, and assumptions. Management believes that the estimates, judgments, and assumptions made when accounting for items and matters such as, but not limited to, the allowance for doubtful accounts, sales incentives, sales returns, impairment assessments,assessment of indefinite-lived intangible assets, recoverability of long-lived assets, income taxes (including deferred taxes and uncertain tax positions), share-based compensation, the assessment of lower of cost or net realizable value on inventory, useful lives assigned to long-lived assets, and depreciation and amortization, are reasonable based on information available at the time they are made. To the extent there are differences between these estimates and actual results, our consolidated financial statements may be materially affected.
8


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. New Accounting Pronouncements
New accounting pronouncements not yet adopted
In August 2020,May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, “Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2021-04”). ASU 2021-04 provides guidance on modifications or exchanges of a freestanding equity-classified written call option that is not within the scope of other accounting standards. Under this guidance, an entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument. ASU 2021-04 provides further guidance on measuring the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. ASU 2021-04 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2021, with early adoption permitted. We are currently assessing the impact of this update on the Company’s condensed consolidated financial statements. The standard is not expected to have a significant impact on the Company's condensed consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for convertible instruments by removing certain separation models in Accounting Standards Codification (“ASC”) 470-20, “Debt—Debt with Conversion and Other Options,” (“ASC 470-20”) for convertible instruments. Under ASU 2020-06, the embedded conversion features no longer are separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under ASC 815, “Derivatives and Hedging,” or that do not result in substantial premiums accounted for as paid-in capital. For smaller reporting companies, ASU 2020-06 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2023, with early adoption permitted for fiscal years beginning after December 15, 2020. We are currently assessing the impact of this update on the Company’s condensed consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides temporary optional guidance to ease the potential burden in accounting for (or recognizingrecognize the effects of) reference rate reform on financial reporting. The relief provided by this guidance is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform initiatives being undertaken in an effort to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The optional amendments of this guidance are effective for all entities upon adoption. We are currently assessing the impact of this update on the Company’s condensed consolidated financial statements.
8


In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 replaces the current incurred loss model guidance with a new method that reflects expected credit losses. Under this guidance, an entity would recognize an impairment allowance for credit losses equal to its estimate of expected credit losses on financial assets measured at amortized cost. In November 2019, the FASB extended the effective date of ASU 2016-13 for smaller reporting companies. As a result, ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2022, with early adoption permitted. The standard is not expected to have a significant impact on the Company's condensed consolidated financial statements.
Accounting pronouncements recently adopted
There were no new accounting pronouncements adopted during the six months ended June 30, 2021.
3. Discontinued Operations
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 income taxes line of the consolidated statement of operations for the year ended December 31, 2019, refer to Note 4, Discontinued Operations, in our Annual Report on Form 10-K for the year ended December 31, 2019.
In the first quarter of 2020, the remaining post-closing conditions of the sale were completed, including a true up to net cash proceeds, for which we recognized a loss on sale of discontinued operations of $0.5 million.
The following table presents the Company’s results from discontinued operations for the three and nine months ended September 30, 2019:
 Three Months Ended September 30, 2019Nine Months Ended September 30, 2019
 (dollars in thousands)
Net sales$29,750 $92,300 
Cost of sales(22,250)(68,530)
Selling, general and administrative expenses(3,050)(9,580)
Other expense, net(210)(400)
Interest expense(80)(310)
Income before income tax expense4,160 13,480 
Income tax expense(1,900)(4,450)
Gain on sale of discontinued operations$180,490 $180,490 
Income from discontinued operations, net of tax$182,750 $189,520 
9


4. Revenues
Revenue Recognition
The Company disaggregates revenuenet sales from contracts with customers by major sales channel. The Company determined that disaggregating revenueits net sales into these categories best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The 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 e-commerce channel represents sales to retailers whose customers utilize the Internet to purchase the Company’s products. The industrial channel represents sales to non-automotive manufacturers and dealers of agricultural equipment, trailers, and other custom assemblies. The 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.
9


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables present the Company’s net sales by segment and disaggregated by major sales channel for the three and nine months ended September 30, 2020 and 2019:are as follows:
Three Months Ended September 30, 2020Three Months Ended June 30, 2021
Horizon AmericasHorizon Europe-AfricaTotalHorizon AmericasHorizon Europe-AfricaTotal
(dollars in thousands)(dollars in thousands)
Net SalesNet SalesNet Sales
AftermarketAftermarket$40,560 $26,130 $66,690 
Automotive OEMAutomotive OEM$24,010 $42,400 $66,410 Automotive OEM22,650 44,190 66,840 
Automotive OESAutomotive OES2,980 13,820 16,800 Automotive OES4,240 19,970 24,210 
Aftermarket35,390 24,360 59,750 
RetailRetail34,290 34,290 Retail32,610 32,610 
E-commerceE-commerce19,730 1,960 21,690 
IndustrialIndustrial7,230 550 7,780 Industrial8,590 630 9,220 
E-commerce15,240 630 15,870 
OtherOther730 730 Other860 860 
TotalTotal$119,140 $82,490 $201,630 Total$128,380 $93,740 $222,120 
Three Months Ended June 30, 2020
Horizon AmericasHorizon Europe-AfricaTotal
(dollars in thousands)
Net Sales
Aftermarket$22,280 $16,680 $38,960 
Automotive OEM9,510 20,620 30,130 
Automotive OES1,080 7,720 8,800 
Retail22,830 22,830 
E-commerce13,370 230 13,600 
Industrial5,040 340 5,380 
Other10 780 790 
Total$74,120 $46,370 $120,490 
Six Months Ended June 30, 2021
Horizon AmericasHorizon Europe-AfricaTotal
(dollars in thousands)
Net Sales
Aftermarket$72,250 $48,550 $120,800 
Automotive OEM50,170 92,750 142,920 
Automotive OES8,100 36,030 44,130 
Retail55,190 55,190 
E-commerce34,250 3,390 37,640 
Industrial18,250 1,180 19,430 
Other1,200 1,200 
Total$238,210 $183,100 $421,310 

Three Months Ended September 30, 2019
Horizon AmericasHorizon
Europe-Africa
Total
(dollars in thousands)
Net Sales
Automotive OEM$21,050 $43,200 $64,250 
Automotive OES1,960 16,510 18,470 
Aftermarket26,920 19,840 46,760 
Retail26,600 26,600 
Industrial7,650 780 8,430 
E-commerce12,040 560 12,600 
Other740 740 
Total$96,220 $81,630 $177,850 
10


HORIZON GLOBAL CORPORATION
Nine Months Ended September 30, 2020
Horizon AmericasHorizon Europe-AfricaTotal
(dollars in thousands)
Net Sales
Automotive OEM$53,880 $104,420 $158,300 
Automotive OES5,330 34,000 39,330 
Aftermarket84,440 56,750 141,190 
Retail80,690 80,690 
Industrial20,120 1,210 21,330 
E-commerce41,120 1,290 42,410 
Other50 2,070 2,120 
Total$285,630 $199,740 $485,370 
Nine Months Ended September 30, 2019
Horizon AmericasHorizon Europe-AfricaTotal
(dollars in thousands)
Net Sales
Automotive OEM$64,970 $137,900 $202,870 
Automotive OES5,380 45,840 51,220 
Aftermarket79,910 56,200 136,110 
Retail88,230 88,230 
Industrial23,860 2,340 26,200 
E-commerce38,300 1,650 39,950 
Other20 3,570 3,590 
Total$300,670 $247,500 $548,170 
During the three and nine months ended September 30, 2020 and 2019, adjustments to estimates of variable consideration for previously recognized revenue were immaterial. As of September 30, 2020 and 2019, total opening and closing balances of contract assets and deferred revenue were immaterial.
11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Six Months Ended June 30, 2020
Horizon AmericasHorizon
Europe-Africa
Total
(dollars in thousands)
Net Sales
Aftermarket$49,050 $32,390 $81,440 
Automotive OEM29,870 62,020 91,890 
Automotive OES2,350 20,180 22,530 
Retail46,400 46,400 
E-commerce25,880 660 26,540 
Industrial12,890 660 13,550 
Other50 1,340 1,390 
Total$166,490 $117,250 $283,740 


5.4. Goodwill and Other Intangible Assets
During the nine months ended September 30, 2020, the Company experienced a decline in its current and projected future operating and financial performance as well as pressure on its near-term financial forecasts as a result of the coronavirus (“COVID-19”) pandemic and the related wide-ranging actions taken by international, federal, state, and local public health and governmental authorities to combat the pandemic and spread of COVID-19 in regions across the United States and the world. These actions included quarantines, social distancing and “stay-at-home” orders, travel restrictions, mandatory business closures, and other mandates that have substantially restricted individuals’ daily activities and curtailed or ceased many businesses’ normal operations. In response to the pandemic and these actions, we had adhered to geographical government shutdowns and operating restrictions for our facilities, which resulted in an adverse impact to our business and financial performance in 2020, as well as on our near-term projected financial performance. Due to the impact of the COVID-19 pandemic, the Company identified an indicator of impairment on its goodwill and indefinite-lived intangible assets in its Horizon Americas reporting unit and on its indefinite-lived intangible assets in its Horizon Europe-Africa reporting unit in the first quarter of 2020.
As a result of the indicator, the Company performed an interim quantitative impairment assessment of the goodwill recorded for the Horizon Americas reporting unit as of March 31, 2020, by considering the market and income approaches. The results of the quantitative analysis performed indicated the fair value of the reporting unit exceeded the carrying value. Key assumptions used in the analysis were a discount rate of 14.0%, Adjusted EBITDA (as defined below) margin and a terminal growth rate of 3.0%. The primary driver in the reduction of the fair value of the reporting unit was a reduction of expected future cash flows during the remainder of 2020 as the full impact of the COVID-19 pandemic remains uncertain. Future events and changing market conditions, including operating restrictions may, however, lead the Company to re-evaluate the assumptions that have been used to test for goodwill impairment, including key assumptions used in the expected Adjusted EBITDA margins, cash flows and discount rate, as well as other assumptions with respect to matters outside of the Company’s control, such as currency rates and the aforementioned geographical government shutdowns and operating restrictions.
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 foreign currency remeasurement costs.
In addition, as a result of the indicator of impairment identified, the Company performed an interim impairment assessment of its indefinite-lived intangible assets as of March 31, 2020 in the Horizon Americas and Horizon Europe-Africa operating segments. Based on the results of our analyses, the estimated fair values of the trade names exceeded the carrying values. Key assumptions used in the analyses were a discount rate of 14.5% and royalty rates ranging from 0.5% to 1.9%.
The Company continues to assess the impact of the COVID-19 pandemic on its business and financial performance and monitor for any other indicators of potential impairment.
Changes in the carrying amount of goodwill for the nine months ended September 30, 2020 are summarized as follows:
Horizon AmericasHorizon Europe-AfricaTotal
(dollars in thousands)
Balance at December 31, 2019$4,350 $$4,350 
Foreign currency translation(1,230)(1,230)
Balance at September 30, 2020$3,120 $$3,120 
Horizon AmericasHorizon Europe-AfricaTotal
(dollars in thousands)
Balance at January 1, 2021$3,360 $$3,360 
Divestiture of business(3,340)(3,340)
Foreign currency translation(20)(20)
Balance at June 30, 2021$$$
Brazil Sale
12


On June 8, 2021, the Company divested its Brazil business via a share sale (the “Brazil Sale”). Under the terms of the Brazil Sale, the Company disposed all assets and liabilities of its Brazil business, including $3.3 million of goodwill within the Horizon Americas operating segment, for nominal consideration. As a result of the Brazil Sale, the Company recorded a $2.2 million loss in other expense, net in the accompanying condensed consolidated statements of operations.
The gross carrying amounts and accumulated amortization of the Company’s other intangible assets are summarized as follows:
As of
September 30, 2020
June 30, 2021
Intangible Category by Useful LifeIntangible Category by Useful LifeGross Carrying AmountAccumulated AmortizationNet Carrying AmountIntangible Category by Useful LifeGross Carrying AmountAccumulated AmortizationNet Carrying Amount
(dollars in thousands)(dollars in thousands)
Finite-lived intangible assets:Finite-lived intangible assets:Finite-lived intangible assets:
Customer relationships (2 – 20 years)Customer relationships (2 – 20 years)$164,650 $(133,670)$30,980 Customer relationships (2 – 20 years)$163,860 $(135,960)$27,900 
Technology and other (3 – 15 years)Technology and other (3 – 15 years)22,140 (17,890)4,250 Technology and other (3 – 15 years)23,000 (17,300)5,700 
Trademark/Trade names (1 – 8 years)Trademark/Trade names (1 – 8 years)150 (150)Trademark/Trade names (1 – 8 years)150 (150)
Total finite-lived intangible assets186,940 (151,710)35,230 
Sub-totalSub-total187,010 (153,410)33,600 
Trademark/Trade names, indefinite-livedTrademark/Trade names, indefinite-lived21,280 — 21,280 Trademark/Trade names, indefinite-lived21,290 — 21,290 
Total other intangible assets$208,220 $(151,710)$56,510 
TotalTotal$208,300 $(153,410)$54,890 

As of
December 31, 2019
Intangible Category by Useful LifeGross Carrying AmountAccumulated AmortizationNet Carrying Amount
(dollars in thousands)
Finite-lived intangible assets:
Customer relationships (2 – 20 years)$164,150 $(129,310)$34,840 
Technology and other (3 – 15 years)21,420 (17,260)4,160 
Trademark/Trade names (1 – 8 years)150 (150)
Total finite-lived intangible assets185,720 (146,720)39,000 
Trademark/Trade names, indefinite-lived21,120 — 21,120 
Total other intangible assets$206,840 $(146,720)$60,120 
11


On March 1, 2019, the Company entered into an agreement of sale of certain business assets in its Horizon 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.HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2020
Intangible Category by Useful LifeGross Carrying AmountAccumulated AmortizationNet Carrying Amount
(dollars in thousands)
Finite-lived intangible assets:
Customer relationships (2 – 20 years)$166,420 $(135,140)$31,280 
Technology and other (3 – 15 years)22,250 (16,710)5,540 
Trademark/Trade names (1 – 8 years)150 (150)
Sub-total188,820 (152,000)36,820 
Trademark/Trade names, indefinite-lived21,410 — 21,410 
Total$210,230 $(152,000)$58,230 

Amortization expense related to other intangible assets as included in the accompanying condensed consolidated statements of operations is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
(dollars in thousands)
Technology and other, included in cost of sales$280 $260 $950 $980 
Customer relationships and Trademark/Trade names, included in selling, general and administrative expenses1,330 1,410 4,090 3,820 
Total amortization expense$1,610 $1,670 $5,040 $4,800 
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(dollars in thousands)
Technology and other, included in cost of sales$580 $550 $780 $670 
Customer relationships, included in selling, general and administrative expenses1,090 1,310 2,190 2,760 
Total$1,670 $1,860 $2,970 $3,430 
13


6.5. Inventories
Inventories consist of the following components:
September 30,
2020
December 31,
2019
June 30,
2021
December 31,
2020
(dollars in thousands) (dollars in thousands)
Finished goodsFinished goods$50,120 $82,080 Finished goods$72,680 $58,600 
Work in processWork in process14,220 12,820 Work in process16,170 13,070 
Raw materialsRaw materials42,780 41,750 Raw materials55,510 43,650 
Total inventories$107,120 $136,650 
TotalTotal$144,360 $115,320 

12
7.


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Property and Equipment, Net
Property and equipment, net consists of the following components:
September 30,
2020
December 31,
2019
June 30,
2021
December 31,
2020
(dollars in thousands) (dollars in thousands)
Land and land improvementsLand and land improvements$490 $470 Land and land improvements$500 $520 
BuildingsBuildings21,800 21,290 Buildings23,010 23,040 
Machinery and equipmentMachinery and equipment130,000 121,740 Machinery and equipment140,110 134,750 
152,290 143,500 
Gross property and equipmentGross property and equipment163,620 158,310 
Accumulated depreciationAccumulated depreciation(78,620)(67,670)Accumulated depreciation(90,100)(84,220)
Property and equipment, net$73,670 $75,830 
TotalTotal$73,520 $74,090 

Depreciation expense included in the accompanying condensed consolidated statements of operations is as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
(dollars in thousands)(dollars in thousands)
Depreciation expense, included in cost of salesDepreciation expense, included in cost of sales$3,920 $3,170 $10,330 $9,760 Depreciation expense, included in cost of sales$3,270 $3,260 $7,130 $6,410 
Depreciation expense, included in selling, general and administrative expensesDepreciation expense, included in selling, general and administrative expenses90 1,420 780 2,220 Depreciation expense, included in selling, general and administrative expenses280 350 620 690 
Total depreciation expense$4,010 $4,590 $11,110 $11,980 
TotalTotal$3,550 $3,610 $7,750 $7,100 

1413


HORIZON GLOBAL CORPORATION
8.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Accrued and Other Long-term Liabilities
Accrued liabilities consist of the following components:
September 30,
2020
December 31,
2019
June 30,
2021
December 31,
2020
(dollars in thousands)(dollars in thousands)
Customer incentivesCustomer incentives$18,960 $14,270 Customer incentives$17,140 $15,870 
Accrued compensationAccrued compensation12,000 6,760 Accrued compensation12,370 12,130 
Short-term tax liabilitiesShort-term tax liabilities6,640 5,570 
Customer claimsCustomer claims3,760 7,540 Customer claims3,680 6,520 
Short-term tax liabilities2,530 90 
Accrued professional servicesAccrued professional services1,360 4,790 Accrued professional services2,070 1,510 
Litigation settlementsLitigation settlements1,100 1,600 
RestructuringRestructuring120 650 
Deferred purchase priceDeferred purchase price1,160 790 Deferred purchase price1,370 
Restructuring900 2,340 
OtherOther19,220 12,270 Other16,630 13,880 
Total accrued liabilities$59,890 $48,850 
TotalTotal$59,750 $59,100 
Other long-term liabilities consist of the following components:
September 30,
2020
December 31,
2019
June 30,
2021
December 31,
2020
(dollars in thousands) (dollars in thousands)
Litigation settlementsLitigation settlements$2,370 $2,930 
Long-term tax liabilitiesLong-term tax liabilities380 130 
Deferred purchase priceDeferred purchase price$1,870 $2,370 Deferred purchase price1,650 
RestructuringRestructuring1,270 1,600 Restructuring1,070 
Long-term tax liabilities360 340 
OtherOther11,960 9,480 Other8,250 8,780 
Total other long-term liabilities$15,460 $13,790 
TotalTotal$11,000 $14,560 
1514


HORIZON GLOBAL CORPORATION
9.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Long-term Debt
The Company’s long-term debt consists of the following:following components:
September 30,
2020
December 31,
2019
June 30,
2021
December 31,
2020
(dollars in thousands) (dollars in thousands)
Revolving Credit FacilityRevolving Credit Facility$28,690 $Revolving Credit Facility$44,230 $24,230 
ABL Facility20,020 
Senior Term LoanSenior Term Loan100,000 
Replacement Term LoanReplacement Term Loan87,580 Replacement Term Loan90,210 
First Lien Term Loan25,210 
Second Lien Term Loan56,960 
Convertible NotesConvertible Notes125,000 125,000 Convertible Notes125,000 125,000 
Paycheck Protection Program LoanPaycheck Protection Program Loan8,670 Paycheck Protection Program Loan8,670 8,670 
Bank facilities, capital leases and other long-term debtBank facilities, capital leases and other long-term debt17,820 13,670 Bank facilities, capital leases and other long-term debt18,130 17,970 
Gross debtGross debt267,760 240,860 Gross debt296,030 266,080 
Less:Less:Less:
Current maturities, long-term debt8,740 4,310 
Short-term borrowings and current maturities, long-term debtShort-term borrowings and current maturities, long-term debt11,990 14,120 
Gross long-term debtGross long-term debt259,020 236,550 Gross long-term debt284,040 251,960 
Less:Less:Less:
Unamortized debt issuance costs and original issuance discount on Senior Term LoanUnamortized debt issuance costs and original issuance discount on Senior Term Loan23,550 
Unamortized debt issuance costs and original issuance discount on Replacement Term LoanUnamortized debt issuance costs and original issuance discount on Replacement Term Loan10,260 Unamortized debt issuance costs and original issuance discount on Replacement Term Loan9,100 
Unamortized debt issuance costs and original issuance discount on First Lien Term Loan700 
Unamortized debt issuance costs and discount on Second Lien Term Loan12,730 
Unamortized debt issuance costs and discount on Convertible NotesUnamortized debt issuance costs and discount on Convertible Notes13,120 18,070 Unamortized debt issuance costs and discount on Convertible Notes7,910 11,470 
Unamortized debt issuance costs and discountUnamortized debt issuance costs and discount23,380 31,500 Unamortized debt issuance costs and discount31,460 20,570 
Long-term debt$235,640 $205,050 
TotalTotal$252,580 $231,390 
ABL Facility
OnIn December 22, 2015, the Company entered into an Amended and Restated Loan Agreement among the Company, Horizon Global Americas Inc. (“HGA”), Cequent UK Limited, Cequent Towing Products of Canada Ltd. (“Cequent Towing”),with 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 $99.0loans. The Amended and Restated Loan Agreement was subsequently amended on several occasions and as a result, the effective facility size was $80.0 million.
The ABL Facility consisted of (i) a US sub-facility, in an aggregate principal amount of up to $85.0 million (subject to availability under a US-specific borrowing base), (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), and (iii) a UK sub-facility in an aggregate principal amount of up to $3.0 million (subject to availability under a UK-specific borrowing base).
In March 2020, the Company paid in full all outstanding debt incurred under the ABL Facility, which the Company accounted for as a debt extinguishment in accordance with guidance in ASC 405-20, “Extinguishment of Liabilities”. As a result of the debt extinguishment, during the six months ended June 30, 2020, the Company recordedrecognized $0.8 million of unamortized debt issuance costs in interest expense includedand $0.6 million of additional costs in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations, during the nine months ended September 30, 2020 in accordance with ASC 470-50, “Modifications and Extinguishments” (“ASC 470-50”). In addition,
During the three and six months ended June 30, 2021, the Company recorded $0.6 millionrecognized 0 amortization of additionaldebt issuance costs in selling, general and administrative expenses included in the accompanying condensed consolidated statements of operations during the ninethree and six months ended SeptemberJune 30, 2020.
The2020, the Company recognized 0 amortization of debt issuance costs and $0.4 million of amortization of debt issuance costs, during the three and nine months ended September 30, 2020, respectively, and $0.3 million and $0.8 million of amortization of debt
16


issuance costs during the three and nine months ended September 30, 2019, respectively, which are included in the accompanying condensed consolidated statements of operations.
Total letters of credit issued and outstanding under the ABL Facility were $0.1 million and $7.7 million at September 30, 2020 and December 31, 2019, respectively. The letters of credit were collateralized with a line block on the ABL Facility. As described below, as the ABL Facility was extinguished, the agreement governing the ABL Facility required cash collateral to be held until expiration of outstanding letters of credit arrangement. The cash collateral requirement is 105% of the outstanding letters of credit, for a total amount of $0.1 million as of September 30, 2020. The cash collateral will be released either because of expiration or early termination and reissuance of the letters of credit. Certain letters of credit were reissued under the Revolving Credit Facility, as defined below, with a total of $3.1 million issued and outstanding as of September 30, 2020, with no cash collateral requirement. Other letters of credit were reissued under the Revolving Credit Facility, with a cash collateral requirement, with a total of $4.9 million as of September 30, 2020. The cash collateral requirement is 105% of the outstanding letters of credit, for a total amount of $5.1 million as of September 30, 2020. The Company presented the cash collateral in restricted cash in the accompanying condensed consolidated balance sheet as of September 30, 2020.
Revolving Credit Facility
In March 2020, the Company, as guarantor, entered into a Loan and Security Agreement (the “Loan Agreement”) with Encina Business Credit, LLC (“Encina”), as agent for the lenders party thereto, and HGAHorizon Global Americas Inc. and Cequent Towing Products of Canada Ltd., as borrowers (the “ABL Borrowers”). The Loan Agreement provides for an asset-based revolving credit facility (the “Revolving Credit Facility”) in the maximum aggregate principal amount of $75.0 million subject to customary borrowing base limitations contained therein, and may be increased at the ABL Borrowers’ request in increments of $5.0 million, up to a maximum of five times over the life of the Revolving Credit Facility, for a total increase of up to $25.0 million.
15


