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 March 31, ~~2021~~2022
orOR
☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to .

Commission file number 001-37427

HORIZON GLOBAL CORPORATION

(Exact name of registrant as specified in its charter)



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

47912 Halyard Drive, Suite 100

Plymouth, Michigan 48170

(Address of principal executive offices, including zip code)

(734) 656-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

HZN

New 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 ☒

~~Accelerated~~Non-accelerated 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 May ~~3, 2021,~~2, 2022, the number of outstanding shares of the Registrant’s common stock was ~~27,007,264~~27,610,521 shares.

HORIZON GLOBAL CORPORATION

Index

Part I.

Financial Information

Forward-Looking Statements

Item 1.

Condensed Consolidated Financial Statements

Condensed Consolidated ~~Balance Sheets as of March 31, 2021 and December 31, 2020~~

~~Condensed Consolidated~~ Statements of Operations for the Three Months Ended March 31, ~~2021~~2022 and ~~2020~~2021

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, ~~2021~~ 2022 and ~~2020~~2021

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2021~~2022 and ~~2020~~2021

Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2022 and 2021 ~~and 2020~~

Notes to Condensed Consolidated Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

2720

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

4032

Item 4.

Controls and Procedures

Unregistered Sales of Equity Securities and Use of Proceeds

4234

Item 3.

Defaults Upon Senior Securities

4234

Item 4.

Mine Safety Disclosures

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 COVID-19 pandemic on the Company’s business, results of operations, financial condition and ~~liquidity;~~liquidity, including, without limitation, supply chain and logistics issues and inflationary pressures; liabilities and restrictions imposed by the Company’s debt instruments, including the Company’s ability to comply with the applicable financial covenants related thereto; market demand; competitive factors; supply constraints and shipping disruptions; material, logistics and energy ~~costs;~~costs, including the increased material costs resulting from the COVID-19 pandemic; inflation and deflation rates; the impact the conflict between Russia and Ukraine has on our business, financial condition or future results, including the duration and scope of such conflict, its impact on disruptions and inefficiencies in our supply chain and our ability to procure certain raw materials; 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; 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; ~~the Company’s ability to maintain compliance with the New York Stock Exchange’s continued listing standards;~~ and other risks that are discussed in Part I, Item 1A, “Risk Factors.” in the Company’s Annual Report on Form 10-K for the twelve months ended December 31, ~~2020.~~2021. The risks described in the Company’s Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deemed to be immaterial also may materially adversely affect our business, financial position and results of operations or cash flows.

The cautionary statements set forth above should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. We caution readers not to place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect the Company. We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statement to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as otherwise required by law.

We disclose important factors that could cause our actual results to differ materially from our expectations implied by our forward-looking statements under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in the Company’s Annual Report on Form 10-K for the twelve months ended December 31, ~~2020.~~2021. These cautionary statements qualify all forward-looking statements attributed to us or persons acting on our behalf. When we indicate that an event, condition or circumstance could or would have an adverse effect on us, we mean to include effects upon our business, financial and other conditions, results of operations, prospects and ability to service our debt.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

HORIZON GLOBAL CORPORATION

CONDENSED CONSOLIDATED ~~BALANCE SHEETS~~STATEMENTS OF OPERATIONS

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

March 31, 2021 December 31, 2020
Assets
Current assets:
Cash and cash equivalents $ 24,560 $ 44,970
Restricted cash 5,700 5,720
Receivables, net 111,870 87,420
Inventories 134,360 115,320
Prepaid expenses and other current assets 12,900 11,510
Total current assets 289,390 264,940
Property and equipment, net 70,720 74,090
Operating lease right-of-use assets 41,480 47,310
Goodwill 3,100 3,360
Other intangibles, net 55,990 58,230
Deferred income taxes 1,230 1,280
Other assets 6,240 7,280
Total assets $ 468,150 $ 456,490
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings and current maturities, long-term debt $ 11,230 $ 14,120
Accounts payable 113,870 99,520
Short-term operating lease liabilities 11,880 12,180
Accrued liabilities 63,450 59,100
Total current liabilities 200,430 184,920
Gross long-term debt 269,140 251,960
Unamortized debt issuance costs and discount (33,920) (20,570)
Long-term debt 235,220 231,390
Deferred income taxes 3,460 3,130
Long-term operating lease liabilities 40,580 46,340
Other long-term liabilities 12,720 14,560
Total liabilities 492,410 480,340
Contingencies (See Note 10) 0 0
Shareholders' equity:
Preferred stock, $0.01 par: Authorized 100,000,000 shares; Issued and outstanding: NaNne 0 0
Common stock, $0.01 par: Authorized 400,000,000 shares; 27,688,689 shares issued and 27,002,183 outstanding at March 31, 2021, and 27,089,673 shares issued and 26,403,167 outstanding at December 31, 2020 270 260
Common stock warrants issued, outstanding and exercisable for 9,231,146 and 5,815,039 shares of common stock at March 31, 2021 and December 31, 2020, respectively 25,010 9,510
Paid-in capital 168,130 166,610
Treasury stock, at cost: 686,506 shares at March 31, 2021 and December 31, 2020 (10,000) (10,000)
Accumulated deficit (193,340) (178,530)
Accumulated other comprehensive loss (8,830) (6,540)
Total Horizon Global shareholders' deficit (18,760) (18,690)
Noncontrolling interest (5,500) (5,160)
Total shareholders' deficit (24,260) (23,850)
Total liabilities and shareholders' equity $ 468,150 $ 456,490