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In May 2020, the Company entered into amendments, limited waivers and consents in connection with the Loan Agreement, with an effective date of April 1, 2020, that, among other things, consented to the Company’s applying for, obtaining and incurring the PPP Loan and French Loan, each as defined and described below.
In February 2021, the Company entered into a limited consent of the Loan Agreement, that among other modifications, consented to the Company’s entering into the Senior Term Loan Credit Agreement, as defined and described below.
On April 19, 2021, the Company entered into an amendment to the Loan Agreement, that among other modifications, increased the maximum amount of credit available under the Revolving Credit Facility from $75.0 million to $85.0 million. The amendment also increased sub-limits relating to the Company’s ability to borrow against in-transit inventory as well as inventory located in the Company’s Mexico facilities.
The interest on the loans under the Loan Agreement will beis payable in cash at the interest rate of LIBOR plus 4.00% per annum, subject to a 1.00% LIBOR floor, provided that if for any reason the loans are converted to base rate loans, interest will be paid in cash at the customary base rate plus a margin of 3.00% per annum. All interest, fees, and other monetary obligations due may, inat Encina’s discretion, but upon prior notice to the ABL Borrowers, be charged to the loan account and thereafter be deemed to be part of the Revolving Credit Facility subject to the same interest rate. There are no amortization payments required under the Loan Agreement. BorrowingsAll outstanding borrowings under the Loan Agreement mature on the earlier of: (i) March 13, 2023 and (ii) 90 days prior to the maturity of any portion of the debt under the Company’s Replacement Term Loan, as defined below, as may be in effect from time to time, unless earlier terminated. As a result of the 2020 Replacement Term Loan Amendment, as described below, the maturity of all borrowings under the Revolving Credit Facility were effectively extended to fiscal year 2022 and are presented in gross long-term debt in the accompanying condensed consolidated balance sheet as of September 30, 2020. 2023.
All of the indebtedness under the Loan Agreement is and will be guaranteed by the Company and certain of the Company’s existing and future North American subsidiaries and is and will be secured by substantially all of the assets of the Company, such other guarantors, and the ABL Borrowers.
The Loan Agreement also contains a financial covenant that stipulates the ABL Borrowers and guarantors under the Loan Agreement will not make Capital Expenditures (as defined in the Loan Agreement)capital expenditures exceeding $30.0 million during any fiscal year.
Debt issuance costs of $2.3 million were incurred in connection with the Loan Agreement. These debt issuance costs will be amortized into interest expense over the contractual term of the Loan Agreement. The
During the three and six months ended June 30, 2021, the Company recognized $0.2$0.1 million and $0.9$0.3 million of amortization of debt issuance costs, respectively, and during the three and ninesix months ended SeptemberJune 30, 2020, the Company recognized $0.5 million and $0.7 million of amortization of debt issuance costs, respectively, which are included in the accompanying condensed consolidated statements of operations. There
As of June 30, 2021 and December 31, 2020, there was $1.4$1.0 million and $1.1 million, respectively, of unamortized debt issuance costs included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheet assheets.
As of SeptemberJune 30, 2021 and December 31, 2020, .
Therethere was $28.7$44.2 million and $24.2 million outstanding, respectively, under the Revolving Credit Facility as of September 30, 2020 and $20.0 million outstanding under the ABL Facility as of December 31, 2019, with a weighted average interest rate of 5.0%5.3% and 5.5%5.0%, respectively. TheAs of June 30, 2021 and December 31, 2020, the Company had $38.2$37.3 million and $38.4 million of availability, respectively, under the Revolving Credit Facility.
As of June 30, 2021 and December 31, 2020, the Company had $1.8 million and $3.1 million, respectively, of letters of credit issued and outstanding, under the Revolving Credit Facility aswith no cash collateral requirement. As of SeptemberJune 30, 2021 and December 31, 2020, respectively, the Company also had $4.4 million and $33.1$4.9 million of availabilityother letters of credit issued and outstanding, under the ABLRevolving Credit Facility aswith a cash collateral requirement. The cash collateral requirement is 105% of the outstanding letters of credit. As of June 30, 2021 and December 31, 2019.2020, the Company had cash collateral, of $4.9 million and $5.1 million, respectively. Cash collateral is presented in restricted cash in the accompanying condensed consolidated balance sheets.
First Lien Term Loan Agreement
OnIn 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 (the “Original Term B Loan”). The Term Loan Agreement has beenwas subsequently amended and restated on several occasions and is
17


collectively referred to as the “First Lien Term Loan Agreement”. The Original Term B Loan haswas also been subsequently amended on several occasions and is collectively referred to as the “First Lien Term Loan”. In conjunction with the entry into the Revolving Credit Facility referenced above, Cortland Capital Markets Services LLC served as administrative agent and collateral agent for the First Lien Term Loan.
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.
In accordance with ASC 470-50, the Company recorded $0.7 million of issuance costs in selling, general and administrative expense in the accompanying condensed consolidated statements of operations during the three and nine months ended September 30, 2019 and wrote off $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.
In May 2020, the Company entered into an amendment, limited waiver and consent to credit agreement (the “Tenth Term Amendment”) with an effective date of April 1, 2020, to amend the First Lien Term Loan Agreement and to consent to the Company’s entering into, among other things, the PPP Loan and French Loan, each as defined and described below.
The Company recognized $5.2 million and $8.7 million of unamortized debt issuance costs in interest expense included in the accompanying condensed consolidated statement of operations during 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 various amendments to the First Lien Term Loan Agreement.
16


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As a result of the 2020 Replacement Term Loan Amendment, as defined and described below, the outstanding balance and any accrued interest has beenwas replaced by the Replacement Term Loan, as defined and described below.
TheDuring the three and six months ended June 30, 2021, the Company recognized 0 amortization of debt issuance costs and discount costsduring the three and six months ended June 30, 2020, the Company recognized $0.1 million and $0.2 million of amortization of debt issuance and discount costs, for the three and nine months ended September 30, 2020, respectively, and $0.8 million and $2.7 million for the three and nine months ended September 30, 2019, respectively, which is included in the accompanying condensed consolidated statements of operations.
TheDuring the three and six months ended June 30, 2021, the Company recognized 0 paid-in-kind (“PIK”) interest and during the three and six months ended June 30, 2020, the Company recognized $0.2 million and $0.4 million of paid-in-kindPIK interest, onrespectively, in the First Lien Term Loan for the three and nine months ended September 30, 2020, respectively, and $1.1 million and $3.0 million for the three and nine months ended September 30, 2019, respectively. The Company had 0 aggregate principal amount outstanding and $25.2 million outstanding asaccompanying condensed consolidated statements of September 30, 2020 and December 31, 2019, respectively, under the First Lien Term Loan, with the $25.2 million outstanding as of December 31, 2019 bearing cash interest at 8.1%.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 provided for a term loan facility in the aggregate principal amount of $51.0 million.
In May 2020, the Company entered into an amendment, limited waiver and consent to credit agreement (the “Second Lien Third Amendment”), with an effective date of April 1, 2020, to amend the Second Lien Term Loan Agreement and to consent to the Company’s entering into, among other things, the PPP Loan and French Loan, each as defined and described below.
Debt issuance costs of $3.8 million and original issuance discount of $1.0 million were incurred in connection with entry into the Second Lien Term Loan Agreement.
As a result of the 2020 Replacement Term Loan Amendment, as defined and described below, the outstanding balance and any accrued interest has beenwas replaced by the Replacement Term Loan, as defined and described below.
TheDuring the three and six months ended June 30, 2021, the Company recognized 0 amortization of debt issuance costs and discount costsduring the three and six months ended June 30, 2020, the Company recognized $1.4 million and $2.7 million of amortization of debt issuance and discount costs, for the three and nine months ended September 30, 2020, respectively, and $0.9 million and $1.7 million for
18


the three and nine months ended September 30, 2019, respectively, which is included in the accompanying condensed consolidated statements of operations.
The Company recognized paid-in-kind interest of $0.1 million and $3.4 million on its Second Lien Term Loan forDuring the three and ninesix months ended SeptemberJune 30, 2020, respectively,2021, the Company recognized 0 PIK interest and $2.1 million and $4.6 million forduring the three and ninesix months ended SeptemberJune 30, 2019, respectively.2020, the Company recognized $1.9 million and $3.3 million of PIK interest, respectively, in the accompanying condensed consolidated statements of operations.
Replacement Term Loan
OnIn July 6, 2020, the Company entered into the 2020 Replacement Term Loan Amendment (the “Eleventh Term Amendment”) to amend the Term Loan Agreement. The Eleventh Term Amendment provided replacement term loans (the “Replacement Term Loan”) that refinanced and replaced the outstanding balances under the First Lien Term Loan Agreement and Second Lien Term Loan Agreement, plus any accrued interest thereon. The remaining unamortized debt issuance and original issuance discount costs related to the First Lien Term Loan Agreement and Second Lien Term Loan Agreement will be amortized into interest expense over the contractual term of the Replacement Term Loan using the effective interest method.

The interest on the Replacement Term Loan will be payable atwas LIBOR plus 10.75% per annum, subject to a 1.00% LIBOR floor, of which 4.00% shall bewas payable in cash and LIBOR plus 6.75% shall be payable-in-kind (PIK)the remainder of which was PIK interest (provided that the Company may elect on not more than one occasion to pay all interest as PIK interest). Borrowings under theThe Eleventh Term Amendment mature on the earlier of: (i) June 30, 2022 and (ii) April 1, 2022 if the Convertible Notes, as defined below, are not repaid or otherwise discharged prior to such date. Additionally, the Eleventh Term Amendment provided for a 1.00% PIK closing fee, which was added to the principal amount of the Replacement Term Loan on the closing date;date and provided for a prepayment penalty on the entire principal amount of the Replacement Term Loan in an amount equal to 3.0% of the aggregate principal amount prepaid prior to December 31, 2021;2021.
In February 2021, the Company entered into the Senior Term Loan Credit Agreement, as defined and amendeddescribed below. The proceeds received from the fixed charge coverage ratio covenant beginning withinitial borrowings under the fiscal quarter endingSenior Term Loan Credit Agreement were used to repay in full all outstanding debt and accrued interest on the Company’s Replacement Term Loan. As a result of the repayment, the Term Loan Agreement was terminated and is no longer in effect. During the six months ended June 30, 2021, as follows:
June 30, 2021: 1.10 to 1.00
September 30, 2021: 1.25 to 1.00
December 31. 2021 and each fiscal quarter ending thereafter: 1.40 to 1.00
In accordance with ASC 470-50, the Company recorded $0.2recognized $11.7 million of issuance costs in selling, general and administrative expenseas loss on debt extinguishment in the accompanying condensed consolidated statements of operations, in accordance with ASC 470-50. Included in the loss was $8.9 million of unamortized debt issuance and others costs and a $2.8 million prepayment penalty.
During the three and six months ended June 30, 2021, the Company recognized 0 amortization of debt issuance costs and $0.4 million amortization of debt issuance costs, respectively, and during the three and ninesix months ended SeptemberJune 30, 2020.2020, the Company recognized 0 amortization of debt issuance costs in the accompanying condensed consolidated statements of operations.
The
17


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, 2020, the Company had total unamortized debt issuance and discount costs of $10.3$9.1 million, all of which arewere recorded as a reduction of thelong-term debt balance onin the Company’s accompanying condensed consolidated balance sheet as of September 30, 2020. The Company recognized $1.2 million of amortization of debt issuance and discount costs forsheets.
During the three and ninesix months ended SeptemberJune 30, 2021, the Company recognized 0 PIK interest and $0.7 million of PIK interest, respectively, and during the three and six months ended June 30, 2020, which is includedthe Company recognized 0 PIK interest in the accompanying condensed consolidated statements of operations.
TheAs of December 31, 2020, the Company had $90.2 million of aggregate principal outstanding.
Senior Term Loan Credit Agreement
On February 2, 2021, the Company entered into a credit agreement (the “Senior Term Loan Credit Agreement”) with Atlantic Park Strategic Capital Fund, L.P. (“Atlantic Park”), as administrative agent and collateral agent, and the lenders party thereto (collectively, the “Lenders”). The Senior Term Loan Credit Agreement provides for an initial term loan facility in the aggregate principal amount outstanding of $87.6$100.0 million, asall of September 30, 2020, underwhich has been borrowed by the Company and was used to repay the Replacement Term Loan, bearing cash interest at 4.00%. In additionas described above, and a delayed draw term loan facility in the aggregate principal amount of up to cash interest,$125.0 million, which may be drawn by the ReplacementCompany in up to three separate borrowings through June 30, 2022. A ticking fee of 25 basis points per annum will accrue on the undrawn portion of the delayed draw term loan facility.
Interest on the Senior Term Loan has 7.75% paid-in-kind interest.Credit Agreement is payable in cash on a quarterly basis at the interest rate of LIBOR plus 7.50% per annum, subject to a 1.00% LIBOR floor. The Company madeSenior Term Loan Credit Agreement includes customary affirmative and negative covenants, including a one-time electionmaximum total net leverage ratio requirement tested quarterly, commencing with the fiscal quarter ending March 31, 2023, not to pay all interest as PIK interest on the first interest payment date. Asexceed: 6.50 to 1.00. The Senior Term Loan Credit Agreement also contains a result of this election,financial covenant that stipulates the Company recognized $2.5will not make capital expenditures exceeding $27.5 million during any fiscal year. To the extent that the amount of paid-in-kind interestcapital expenditures is less than $27.5 million in any fiscal year, up to 50% of the difference may be carried forward and used for bothcapital expenditures in the threeimmediately succeeding fiscal year.
Following a one-year no-call period, the Senior Term Loan Credit Agreement provides for a 2.5% call premium for years two through five and nine months ended September 30, 2020.

no premium thereafter. All outstanding borrowings under the Senior Term Loan Credit Agreement mature on February 2, 2027.
All of the indebtedness under the ReplacementSenior Term Loan Credit Agreement is and will be guaranteed by the Company’s existing and future material domesticUnited States, Canadian and Mexican subsidiaries and certain other foreign subsidiaries and is and will be secured by substantially all of the assets of the Company and such guarantors.
Pursuant to the Senior Term Loan Credit Agreement, the Company issued warrants (the “Senior Term Loan Warrants”) to Atlantic Park to purchase in the aggregate up to 3,905,486 shares of the Company’s common stock, with an exercise price of $9.00 per share, subject to adjustment as provided in the Senior Term Loan Warrants. The Senior Term Loan Warrants are exercisable at any time prior to February 2, 2026.
In accordance with guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging”, the Senior Term Loan Credit Agreement and the Senior Term Loan Warrants are each freestanding instruments and proceeds were allocated to each instrument on a relative fair value basis of $82.4 million and $17.6 million, respectively.
The Senior Term Loan Warrants are not within the scope of ASC 480 and do not meet the criteria for liability classification. However, the Senior Term Loan Warrants are determined to be indexed to the Company’s common stock and meet the requirements for equity classification pursuant to ASC 815-40, “Derivatives and Hedging - Contracts in Entity’s Own Equity”. The $17.6 million allocated to the Senior Term Loan Warrants was determined using an option pricing method and is recorded in common stock warrants in the accompanying condensed consolidated balance sheets.
Debt issuance costs of $5.4 million and original issue discount of $3.0 million were incurred in connection with entry into the Senior Term Loan Credit Agreement. The total costs of $8.4 million were allocated to each instrument on a relative fair value basis. The $7.1 million allocated to the Senior Term Loan Credit Agreement will be amortized into interest expense over the contractual term of the loan using the effective interest method and the $1.3 million allocated to the Senior Term Loan Warrants was recorded as a reduction of equity.
The Company determined the fair value of the Senior Term Loan Credit Agreement using a discount rate build up approach. The debt discount of $17.6 million created by the relative fair value allocation of the equity component is being amortized as additional non-cash interest expense using the effective interest method over the contractual term of the loan. The debt discount is recorded as a reduction of long-term debt in the accompanying condensed consolidated balance sheets.
18


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the three and six months ended June 30, 2021, the Company recognized $0.7 million and $1.1 million, respectively, of amortization of debt issuance and discount costs in the accompanying condensed consolidated statements of operations.
As of June 30, 2021, the Company had total unamortized debt issuance and discount costs of $23.6 million, all of which were recorded as a reduction of long-term debt in the accompanying condensed consolidated balance sheets.
As of June 30, 2021, the Company had $100.0 million aggregate principal outstanding.
Convertible Notes
In February 2017, the Company completed a public offering of 2.75% Convertible Senior Notes (the “Convertible Notes”) in an aggregate principal amount of $125.0 million. 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. 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.
During the thirdsecond quarter of 2020,2021, no conditions allowing holders of the Convertible Notes to convert have been met. Therefore, the Convertible Notes were not convertible during the second quarter of 20202021 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
19


convertible at their holders’ option during the immediately following quarter. As of SeptemberJune 30, 2020,2021, 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 470-20Debt-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.
During the three and six months ended June 30, 2021, the Company recognized total interest expense of $2.7 million and $5.3 million and during the three and six months ended June 30, 2020, the Company recognized total interest expense of $2.5 million and $5.1 million, respectively, in the accompanying condensed consolidated statements of operations. The interest expense recognized consists of contractual interest coupon, amortization of debt discount and amortization of debt issuance costs on the Convertible Notes, and is as follows:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(dollars in thousands)
Contractual interest coupon on convertible debt$860 $870 $1,720 $1,740 
Amortization of debt issuance costs140 140 270 270 
Amortization of "equity discount" related to debt1,650 1,520 3,300 3,040 
Total$2,650 $2,530 $5,290 $5,050 

As of June 30, 2021 and December 31, 2020, the Company had total unamortized debt issuance and discount costs of $7.9 million and $11.5 million, respectively, all of which were recorded as a reduction of long-term debt in the accompanying condensed consolidated balance sheets.
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HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of June 30, 2021 and December 31, 2020, the Company had $125.0 million and $125.0 million, respectively, of aggregate principal outstanding.
Paycheck Protection Program Loan
In April 2020, Horizon Global Company LLC (the “US“U.S. Borrower”), a direct US-basedU.S.-based subsidiary of the Company, received a loan from PNC Bank, National Association (“PNC”) for $8.7 million, pursuant to the Paycheck Protection Program (the “PPP Loan”) under Division A, Title I of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The PPP Loan, which is in the form of a Notenote dated April 18, 2020 issued by the USU.S. Borrower, matures on April 18, 2022. The PPP Loan bears interest at 1.0% per annum and is payable monthly commencing on November 15, 2020. Funds from the PPP Loan may be used for payroll, costs used to continue group health care benefits, rent and utilities. Under the terms of the PPP Loan, certain amounts may be forgiven if they are used for qualifying expenses as described in the CARES Act.
The Company submitted its PPP Loan application in good faith in accordance with the CARES Act and the guidance issued by the Small Business Administration (the “SBA”), including the SBA’s Paycheck Protection Program’s Frequently Asked Questions. During 2020, the Company, in accordance with the final guidance issued by the United States Department of the Treasury (the “Treasury”), met the need and sized based criteria of the program. The
As of June 30, 2021, the Company plans to filehas filed its application of loan forgiveness with PNC and the SBA for forgiveness of $8.0 million of the $8.7 million of funds originally received. The potential loan forgiveness is determined, subject to limitations, based on the use of loan proceeds for payment of qualifying expenses over the 24 weeks after the loan proceeds were disbursed. The unforgiven portion of the loan has an interest rate of 1.0% per annum, and in July 2021, the near termnote was amended to make the unforgiven portion payable over five years on a monthly basis. The Company has deferred interest payments until the Company’s application for forgiveness is completed in accordance with the guidance issued by the SBA and continues toTreasury and the terms of the Company’s PPP Loan. While we currently believe that our use of the loan proceeds will meet the conditions for forgiveness of our PPP Loan, proceeds on qualifying expenses; however, there iscan be no guaranteeassurance that forgiveness for any portion of the PPP Loan proceeds will be forgiven.obtained.
The French Loan
In April 2020, S.I.A.R.R. SAS (the “French Borrower”), an indirect subsidiary of the Company, received a loan from BNP Paribas (the “French Loan”) for $5.5 million. The French Loan, issued pursuant to an agreement dated April 9, 2020, betweenOn February 17, 2021, the French Borrower entered into an amendment to the French Loan. Under the terms of the amendment, the repayment of the loan was modified to monthly repayments of principal and BNP Paribas, matures oninterest beginning April 2022 through April 2026, from the original maturity of April 9, 2021. TheIn addition, the interest rate on the French Loan bears interest atwas amended to a rate of 0.5%1.0% per annum. The French Borrower, at its election, may repay the French Loan in full onannum and interest is payable monthly beginning April 9, 2021 or in monthly installments for a period of five years from the date of election.2021.
Covenant and Liquidity Matters
As of September 30, 2020, and our current forecast through September 30, 2021, the Company believes it has sufficient liquidity to operate its business for the foreseeable future.
The Company is in compliance with all of its financial covenants in its debt agreements as of SeptemberJune 30, 2020.
10. Derivative Instruments
Foreign Currency Exchange Rate Risk
In the past, the Company has used 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 hedged currency exposure between the Mexican peso and the US dollar and matured at specified monthly settlement dates through 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-designated the foreign currency forward contracts.
On October 4, 2016, the Company entered into a cross currency swap arrangement to hedge changes in foreign currency exchange rates. The Company used the cross currency swap to mitigate the risk associated with fluctuations in currency rates impacting cash flows related to a non-functional currency intercompany loan of €110.0 million. The cross currency swap hedged currency exposure between the euro and the US dollar and matured on January 3, 2019 with a liability of $2.5 million.2021.
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HORIZON GLOBAL CORPORATION
The Company entered into forward contracts to settle the cross currency swap, which resulted in a $0.9 million offset to the liability. These settlements resulted in a net realized gain reclassified from accumulated other comprehensive loss (“AOCI”) of $0.6 million. The Company made quarterly principal payments of €1.4 million, plus interest at a fixed rate of 5.4% per annum, in exchange for $1.5 million, plus interest at a fixed rate of 7.2% per annum during the term of the cross currency swap arrangement. At inception, the Company designated the cross currency swap as a cash flow hedge. Changes in the currency rate resulted in reclassification of amounts from AOCI to earnings to offset the re-measurement gain or loss on the non-US denominated intercompany loan.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
There were no outstanding derivatives contracts at September 30, 2020 and December 31, 2019.
Financial Statement Presentation
The following table summarizes the amounts reclassified from AOCI into earnings:
Three Months Ended
September 30, 2019
Nine Months Ended
September 30, 2019
Cost of salesInterest expenseCost of salesInterest expense
(dollars in thousands)
Total Amounts of Expense Line Items Presented in the Statement of Operations in Which the Effects of Cash Flow Hedges are Recorded$(149,560)$(24,120)$(460,010)$(50,270)
Amount of Gain Reclassified from AOCI into Earnings
Derivatives classified as cash flow hedges:
Foreign currency forward contracts$350 $$1,550 $
Cross currency swap$$$$900 
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 for each type of exit cost as of and for the nine months ended September 30, 2020:
Employee CostsFacility Closure and Other CostsTotal
(dollars in thousands)
Balance at January 1, 2020$1,830 $2,110 $3,940 
Payments and other(1)
(1,580)(190)(1,770)
Balance at September 30, 2020$250 $1,920 $2,170 
(1)Other consists primarily of changes in the liability balance due to foreign currency translation and finalization of facility closures.
129. Leases
On January 1, 2019, the Company adopted ASC 842, “Leases”, as issued by the FASB under ASU 2016-02. Refer to Note 2, New Accounting Pronouncements, in our Annual Report on Form 10-K for the year ended December 31, 2019 for more information.
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The Company leases certain facilities, automobiles and equipment under non-cancellable operating leases. Our leases have remaining lease terms of one year to eleveneight 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. The Company’s financing leases are immaterial.
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 right-of-use (“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 The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Refer to Note 3, Summary of Significant Accounting Policies, in the Company’s leases do not provide an implicit rate,Annual Report on Form 10-K for 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 operating segmenttwelve months ended December 31, 2020, for determining the incremental borrowing rate.more information.
The following table provides additional cost and cash flowSupplemental information for the Company’s leases:leases is as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
 (dollars in thousands)
Operating lease cost$4,260 $4,330 $11,460 $13,330 
Operating cash flows from operating leases$3,950 $4,564 $12,060 $14,320 
ROU assets obtained in exchange for operating lease obligations$1,500 $190 $4,080 $15,030 
Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
 (dollars in thousands)
Operating lease cost$3,760 $3,600 $7,630 $7,200 

The following table provides additional balance sheet information for the Company’s leases:
          As of September 30, 2020      As of December 31, 2019
Weighted average remaining lease term (years)6.16.8
Weighted average discount rate8.4 %8.7 %
Six Months Ended June 30,
 20212020
Operating cash flows from operating leases$6,120 $8,110 
ROU assets obtained in exchange for operating lease obligations$540 $2,580 

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 expenses in the accompanying condensed consolidated statements of operations during the three and nine months ended September 30, 2019.
 June 30,
2021
December 31,
2020
Weighted average remaining lease term (years)5.46.0
Weighted average discount rate8.4 %8.4 %
13.10. 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 did not allege any damage and only sought replacement of the product. 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. During the three months ended September 30, 2019, the Company reduced its exposure related to the claims by $4.3 million and had 0 charge recorded for the nine months ended September 30, 2019.
As of December 31, 2019, the Company had $3.9 million recorded in accrued liabilities for the remaining unpaid settlement obligations and an insurance-related asset of $0.4 million recorded in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets. In the first quarter of 2020, the Company settled its outstanding obligations related to the claim. The Company has 0 remaining liability or insurance-related asset.
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On April 29, 2020, the Company agreed to a settlement (the “Settlement”) related to certain intellectual property infringement claims made against one of the Company’s subsidiaries in its Horizon Europe-Africa operating segment. The Company settled all historical and future associated claims for $4.4 million to be paid evenly in semi-annual installments on June 30 and December 31 of each year through December 31, 2024. As a result of the Settlement, the Company recorded a $1.5 million charge during the first quarter of 2020 in cost of sales of the accompanying condensed consolidated statements of operations. During the three and six months ended June 30, 2021, the Company recorded $0.1 million and $0.2 million of royalties, respectively, and during the three and six months ended June 30, 2020, the Company recorded $0.2 million of royalties, all of which were recorded in cost of sales in the accompanying condensed consolidated statementstatements of operations during the first quarter of 2020.operations.
The Company recognized $0.2 million of royalties and $1.9 million in cost of sales in the accompanying condensed consolidated statement of operations for the three and nine months ended September 30, 2020, respectively. As of SeptemberJune 30, 2021 and December 31, 2020, the Company had recorded $0.9 million and $0.9 million, respectively, in prepaid expenses and other current assets and $1.9$1.4 million and $1.8 million, respectively, in other assets, in the accompanying condensed consolidated balance sheets related to the future royalties to be recognized by the Company over the life of future programs relatedconnected to the SettlementSettlement. In addition, as of June 30, 2021 and December 31, 2020, the Company had $0.9 million and $1.0 million, respectively, in accrued liabilities and $3.3$2.4 million and $2.9 million, respectively, in other long-term liabilities, in the accompanying condensed consolidated balance sheetsheets related to the remaining semi-annual installment payments to be paid.payments.
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14.

HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)



11. Earnings (Loss) per Share
Basic earnings (loss) per share is computed using net income (loss) attributable to Horizon Global and the number of weighted average shares outstanding. Diluted earnings (loss) per share is computed using net income (loss) attributable to Horizon Global and the number of weighted average shares outstanding, adjusted to give effect to the assumed exercise of outstanding stock options and warrants, vesting of restricted shares outstanding, and conversion of the Convertible Notes, where dilutive to earnings per share.
The following table sets forth theA reconciliation of the numerator and the denominator of basic earningsincome (loss) per share attributable to Horizon Global and diluted earningsincome (loss) per share attributable to Horizon Global:Global is as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
(dollars in thousands, except share and per share data)(dollars in thousands, except for per share amounts)
Numerator:Numerator:Numerator:
Net income (loss) from continuing operationsNet income (loss) from continuing operations$1,590 $(37,500)$(31,660)$(78,030)Net income (loss) from continuing operations$960 $(16,720)$(14,190)$(33,250)
Add: Income (loss) from discontinued operations, net of tax182,750 (500)189,520 
Add: Loss from discontinued operations, net of taxAdd: Loss from discontinued operations, net of tax(500)
Less: Net loss attributable to noncontrolling interestLess: Net loss attributable to noncontrolling interest(340)(260)(1,010)(840)Less: Net loss attributable to noncontrolling interest(330)(380)(670)(670)
Net income (loss) attributable to Horizon GlobalNet income (loss) attributable to Horizon Global$1,930 $145,510 $(31,150)$112,330 Net income (loss) attributable to Horizon Global$1,290 $(16,340)$(13,520)$(33,080)
Denominator:Denominator:Denominator:
Weighted average shares outstanding, basicWeighted average shares outstanding, basic25,939,741 25,329,492 25,651,789 25,267,310 Weighted average shares outstanding, basic27,022,652 25,618,793 26,883,818 25,509,794 
Dilutive effect of stock-based awards7,389,365 
Dilutive effect of common stock equivalentsDilutive effect of common stock equivalents5,724,551 
Weighted average shares outstanding, dilutedWeighted average shares outstanding, diluted33,329,106 25,329,492 25,651,789 25,267,310 Weighted average shares outstanding, diluted32,747,203 25,618,793 26,883,818 25,509,794 
Basic income (loss) per share attributable to Horizon GlobalBasic income (loss) per share attributable to Horizon GlobalBasic income (loss) per share attributable to Horizon Global
Continuing operationsContinuing operations$0.07 $(1.47)$(1.19)$(3.05)Continuing operations$0.05 $(0.64)$(0.50)$(1.28)
Discontinued operationsDiscontinued operations7.21 (0.02)7.50 Discontinued operations(0.02)
TotalTotal$0.07 $5.74 $(1.21)$4.45 Total$0.05 $(0.64)$(0.50)$(1.30)
Diluted income (loss) per share attributable to Horizon GlobalDiluted income (loss) per share attributable to Horizon GlobalDiluted income (loss) per share attributable to Horizon Global
Continuing operationsContinuing operations$0.06 $(1.47)$(1.19)$(3.05)Continuing operations$0.04 $(0.64)$(0.50)$(1.28)
Discontinued operationsDiscontinued operations7.21 (0.02)7.50 Discontinued operations(0.02)
TotalTotal$0.06 $5.74 $(1.21)$4.45 Total$0.04 $(0.64)$(0.50)$(1.30)
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Due to lossesAs a result of the net loss from continuing operations for the three months ended September 30, 2019 and nine months ended SeptemberJune 30, 2020 and 2019,six months ended June 30, 2021 and 2020, the effect of certain dilutive securities werewas 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:are as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Number of options18,961 53,321 18,961 61,184 
Exercise price of options$9.20 - $11.02$9.20 - $11.29$9.20 - $11.02$9.20 - $11.29
Restricted stock units1,524,778 1,820,186 1,101,855 
Convertible Notes5,005,000 5,005,000 5,005,000 5,005,000 
Convertible Notes warrants5,005,000 5,005,000 5,005,000 5,005,000 
Second Lien Term Loan warrants6,545,479 6,376,519 3,671,607 
22


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Number of options18,961 18,961 18,961 18,961 
Exercise price of options$9.20 - $11.02$9.20 - $11.02$9.20 - $11.02$9.20 - $11.02
Restricted stock units2,011,211 1,915,451 1,709,598 
Convertible Notes5,005,000 5,005,000 5,005,000 5,005,000 
Convertible Notes warrants5,005,000 5,005,000 5,005,000 5,005,000 
Common stock warrants3,905,486 6,443,910 8,596,184 6,443,910 
For purposes of determining diluted earnings (loss)loss per share, the Company has elected a policy to assume that the principal portion of the Convertible Notes, as described in Note 9,8, 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 (loss)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 Warrantswarrants 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)loss per share.
15.12. Equity Awards
Description of the Plans
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 US 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 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.
OnIn June 19, 2020, the shareholders approved the Horizon Global Corporation 2020 Equity and Incentive Compensation Plan (the “Horizon 2020 Plan”). Horizon employees, and non-employee directors and certain consultants participate in the Horizon 2020 Plan. The Horizon 2020 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 USU.S. Internal Revenue Code), appreciation rights, restricted shares, restricted stock units, performance shares, performance stock units, cash incentive awards, dividend equivalents and certain other awards based upon terms and conditions described in the Horizon 2020 Plan. No more than 4.1 million Horizon common shares may be delivered under the Horizon 2020 Plan, plus (A) the total number of shares remaining available for awards under the Horizon 2015 Plan, as defined and described above,below, as of June 19, 2020, plus (B) the shares that are subject to awards granted under the Horizon 2020 Plan or the Horizon 2015 Plan that are added (or added back, as applicable) to the aggregate number of shares available under the Horizon 2020 Plan pursuant to the share counting rules of the Horizon 2020 Plan. These shares may be shares of original issuance or treasury shares, or a combination of both.
Prior to the Horizon 2020 Plan, employees and non-employee directors participated in the Horizon Global Corporation 2015 Equity and Incentive Compensation Plan (as amended and restated, the “Horizon 2015 Plan”). The Horizon 2015 Plan authorized 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 our common stock to Horizon employees and non-employee directors.
Stock Options
The following table summarizes HorizonHorizon’s stock option activity from December 31, 2019 to September 30, 2020:is as follows:
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HORIZON GLOBAL CORPORATION
Number of Stock OptionsWeighted Average Exercise PriceAverage Remaining Contractual Life (Years)Aggregate Intrinsic Value
Outstanding at December 31, 201937,737$10.52 
Granted
Exercised
Canceled, forfeited(18,776)10.61 
Expired
Outstanding at September 30, 202018,961 $10.43 5.2$
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Number of Stock OptionsWeighted Average Exercise PriceAverage Remaining Contractual Life (Years)Aggregate Intrinsic Value
Outstanding at December 31, 202018,961 $10.43 
Granted
Exercised
Canceled, forfeited
Expired
Outstanding at June 30, 202118,961 $10.43 4.5$
As of SeptemberJune 30, 2020, the2021, there was no unrecognized compensation cost related to stock options is immaterial. Foroptions. During the three and ninesix months ended SeptemberJune 30, 2021 and 2020, and 2019, thethere was no stock-based compensation expense recognized by the Company related to stock options was immaterial. There was nooptions. As of June 30, 2021, the aggregate intrinsic value of the outstanding stock options at September 30, 2020.was immaterial. Stock-based compensation expense is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.


Restricted SharesStock Units
During the ninesix months ended SeptemberJune 30, 2021, the Company granted an aggregate of 524,711 restricted stock units (“RSUs”) and performance stock units (“PSUs”) to certain key employees and non-employee directors. The total grants consisted of: (i) 83,482 RSUs that vested during the period, (ii) 153,563 time-based RSUs vesting on a ratable basis on March 1, 2022, March 1, 2023 and March 1, 2024, (iii) 230,350 PSUs vesting on April 1, 2024 and (iv) 57,316 time-based RSUs vesting on May 28, 2022.
During 2020, the Company granted an aggregate of 1,502,072 restricted stock unitsRSUs and performance stock unitsPSUs to certain key employees.employees and non-employee directors. The total grants consisted of: (i) 284,859 time-based restricted stock unitsRSUs vesting on a ratable basis on March 3, 2021, March 3, 2022 and March 3, 2023; (ii) 277,228 time-based restricted stock unitsRSUs vesting on June 24, 2021; (iii) 21,351 time-based restricted stock unitsRSUs vesting on a ratable basis on April 2, 2021, March 3, 2022 and March 3, 2023 and (iv) 918,634 performance stock units that vestPSUs vesting on March 3, 2023 (the “2020 PSUs”).2023.
The performance criteria for the 2020 PSUs granted is based on the Company’s three-year cumulative EBITDA. The grant date fair values for the performance stock unitsPSUs and restricted stock units granted during 2020 RSUs are based on the closing trading price of the Company’s common stock on the date of grant.
During 2019, the Company granted an aggregate of 1,950,296 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) 27,840 time-based restricted stock units that vest on September 10, 2020; (iii) 245,134 time-based restricted stock units that vest on September 19, 2020; (iv) 25,000 time-based restricted stock units that vest on November 13, 2020; (v) 25,000 time-based restricted stock units that vest on December 9, 2020; (vi) 5,000 time-based restricted stock units that vest on May 15, 2021; (vii) 411,373 time-based restricted stock units that vest on March 19, 2022 and (viii) 857,357 market-based performance stock units (the “2019 PSUs”), of which 757,357 vest on March 19, 2022 with the remaining 100,000 vesting on a ratable basis on September 23, 2020, September 23, 2021 and September 23, 2022.
For the 2019 PSUs, 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. TSR is measured over a period beginning January 1, 2019 and ending December 31, 2021. 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 2.43% and annualized volatility of 84.1%. The grant date fair value of the performance stock units was $3.69.
25


The grant date fair value of rRSUs estricted stock units is expensed over the vesting period. Restricted 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 sharesRSUs outstanding for the periodsix months ended SeptemberJune 30, 2020 were2021 are as follows:
Number of Restricted SharesWeighted Average Grant Date Fair Value
Number of Restricted Stock Units(a)
Weighted Average Grant Date Fair Value
Outstanding at December 31, 20191,393,085 $4.30 
Outstanding at December 31, 2020Outstanding at December 31, 20201,800,682 $3.14 
GrantedGranted1,502,072 2.92 Granted524,711 8.96 
VestedVested(581,803)3.92 Vested(496,565)2.63 
Canceled, forfeitedCanceled, forfeited(455,072)4.87 Canceled, forfeited(71,669)5.21 
Outstanding at September 30, 20201,858,282 $3.16 
Outstanding at June 30, 2021Outstanding at June 30, 20211,757,159 $4.94 
(a)Includes PSUs at 100% attainment.
As of SeptemberJune 30, 2020,2021, there was $4.0$5.7 million in unrecognized compensation costs related to unvested restricted stock unitsRSUs that is expected to be recognized over a weighted-average period of 2.2 years.
The
24


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the three and six months ended June 30, 2021, the Company recognized $0.9 million and $2.2$1.7 million, respectively, of stock-based compensation expense related to restricted sharesRSUs, and during the three and ninesix months ended SeptemberJune 30, 2020, respectively, andthe Company recognized $0.9 million and $1.8$1.3 million, during the three and nine months ended and September 30, 2019, respectively.respectively, of stock-based compensation expense related to RSUs. Stock-based compensation expense is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.
25
16.


HORIZON GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Shareholders’ Equity
Preferred Stock
The Company is authorized to issue 100,000,000 shares of preferred stock, par value of $0.01 per share. ThereAs of June 30, 2021 and December 31, 2020, there were 0 preferred shares outstanding as of September 30, 2020 or December 31, 2019.outstanding.
Common Stock
The Company is authorized to issue 400,000,000 shares of Horizon Global common stock, par value of $0.01 per share. As of SeptemberJune 30, 2020,2021, there were 26,902,43927,970,998 shares of common stock issued and 26,215,93327,284,492 shares of common stock outstanding. As of December 31, 2019,2020, there were 26,073,89427,089,673 shares of common stock issued and 25,387,38826,403,167 shares of common stock outstanding.
Common Stock Warrants
In March 2019, in connection with the Second Lien Term Loan, the Company entered into in March 2019, the Company became obligated to issue detachable warrants to purchase up to 6.25 million shares of itsthe Company’s common stock, which can be exercised on a cashless basis over a five year term with an exercise price of $1.50 per share.
The Company also issued 90,667 shares of Series A Preferred Stock in March 2019In February 2021, in connection with the Second LienSenior Term Loan that were convertible into additional warrants upon receipt of shareholder approvalCredit Agreement, the Company issued the Senior Term Loan Warrants to purchase up to 3,905,486 shares of the issuance of such additional warrants and the shares ofCompany’s common stock, issuable uponwhich can be exercised on a cashless basis over a five year term with an exercise thereof. The Series A Preferred Stock was presented as temporary equity in the March 31, 2019 condensed consolidated balance sheet. Upon receiptprice of such shareholder approval on June 25, 2019, the 90,667 shares of Series A Preferred Stock were converted into warrants to purchase 2,952,248 shares of common stock.$9.00 per share. See Note 9,8, Long-term Debt, for additional information.
As of SeptemberJune 30, 2020,2021, warrants for 560,611to purchase 1,228,490 shares of the Company’s common stock have been exercised, on a net basis, resulting in the issuance of 372,963972,924 shares of the Company’s common stock. As of SeptemberJune 30, 2020,2021, warrants to purchase 5,993,5399,231,146 shares of the Company’s common stock were issued and remain outstanding. During the three and ninesix months ended SeptemberJune 30, 2020,2021, a related-party entity, JKI Holdings, LLC, an entity owned by the chair of our board of directors, exercised in full the warrants that it originally received in connection with the March 2019 issuance described above, and paid the exercise price in cash and received 278,283 shares of common stock. During the six months ended June 30, 2021, the Company recognized $0.8$0.3 million of non-cash transactions in connection with warrants exercised.
26


Accumulated Other Comprehensive Income (Loss) (“AOCI”)
ChangesThe change in AOCI attributable to Horizon Global by component, net of tax, for the ninesix months ended SeptemberJune 30, 2020 are summarized2021 is as follows:
Derivative InstrumentsForeign Currency Translation and OtherTotal
(dollars in thousands)
Balances at January 1, 2020$$(9,790)$(9,790)
Net unrealized losses arising during the period(400)(400)
Net current-period change(400)(400)
Balances at September 30, 2020$$(10,190)$(10,190)
Foreign Currency Translation and Other
(dollars in thousands)
Balance at January 1, 2021$(6,540)
Net unrealized losses arising during the period(2,420)
Net change(2,420)
Balance at June 30, 2021$(8,960)
ChangesThe change in AOCI attributable to Horizon Global by component, net of tax, for the ninesix months ended SeptemberJune 30, 2019 are summarized2020 is as follows:
Derivative InstrumentsForeign Currency Translation and OtherTotal
(dollars in thousands)
Balances at January 1, 2019$1,960 $5,800 $7,760 
Net unrealized gains arising during the period(a)
730 (30)700 
Less: Net realized gains reclassified to net loss(a)
2,450 2,450 
Amounts reclassified from AOCI(20)(17,240)(17,260)
Net current-period change(1,740)(17,270)(19,010)
Balances at September 30, 2019$220 $(11,470)$(11,250)
Foreign Currency Translation and Other
(dollars in thousands)
Balance at January 1, 2020$(9,790)
Net unrealized losses arising during the period(2,300)
Net change(2,300)
Balance at June 30, 2020$(12,090)
26