	Three Months Ended March 31,
		2022		2021
Net sales		$	180,860	$	199,190
Cost of sales		(160,650)		(158,630)
Gross profit		20,210		40,560
Selling, general and administrative expenses		(33,770)		(33,780)
Operating (loss) profit		(13,560)		6,780
Interest expense		(7,670)		(7,050)
Loss on debt extinguishment of Replacement Term Loan		—		(11,650)
Other expense, net		(5,490)		(2,230)
Loss before income tax		(26,720)		(14,150)
Income tax expense		(230)		(1,000)
Net loss		(26,950)		(15,150)
Less: Net loss attributable to noncontrolling interest		(270)		(340)
Net loss attributable to Horizon Global		$	(26,680)	$	(14,810)
Net loss per share:
Basic		$	(0.98)	$	(0.55)
Diluted		$	(0.98)	$	(0.55)

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

HORIZON GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~

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

Three Months Ended March 31,
2021 2020
Net sales $ 199,190 $ 163,250
Cost of sales (158,630) (137,000)
Gross profit 40,560 26,250
Selling, general and administrative expenses (33,780) (32,930)
Operating profit (loss) 6,780 (6,680)
Other expense, net (2,230) (1,670)
Loss on debt extinguishment (11,650) 0
Interest expense (7,050) (8,190)
Loss from continuing operations before income tax (14,150) (16,540)
Income tax (expense) benefit (1,000) 10
Net loss from continuing operations (15,150) (16,530)
Loss from discontinued operations, net of income tax 0 (500)
Net loss (15,150) (17,030)
Less: Net loss attributable to noncontrolling interest (340) (290)
Net loss attributable to Horizon Global $ (14,810) $ (16,740)
Net loss per share attributable to Horizon Global:
Basic:
Continuing operations $ (0.55) $ (0.64)
Discontinued operations 0 (0.02)
Total $ (0.55) $ (0.66)
Diluted:
Continuing operations $ (0.55) $ (0.64)
Discontinued operations 0 (0.02)
Total $ (0.55) $ (0.66)
Weighted average common shares outstanding:
Basic 26,743,441 25,393,668
Diluted 26,743,441 25,393,668

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

~~HORIZON GLOBAL CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF~~ COMPREHENSIVE LOSS

(unaudited—dollars in thousands)


		Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020				2022		2021
Net loss	Net loss	$	(15,150)	$	(17,030)	Net loss		$	(26,950)	$	(15,150)
Other comprehensive loss, net of tax:
Other comprehensive income (loss), net of tax:						Other comprehensive income (loss), net of tax:
Foreign currency translation and other	Foreign currency translation and other	(2,290)		(4,340)		Foreign currency translation and other		1,890		(2,290)
Total other comprehensive loss, net of tax		(2,290)		(4,340)
Total other comprehensive income (loss), net of tax						Total other comprehensive income (loss), net of tax		1,890		(2,290)
Total comprehensive loss	Total comprehensive loss	(17,440)		(21,370)		Total comprehensive loss		(25,060)		(17,440)
Less: Comprehensive loss attributable to noncontrolling interest	Less: Comprehensive loss attributable to noncontrolling interest	(340)		(290)		Less: Comprehensive loss attributable to noncontrolling interest		(270)		(340)
Comprehensive loss attributable to Horizon Global	Comprehensive loss attributable to Horizon Global	$	(17,100)	$	(21,080)	Comprehensive loss attributable to Horizon Global		$	(24,790)	$	(17,100)

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

HORIZON GLOBAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited—dollars in thousands)