(a) There was no income tax impact for derivative instruments during the nine months ended September 30, 2019. See Note 10, Derivative Instruments, for further details.
HORIZON GLOBAL CORPORATION
17.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. Segment Information
The Company groups its business into operating segments generally by the region in which sales and manufacturing efforts are focused, which are grouped on the basis of similar product, market and operating factors. Each operating segment has discrete financial information evaluated regularly by the Company’s chief operating decision maker in determining resource allocation and assessing performance. The Company reports the results of its business in 2 operating segments: Horizon Americas and Horizon Europe-Africa. Horizon Americas is comprised of the Company’s North American operations, and prior to the Brazil Sale also included the Company’s South American operations. Horizon Europe-Africa is comprised of the Company’s European and South African operations. See below for further information regarding the types of products and services provided within each operating segment.
Previously, theThe Company previously had three operating segments. However, as a result of its sale in the third quarter of 2019, we have removed APAC as a separate operating segment, Horizon Asia-Pacific (“APAC”); however, the APAC segment was sold on September 19, 2019, and its results areis presented as a discontinued operation in the accompanying condensed consolidated financial statements. Historical information has been retrospectively adjustedDuring the first quarter of 2020, the remaining post-closing conditions of the sale were completed, resulting in a true up to reflect these changes. Please see Note 3, net cash proceeds, which were recognized as a loss on sale of discontinued operations of $0.5 million in accordance with Accounting Standards Codification 205, “Discontinued OperationsOperations”, 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 automotive OEMs, automotive 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 the Europe and Africa regions of the world.
The Company’s operating segment activity is as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
 (dollars in thousands)
Net Sales
Horizon Americas$128,380 $74,120 $238,210 $166,490 
Horizon Europe-Africa93,740 46,370 183,100 117,250 
Total$222,120 $120,490 $421,310 $283,740 
Operating Profit (Loss)
Horizon Americas$16,760 $3,430 $28,600 $6,160 
Horizon Europe-Africa1,240 (5,970)2,700 (8,480)
Corporate(6,670)(5,430)(13,190)(12,330)
Total$11,330 $(7,970)$18,110 $(14,650)
27


HORIZON GLOBAL CORPORATION
The following table presents the Company’s operating segment activity:NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
 (dollars in thousands)
Net Sales
Horizon Americas$119,140 $96,220 $285,630 $300,670 
Horizon Europe-Africa82,490 81,630 199,740 247,500 
Total$201,630 $177,850 $485,370 $548,170 
Operating Profit (Loss)
Horizon Americas$13,170 $(2,230)$19,330 $5,760 
Horizon Europe-Africa2,440 1,730 (6,040)120 
Corporate(7,050)(12,260)(19,380)(29,360)
Total$8,560 $(12,760)$(6,090)$(23,480)
18.15. 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.
TheDuring the three and six months ended June 30, 2021, the effective income tax rate was 5.9%59.3% and (0.5)(20.4)% for, respectively. During the three and ninesix months ended SeptemberJune 30, 2020, respectively. Thethe effective income tax rate was 2.6%(0.5)% and 2.9% for the three and nine months ended September 30, 2019,(0.2)%, respectively. The 2020 lowerdifferences in the effective tax rate compared to the statutory tax rate is attributable to the valuation allowance recorded in the USU.S. and several foreign jurisdictions, which resulted in no income tax benefit recognized for jurisdictional pretax losses.losses, and therefore, are excluded from the estimated effective tax rate.
The Company evaluates the realizability of its deferred tax assets on a quarterly basis. In completing this evaluation, the Company considers all available evidence in order to determine whether, based on the weight of the evidence, a valuation allowance is necessary. Full valuation allowances that are recorded for deferred tax assets in the USU.S. and certain foreign jurisdictions will be maintained until sufficient positive evidence exists to reduce or eliminate them. The factors considered by management in its determination of the probability of the realization of the deferred tax assets include, but are not limited to, recent historical financial results, historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences, tax planning strategies. If, based upon the weight of available evidence, it is more likely than not the deferred tax assets will not be realized, a valuation allowance is recorded. The Company has recently experienced pre-tax losses. As of SeptemberJune 30, 2020,2021, the Company believes that it is more likely than not that the recorded deferred tax assets will be realized.
On March 27, 2020, Congress enacted the CARES Act to provide certain relief as a result of the COVID-19 pandemic. The Company is currently evaluating how the CARES Act provisions will impact our consolidated financial statements, but is not currently projecting significant impacts on its income tax provision based on its domestic valuation allowance and historical operating performance.
19.16. Other Income (Expense),Expense, Net
Other income (expense),expense, net consists of the following components:
28


Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
(dollars in thousands)(dollars in thousands)
Foreign currency gain / (loss)$1,080 $(1,180)$(670)$(1,800)
Loss on sale of businessLoss on sale of business$(2,230)$$(2,230)$
Foreign currency gain (loss)Foreign currency gain (loss)460 (220)(1,650)(1,750)
Customer pay discountsCustomer pay discounts(420)(300)(960)(1,220)Customer pay discounts(260)(270)(500)(540)
Loss on sale of business(3,630)
Other30 (160)200 40 
Other, netOther, net40 40 160 170 
TotalTotal$690 $(1,640)$(1,430)$(6,610)Total$(1,990)$(450)$(4,220)$(2,120)

2928


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition contains forward-looking statements regarding industry outlook and our expectations regarding the performance of our business. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under the heading “Forward-Looking Statements,” at the beginning of this Quarterly Report on Form 10-Q. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
You should read the following discussion together with the Company’s reports on file with the Securities and Exchange Commission, as well as our Annual Report on Form 10-K for the yeartwelve months ended December 31, 20192020 (See Item 1A. Risk Factors).
Overview
Headquartered in Plymouth, Michigan, Horizon Global Corporation and its consolidated subsidiaries (“Horizon,” “Horizon Global,” “we,” or the “Company”) are a leading designer, manufacturer and distributor of a wide variety of high-quality, custom-engineered towing, trailering, cargo management and other related accessory products on a global basis,primarily in the North American, European and African markets, primarily servicing the aftermarket, retail and e-commerce andautomotive original equipment manufacturers (“automotive OEMs”) and automotive original equipment servicers (“automotive OESs”) (collectively, “OEs”), retail, e-commerce and industrial channels, supporting our customers generally through a regional service and delivery model.
Critical factors affecting our ability to succeed include:
Our ability to realize the expected future economic benefits resulting from the changes made to our manufacturing operations, distribution footprint and management team during 2017 through 2019,in recent years, including the operational improvement initiatives implemented in 2019;2019-2020, which are continuously ongoing to support margin expansion;
Our ability to continue to manage our liquidity, including continuing to deleverage our balance sheet and service our debt obligations;obligations and comply with the applicable financial covenants thereto, especially given our recent debt refinancing and capital structure alignment to support business growth and the Company’s long-term strategic plan;
Our ability to quickly and cost-effectively introduce new products to our customers and end-user market with a resulting streamlined customer service model and improved operating margins;
Our ability to continue to successfully launch new products and customer programs to expand or realign our geographic coverage or distribution channels and realize desired operating efficiencies;efficiencies and product line or customer content penetration;
Our ability to manage our cost structure more efficiently via global supply base management, internal sourcing and/or purchasing of materials, freight and logistics management, selective outsourcing and/or purchasing of support functions, working capital management and a global approach to leverage our administrative functions; and
Our ability to manage the business disruption and the operational and financial impacts, including temporary facility closures, liquidity and other economic and business uncertainties related to the COVID-19 pandemic that may result in future business disruption, including any mandated operating restrictions such as further detailed below.temporary facility closures.
If we are unable to do any of the foregoing successfully, our financial condition and results of operations could be materially and adversely impacted.
In December 2019, a novel coronavirus (“COVID-19”) outbreak occurred in China and has since spread to other parts of the world and been declared a pandemic. In connection with the COVID-19 pandemic, we have been adhering to mandates and other guidance from local governments and health authorities, as well as the World Health Organization and the Centers for Disease Control. As a result of the pandemic, we experienced, and may experience again in the future, decreases in demand and customer orders for our products in all sales channels, as well as temporary disruptions and closures of some of our facilities due to decreased demand and government mandates. The COVID-19 pandemic also impacted various aspects of the supply chain as our suppliers experienced similar business disruptions due to operating restrictions from government mandates. We continue to monitor procurement of raw materials and components used in the manufacturing, distribution and sale of our products, but future disruptions in the supply chain due to the COVID-19 pandemic may cause difficulty in sourcing materials or unexpected shortages or delays in delivery of raw materials and components, and may result in increased costs in our supply chain. The extent to which we or our customers may successfully mitigate the impact of the COVID-19 pandemic, if at all, is unclear. The extent and duration of the impact of the COVID-19 pandemic and resulting effect on the Company’s operations continues to evolve and remains uncertain. However, we expect that our results of operations in future periods may be adversely impacted by the COVID-19 pandemic and its negative effects on global economic conditions. See Part II, Item 1A, “Risk Factors,” for additional risks relating to the COVID-19 pandemic.
30


Horizon Global reports its business in two operating segments: Horizon Americas and Horizon Europe-Africa. See Note 17,14, Segment Information, included in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” within this Quarterly Report on Form 10-Q for further description of the Company’s operating segments.
We reportShipping and handling costs associated with outbound freight are accounted for as a fulfillment cost and are included in cost of sales in our condensed consolidated statements of operations. Other shipping and handling expenses, associated withwhich primarily relate to Horizon Americas’ distribution network, as an element ofare included in selling, general and administrative expenses in our condensed consolidated statements of operations. As such, gross margins for Horizon Americas may not be comparable to those of Horizon Europe-Africa, which primarily relies on third-party distributors, for which all costs are included in cost of sales.
29



Supplemental Analysis and Segment Information
Non-GAAP Financial Measures
The Company’s management utilizes Adjusted EBITDA as the key measure of company and segment performance and for planning and forecasting purposes, as management believes this measure is most reflective of the operational profitability or loss of the Company and its operating segments and provides management and investors with information to evaluate the operating performance of its business and is representative of its performance used to measure certain of its financial covenants, further discussed in the Liquidity and Capital Resources section below. Adjusted EBITDA should not be considered a substitute for results prepared in accordance with USU.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 USU.S. GAAP. Adjusted EBITDA, as determined and measured by Horizon Global, should also not be compared to similarly titled measures reported by other companies. The Company also uses operating profit (loss) to measure stand-alone segment performance.
Adjusted EBITDA is defined as net income (loss) attributable to Horizon Global before interest expense, income taxes, depreciation and amortization, and before certain items, as applicable, such as severance, restructuring, relocation and related business disruption costs, gains (losses) on debt extinguishment, 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, debt issuance costs, board transition support and non-cash unrealized foreign currency remeasurement costs.
The following table summarizes Adjusted EBITDA for our operating segments for the three months ended SeptemberJune 30, 2020 :2021:
Three Months Ended
September 30, 2020
Three Months Ended June 30, 2021
Horizon AmericasHorizon Europe-AfricaCorporateConsolidatedHorizon AmericasHorizon Europe-AfricaCorporateConsolidated
(dollars in thousands)(dollars in thousands)
Net income attributable to Horizon GlobalNet income attributable to Horizon Global$1,930 Net income attributable to Horizon Global$1,290 
Net loss attributable to noncontrolling interestNet loss attributable to noncontrolling interest(340)Net loss attributable to noncontrolling interest(330)
Net incomeNet income$1,590 Net income$960 
Interest expenseInterest expense7,560 Interest expense6,980 
Income tax expenseIncome tax expense100 Income tax expense1,400 
Depreciation and amortizationDepreciation and amortization5,620 Depreciation and amortization5,220 
EBITDAEBITDA$13,870 $7,490 $(6,490)$14,870 EBITDA$15,980 $5,040 $(6,460)$14,560 
Net loss attributable to noncontrolling interestNet loss attributable to noncontrolling interest— 340 — 340 Net loss attributable to noncontrolling interest— 330 — 330 
Severance— (170)— (170)
Restructuring, relocation and related business disruption costsRestructuring, relocation and related business disruption costs250 (20)150 380 Restructuring, relocation and related business disruption costs20 90 (40)70 
Non-cash stock compensationNon-cash stock compensation— — 870 870 Non-cash stock compensation— — 850 850 
Loss (gain) on business divestitures and other assetsLoss (gain) on business divestitures and other assets420 — (20)400 Loss (gain) on business divestitures and other assets2,480 (10)— 2,470 
Debt issuance costsDebt issuance costs— — 530 530 Debt issuance costs— — 190 190 
Unrealized foreign currency remeasurement costsUnrealized foreign currency remeasurement costs980 (1,580)(500)(1,100)Unrealized foreign currency remeasurement costs— (340)(110)(450)
Adjusted EBITDAAdjusted EBITDA$15,520 $6,060 $(5,460)$16,120 Adjusted EBITDA$18,480 $5,110 $(5,570)$18,020 







3130


The following table summarizes Adjusted EBITDA for our operating segments for the three months ended SeptemberJune 30, 2019:2020:
Three Months Ended
September 30, 2019
Horizon AmericasHorizon Europe-AfricaCorporateConsolidated
(dollars in thousands)
Net income attributable to Horizon Global$145,510 
Net loss attributable to noncontrolling interest(260)
Net income$145,250 
Interest expense24,120 
Income tax benefit(1,020)
Depreciation and amortization6,250 
EBITDA$(1,290)$3,950 $171,940 $174,600 
Net loss attributable to noncontrolling interest— 260 — 260 
Income from discontinued operations, net of tax— — (182,750)(182,750)
Severance(10)10 1,620 1,620 
Restructuring, relocation and related business disruption costs(200)— 4,250 4,050 
Non-cash stock compensation— — 850 850 
Loss (gain) on business divestitures and other assets320 — (1,320)(1,000)
Product liability and litigation claims820 (4,270)— (3,450)
Debt issuance costs— — 1,310 1,310 
Unrealized foreign currency remeasurement costs240 650 300 1,190 
Other670 130 (530)270 
Adjusted EBITDA$550 $730 $(4,330)$(3,050)

Segment Information
Previously, the Company had three operating 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, included in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” within this Quarterly Report on Form 10-Q for additional information.









Three Months Ended June 30, 2020
Horizon AmericasHorizon Europe-AfricaCorporateConsolidated
(dollars in thousands)
Net loss attributable to Horizon Global$(16,340)
Net loss attributable to noncontrolling interest(380)
Net loss$(16,720)
Interest expense8,220 
Income tax expense80 
Depreciation and amortization5,470 
EBITDA$5,350 $(3,250)$(5,050)$(2,950)
Net loss attributable to noncontrolling interest— 380 — 380 
Restructuring, relocation and related business disruption costs410 30 210 650 
Non-cash stock compensation— — 900 900 
Loss on business divestitures and other assets240 — 40 280 
Debt issuance costs— — 560 560 
Unrealized foreign currency remeasurement costs(100)690 (370)220 
Adjusted EBITDA$5,900 $(2,150)$(3,710)$40 
3231


The following table summarizes financialSegment Information
Financial information for our operating segments for the three months ended SeptemberJune 30, 2021 and 2020 and 2019:is as follows:
Three Months Ended September 30,ChangeConstant Currency ChangeThree Months Ended June 30,ChangeConstant Currency Change
2020As a Percentage of Net Sales2019As a Percentage of Net Sales$%$%2021As a Percentage of Net Sales2020As a Percentage of Net Sales$%$%
(dollars in thousands)(dollars in thousands)
Net SalesNet SalesNet Sales
Horizon AmericasHorizon Americas$119,140 59.1 %$96,220 54.1 %$22,920 23.8 %$23,420 24.3 %Horizon Americas$128,380 57.8 %$74,120 61.5 %$54,260 73.2 %$54,270 73.2 %
Horizon Europe-AfricaHorizon Europe-Africa82,490 40.9 %81,630 45.9 %860 1.1 %(2,720)(3.3 %)Horizon Europe-Africa93,740 42.2 %46,370 38.5 %47,370 102.2 %39,480 85.1 %
TotalTotal$201,630 100.0 %$177,850 100.0 %$23,780 13.4 %$20,700 11.6 %Total$222,120 100.0 %$120,490 100.0 %$101,630 84.3 %$93,750 77.8 %
Gross ProfitGross ProfitGross Profit
Horizon AmericasHorizon Americas$32,960 27.7 %$17,270 17.9 %$15,690 90.9 %$15,910 92.1 %Horizon Americas$35,080 27.3 %$18,140 24.5 %$16,940 93.4 %$16,700 92.1 %
Horizon Europe-AfricaHorizon Europe-Africa10,410 12.6 %11,020 13.5 %(610)(5.5 %)(1,120)(10.2 %)Horizon Europe-Africa12,210 13.0 %(90)(0.2)%12,300 13,666.7 %11,390 12,655.6 %
TotalTotal$43,370 21.5 %$28,290 15.9 %$15,080 53.3 %$14,790 52.3 %Total$47,290 21.3 %$18,050 15.0 %$29,240 162.0 %$28,090 155.6 %
Selling, General and Administrative ExpensesSelling, General and Administrative ExpensesSelling, General and Administrative Expenses
Horizon AmericasHorizon Americas$19,790 16.6 %$19,500 20.3 %$290 1.5 %$520 2.7 %Horizon Americas$18,320 14.3 %$14,730 19.9 %$3,590 24.4 %$3,480 23.6 %
Horizon Europe-AfricaHorizon Europe-Africa7,960 9.6 %9,330 11.4 %(1,370)(14.7 %)(1,660)(17.8 %)Horizon Europe-Africa10,970 11.7 %5,870 12.7 %5,100 86.9 %4,140 70.5 %
CorporateCorporate7,070 N/A12,270 N/A(5,200)(42.4 %)(5,200)(42.4 %)Corporate6,670 N/A5,420 N/A1,250 23.1 %1,250 23.1 %
TotalTotal$34,820 17.3 %$41,100 23.1 %$(6,280)(15.3 %)$(6,340)(15.4 %)Total$35,960 16.2 %$26,020 21.6 %$9,940 38.2 %$8,870 34.1 %
Operating Profit (Loss)Operating Profit (Loss)Operating Profit (Loss)
Horizon AmericasHorizon Americas$13,170 11.1 %$(2,230)(2.3)%$15,400 690.6 %$15,400 690.6 %Horizon Americas$16,760 13.1 %$3,430 4.6 %$13,330 388.6 %$13,210 385.1 %
Horizon Europe-AfricaHorizon Europe-Africa2,440 3.0 %1,730 2.1 %710 41.0 %510 29.5 %Horizon Europe-Africa1,240 1.3 %(5,970)(12.9)%7,210 120.8 %7,240 121.3 %
CorporateCorporate(7,050)N/A(12,260)N/A5,210 42.5 %5,210 42.5 %Corporate(6,670)N/A(5,430)N/A(1,240)(22.8 %)(1,240)(22.8 %)
TotalTotal$8,560 4.2 %$(12,760)(7.2)%$21,320 167.1 %$21,120 165.5 %Total$11,330 5.1 %$(7,970)(6.6)%$19,300 242.2 %$19,210 241.0 %
Capital ExpendituresCapital ExpendituresCapital Expenditures
Horizon AmericasHorizon Americas$1,180 1.0 %$2,130 2.2 %$(950)(44.6 %)$(890)(41.8 %)Horizon Americas$2,880 2.2 %$900 1.2 %$1,980 220.0 %$1,970 218.9 %
Horizon Europe-AfricaHorizon Europe-Africa1,460 1.8 %650 0.8 %810 124.6 %1,100 169.2 %Horizon Europe-Africa3,700 3.9 %490 1.1 %3,210 655.1 %3,170 646.9 %
CorporateCorporate— N/A— N/A— — %— — %Corporate— N/A— N/A— — %— — %
TotalTotal$2,640 1.3 %$2,780 1.6 %$(140)(5.0 %)$210 7.6 %Total$6,580 3.0 %$1,390 1.2 %$5,190 373.4 %$5,140 369.8 %
Depreciation and Amortization of Intangible Assets
Depreciation of Property and Equipment and Amortization of IntangiblesDepreciation of Property and Equipment and Amortization of Intangibles
Horizon AmericasHorizon Americas$2,100 1.8 %$2,160 2.2 %$(60)(2.8 %)$(30)(1.4 %)Horizon Americas$1,780 1.4 %$2,040 2.8 %$(260)(12.7 %)$(280)(13.7 %)
Horizon Europe-AfricaHorizon Europe-Africa3,470 4.2 %3,020 3.7 %450 14.9 %320 10.6 %Horizon Europe-Africa3,390 3.6 %3,370 7.3 %20 0.6 %(260)(7.7 %)
CorporateCorporate50 N/A1,080 N/A(1,030)(95.4 %)(1,030)(95.4 %)Corporate50 N/A60 N/A(10)(16.7 %)(10)(16.7 %)
TotalTotal$5,620 2.8 %$6,260 3.5 %$(640)(10.2 %)$(740)(11.8 %)Total$5,220 2.4 %$5,470 4.5 %$(250)(4.6 %)$(550)(10.1 %)
Adjusted EBITDAAdjusted EBITDAAdjusted EBITDA
Horizon AmericasHorizon Americas$15,520 13.0 %$550 0.6 %$14,970 2,721.8 %N/AN/AHorizon Americas$18,480 14.4 %$5,900 8.0 %$12,580 213.2 %N/AN/A
Horizon Europe-AfricaHorizon Europe-Africa6,060 7.3 %730 0.9 %5,330 730.1 %N/AN/AHorizon Europe-Africa5,110 5.5 %(2,150)(4.6)%7,260 337.7 %N/AN/A
CorporateCorporate(5,460)N/A(4,330)N/A(1,130)(26.1 %)N/AN/ACorporate(5,570)N/A(3,710)N/A(1,860)(50.1 %)N/AN/A
TotalTotal$16,120 8.0 %$(3,050)(1.7)%$19,170 628.5 %N/AN/ATotal$18,020 8.1 %$40 — %$17,980 44,950.0 %N/AN/A
3332



Results of Operations
Three Months Ended SeptemberJune 30, 20202021 Compared towith Three Months Ended SeptemberJune 30, 20192020
Consolidated net sales increased by $23.7$101.6 million, or 13.4%84.3%, to $201.6$222.1 million induring the three months ended SeptemberJune 30, 2020,2021, as compared with $177.9to $120.5 million induring the three months ended SeptemberJune 30, 2019,2020. The impact was driven by an increase in net sales in Horizon Americas and Horizon Europe-Africa. The increaseEurope-Africa primarily as a result of the impacts of economic uncertainty and business disruptions of the COVID-19 pandemic that significantly impacted the Company in netthe second quarter of 2020. Net sales withinfor Horizon Americas of $22.9increased $54.3 million, wasdriven primarily driven by increases in sales volumes in the aftermarket, automotive OEM and retail sales channels, as well as pricing recovery initiatives driven by commodity and input cost price increases. Net sales for Horizon Europe-Africa increased $47.3 million, driven primarily by increases in sales volumes in the automotive OEM, automotive OES retail,and aftermarket and E-commerce sales channels, partially offset by a decrease in the industrial sales channel. The increase in net sales of $0.9 million in Horizon Europe-Africa was primarily attributable to $3.6as well as $7.9 million of favorable currency translation and higher net sales in the aftermarket sales channel, partially offset by lower net sales in the automotive OEM and automotive OES sales channels.translation.
Gross profit margin (gross profit as a percentage of net sales) was 21.5%21.3% and 15.9%15.0% during the three months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. The improved gross profit margin is primarily due to higher net sales in Horizon Americas. Both operating segments hadAmericas and Horizon Europe-Africa as detailed above, coupled with favorable net sales channel mix, as well as improved operating efficiency whileduring the efficiency within Horizon Europe-Africa was offset bythree months ended June 30, 2021, as compared to the three months ended June 30, 2020, as a prior year favorable expense recovery that did not recur.result of the impacts of the COVID-19 pandemic experienced in the second quarter of 2020.
Selling, general and administrative (“SG&A”) expenses decreased by $6.3increased $9.9 million, primarily attributable to Corporate expenses incurred$4.9 million higher personnel and other variable compensation costs combined across the Company, driven by temporary salary reductions in the three months ended September 30, 2019 for $5.3 millionU.S. and participation in certain payroll reimbursement programs in Horizon Europe-Africa in the second quarter of lease abandonment and leasehold improvement charges related2020 in response to the Company’s departure from its headquarters lease and $1.6impacts of the COVID-19 pandemic. Unfavorable currency translation in Horizon Europe-Africa of $1.0 million of severance costs relatedalso contributed to the separation agreement reached with our former chief executive officer which did not recur in the three months ended September 30, 2020.increase.
Operating margin (operating profit (loss) as a percentage of net sales) was 4.2%5.1% and (7.2)(6.6)% induring the three months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. Operating marginprofit improved by $21.4$19.3 million to an operating profit of $8.6$11.3 million induring the three months ended SeptemberJune 30, 2020,2021, from an operating loss of $(12.8)$(8.0) million induring the three months ended SeptemberJune 30, 2019,2020. Improved operating profit and operating margin were primarily due to the operational results detailed above.
Other expense, net increased $1.5 million to $2.0 million during the three months ended June 30, 2021, as compared to $0.5 million during the three months ended June 30, 2020, primarily attributable to the $2.2 million loss on the sale of the Company’s Brazil business during the three months ended June 30, 2021. Refer to Note 4, Goodwill and Other Intangible Assets, in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” included within this Quarterly Report on Form 10-Q for additional information of the sale of the Company’s Brazil business.
Interest expense decreased $1.2 million to $7.0 million during the three months ended June 30, 2021, as compared to $8.2 million during the three months ended June 30, 2020, primarily as a result of the operational results detailed above.
Other income (expense), net improved by $2.3 million to $0.7 millionCompany’s February 2021 refinancing, which resulted in a new term loan agreement and replaced the Company’s existing term loan agreement. The new term loan included a lower interest rate and removed paid-in-kind interest, resulting in lower interest expense for the three months ended SeptemberJune 30, 2020,2021, as compared to $(1.6) million in the three months ended September 30, 2019 primarily attributable to a $1.1 million foreign currency gain in the three months ended September 30, 2020 as compared to a $(1.2) million foreign currency loss in the three months ended September 30, 2019.
Interest expense decreased by $16.5 million to $7.6 million in the three months ended September 30, 2020, as compared to $24.1 million in the three months ended September 30, 2019. Interest expense decreased primarily as a result of the pay down of principal on the Company’s First Lien Term Loan (as defined below) in September 2019, which resulted in lower borrowings as well as lower interest rates compared to the three months ended SeptemberJune 30, 2019.2020. 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 of the Company’s February 2021 refinancing.
The effective income tax rate for continuing operationsthe three months ended June 30, 2021 and 2020 was 59.3% and (0.5)%, respectively. The increase in tax expense and related impacts on the effective income tax rate for the three months ended SeptemberJune 30, 2020 and2021 is attributable to projected jurisdictional income mix in jurisdictions not in a valuation allowance, coupled with utilization limitations on usage of U.S. tax attributes. The difference in the three months ended September 30, 2019 was 5.9% and 2.6%, respectively. The lower effective tax rate compared to the statutory tax rate for both periods is attributable to the valuation allowance recorded in the USU.S. and several foreign jurisdictions, as of September 30, 2020, which resulted in no income tax benefit recognized for jurisdictional pretax losses.losses, and therefore, are excluded from the estimated effective tax rate.
Net income (loss) from continuing operations increased by $39.1$17.7 million to net income of $1.6$1.0 million induring the three months ended SeptemberJune 30, 2020,2021, compared to a net loss from continuing operations of $(37.5)$(16.7) million induring the three months ended SeptemberJune 30, 2019, primarily as a result of2020. The improvement was attributable to the operational results detailed above.
Income from discontinued operations, net of tax is attributable to the sale of the Company’s former APAC operating segment, which was sold in September 2019. APAC has been presented as discontinued operations in our condensed consolidated financial statements in accordance with ASC 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 Company’s discontinued operations.
See below for a discussion of operating results by segment.
3433


Horizon Americas
Net sales by sales channel, in thousands, for Horizon Americas during the three months ended September 30, 2020 and 2019 are as follows:
Three Months Ended September 30,ChangeThree Months Ended June 30,Change
20202019$%20212020$%
Net SalesNet SalesNet Sales
AftermarketAftermarket$40,560 $22,280 $18,280 82.0 %
Automotive OEMAutomotive OEM$24,010 $21,050 $2,960 14.1 %Automotive OEM22,650 9,510 13,140 138.2 %
Automotive OESAutomotive OES2,980 1,960 1,020 52.0 %Automotive OES4,240 1,080 3,160 292.6 %
Aftermarket35,390 26,920 8,470 31.5 %
RetailRetail34,290 26,600 7,690 28.9 %Retail32,610 22,830 9,780 42.8 %
E-commerceE-commerce19,730 13,370 6,360 47.6 %
IndustrialIndustrial7,230 7,650 (420)(5.5)%Industrial8,590 5,040 3,550 70.4 %
E-commerce15,240 12,040 3,200 26.6 %
OtherOther— 10 (10)(100.0)%
TotalTotal$119,140 $96,220 $22,920 23.8 %Total$128,380 $74,120 $54,260 73.2 %
Net sales increased by $22.9$54.3 million, or 23.8%73.2%, to $119.1 million in the three months ended September 30, 2020, as compared to $96.2$128.4 million during the three months ended SeptemberJune 30, 2019,2021, as compared to $74.1 million during the three months ended June 30, 2020, primarily attributable to higher sales volumes. In addition,volumes in all sales channels. The increased volumes compared to the three months ended June 30, 2020, are attributable to the impacts of economic uncertainty and business disruptions of the COVID-19 pandemic that impacted the Company in the second quarter of 2020. Net sales also increased by $10.3 million in 2021 due to pricing increases, which were implemented to recover increased material and input costs. The increase was also duepartially offset by a $1.5$5.0 million reductionincrease in sales returns and allowances induring the three months ended SeptemberJune 30, 2020,2021, as compared with the three months ended SeptemberJune 30, 2019.2020, primarily as a result of the higher sales volumes experienced.
Horizon Americas’ gross profit increased by $15.7$17.0 million, or 93.4%, to $33.0$35.1 million, inor 27.3% of net sales, during the three months ended SeptemberJune 30, 2020,2021, as compared to $17.3$18.1 million, inor 24.5% of net sales, during the three months ended SeptemberJune 30, 2019.2020. The increase in gross profit and gross profit margin reflects the changes in sales detailed above. Additionally, gross profit was impacted by the following:
$3.70.9 million of favorable tariff recoveries;
$5.2 million unfavorable manufacturing input costs, such as material costs due to increasing commodity and raw material market prices, coupled with other input costs; and
$3.42.3 million lower scrapunfavorable outbound freight costs and inventory reserves.driven by higher sales volumes discussed above.
SG&A expenses increased by $0.3$3.6 million to $19.8$18.3 million, or 16.6%14.3% of net sales, induring the three months ended SeptemberJune 30, 2020,2021, as compared to $19.5$14.7 million, or 20.3%19.9% of net sales, induring the three months ended SeptemberJune 30, 2019.2020. The increase in SG&A expenses was primarily attributable to the cost saving initiatives implemented by the Company and corresponding savings realized during the second quarter of 2020 in response to the impacts of the COVID-19 pandemic. As a result, the increase in SG&A is attributable to the following:
$2.62.3 million higher personnel and other variable compensation costs; partially offset by:
$1.2 million decreased allowance for doubtful accounts;costs, primarily as a result of temporary salary reductions in the U.S. and other compensation and benefit cost reductions in the second quarter of 2020 in response to the impacts of the COVID-19 pandemic; and
$0.80.9 million lower litigationhigher outside professional fees and other administrative costs.
Horizon Americas’ operating marginprofit increased by $15.4$13.4 million to an operating profit of $13.2$16.8 million, or 11.1%13.1% of net sales, induring the three months ended SeptemberJune 30, 2020,2021, as compared to an operating loss of $(2.2)$3.4 million, or (2.3)%4.6% of net sales, induring the three months ended SeptemberJune 30, 2019. Operating2020. Improved operating profit and operating margin increasedwere primarily due to the operational results detailed above.
Horizon Americas’ Adjusted EBITDA increased by $14.9$12.6 million to $15.5$18.5 million induring the three months ended SeptemberJune 30, 2020,2021, as compared to Adjusted EBITDA of $0.6$5.9 million induring the three months ended SeptemberJune 30, 2019.2020. Adjusted EBITDA increasedimproved primarily due to the operational results detailed above.
3534


Horizon Europe-Africa
Net sales by sales channel, in thousands, for Horizon Europe-Africa are as follows:
Three Months Ended June 30,Change
20212020$%
Net Sales
Aftermarket$26,130 $16,680 $9,450 56.7 %
Automotive OEM44,190 20,620 23,570 114.3 %
Automotive OES19,970 7,720 12,250 158.7 %
E-commerce1,960 230 1,730 752.2 %
Industrial630 340 290 85.3 %
Other860 780 80 10.3 %
Total$93,740 $46,370 $47,370 102.2 %
Net sales increased $47.3 million, or 102.2%, to $93.7 million during the three months ended SeptemberJune 30, 2020 and 2019 are2021, as follows:
Three Months Ended September 30,Change
20202019$%
Net Sales
Automotive OEM$42,400 $43,200 $(800)(1.9)%
Automotive OES13,820 16,510 (2,690)(16.3)%
Aftermarket24,360 19,840 4,520 22.8 %
Industrial550 780 (230)(29.5)%
E-commerce630 560 70 12.5 %
Other730 740 (10)(1.4)%
Total$82,490 $81,630 $860 1.1 %
Net sales increased by $0.9compared to $46.4 million, or 1.1%, to $82.5 million induring the three months ended SeptemberJune 30, 2020, as compared to $81.6 million in the three months ended September 30, 2019, primarily attributable to favorable currency translation and higher net sales in the aftermarket sales channel, partially offset by lower net salesvolumes in the automotive OEM, and automotive OES and aftermarket sales channels. The increased volumes are attributable to the impacts of economic uncertainty and business disruptions of the COVID-19 pandemic that impacted the Company in the second quarter of 2020. The increase was also due to $7.9 million of favorable currency translation.
Horizon Europe-Africa’s gross profit decreased by $0.6increased $12.3 million, or 13,666.7%, to $10.4$12.2 million, inor 13.0% of net sales, during the three months ended SeptemberJune 30, 2020, as compared to $11.02021, from $(0.1) million, inor (0.2)% of net sales, during the three months ended SeptemberJune 30, 2019.2020. The decreaseincrease in gross profit and gross profit margin reflects the changes in sales detailed above. In addition,Additionally, gross profit was impacted by the following:
$4.32.5 million higher labor costs, primarily as a result of payroll costs reimbursed in the prior year favorable expense recovery related to the settlementunder terms of potential product liability claims from product sold by Horizon Europe-Africa, see Note 13, Contingencies, included in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements; partially offset by:certain government payroll reimbursement programs;
$2.51.1 million favorable material input costs;unfavorable outbound freight costs driven by higher sales volumes discussed above; and
$1.60.8 million favorable laborunfavorable manufacturing input costs, such as material costs due to increasing commodity and raw material market prices, coupled with other input costs.
SG&A expenses decreased by $1.3increased $5.1 million to $8.0$11.0 million, or 9.6%11.7% of net sales, induring the three months ended SeptemberJune 30, 2020,2021, as compared to $9.3$5.9 million, or 11.4%12.7% of net sales, induring the three months ended SeptemberJune 30, 2019.2020. The decreaseincrease in SG&A expenses was primarily attributable to the cost saving initiatives implemented by the Company and corresponding savings realized during the second quarter of 2020 in response to the impacts of the COVID-19 pandemic. As a result, the increase in SG&A is attributable to the following:
$0.81.3 million decreased allowance for doubtful accounts;of higher personnel and other variable compensation cost, partially as a result of payroll costs reimbursed in the prior year under terms of certain government payroll reimbursement programs;
$1.3 million of higher outside professional fees and other administrative costs; and
$0.71.0 million lower personnel and compensation costs.of unfavorable currency translation.
Horizon Europe-Africa’s operating marginprofit increased by $0.7$7.2 million to an operating profit of $2.4$1.2 million, or 3.0%1.3% of net sales, induring the three months ended SeptemberJune 30, 2020,2021, as compared to an operating profitloss of $1.7$(6.0) million, or 2.1%(12.9)% of net sales, induring the three months ended SeptemberJune 30, 2019. Operating2020. Improved operating profit and operating margin increasedwere primarily due to the operational results detailed above.
Horizon Europe-Africa’s Adjusted EBITDA increased by $5.4$7.3 million to $6.1$5.1 million induring the three months ended SeptemberJune 30, 2020,2021, as compared to Adjusted EBITDA of $0.7$(2.2) million induring the three months ended SeptemberJune 30, 2019.2020. Adjusted EBITDA increasedimproved primarily due to the operational results describeddetailed above.
3635


Corporate Expenses
Corporate expenses included in operating profit decreased by $5.2increased $1.3 million to $7.1$6.7 million induring the three months ended SeptemberJune 30, 2020,2021, as compared to $12.3$5.4 million induring the three months ended SeptemberJune 30, 2019.2020. The decreaseincrease was primarily attributable to the following:
$5.3 million lease abandonment and leasehold improvement charges in the three months ended September 30, 2019 related to the Company’s departure from its headquarters lease;
$1.6 million severance costs related to the separation agreement reached with our former chief executive officer in the three months ended September 30, 2019;
$0.5 million lower discretionary and administrative support costs; partially offset by:
$1.61.3 million higher personnel and other variable compensation costs.costs, primarily as a result of temporary salary reductions in the U.S. and other compensation and benefit cost reductions in the second quarter of 2020 in response to the impacts of the COVID-19 pandemic.
Corporate Adjusted EBITDA was $(5.5)$(5.6) million during the three months ended SeptemberJune 30, 2020, which was lower by $1.2 million,2021, as compared to Adjusted EBITDA of $(4.3)$(3.7) million induring the three months ended SeptemberJune 30, 2019.2020. The change in Adjusted EBITDA declinedwas primarily due to the higher personnel and compensation costs, partially offset by the lower discretionary and administrative support costs, as describedoperational results detailed above.
The following table summarizes Adjusted EBITDA for our operating segments for the ninesix months ended SeptemberJune 30, 2020:2021:
Nine Months Ended
September 30, 2020
Horizon AmericasHorizon Europe-AfricaCorporateConsolidated
(dollars in thousands)
Net loss attributable to Horizon Global$(31,150)
Net loss attributable to noncontrolling interest(1,010)
Net loss$(32,160)
Interest expense23,970 
Income tax expense170 
Depreciation and amortization16,150 
EBITDA$24,160 $3,150 $(19,180)$8,130 
Net loss attributable to noncontrolling interest— 1,010 — 1,010 
Loss from discontinued operations, net of tax— — 500 500 
Severance530 (150)(10)370 
Restructuring, relocation and related business disruption costs1,550 10 470 2,030 
Non-cash stock compensation— — 2,190 2,190 
Loss (gain) on business divestitures and other assets1,020 (180)20 860 
Product liability and litigation claims— 1,510 — 1,510 
Debt issuance costs— — 1,840 1,840 
Unrealized foreign currency remeasurement costs280 860 (490)650 
Adjusted EBITDA$27,540 $6,210 $(14,660)$19,090 












Six Months Ended June 30, 2021
Horizon AmericasHorizon Europe-AfricaCorporateConsolidated
(dollars in thousands)
Net loss attributable to Horizon Global$(13,520)
Net loss attributable to noncontrolling interest(670)
Net loss$(14,190)
Interest expense14,030 
Income tax expense2,400 
Depreciation and amortization10,720 
EBITDA$29,180 $8,830 $(25,050)$12,960 
Net loss attributable to noncontrolling interest— 670 — 670 
Restructuring, relocation and related business disruption costs(840)20 (40)(860)
Loss on debt extinguishment— — 11,650 11,650 
Non-cash stock compensation— — 1,710 1,710 
Loss (gain) on business divestitures and other assets2,720 (10)— 2,710 
Debt issuance costs— — 190 190 
Unrealized foreign currency remeasurement costs270 950 420 1,640 
Adjusted EBITDA$31,330 $10,460 $(11,120)$30,670 

3736



The following table summarizes Adjusted EBITDA for our operating segments for the ninesix months ended SeptemberJune 30, 2019:2020:
Nine Months Ended
September 30, 2019
Six Months Ended June 30, 2020
Horizon AmericasHorizon Europe-AfricaCorporateConsolidatedHorizon AmericasHorizon Europe-AfricaCorporateConsolidated
(dollars in thousands)(dollars in thousands)
Net income attributable to Horizon Global$112,330 
Net loss attributable to Horizon GlobalNet loss attributable to Horizon Global$(33,080)
Net loss attributable to noncontrolling interestNet loss attributable to noncontrolling interest(840)Net loss attributable to noncontrolling interest(670)
Net income$111,490 
Net lossNet loss$(33,750)
Interest expenseInterest expense50,270 Interest expense16,410 
Income tax benefit(2,330)
Income tax expenseIncome tax expense70 
Depreciation and amortizationDepreciation and amortization16,790 Depreciation and amortization10,530 
EBITDAEBITDA$9,960 $4,550 $161,710 $176,220 EBITDA$10,290 $(4,340)$(12,690)$(6,740)
Net loss attributable to noncontrolling interestNet loss attributable to noncontrolling interest— 840 — 840 Net loss attributable to noncontrolling interest— 670 — 670 
Income from discontinued operations, net of tax— — (189,520)(189,520)
Loss from discontinued operations, net of taxLoss from discontinued operations, net of tax— — 500 500 
SeveranceSeverance(200)10 1,620 1,430 Severance530 20 (10)540 
Restructuring, relocation and related business disruption costsRestructuring, relocation and related business disruption costs1,110 (1,410)4,250 3,950 Restructuring, relocation and related business disruption costs1,300 30 320 1,650 
Non-cash stock compensationNon-cash stock compensation— — 1,820 1,820 Non-cash stock compensation— — 1,320 1,320 
Loss on business divestitures and other assets1,280 3,630 — 4,910 
Board transition support— — 1,450 1,450 
Loss (gain) on business divestitures and other assetsLoss (gain) on business divestitures and other assets600 (180)40 460 
Product liability and litigation claimsProduct liability and litigation claims820 50 — 870 Product liability and litigation claims— 1,510 — 1,510 
Debt issuance costsDebt issuance costs— — 4,350 4,350 Debt issuance costs— — 1,310 1,310 
Unrealized foreign currency remeasurement costsUnrealized foreign currency remeasurement costs160 1,210 440 1,810 Unrealized foreign currency remeasurement costs(700)2,440 10 1,750 
Other870 (180)(630)60 
Adjusted EBITDAAdjusted EBITDA$14,000 $8,700 $(14,510)$8,190 Adjusted EBITDA$12,020 $150 $(9,200)$2,970 
3837


The following table summarizes financial information for our operating segments for the ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
Nine Months Ended September 30,ChangeConstant Currency ChangeSix Months Ended June 30,ChangeConstant Currency Change
2020As a Percentage
of Net Sales
2019As a Percentage
of Net Sales
$%$%2021As a Percentage
of Net Sales
2020As a Percentage
of Net Sales
$%$%
(dollars in thousands)(dollars in thousands)
Net SalesNet SalesNet Sales
Horizon AmericasHorizon Americas$285,630 58.8 %$300,670 54.8 %$(15,040)(5.0)%$(14,130)(4.7)%Horizon Americas$238,210 56.5 %$166,490 58.7 %$71,720 43.1 %$72,160 43.3 %
Horizon Europe-AfricaHorizon Europe-Africa199,740 41.2 %247,500 45.2 %(47,760)(19.3)%(48,570)(19.6)%Horizon Europe-Africa183,100 43.5 %117,250 41.3 %65,850 56.2 %51,020 43.5 %
TotalTotal$485,370 100.0 %$548,170 100.0 %$(62,800)(11.5)%$(62,700)(11.4)%Total$421,310 100.0 %$283,740 100.0 %$137,570 48.5 %$123,180 43.4 %
Gross ProfitGross ProfitGross Profit
Horizon AmericasHorizon Americas$70,720 24.8 %$62,080 20.6 %$8,640 13.9 %$9,100 14.7 %Horizon Americas$64,350 27.0 %$37,760 22.7 %$26,590 70.4 %$26,450 70.0 %
Horizon Europe-AfricaHorizon Europe-Africa16,950 8.5 %26,080 10.5 %(9,130)(35.0)%(9,550)(36.6)%Horizon Europe-Africa23,500 12.8 %6,540 5.6 %16,960 259.3 %15,180 232.1 %
TotalTotal$87,670 18.1 %$88,160 16.1 %$(490)(0.6)%$(450)(0.5)%Total$87,850 20.9 %$44,300 15.6 %$43,550 98.3 %$41,630 94.0 %
Selling, General and Administrative ExpensesSelling, General and Administrative ExpensesSelling, General and Administrative Expenses
Horizon AmericasHorizon Americas$51,340 18.0 %$56,360 18.7 %$(5,020)(8.9)%$(4,530)(8.0)%Horizon Americas$35,750 15.0 %$31,620 19.0 %$4,130 13.1 %$4,120 13.0 %
Horizon Europe-AfricaHorizon Europe-Africa22,960 11.5 %27,410 11.1 %(4,450)(16.2)%(4,330)(15.8)%Horizon Europe-Africa20,800 11.4 %15,020 12.8 %5,780 38.5 %4,070 27.1 %
CorporateCorporate19,380 N/A29,370 N/A(9,990)(34.0)%(9,990)(34.0)%Corporate13,190 N/A12,310 N/A880 7.1 %880 7.1 %
TotalTotal$93,680 19.3 %$113,140 20.6 %$(19,460)(17.2)%$(18,850)(16.7)%Total$69,740 16.6 %$58,950 20.8 %$10,790 18.3 %$9,070 15.4 %
Operating Profit (Loss)Operating Profit (Loss)Operating Profit (Loss)
Horizon AmericasHorizon Americas$19,330 6.8 %$5,760 1.9 %$13,570 235.6 %$13,530 234.9 %Horizon Americas$28,600 12.0 %$6,160 3.7 %$22,440 364.3 %$22,320 362.3 %
Horizon Europe-AfricaHorizon Europe-Africa(6,040)(3.0)%120 — %(6,160)(5,133.3)%(6,700)(5,583.3)%Horizon Europe-Africa2,700 1.5 %(8,480)(7.2)%11,180 131.8 %11,090 130.8 %
CorporateCorporate(19,380)N/A(29,360)N/A9,980 34.0 %9,980 (34.0)%Corporate(13,190)N/A(12,330)N/A(860)(7.0)%(860)(7.0)%
TotalTotal$(6,090)(1.3)%$(23,480)(4.3)%$17,390 74.1 %$16,810 71.6 %Total$18,110 4.3 %$(14,650)(5.2)%$32,760 223.6 %$32,550 222.2 %
Capital ExpendituresCapital ExpendituresCapital Expenditures
Horizon AmericasHorizon Americas$2,650 0.9 %$5,960 2.0 %$(3,310)(55.5)%$(3,250)(54.5)%Horizon Americas$4,380 1.8 %$1,470 0.9 %$2,910 198.0 %$2,900 197.3 %
Horizon Europe-AfricaHorizon Europe-Africa5,440 2.7 %2,450 1.0 %2,990 122.0 %3,410 139.2 %Horizon Europe-Africa5,560 3.0 %3,980 3.4 %1,580 39.7 %1,060 26.6 %
CorporateCorporate— N/A50 N/A(50)(100.0)%(50)(100.0)%Corporate— N/A— N/A— — %— — %
TotalTotal$8,090 1.7 %$8,460 1.5 %$(370)(4.4)%$110 1.3 %Total$9,940 2.4 %$5,450 1.9 %$4,490 82.4 %$3,960 72.7 %
Depreciation and Amortization of Intangible Assets
Depreciation of Property and Equipment and Amortization of IntangiblesDepreciation of Property and Equipment and Amortization of Intangibles
Horizon AmericasHorizon Americas$6,300 2.2 %$6,470 2.2 %$(170)(2.6)%$(80)(1.2)%Horizon Americas$3,690 1.5 %$4,200 2.5 %$(510)(12.1)%$(500)(11.9)%
Horizon Europe-AfricaHorizon Europe-Africa9,690 4.9 %9,060 3.7 %630 7.0 %680 7.5 %Horizon Europe-Africa6,930 3.8 %6,220 5.3 %710 11.4 %160 2.6 %
CorporateCorporate160 N/A1,250 N/A(1,090)(87.2)%(1,090)(87.2)%Corporate100 N/A110 N/A(10)(9.1)%(10)(9.1)%
TotalTotal$16,150 3.3 %$16,780 3.1 %$(630)(3.8)%$(490)(2.9)%Total$10,720 2.5 %$10,530 3.7 %$190 1.8 %$(350)(3.3)%
Adjusted EBITDAAdjusted EBITDAAdjusted EBITDA
Horizon AmericasHorizon Americas$27,540 9.6 %$14,000 4.7 %$13,540 96.7 %N/AN/AHorizon Americas$31,330 13.2 %$12,020 7.2 %$19,310 160.6 %N/AN/A
Horizon Europe-AfricaHorizon Europe-Africa6,210 3.1 %8,700 3.5 %(2,490)(28.6)%N/AN/AHorizon Europe-Africa10,460 5.7 %150 0.1 %10,310 6,873.3 %N/AN/A
CorporateCorporate(14,660)N/A(14,510)N/A(150)(1.0)%N/AN/ACorporate(11,120)N/A(9,200)N/A(1,920)(20.9)%N/AN/A
TotalTotal$19,090 3.9 %$8,190 1.5 %$10,900 133.1 %N/AN/ATotal$30,670 7.3 %$2,970 1.0 %$27,700 932.7 %N/AN/A
3938


Results of Operations

Nine
Six Months Ended SeptemberJune 30, 20202021 Compared with NineSix Months Ended SeptemberJune 30, 20192020
Consolidated net sales decreased by $62.8increased $137.6 million, or 11.5%48.5%, to $485.4$421.3 million induring the ninesix months ended SeptemberJune 30, 2020,2021, as compared with $548.2to $283.7 million induring the ninesix months ended SeptemberJune 30, 2019. As noted in the following segment results discussions, the decrease2020. The impact was driven by an increase in net sales in the Horizon Americas and Horizon Europe-Africa was attributable toprimarily as a result of the impacts of economic uncertainty and business disruptions in these jurisdictions associated withof the COVID-19 pandemic that began duringto impact the Company near the end of the first quarter of 2020, and significantly impacted the Company during the second quarter of 2020. The decrease in netNet sales withinfor Horizon Americas of $15.0increased $71.7 million, wasdriven primarily driven by declinesincreases in sales volumes in the aftermarket, automotive OEM, retail and industriale-commerce sales channels, partially offsetas well as pricing recovery initiatives driven by higher netcommodity and input cost price increases. Net sales in the aftermarket and e-commerce sales channels. The decrease in net sales of $47.8 million infor Horizon Europe-Africa wasincreased $65.9 million, driven primarily driven by declinesincreases in sales volumes in the automotive OEM, automotive OES and industrialaftermarket sales channels. Net saleschannels, as well as $14.8 million of Horizon Europe-Africa were also negatively impacted by the sale of its non-automotive business in the first quarter 2019.favorable currency translation.
Gross profit margin was 18.1%20.9% and 16.1% in15.6% during the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. The improved gross profit margin is primarily due to higher net sales in Horizon Americas and Horizon Europe-Africa as detailed above, coupled with favorable net sales channel mix, andas well as improved operating efficiency in Horizon Americas which more than offsetduring the negativesix months ended June 30, 2021, as compared to six months ended June 30, 2020, as a result of the impacts of the COVID-19 pandemic and related sales volume declines.experienced during the six months ended June 30, 2020.
SG&A expenses decreased by $19.5increased $10.8 million primarily attributable to lower distribution center lease, operating$7.9 million higher personnel and supportother variable compensation costs combined across the Company, driven primarily by temporary salary reductions in the U.S. and the Company’s participation in certain payroll reimbursement programs in the second quarter of 2020 in response to the impacts of the COVID-19 pandemic. Unfavorable currency translation in Horizon Americas. In Horizon Europe-Africa lower administration and personnel cost savings were realized as a result of prior-year restructuring and business rationalization projects, as well as the reimbursement of certain payroll costs as part of government payroll reimbursement programs. Additionally, Corporate expenses incurred in the nine months ended September 30, 2019 for $5.3$1.7 million of lease abandonment and leasehold improvement charges relatedalso contributed to the Company’s departure from its headquarters lease and $1.6 million of severance costs related to the separation agreement reached with our former chief executive officer which did not recur, as well as higher professional service fees and other costs in the nine months ended September 30, 2019 related to new debt issuance, amendments, and modifications and related structure changes.increase.
Operating margin was (1.3)4.3% and (5.2)% and (4.3)% induring the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. Operating marginprofit improved $17.4$32.8 million to an operating lossprofit of $(6.1)$18.1 million induring the ninesix months ended SeptemberJune 30, 2020,2021, from an operating loss of $(23.5)$(14.7) million induring the ninesix months ended SeptemberJune 30, 2019,2020. Improved operating profit and operating margin were primarily due to the operational results detailed above.
Other expense, net increased $2.1 million to $4.2 million during the six months ended June 30, 2021, as compared to $2.1 million during the six months ended June 30, 2020, primarily attributable to the $2.2 million loss on the sale of the Company’s Brazil business completed during the second quarter of 2021. Refer to Note 4, Goodwill and Other Intangible Assets, in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” included within this Quarterly Report on Form 10-Q for additional information of the sale of the Company’s Brazil business.
Interest expense decreased $2.4 million to $14.0 million during the six months ended June 30, 2021, as compared to $16.4 million during the six months ended June 30, 2020, primarily as a result of the operational results detailed above.
OtherCompany’s February 2021 refinancing, which resulted in a new term loan agreement and replaced the Company’s existing term loan agreement. The new term loan included a lower interest rate and removed paid-in-kind interest, resulting in lower interest expense net decreased by $5.2 million to $1.4 million infor the ninesix months ended SeptemberJune 30, 2020, as compared to $6.6 million in the nine months ended September 30, 2019, primarily attributable to the $3.6 million loss on sale related to the Company’s divestiture of its non-automotive business in Horizon Europe-Africa in the nine months ended September 30, 2019 that did not recur in the nine months ended September 30, 2020 as well as $1.1 million of lower foreign currency loss in the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019.
Interest expense decreased by $26.3 million to $24.0 million in the nine months ended September 30, 2020, as compared to $50.3 million for the nine months ended September 30, 2019. Interest expense decreased primarily2021. Additionally, as a result of the pay down of principalrefinancing, the Company incurred an $11.7 million loss on the Company’s First Lien Term Loan (as defined below) in September 2019, which resulted in lower borrowings as well as lower interest rates compareddebt extinguishment related to the nine months ended September 30, 2019.termination of the existing term loan agreement. 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.
The effective income tax rate for the ninesix months ended SeptemberJune 30, 2021 and 2020 and 2019 was (0.5)(20.4)% and 2.9%(0.2)%, respectively. The lowerincrease in tax expense and related impacts on the effective income tax rate for the six months ended June 30, 2021 is attributable to projected jurisdictional income mix in jurisdictions not in a valuation allowance, coupled with utilization limitations on usage of U.S. tax attributes. The difference in the effective tax rate compared to the statutory tax rate for both periods is attributable to the valuation allowance recorded in the USU.S. and several foreign jurisdictions, as of September 30, 2020, which resulted in no income tax benefit recognized for jurisdictional pretax losses.losses, and therefore, are excluded from the estimated effective tax rate.
Net loss from continuing operations decreased by $46.3improved $19.1 million, to a net loss of $(31.7)$(14.2) million for the ninesix months ended SeptemberJune 30, 2020,2021, compared to a net loss from continuing operations of $(78.0)$(33.3) million for the ninesix months ended SeptemberJune 30, 2019, primarily as a result of2020. The improvement was attributable to the operational results detailed above.
(Loss) incomeLoss from discontinued operations, net of tax is attributable to the sale of the Company’s former APAC operating segment, which was sold in September 2019. During the ninesix months ended SeptemberJune 30, 2020, the remaining post-closing conditions of the sale were completed, including a true up to net cash proceeds, which resulted in a loss on sale of discontinued operations of $0.5 million. APAC has been presented as discontinued operations in our condensed consolidated financial statementsmillion, in accordance with ASC 205,Accounting Standards Codification 205-20, “Discontinued OperationsOperations”.” 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 Company’s discontinued operations.
See below for a discussion of operating results by segment.
4039


Horizon Americas
Net sales by sales channel, in thousands, for Horizon Americas during the nine months ended September 30, 2020 and 2019 are as follows:
Nine Months Ended
September 30,
ChangeSix Months Ended June 30,Change
20202019$%20212020$%
Net SalesNet SalesNet Sales
AftermarketAftermarket$72,250 $49,050 $23,200 47.3 %
Automotive OEMAutomotive OEM$53,880 $64,970 $(11,090)(17.1)%Automotive OEM50,170 29,870 20,300 68.0 %
Automotive OESAutomotive OES5,330 5,380 (50)(0.9)%Automotive OES8,100 2,350 5,750 244.7 %
Aftermarket84,440 79,910 4,530 5.7 %
RetailRetail80,690 88,230 (7,540)(8.5)%Retail55,190 46,400 8,790 18.9 %
E-commerceE-commerce34,250 25,880 8,370 32.3 %
IndustrialIndustrial20,120 23,860 (3,740)(15.7)%Industrial18,250 12,890 5,360 41.6 %
E-commerce41,120 38,300 2,820 7.4 %
OtherOther50 20 30 N/AOther— 50 (50)N/A
TotalTotal$285,630 $300,670 $(15,040)(5.0)%Total$238,210 $166,490 $71,720 43.1 %
Net sales decreased by $15.0increased $71.7 million, or 5.0%43.1%, to $285.6$238.2 million induring the ninesix months ended SeptemberJune 30, 2020,2021, as compared to $300.7$166.5 million induring the ninesix months ended SeptemberJune 30, 2019,2020, primarily attributable to lowerhigher sales volumes in the automotive OEM, retail and industrialall sales channels, duechannels. The increased volumes compared to the effectssix months ended June 30, 2020, are attributable to the impacts of economic uncertainty and business disruptions of the COVID-19 pandemic that began to impact the Company near the end of the first quarter of 2020, and significantly impacted the Company during the second quarter of 2020. Net sales also increased by $13.1 million in the nine months ended September 30, 2020.2021 due to pricing increases, which were implemented to recover increased material and input costs. The decreaseincrease was partially offset by higher sales in the aftermarket and e-commerce sales channels as well as a $2.5$3.7 million reductionincrease in sales returns and allowances induring the ninesix months ended SeptemberJune 30, 2020,2021, as compared with the ninesix months ended SeptemberJune 30, 2019.2020, primarily as a result of the higher sales volumes experienced.
Horizon Americas’ gross profit increased by $8.6$26.6 million, or 70.4%, to $70.7$64.4 million, inor 27.0% of net sales, during the ninesix months ended SeptemberJune 30, 2020,2021, as compared to $62.1$37.8 million, or 22.7% of net sales, during the six months ended June 30, 2020. The increase in gross profit and gross profit margin reflects the changes in sales detailed above. Additionally, gross profit was impacted by the following:
$2.1 million of favorable tariff recoveries;
$4.0 million unfavorable outbound freight costs driven by higher sales volumes discussed above; and
$3.7 million unfavorable manufacturing input costs, such as material costs due to increasing commodity and raw material market prices, coupled with other input costs.
SG&A increased $4.2 million to $35.8 million, or 15.0% of net sales during the six months ended June 30, 2021, as compared to $31.6 million, or 19.0% of net sales, during the six months ended June 30, 2020. The increase in SG&A was primarily attributable to the cost saving initiatives implemented by the Company and corresponding savings realized during the second quarter of 2020 in response to the impacts of the COVID-19 pandemic. As a result, the increase in SG&A is attributable to the following:
$3.8 million higher personnel and other variable compensation costs, primarily as a result of temporary salary reductions in the nineU.S. and other compensation and benefit cost reductions in the second quarter of 2020 in response to the impacts of the COVID-19 pandemic;
$1.5 million higher distribution center lease and variable operating and other support costs; partially offset by:
$0.8 million lower depreciation and amortization.
Horizon Americas’ operating profit increased $22.4 million to $28.6 million, or 12.0% of net sales, during the six months ended SeptemberJune 30, 2019.2021, as compared to $6.2 million, or 3.7% of net sales, during the six months ended June 30, 2020. Improved operating profit and operating margin were primarily due to the operational results detailed above.
Horizon Americas’ Adjusted EBITDA increased $19.3 million to $31.3 million during the six months ended June 30, 2021, as compared to Adjusted EBITDA of $12.0 million during the six months ended June 30, 2020. Adjusted EBITDA improved primarily due to operational results detailed above.
40


Horizon Europe-Africa
Net sales by sales channel, in thousands, for Horizon Europe-Africa are as follows:
Six Months Ended June 30,Change
20212020$%
Net Sales
Aftermarket$48,550 $32,390 $16,160 49.9 %
Automotive OEM92,750 62,020 30,730 49.5 %
Automotive OES36,030 20,180 15,850 78.5 %
E-commerce3,390 660 2,730 413.6 %
Industrial1,180 660 520 78.8 %
Other1,200 1,340 (140)(10.4)%
Total$183,100 $117,250 $65,850 56.2 %
Net sales increased $65.9 million, or 56.2%, to $183.1 million during the six months ended June 30, 2021, as compared to $117.3 million during the six months ended June 30, 2020, primarily attributable to higher sales volumes in the automotive OEM, automotive OES and aftermarket sales channels. The increased volumes are attributable to the impacts of economic uncertainty and business disruptions of the COVID-19 pandemic that began to impact the Company near the end of the first quarter of 2020, and significantly impacted the Company during the second quarter of 2020. The increase was also due to $14.8 million of favorable currency translation.
Horizon Europe-Africa’s gross profit increased $17.0 million, or 259.3%, to $23.5 million, or 12.8% of net sales, during the six months ended June 30, 2021, from $6.5 million, or 5.6% of net sales, during the six months ended June 30, 2020. The increase in gross profit margin reflects the changes in sales detailed above. Additionally, gross profit was impacted by the following:
$8.53.7 million lower scrapfavorable manufacturing costs driven by improved operating efficiency and inventory reserves;partially offset by unfavorable manufacturing input costs, such as material costs due to increasing commodity and raw material market prices, coupled with other input costs;
$6.61.5 million favorable manufacturing costs; and
$1.9 million lower outbound freight costs.
SG&A expenses decreased by $5.1 million to $51.3 million, or 18.0% of net sales in the nine months ended September 30, 2020, as compared to $56.4 million, or 18.7% of net sales, in the nine months ended September 30, 2019. The decrease in SG&A expenses was attributable to the following:
$2.8 million lower distribution center lease, operating and support costs; and
$2.2 million lower litigation and other administrative costs.
Horizon Americas’ operating margin increased by $13.5 million to an operating profit of $19.3 million, or 6.8% of net sales, in the nine months ended September 30, 2020, as compared to an operating profit of $5.8 million, or 1.9% of net sales, in the nine months ended September 30, 2019. Operating margin increased primarily due to the operational results detailed above.
Horizon Americas’ Adjusted EBITDA increased by $13.5 million to $27.5 million in the nine months ended September 30, 2020, as compared to Adjusted EBITDA of $14.0 million in the nine months ended September 30, 2019. Adjusted EBITDA increased primarily due to operational results detailed above.
41


Horizon Europe-Africa
Net sales by sales channel, in thousands, for Horizon Europe-Africa during the nine months ended September 30, 2020 and 2019 are as follows:
Nine Months Ended
September 30,
Change
20202019$%
Net Sales
Automotive OEM$104,420 $137,900 $(33,480)(24.3)%
Automotive OES34,000 45,840 (11,840)(25.8)%
Aftermarket56,750 56,200 550 1.0 %
Industrial1,210 2,340 (1,130)N/A
E-commerce1,290 1,650 (360)(21.8)%
Other2,070 3,570 (1,500)(42.0)%
Total$199,740 $247,500 $(47,760)(19.3)%
Net sales decreased by $47.8 million, or 19.3%, to $199.7 million in the nine months ended September 30, 2020, as compared to $247.5 million in the nine months ended September 30, 2019, primarily attributable to lower volumes in the automotive OEM and automotive OES sales channels, due to the effects of the COVID-19 pandemic in the nine months ended September 30, 2020. Net sales of Horizon Europe-Africa were also negatively impacted by $2.1 millionsettlement costs related to the sale of its non-automotive businesscharge incurred in the first quarter 2019.
Horizon Europe-Africa’s gross profit decreased by $9.1 million to $17.0 million in the nine months ended September 30, 2020, as compared to $26.1 million in the nine months ended September 30, 2019. The decrease in gross profit margin reflects the changes in sales detailed above. Additionally, gross profit was impacted by the following:
$5.8 million favorable labor costs, including the payroll reimbursement costs received in the nine months ended September 30, 2020 under terms of government payroll reimbursement programs, which includes the KUG (as defined in the Liquidity section below); partially offset by:
$1.9 million of charges in the nine months ended September 30, 2020prior year for royalty costs and settlement of certain intellectual property infringement claims, see Note 13,10, Contingencies, included in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements. for more information;
$3.9 million higher labor costs, primarily as a result of payroll costs reimbursed in the prior year under terms of certain government payroll reimbursement programs; and
$1.3 million unfavorable outbound freight costs driven by higher sales volumes discussed above.
SG&A expenses decreased by $4.4increased $5.8 million to $23.0$20.8 million, or 11.5%11.4% of net sales induring the ninesix months ended SeptemberJune 30, 2020,2021, as compared to $27.4$15.0 million, or 11.1%12.8% of net sales, induring the ninesix months ended SeptemberJune 30, 2019.2020. The decreaseincrease in SG&A expenses was primarily attributable to the cost saving initiatives implemented by the Company and corresponding savings realized during the second quarter of 2020 in response to the impacts of the COVID-19 pandemic. As a result, the increase in SG&A is attributable to the following:
$3.01.8 million lowerhigher personnel and other variable compensation cost, partially as a result of payroll costs including the payroll reimbursement costs receivedreimbursed in the nine months ended September 30, 2020prior year under terms of certain government payroll reimbursement programs, which includes the KUG;programs;
$1.2 million of higher outside professional fees and other administrative costs; and
$0.81.7 million decreased allowance for doubtful accounts.of unfavorable currency translation.
Horizon Europe-Africa’s operating margin decreased by $6.2profit increased $11.2 million to an operating profit of $2.7 million, or 1.5% of net sales during the six months ended June 30, 2021, as compared to an operating loss of $(6.0)$(8.5) million, or (3.0)(7.2)% of net sales, induring the ninesix months ended SeptemberJune 30, 2020, as compared to an2020. Improved operating profit of $120.0 thousand, or 0.05% of net sales, in the nine months ended September 30, 2019. Operatingand operating margin declinedwere primarily due to the operational results described above.
Horizon Europe-Africa’s Adjusted EBITDA decreased by $2.5increased $10.3 million to $6.2$10.5 million induring the ninesix months ended SeptemberJune 30, 2020,2021, as compared to Adjusted EBITDA of $8.7$0.2 million induring the ninesix months ended SeptemberJune 30, 2019.2020. Adjusted EBITDA decreasedimproved primarily due to operational results detailed above.
4241


Corporate Expenses
Corporate expenses included in operating loss decreased by $10.0profit increased $0.9 million to $19.4$13.2 million induring the ninesix months ended SeptemberJune 30, 2020,2021, as compared to $29.4$12.3 million induring the ninesix months ended SeptemberJune 30, 2019.2020. The decreaseincrease was primarily attributable to the following:
$5.32.3 million lease abandonmenthigher personnel and leasehold improvement chargesother variable compensation costs primarily as a result of temporary salary reductions in the nine months ended September 30, 2019 relatedU.S. and other compensation and benefit cost reductions in the second quarter of 2020 in response to the Company’s departure from its headquarters lease;impacts of the COVID-19 pandemic; partially offset by:
$1.61.1 million severancelower costs incurred related to the separation agreement reached with our former chief executive officer in the nine months ended September 30, 2019;
$4.0 higher professional service fees and other costs incurred in the nine months ended September 30, 2019 related toassociated with new debt issuance, amendments, and modifications and related structure changes;    
$1.9 million lower discretionary and administrative support costs; partially offset by:
$2.3 million higher personnel and compensation costs.changes.
Corporate Adjusted EBITDA was $(14.7)$(11.1) million during the ninesix months ended SeptemberJune 30, 2020, which was lower by $0.2 million,2021, as compared to Adjusted EBITDA of $(14.5)$(9.2) million induring the ninesix months ended SeptemberJune 30, 2019.2020. The change in Adjusted EBITDA declinedwas primarily due to the higher personnel and compensation costs partially offset by the lower discretionary and administrative support costs, as described above.
4342


Liquidity and Capital Resources
Our capital and working capital requirements are funded through a combination of cash on hand, cash flows from operations, cash on hand and various borrowings and factoring arrangements described below, including our asset-based revolving credit facilityRevolving Credit Facility (as defined below). As of SeptemberJune 30, 2020,2021, and December 31, 2019, there was $15.62020, we had $12.9 million and $8.7$18.2 million, respectively, of cash and cash equivalents held at foreign subsidiaries. There may be country specific regulations, thatwhich may restrict or result in increased costs in the repatriation of these funds.
We believe our available cash on hand, cash flow from operations and availability under our Revolving Credit Facility, as defined below, are our most significant sources of liquidity. In response to the uncertain economic environment caused in part from the COVID-19 pandemic, the Company pursued funding from available government programs and other sources of liquidity designed to strengthen its balance sheet and enhance financial flexibility. These sources included short-term loans, some of which are forgivable if certain conditions are met as well as entering into or modifying other arrangements. A summary of these actions is described below.
In April 2020, Horizon Global Company LLC (the “US Borrower”), a direct US-based subsidiary of the Company, received a loan from PNC Bank, National Association for $8.7 million, pursuant to the Paycheck Protection Program (the “PPP Loan”) under Division A, Title I of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The PPP Loan, which is in the form of a Note dated April 18, 2020 issued by the US Borrower, matures on April 18, 2022. The PPP Loan bears interest at 1.0% per annum and is payable monthly commencing on November 15, 2020. Funds from the PPP Loan may be used for payroll, costs used to continue group health care benefits, rent and utilities. Under the terms of the PPP Loan, certain amounts may be forgiven if they are used for qualifying expenses as described in the CARES Act.
The Company submitted its PPP Loan application in good faith in accordance with the CARES Act and the guidance issued by the Small Business Administration (the “SBA”), including the SBA’s Paycheck Protection Program’s Frequently Asked Questions. During 2020, the Company, in accordance with the final guidance issued by the United States Department of the Treasury, met the need and sized based criteria of the program. The Company plans to file its application of forgiveness in the near term and continues to use the PPP Loan proceeds on qualifying expenses; however, there is no guarantee that any portion of the PPP Loan proceeds will be forgiven.
In April 2020, S.I.A.R.R. SAS (the “French Borrower”), an indirect subsidiary of the Company, received a loan from BNP Paribas (the “French Loan”) for $5.5 million. The French Loan, issued pursuant to an agreement dated April 9, 2020, between the French Borrower and BNP Paribas, matures on April 9, 2021. The French Loan bears interest at a rate of 0.5% per annum. The French Borrower, at its election, may repay the French Loan in full on April 9, 2021 or in monthly installments for a period of five years from the date of election.
In March 2020, Westfalia-Automotive Gmbh (“Westfalia”), an indirect subsidiary of the Company, was approved for a government payroll reimbursement program in Germany under the Kurzarbeitergeld (the “KUG”). The KUG is designed to reimburse employers for payroll costs incurred and paid to employees affected by the business disruption and government mandated operating restrictions in place due to COVID-19 for the period March 1, 2020 through August 31, 2020. Westfalia was approved to receive reimbursement of certain costs for the period March 19, 2020 through August 31, 2020. The Company did not have any qualifying payroll costs for reimbursement during the three months ended September 30, 2020 and was reimbursed $3.3 million for qualifying payroll costs under terms of the KUG for the nine months ended September 30, 2020.
The Company also proactively took the following measures to reduce costs and ensure appropriate liquidity:
pursue additional governmental grant or loan programs in the jurisdictions in which it operates;
participating in payroll or payroll tax deferral programs such as those enacted by the CARES Act;
successfully negotiated with certain landlords to defer short-term rent payments;
assessed its supplier base and related payment terms and amended, extended and/or retimed supplier payments;
reduced or retimed investments, including capital expenditures, that did not materially impact future business opportunities or our organic growth; and
reduced reliance on temporary employees in both administrative and operations functions.
Additionally, in the United States, the Company has not furloughed or otherwise voluntarily reduced its workforce. To protect the continued employment of its US-based employees, the Company, in addition to the other cost savings measures described above, implemented a temporary 20% wage reduction for all employees in the United States. In some cases, employees outside of the United States were furloughed in response to government mandated operational restrictions and fluctuations in customer demand. To the extent available, the Company availed itself of local government programs to support furloughed employees, such as those described above.
44


In March 2020, the Company, as guarantor, entered into a Loan and Security Agreement (the “Loan Agreement”) with Encina Business Credit, LLC (“Encina”), as agent for the lenders party thereto, and Horizon Global Americas Inc. and Cequent Towing Products of Canada Ltd., as borrowers (the “ABL Borrowers”). The Loan Agreement provides for an asset-based revolving credit facility (the “Revolving Credit Facility”) in the maximum aggregate principal amount of $75.0 million subject to customary borrowing base limitations contained therein, and may be increased at the ABL Borrowers’ request in increments of $5.0 million, up to a maximum of five times over the life of the Revolving Credit Facility, for a total increase of up to $25.0 million. As of SeptemberJune 30, 2020,2021, the Company had availability of $38.2$37.3 million under the Revolving Credit Facility and $24.2$11.8 million of cash and cash equivalents in the United States.
ReferAs of June 30, 2021 and December 31, 2020, total cash and availability was $62.0 million and $83.4 million, respectively. The Company defines cash and availability as cash and cash equivalents and amounts of cash accessible but undrawn from credit facilities.
During 2020, in response to Notethe initial uncertain economic environment caused in part from the COVID-19 pandemic, the Company pursued funding from available government programs and other sources of liquidity designed to strengthen its balance sheet and enhance financial flexibility. These sources included short-term loans, some of which are forgivable if certain conditions are met as well as entering into or modifying other arrangements. A summary of these actions is described below.
In April 2020, Horizon Global Company LLC (the “U.S. Borrower”), a direct U.S.-based subsidiary of the Company, received a loan from PNC Bank, National Association (“PNC”) for $8.7 million, pursuant to the Paycheck Protection Program (the “PPP Loan”) under Division A, Title I of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The PPP Loan, which is in the form of a note dated April 18, 2020 issued by the U.S. Borrower, matures on April 18, 2022. Funds from the PPP Loan may be used for payroll, costs used to continue group health care benefits, rent and utilities. Under the terms of the PPP Loan, certain amounts may be forgiven if they are used for qualifying expenses as described in the CARES Act.
The Company submitted its PPP Loan application in good faith in accordance with the CARES Act and the guidance issued by the Small Business Administration (the “SBA”), including the SBA’s Paycheck Protection Program’s Frequently Asked Questions. During 2020, the Company, in accordance with the final guidance issued by the United States Department of the Treasury (the “Treasury”), met the need and sized based criteria of the program.
As of June 30, 2021, the Company has filed its application of loan forgiveness with PNC and the SBA for forgiveness of $8.0 million of $8.7 million of funds originally received. The potential loan forgiveness is determined, subject to limitations, based on the use of loan proceeds for payment of qualifying expenses over the 24 weeks after the loan proceeds were disbursed. The unforgiven portion of the loan has an interest rate of 1.0% per annum, and in July 2021, the note was amended to make the unforgiven portion payable over five years on a monthly basis. The Company has deferred interest payments until the Company’s application for forgiveness is completed in accordance with the guidance issued by the SBA and Treasury and the terms of the Company’s PPP Loan. While we currently believe that our use of the loan proceeds will meet the conditions for forgiveness of our PPP Loan, there can be no assurance that forgiveness for any portion of the PPP Loan will be obtained.
In April 2020, S.I.A.R.R. SAS (the “French Borrower”), an indirect subsidiary of the Company, received a loan from BNP Paribas (the “French Loan”) for $5.5 million. On February 17, 2021, the French Borrower entered into an amendment to the French Loan, which under the terms of the amendment, the repayment of the loan was modified to monthly repayments of principal and interest beginning April 2022 through April 2026, from the original maturity of April 9, Long-term Debt2021. In addition, the interest rate on the French Loan was amended to a rate of 1.0% per annum and interest is payable monthly beginning April 2021.
In March 2020, Westfalia-Automotive GmbH (“Westfalia”), includedan indirect subsidiary of the Company, was approved for a government payroll reimbursement program in Part I, ItemGermany under the Kurzarbeitergeld (the “KUG”). The KUG is designed to reimburse employers for payroll costs incurred and paid to employees affected by the business disruption and government mandated operating restrictions in place due to the COVID-19 pandemic for the period March 1, Notes2020 through August 31, 2020. Westfalia was approved to Condensed Consolidated Financial Statements,” included within this Quarterly Report on Form 10-Qreceive reimbursement of certain costs for additional information.the period March 19, 2020 through August 31, 2020. The Company was reimbursed $3.3 million for qualifying payroll costs under terms of the KUG for the twelve months ended December 31, 2020.
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We believe the combination of these sources, as well as the changes to our capital structure following our recent refinancing activities, as fully summarized below, will enable us to meet our working capital, capital expenditures 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 Revolving Credit Facility, depends on our future operating performance and cash flow and many factors outside of our control, including the costs of raw materials, the state of the automotive accessories market, and financial and economic conditions and the extent and duration of the impact of the COVID-19 pandemic.
Cash Flows - Operating Activities
Net cash used for and provided by and used for operating activities during the ninesix months ended SeptemberJune 30, 2021 and 2020 and 2019 was $24.2$(27.6) million and $(65.8)$4.9 million, respectively.
During the ninesix months ended SeptemberJune 30, 2020,2021, the Company generated $3.5$18.8 million in cash flows, based on the reported net loss of $(31.7)$(14.2) million and after considering the effects of non-cash items related to gains and losses on dispositions of property and equipment, depreciation, amortization of intangible assets, write off of operating lease assets,loss on debt extinguishment, amortization of original issuance discount and debt issuance costs, deferred income taxes, stocknon-cash compensation expense, paid-in-kind interest, and other, net. During the ninesix months ended SeptemberJune 30, 2019,2020, the Company used $(44.7)$(8.2) million in cash flows, based on the reported net loss of $(78.0)$(33.3) million and after considering the effects of similar non-cash items previously described.
Changes in operating assets and liabilities sourced $20.7used $(46.5) million and used $(21.1)sourced $13.1 million of cash during the ninesix months ended SeptemberJune 30, 2021 and 2020, and 2019, respectively. Increases
Changes in accounts receivable resulted in a net use of cash of $(35.2)$(30.6) million and $(4.7)$(16.8) million during the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. The increase in accounts receivable is higher in the ninesix months ended SeptemberJune 30, 20202021 as compared with the ninesix months ended SeptemberJune 30, 20192020 as a result of higher net sales activity in the three months ended September 30, 2020second quarter of 2021 as compared with the three months ended September 30, 2019, when compared withsecond quarter of 2020 driven by the respective fourthimpacts of the COVID-19 pandemic that began to impact the Company near the end of the first quarter periods.of 2020, and significantly impacted the Company during the second quarter of 2020.
Changes in inventory resulted in a sourceuse of cash of $30.1$(31.4) million during the ninesix months ended SeptemberJune 30, 20202021 and source of cash of $1.9$19.3 million during the ninesix months ended SeptemberJune 30, 2019.2020. The increase in inventory during the six months ended June 30, 2021 was due in part to recent macroeconomic factors, such as rising costs of raw materials, constraints on shipping container availability and port congestion leading to higher inventory costs and levels of in-transit inventory as well as seasonal inventory build in order to meet the demand of the Company’s traditional peak selling season. The decrease in inventory during the ninesix months ended SeptemberJune 30, 2020 was due to improved inventory management in addition to an extended selling season incoupled with the threeCOVID-19 business disruptions that impacted the Company during the six months ended SeptemberJune 30, 2020. The increase in inventory during the nine months ended September 30, 2019 was due to softening of demand at the start of the typically strong selling season.
IncreasesChanges in accounts payable and accrued liabilities resulted in a source of cash of $29.8$16.0 million and $13.5 million during the ninesix months ended SeptemberJune 30, 2021 and 2020, and use of cash of $(15.6) million during the nine months ended September 30, 2019.respectively. The higher source of cash for the ninesix months ended SeptemberJune 30, 20202021 as compared to the ninesix months ended SeptemberJune 30, 20192020 is primarily due to the working capital build during the six months ended June 30, 2021 for the Company’s peak selling season coupled with the mix of payments made to suppliers and vendors and the related terms coupled with improved working capital management during the nine months ended September 30, 2020.terms.
Cash Flows - Investing Activities
Net cash used for investing activities during the ninesix months ended SeptemberJune 30, 2021 and 2020 was $(8.0)$(9.9) million and net cash provided by investing activities was $207.6$(5.4) million, duringrespectively.
During the ninesix months ended SeptemberJune 30, 2019. Capital2021 and 2020, capital expenditures were $(8.1)$(9.9) million and $(8.5)$(5.5) million, for the nine months ended September 30, 2020respectively, and 2019, respectively, related to growth, capacity and productivity-related projects within Horizon Europe-AfricaAmericas and Horizon Americas, respectively. DuringEurope-Africa. The increase in capital expenditures is primarily due to the nineCompany’s curtailment or retiming of certain projects during the six months ended SeptemberJune 30, 2019, net proceeds from the sale of business were $214.6 million, related2020, in response to the saleimpacts and business disruptions of the APAC operating segment and the non-automotive business in Horizon Europe-Africa.
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COVID-19 pandemic.
Cash Flows - Financing Activities
Net cash provided by financing activities was $17.9$17.3 million and net cash used for financing activities $(163.7)$29.3 million during the ninesix months ended SeptemberJune 30, 2021 and 2020, and 2019, respectively.
During the ninesix months ended SeptemberJune 30, 2021 and 2020, net proceeds from the Revolving Credit Facility, net of issuance costs, were $26.4$20.0 million and $35.5 million, respectively. During the six months ended June 30, 2020, net repayments on the Company’s former asset based lending facility totaled $(19.9) million.
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During the six months ended June 30, 2021, proceeds from the Company’s new term loan, net of issuance costs and related issuance of common stock warrants were $75.3 million and $16.3 million, respectively. During the six months ended June 30, 2021, repayments of borrowings on Replacement Term Loan, including transaction fees were $(94.9) million.
Additionally, during the six months ended June 30, 2020, proceeds from the PPP Loan were $8.7 million. During the nine months ended September 30, 2020 and ###, net repayments on the ABL Facility totaled $(19.9) million and $(43.7) million, respectively. During the nine months ended September 30, 2019, net proceeds from borrowings on our Second Lien Term Loan were $35.5 million, and cash of $(173.4) million was used for repayments and debt issuance and transaction costs to amend our First Lien Term Loan.
Factoring Arrangements
We haveThe Company has factoring arrangements with financial institutions to sell certain accounts receivable under non-recourse agreements. Totalreceivable. During the six months ended June 30, 2021 and 2020, total receivables sold during the year under thecertain non-recourse factoring arrangements were $166.1was $158.2 million and $199.2$94.6 million, as of September 30, 2020 and 2019, respectively. We utilize factoring arrangements as part of our business funding to meet the Company’s working capital needs. The costs of participating in these arrangements are immaterial to our results. Refer to Note 3, Summary of Significant Accounting Policies, in Item 8, “Financial Statements and Supplementary Data,” included within our Annual Report on Form 10-K for the twelve months ended December 31, 2020, for additional information.
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Our Debt and Other Commitments
In March 2019, the Company entered into the Second Lien Term Loan Agreement that provided for a term loan facility in the aggregate principal amountWe and certain of $51.0 million.
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.
In September 2019, the Company amended the existing Second Lien Term Loan Agreement (“Second Lien Amendment”) to remove the prepayment requirement relatedour subsidiaries are party to the use of APAC sale proceeds and made certain negative covenants less restrictive.
In March 2020, the Company entered into the Loan Agreement, as defined above. The interest on the loans under the Loan Agreement are payable in cash at the interest rate of LIBOR plus 4.00% per annum, subject to a 1.00% LIBOR floor. All interest, fees, and other monetary obligations due may, in Encina’s discretion but upon prior notice to the Company, be charged to the loan account and thereafter be deemed to be part of theasset-based Revolving Credit Facility, subject to the same interest rate. Borrowings under the Loan Agreement mature on the earlier of: (i) March 13, 2023 and (ii) 90 days prior to the maturity of any portion of the debt under the Company’s Replacement Term Loan, as defined below, as may be in effect from time to time, unless earlier terminated. As a result of the 2020 Replacement Term Loan Amendment, as defined below, the maturity of all borrowings under theand described above. The Revolving Credit Facility were effectively extendedprovides for $75.0 million of funding on a revolving basis, subject to fiscal year 2022borrowing base availability, and are presented in gross long-term debt in the accompanying condensed consolidated balance sheet as of September 30, 2020. With the proceeds of the Revolving Credit Facility, the Company paid in full all outstanding debt incurred under the ABL Facility, which the Company accounted for as a debt extinguishment.
matures on March 13, 2023. As of SeptemberJune 30, 2020, $28.72021, there was $44.2 million was outstanding on the Revolving Credit Facility bearing interest at a weighted average rate of 5.0%5.3%. The
In February 2021, the Company had $38.2 millionentered into a limited consent to the Loan Agreement governing its Revolving Credit Facility, that among other modifications, consented to the Company’s entering into the Senior Term Loan Credit Agreement, as defined and described below.
On April 19, 2021, the Company entered into an amendment to the Loan Agreement governing its Revolving Credit Facility, that among other modifications, increased the maximum amount of availabilitycredit available under the Revolving Credit Facility from $75.0 million to $85.0 million. The amendment also increased sub-limits relating to the Company’s ability to borrow against in-transit inventory as well as inventory located in the Company’s Mexico facilities.
In addition, the Company and $39.8certain of its subsidiaries, have been or are parties to other long-term credit agreements, including the Senior Term Loan Credit Agreement, as defined and described below. As of June 30, 2021, there was $100.0 million outstanding on the Senior Term Loan Credit Agreement bearing cash interest at 7.50%.
In February 2017, the Company completed a public offering of 2.75% Convertible Senior Notes due 2022 (the “Convertible Notes”) in an aggregate principal amount of $125.0 million. Interest is payable on January 1 and July 1 of each year.
First Lien Term Loan Agreement and Second Lien Term Loan Agreement
In March 2019, the Company amended and restated the existing term loan agreement (the “First Lien Term Loan Agreement”) to permit the Company to, among other things, enter into the Second Lien Term Loan Agreement, as defined and described below.
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.
In May 2020, the Company entered into amendments, limited waivers and consents in connection with the Loan Agreement governing its Revolving Credit Facility, the First Lien Term Loan Agreement, and the Second Lien Term Loan Agreement, each with an effective date of April 1, 2020, that, among other things, consented to the Company’s applying for, obtaining and incurring the PPP Loan and French Loan, each as defined and described above.
As a result of the Replacement Term Loan Amendment, as defined and described below, the outstanding balance and any accrued interest under the First Lien Term Loan Agreement and Second Lien Term Loan Agreement was replaced by the Replacement Term Loan, as defined and described below.
Replacement Term Loan
In July 2020, the Company entered into a limited consent to the Loan Agreement governing its Revolving Credit Facility and the Replacement Term Loan Amendment (the “Eleventh Term Amendment”) to amend the First Lien Term Loan Agreement and Second Lien Term Loan Agreement. The Eleventh Term Amendment provided replacement term loans (the “Replacement Term Loan”) that refinanced and replaced the outstanding balances under the First Lien Term Loan Agreement and Second Lien Term Loan Agreement, plus any accrued interest thereon.
In February 2021, the Company entered into the Senior Term Loan Credit Agreement, as defined and described below. The proceeds received from the initial borrowings under the Senior Term Loan Credit Agreement were used to repay in full all outstanding debt and accrued interest on the Company’s Replacement Term Loan. As a result of the repayment, the credit agreement governing the Company’s Replacement Term Loan was terminated and is no longer in effect.

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Senior Term Loan Credit Agreement
On February 2, 2021, the Company entered into a credit agreement (the “Senior Term Loan Credit Agreement”) with Atlantic Park Strategic Capital Fund, L.P. (“Atlantic Park”), as administrative agent and collateral agent, and the lenders party thereto (collectively, the “Lenders”). The Senior Term Loan Credit Agreement provides for an initial term loan facility in the aggregate principal amount of $100.0 million, all of which has been borrowed by the Company and used to repay the Replacement Term Loan, as described above, and a delayed draw term loan facility in the aggregate principal amount of up to $125.0 million, which may be drawn by the Company in up to three separate borrowings through June 30, 2022. A ticking fee of 25 basis points per annum will accrue on the undrawn portion of the delayed draw term loan facility.
Interest on the Senior Term Loan Credit Agreement is payable in cash on a quarterly basis at the interest rate of LIBOR plus 7.50% per annum, subject to a 1.00% LIBOR floor. The Senior Term Loan Credit Agreement includes customary affirmative and cash equivalentsnegative covenants, including a maximum total net leverage ratio requirement tested quarterly, commencing with the fiscal quarter ending March 31, 2023, not to exceed: 6.50 to 1.00. The Senior Term Loan Credit Agreement also contains a financial covenant that stipulates the Company will not make capital expenditures exceeding $27.5 million during any fiscal year. To the extent that the amount of capital expenditures is less than $27.5 million in any fiscal year, up to 50% of the difference may be carried forward and used for total liquiditycapital expenditures in the immediately succeeding fiscal year.
Following a one-year no-call period, the Senior Term Loan Credit Agreement provides for a 2.5% call premium for years two through five and no premium thereafter. All outstanding borrowings under the Senior Term Loan Credit Agreement mature on February 2, 2027.
All of $78.0 million asthe indebtedness under the Senior Term Loan Credit Agreement is and will be guaranteed by the Company’s existing and future United States, Canadian and Mexican subsidiaries and certain other foreign subsidiaries and is and will be secured by substantially all of September 30, 2020.the assets of the Company and such guarantors.
Covenant and Liquidity Matters
The Loan Agreement governing our Revolving Credit Facility contains 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 Revolving Credit Facility does not include any financial maintenance covenants other than a financial covenant that stipulates the Company will not make Capital Expenditures (as defined in the Loan Agreement)capital expenditures exceeding $30.0 million during any fiscal year.
In May 2020, the Company entered into amendments, limited waivers and consents in connection with its Loan Agreement and the First Lien Term Loan Agreement (the “Tenth Term Amendment”) and the Second Lien Term Loan Agreement (“the Second Lien Third Amendment”), with an effective date of April 1, 2020, that, among other things, consented to the Company’s applying for, obtaining and incurring the PPP Loan and French Loan, each as defined and described above.
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On July 3, 2020, the Company entered into a limited consent to the Loan Agreement with Encina, that consented to the Company’s entering into the 2020 Replacement Term Loan Amendment, as defined and described below.
On July 6, 2020, the Company entered into the 2020 Replacement Term Loan Amendment (the “Eleventh Term Amendment”) to amend the Term Loan Agreement. The Eleventh Term Amendment provided replacement term loans (the “Replacement Term Loan”) that refinanced and replaced the outstanding balances under the First Lien Term Loan Agreement and Second Lien Term Loan Agreement, plus any accrued interest thereon. The interest on the Replacement Term Loan will be payable at LIBOR plus 10.75% per annum, subject to a 1.00% LIBOR floor, of which 4.00% shall be payable in cash and LIBOR plus 6.75% shall be payable-in-kind (PIK) interest (provided that the Company may elect on not more than one occasion to pay all interest as PIK interest). Borrowings under the Eleventh Term Amendment mature on the earlier of: (i) June 30, 2022 and (ii) April 1, 2022 if the Convertible Notes, as defined in Note 9, Long-term Debt, in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” included within this Quarterly Report on Form 10-Q, are not repaid or otherwise discharged prior to such date. Additionally, the Eleventh Term Amendment provided for a 1.00% PIK closing fee, which was added to the principal amount of the Replacement Term Loan on the closing date;provided for a prepayment penalty on the entire principal amount of the Replacement Term Loan in an amount equal to 3.0% of the aggregate principal amount prepaid prior to December 31, 2021; and amended the fixed charge coverage ratio covenant beginning with the fiscal quarter ending June 30, 2021, as follows:
June 30, 2021: 1.10 to 1.00
September 30, 2021: 1.25 to 1.00
December 31, 2021 and each fiscal quarter ending thereafter: 1.40 to 1.00
We are subject to variable interest rates on our ReplacementSenior Term Loan Credit Agreement and Revolving Credit Facility. At SeptemberJune 30, 2020, one-month2021, 1-Month LIBOR and three-month3-Month LIBOR approximated 0.14%0.10% and 0.23%0.15%, respectively.
As of September 30, 2020, and our current forecast through September 30, 2021, the Company believes it has sufficient liquidity to operate its business for the foreseeable future.
The Company is in compliance with all of its financial covenants in its debt agreements as of SeptemberJune 30, 2020. Refer to Note 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.2021.
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 rent expense related thereto for the six months ended June 30, 2021 and 2020 was $11.5$7.6 million and $13.3$7.2 million, for the nine months ended September 30, 2020 and the nine months ended September 30, 2019.respectively. We expect to continue to utilize leasing as a financing strategy in the future to meet capital expenditure needs and to reduce debt levels.
Refer to Note 12,8, Long-term Debt, and Note 9, Leases, in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” included within this Quarterly Report on Form 10-Q for additional information.
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Consolidated EBITDA
Consolidated EBITDA (defined as “Consolidated EBITDA” in our First LienSenior Term Loan Agreement and Second Lien Term Loan Agreement, collectively “Term Loan Agreements”)Agreement) 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 covenantscovenant compliance in accordance with the Senior Term Loan Agreements,Agreement, which includes Adjusted EBITDA at the operating segment level. For the measurement of our Senior Term Loan AgreementsAgreement financial covenants, the definition of Consolidated EBITDA limits the amount of non-recurring expenses or costs including restructuring, moving and severance that can be excluded to $10 million in any cumulative four fiscal quarter period. Similarly, the definition limits the amount of fees, costs and expenses incurred in connection with any proposed asset sale, offering of equity interests or any indebtedness, lender agent fees, and fees in connection with the maintenance and/or forgiveness of the PPP Loan, in aggregate, that can be excluded to $5$8 million in any cumulative four fiscal quarter period.
The reconciliations of net income (loss) attributable to Horizon Global to EBITDA, EBITDA to Adjusted EBITDA and Adjusted EBITDA to Consolidated EBITDA for the three months ended September 30, 2020 and 2019; the nine months ended September 30, 2020 and 2019; and the last twelve months ended September 30, 2020 and 2019 are as follows:
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Three Months Ended
September 30,
Nine Months Ended
September 30,
Last Twelve Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,Last Twelve Months Ended June 30,
20202019Change20202019Change20202019Change20212020Change20212020Change20212020Change
(dollars in thousands)(dollars in thousands)(dollars in thousands)(dollars in thousands)(dollars in thousands)(dollars in thousands)
Net income (loss) attributable to Horizon GlobalNet income (loss) attributable to Horizon Global$1,930 $145,510 $(143,580)$(31,150)$112,330 $(143,480)$(62,730)$65,620 $(128,350)Net income (loss) attributable to Horizon Global$1,290 $(16,340)$17,630 $(13,520)$(33,080)$19,560 $(17,000)$80,720 $(97,720)
Net loss attributable to noncontrolling interestNet loss attributable to noncontrolling interest(340)(260)(80)(1,010)(840)(170)(1,410)(1,070)(340)Net loss attributable to noncontrolling interest(330)(380)50 (670)(670)— (1,420)(1,320)(100)
Net income (loss)Net income (loss)$1,590 $145,250 $(143,660)$(32,160)$111,490 $(143,650)$(64,140)$64,550 $(128,690)Net income (loss)$960 $(16,720)$17,680 $(14,190)$(33,750)$19,560 $(18,420)$79,400 $(97,820)
Interest expenseInterest expense7,560 24,120 (16,560)23,970 50,270 (26,300)31,970 58,140 (26,170)Interest expense6,980 8,220 (1,240)14,030 16,410 (2,380)29,300 48,530 (19,230)
Income tax expense (benefit)Income tax expense (benefit)100 (1,020)1,120 170 (2,330)2,500 (8,320)1,930 (10,250)Income tax expense (benefit)1,400 80 1,320 2,400 70 2,330 750 (9,320)10,070 
Depreciation and amortizationDepreciation and amortization5,620 6,250 (630)16,150 16,790 (640)21,050 22,300 (1,250)Depreciation and amortization5,220 5,470 (250)10,720 10,530 190 23,100 21,680 1,420 
EBITDAEBITDA$14,870 $174,600 $(159,730)$8,130 $176,220 $(168,090)$(19,440)$146,920 $(166,360)EBITDA$14,560 $(2,950)$17,510 $12,960 $(6,740)$19,700 $34,730 $140,290 $(105,560)
Net loss attributable to noncontrolling interestNet loss attributable to noncontrolling interest340 260 80 1,010 840 170 1,410 1,070 340 Net loss attributable to noncontrolling interest330 380 (50)670 670 — 1,420 1,320 100 
(Income) loss from discontinued operations, net of tax— (182,750)182,750 500 (189,520)190,020 500 (192,690)193,190 
Loss (income) from discontinued operations, net of taxLoss (income) from discontinued operations, net of tax— — — — 500 (500)— (182,240)182,240 
EBITDA from continuing operationsEBITDA from continuing operations$15,210 $(7,890)$23,100 $9,640 $(12,460)$22,100 $(17,530)$(44,700)$27,170 EBITDA from continuing operations$14,890 $(2,570)$17,460 $13,630 $(5,570)$19,200 $36,150 $(40,630)$76,780 
Adjustments pursuant to Term Loan Agreements:
Adjustments pursuant to Senior Term Loan Agreement:Adjustments pursuant to Senior Term Loan Agreement:
Losses on sale of receivablesLosses on sale of receivables420 320 100 960 1,280 (320)1,270 1,510 (240)Losses on sale of receivables270 250 20 500 540 (40)1,370 1,170 200 
Debt extinguishment lossesDebt extinguishment losses— — — 11,650 — 11,650 11,650 — 11,650 
Non-cash equity grant expensesNon-cash equity grant expenses870 850 20 2,190 1,820 370 2,520 1,970 550 Non-cash equity grant expenses850 900 (50)1,710 1,320 390 3,390 2,500 890 
Other non-cash expenses or lossesOther non-cash expenses or losses(1,080)(10)(1,070)670 5,560 (4,890)(1,180)9,300 (10,480)Other non-cash expenses or losses1,790 220 1,570 3,920 1,750 2,170 1,360 1,210 150 
Term Loans related fees, costs and expensesTerm Loans related fees, costs and expenses— (120)120 — 2,920 (2,920)— 2,920 (2,920)Term Loans related fees, costs and expenses— — — — — — — (120)120 
Lender agent related professional fees, costs, and expenses(a)Lender agent related professional fees, costs, and expenses(a)— (150)150 380 760 (380)460 760 (300)Lender agent related professional fees, costs, and expenses(a)90 270 (180)100 380 (280)100 320 (220)
Non-recurring expenses or costs(a)(b)
Non-recurring expenses or costs(a)(b)
700 2,450 (1,750)5,180 8,480 (3,300)16,640 20,570 (3,930)
Non-recurring expenses or costs(a)(b)
130 970 (840)(820)4,480 (5,300)110 17,080 (16,970)
Non-cash losses on asset salesNon-cash losses on asset sales(10)1,310 (1,320)80 (150)230 (70)180 (250)Non-cash losses on asset sales10 20 (10)10 90 (80)10 1,240 (1,230)
OtherOther10 190 (180)(10)(20)10 480 330 150 Other(10)(20)10 (30)(20)(10)(30)660 (690)
Adjusted EBITDAAdjusted EBITDA$16,120 $(3,050)$19,170 $19,090 $8,190 $10,900 $2,590 $(7,160)$9,750 Adjusted EBITDA$18,020 $40 $17,980 $30,670 $2,970 $27,700 $54,110 $(16,570)$70,680 
Non-recurring expense limitation(a)(b)
Non-recurring expense limitation(a)(b)
N/AN/AN/AN/AN/AN/A(6,640)(10,570)3,930 
Non-recurring expense limitation(a)(b)
N/AN/AN/AN/AN/AN/AN/A(7,080)7,080 
OtherOther(10)(190)180 10 20 (10)(480)(330)(150)Other10 20 (10)30 20 10 30 (660)690 
Consolidated EBITDAConsolidated EBITDA$16,110 $(3,240)$19,350 $19,100 $8,210 $10,890 $(4,530)$(18,060)$13,530 Consolidated EBITDA$18,030 $60 $17,970 $30,700 $2,990 $27,710 $54,140 $(24,310)$78,450 
(a)Non-recurring Fees, costs and expenses incurred in connection with any proposed asset sale, offering of equity interests or costs including severance, restructuringany indebtedness, lender agent fees, and relocationfees in connection with the maintenance and/or forgiveness of the PPP Loan are not to, in aggregate, exceed $10$8 million in adjustments in determining Consolidated EBITDA in any four fiscal quarter period.
(b) Fees,Non-recurring expenses or costs including restructuring, moving and expenses incurred in connection with any proposed asset saleseverance are not to, in aggregate, exceed $5$10 million in adjustments in determining Consolidated EBITDA in any four fiscal quarter period.
Credit Rating
The Company’s debt agreements do not require that we maintain a credit rating.
Outlook
The Company began 2020 with strong performance and our operating results demonstrated strong demand for our products. The COVID-19 pandemic caused significant business and economic disruption globally and resulted in economic uncertainty and challenges, both in the short term and long term. The Company’s main priority continues to be the health of its employees and others in the communities where it does business and have taken the following decisive actions to ensure the welfare of these groups, based on guidance from local governments and health authorities, as well as the World Health Organization and the Centers for Disease Control, designed to reduce the risk of spreading COVID-19:
requiring administrative employees to work remotely;
temporarily eliminating domestic and international travel;
gating measures defined and implemented for essential workers to enter facilities;
providing and requiring the use of personal protective equipment by all employees during working hours;
requiring essential on-site employees to practice social distancing, including refraining from handshaking, hugging or other forms of physical greeting and maintaining 6 feet of distance from coworkers where possible;
professionally sanitizing each facility on a regular basis;
sanitizing equipment between uses;
requiring frequent hand washing, including before and after the use of shared equipment;
conducting temperature checks on employees at the start of each shift;
ensuring availability of hand sanitizer at each facility and encouraging frequent application; and
requiring employees to stay home if they are experiencing cold or flu-like symptoms.
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The Company experienced increasing volumes throughout the third quarterOutlook
Our business remains susceptible to economic conditions that could adversely affect our results, including potential negative impacts of 2020 resulting in an extended selling season based on the performance and strong customer demand for our products experienced in early 2020, prior to the COVID-19 pandemic. The trend of customer orders in the economies that most significantly affect our demand has been strong, including the United States and Europe. However, we have experienced rising pricing to certain raw materials, including steel, and while the Company remainsendeavors to recover incremental input costs through pricing actions, the recoveries generally occur over time and are not guaranteed. In addition, recent macroeconomic factors, such as constraints on shipping container availability, port congestion and the global microchip shortage have resulted in a delay of receiving raw materials by the Company or some of our OE customers, which has resulted in retiming some customer orders to future periods. We continue to monitor these supply constraints and remain committed to fulfilling and delivering our customers’ orders driven by the strong product demand we have experienced.
We also remain focused on the health of its employees and others within the communities where it conducts business and with the risk mitigation initiative actions described above, the Company has returnedmaintaining liquidity to a fully operational statusfund our operations, while considering future maturities in our capital structure, which have been addressed and will continue to fulfill and deliver uponbe addressed as the strong trend in customer orders thatCompany continues to be experienced.execute upon its business plan and operational improvement initiatives in 2021. These initiatives were put in place to streamline and simplify its operations and provide a roadmap to achieve our strategic priorities of margin expansion, liquidity management and organic business growth.
We believe the unique strategic footprint we enjoy in our market space will benefit 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 and provide leverage to see balanced growth in OE, aftermarket and retail businesses. That position and brand recognition allows us flexibility to bring our products to market in various channels that we believe provide us the ability to leverage our current operational footprint to meet or exceed our customer demands.
Impact of New Accounting Standards
See Note 2, New Accounting Pronouncements, included in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” within this Quarterly Report on Form 10-Q.
Critical Accounting Policies
Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted within the United States of Americas (“US GAAP”).U.S. GAAP. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates that affect both the amounts and timing of the recording of assets, liabilities, net sales and expenses. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, our evaluation of business and macroeconomic trends, and information from other outside sources, as appropriate.
There were no material changes to the items that we disclosed as our critical accounting policies in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the yeartwelve months ended December 31, 2019.2020.
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
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be a large accelerated filer under applicable SEC rules. Based on the foregoing, we expect we will no longer qualify as an emerging growth company as of 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
Not applicable.
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Item 4. Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended, 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 SeptemberJune 30, 2020,2021, 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 SeptemberJune 30, 2020,2021, 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
There were no changes in the Company’s internal control over financial reporting that occurred during the three months ended SeptemberJune 30, 2020,2021, that have materially affected, or is reasonably likely to materially affect, its internal control over financial reporting. As a result of the COVID-19 pandemic, certain employees of the Company began working remotely in March 2020. Management has taken measures to ensure that our internal control over financial reporting remained effective and were not materially affected during the period. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are subject to claims and litigation in the ordinary course of business, but we do not believe that any such claim or litigation is likely to have a material adverse effect on our financial position, results of operations, or cash flows. For additional information regarding legal proceedings, refer to Note 13,10, Contingencies, included in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” within this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
For aA discussion of our risks and uncertainties, see the risk factors, below and the informationwhich could materially affect our business, financial condition or future results, can be found in the section entitled “Risk Factors,” in our Annual Report on Form 10-K for the yeartwelve months ended December 31, 2019.
The novel coronavirus (“COVID-19”) pandemic has disrupted, and may continue to disrupt, our business, which could result in a material adverse impact to our business, results of operations, cash flow, liquidity and financial condition.
In December 2019, the COVID-19 outbreak occurred in China and has since spread to other parts of the world. On March 11, 2020, the World Health Organization declared COVID-19 to be a global pandemic and recommended containment and mitigation measures. On March 13, 2020, the United States declared a national emergency concerning the outbreak. Along with these declarations, extraordinary and wide-ranging actions were taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions across the United States and the world, including quarantines, social distancing and “stay-at-home” orders, travel restrictions, mandatory business closures and other mandates that substantially restricted individuals’ daily activities and curtailed or ceased many businesses’ normal operations.
To date, the COVID-19 pandemic has surfaced in nearly all regions around the world and has negatively impacted the global economy, disrupted consumer spending and global supply chains, and created2020. There have been no significant volatility and disruption of financial markets. As a result, we have experienced, and may continue to experience, decreases in demand and customer orders for our products in all sales channels, as well as temporary disruptions and closures of some of our facilities due to decreased demand and government mandates. The COVID-19 pandemic has also impacted various aspects of the supply chain as our suppliers experience similar business disruptions due to operating restrictions from government mandates. We continue to monitor procurement of raw materials and components used in the manufacturing, distribution and sale of our products, but continued disruptions in the supply chain due to the COVID-19 pandemic may cause difficulty in sourcing materials or unexpected shortages or delays in delivery of raw materials and components, and may result in increased costschanges in our supply chain. We have implemented plans to reduce spending in certain areas of our business, including flexing variable labor, involuntary leave programs, reductions or delays in variable costs and investments, including capital expenditures, and may need to take additional actions to reduce spending in the future.
Generally, government restrictions have been lifted and economies have reopened. Currently, all of our facilities are operating, and most of our customers and suppliers have reopened and increased their operating levels. However, certain jurisdictions or regions may have to re-establish restrictions due to a resurgence in COVID-19 cases or otherwise, which could require us, our customers or our suppliers to close or limit operations. Accordingly, the ultimate shape of the economic recovery is uncertain. We will continue to closely monitor and assess the impact of the pandemic on our business, the extent of the impact on our liquidity to meet our short-term obligations and fund our business needs and growth, and our ability to meet financial covenants within our credit agreements. While we are closely monitoring the impact of the pandemic on all aspects of our business, the extent of the impact on our results of operations, cash flow, liquidity, and financial performance, as well as our ability to execute near- and long-term business strategies and initiatives, will depend on numerous evolvingrisk factors and future developments, which are highly uncertain and cannot be reasonably predicted, including: (a) the duration, severity and scope of the pandemic, including the resurgence of COVID-19 cases; (b) rapidly-changing governmental and public health mandates and guidance to contain and combat the outbreak; (c) the extent and duration of the pandemic’s adverse effect on economic and social activity, consumer confidence, discretionary spending and preferences, labor and healthcare costs, and unemployment rates, any of which may reduce demand for some of our products and impair the ability of those with whom we do business to satisfy their obligations to us; (d) our ability to sell and provide our services and products, including as a result of any restrictions, mandatory business closures, and any stay-at home or similar orders; (e) any temporary reductiondisclosed in our workforce, closures of our offices and facilities and our ability to adequately staff and maintain our operations; (f) the ability of our customers and suppliers to continue their operations, which could result in terminations of contracts, losses of revenue, and further adverse effects to our supply chain; (g) any impairment in value of our tangible or intangible assets, which could be recorded as a result of weaker economic conditions; and (h) the potential effects on our internal controls, including as a result of changes in working environments and observing stay-at-home and similar orders that are applicable to our employees and business partners, among others. In addition, if the pandemic continues to create disruptions or turmoil in the credit or financial
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markets, or impacts our credit ratings, it could adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs.
Given the inherent uncertainty surrounding the COVID-19 pandemic, the pandemic may have an adverse impact on our business, results of operations, cash flow, liquidity, and financial condition.
We are currently out of compliance with the NYSE's minimum market capitalization requirement and are at risk of the NYSE delisting our common stock, which would have an adverse impact on the trading volume, liquidity and market price of our common stock.
On April 30, 2020 we were notified (the “Notice”) by the New York Stock Exchange (the “NYSE”) that we were not in compliance with the continued listing standard set forth in Section 802.01B of the NYSE Listed Company Manual because our average market capitalization was less than $50 million over a consecutive 30 trading-day period and our stockholders’ equity was less than $50 million. We are taking actions to meet the continued listing standards of the NYSE to cure the market capitalization condition, which we expect will ultimately lead to a recovery of our common stock price and market capitalization. Our common stock could also be delisted if our average market capitalization over a consecutive 30 day-trading period is less than $15 million, in which case we would not have an opportunity to cure the deficiency, our common stock would be suspended from trading on the NYSE immediately, and the NYSE would begin the process to delist our common stock, subject to our right to appeal under NYSE rules. We cannot assure you that any appeal we undertake in these or other circumstances will be successful. While we are working to cure this deficiency and regain compliance with this continued listing standard, there can be no assurance that we will be able to cure this deficiency or if we will cease to comply with another continued listing standard of the NYSE.
A delisting of our common stock from the NYSE could negatively impact us as it would likely reduce the liquidity and market price of our common stock; reduce the number of investors willing to hold or acquire our common stock; and negatively impact our ability to access equity markets and obtain financing.
If we fail to meet the necessary requirements for our common stock to remain listed on the NYSE or other similar markets, then we will be obligated to offer to repurchase all of our outstanding Convertible Notes. Our failure to make such an offer or repurchase any tendered Convertible Notes will result in an event of default under the indentures governing the Convertible Notes. Any such default will trigger a cross-default on our other debt obligations, including the First Lien Term Loan, Second Lien Term and Revolving Credit Facility. Our inability to cure any such defaults, including the payment of our debt obligations, would have a material adverse effect on our financial position and results of operations.Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 3.    Defaults Upon Senior Securities
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits.
Exhibits Index:
3.1(b)
3.2(a)
10.1*
10.2*
31.1
31.2
32.1
32.2
101.INS
Inline XBRL Instance Document. (not part of filing)
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (embedded within the Inline XBRL document).
(a)Incorporated by reference to the Exhibit filed with our Current Report on Form 8-K filed on February 20, 2019 (File No. 001-37427).
(b)Incorporated by reference to the Exhibit filed with our Quarterly Report on Form 10-Q filed on August 8, 2019 (File No. 001-37427).

* Certain exhibits and schedules are omitted pursuant to Item 601(a)(5) of Regulation S-K, and the Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted exhibits and schedules upon request.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 HORIZON GLOBAL CORPORATION (Registrant)
/s/ DENNIS E. RICHARDVILLE
Date:November 5, 2020August 3, 2021By:
Dennis E. Richardville
Chief Financial Officer

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