	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	29,660	$	11,780
Restricted cash	5,470		5,490
Receivables, net	95,570		80,720
Inventories	178,840		162,830
Prepaid expenses and other current assets	15,180		12,340
Total current assets	324,720		273,160
Property and equipment, net	72,600		71,610
Operating lease right-of-use assets	37,300		37,810
Other intangibles, net	46,860		48,910
Deferred income taxes	1,750		1,750
Other assets	5,270		5,680
Total assets	$	488,500	$	438,920
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings and current maturities, long-term debt	$	3,670	$	3,780
Accounts payable	128,710		102,190
Short-term operating lease liabilities	11,210		11,010
Accrued liabilities	49,680		44,870
Total current liabilities	193,270		161,850
Gross long-term debt	339,970		297,070
Unamortized debt issuance costs and discount	(27,830)		(26,520)
Long-term debt	312,140		270,550
Deferred income taxes	1,650		1,920
Long-term operating lease liabilities	34,290		35,930
Other long-term liabilities	8,800		8,920
Total liabilities	550,150		479,170
Commitments and Contingencies (Note 9)	0		0
Shareholders' equity:
Preferred stock, $0.01 par: Authorized 100,000,000 shares; Issued and outstanding: None	—		—
Common stock, $0.01 par: Authorized 400,000,000 shares; 28,297,027 shares issued and 27,610,521 outstanding at March 31, 2022, and 27,973,153 shares issued and 27,286,647 outstanding at December 31, 2021	280		270
Common stock warrants issued, outstanding and exercisable for 10,206,146 and 9,231,146 shares of common stock at March 31, 2022 and December 31, 2021, respectively	28,050		25,010
Paid-in capital	171,600		170,990
Treasury stock, at cost: 686,506 shares at March 31, 2022 and December 31, 2021	(10,000)		(10,000)
Accumulated deficit	(236,930)		(210,250)
Accumulated other comprehensive loss	(7,820)		(9,710)
Total Horizon Global shareholders' deficit	(54,820)		(33,690)
Noncontrolling interest	(6,830)		(6,560)
Total shareholders' deficit	(61,650)		(40,250)
Total liabilities and shareholders' deficit	$	488,500	$	438,920

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

HORIZON GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited—dollars in thousands)


		Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020			2022		2021
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:					Cash Flows from Operating Activities:
Net loss	Net loss	$	(15,150)	$	(17,030)	Net loss	$	(26,950)	$	(15,150)
Less: Net loss from discontinued operations		0		(500)
Net loss from continuing operations		(15,150)		(16,530)

Adjustments to reconcile net loss from continuing operations to net cash provided by (used for) operating activities:
Adjustments to reconcile net loss to net cash used for operating activities:						Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation	Depreciation	4,200		3,490		Depreciation	3,350		4,200
Amortization of intangible assets	Amortization of intangible assets	1,300		1,570		Amortization of intangible assets	1,270		1,300
Loss on debt extinguishment		11,650		0
Amortization of original issuance discount and debt issuance costs	Amortization of original issuance discount and debt issuance costs	2,810		4,400		Amortization of original issuance discount and debt issuance costs	2,870		2,810
Deferred income taxes	Deferred income taxes	470		(40)		Deferred income taxes	(200)		470
Non-cash compensation expense	Non-cash compensation expense	860		420		Non-cash compensation expense	1,250		860
Loss on debt extinguishment of Replacement Term Loan						Loss on debt extinguishment of Replacement Term Loan	—		11,650
Paid-in-kind interest	Paid-in-kind interest	650		1,570		Paid-in-kind interest	—		650
Increase in receivables	Increase in receivables	(26,870)		(15,610)		Increase in receivables	(16,250)		(26,870)
(Increase) decrease in inventories		(20,950)		15,350
Increase in inventories						Increase in inventories	(17,000)		(20,950)
Increase in prepaid expenses and other assets	Increase in prepaid expenses and other assets	(940)		(2,060)		Increase in prepaid expenses and other assets	(2,710)		(940)
Increase in accounts payable and accrued liabilities	Increase in accounts payable and accrued liabilities	23,120		11,550		Increase in accounts payable and accrued liabilities	33,350		23,120
Other, net	Other, net	600		1,600		Other, net	2,690		600
Net cash (used for) provided by operating activities for continuing operations		(18,250)		5,710
Net cash used for operating activities						Net cash used for operating activities	(18,330)		(18,250)
Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Capital expenditures	Capital expenditures	(3,360)		(4,060)		Capital expenditures	(5,000)		(3,360)
Net proceeds from disposition of property and equipment		0		70
Net cash used for investing activities for continuing operations		(3,360)		(3,990)

Net cash used for investing activities						Net cash used for investing activities	(5,000)		(3,360)
Cash Flows from Financing Activities:	Cash Flows from Financing Activities:					Cash Flows from Financing Activities:
Proceeds from borrowings on credit facilities	Proceeds from borrowings on credit facilities	1,530		580		Proceeds from borrowings on credit facilities	1,040		1,530
Repayments of borrowings on credit facilities	Repayments of borrowings on credit facilities	(720)		(630)		Repayments of borrowings on credit facilities	(1,930)		(720)
Proceeds from Senior Term Loan, net of issuance costs	Proceeds from Senior Term Loan, net of issuance costs	75,300		0		Proceeds from Senior Term Loan, net of issuance costs	30,900		75,300
Repayments of borrowings on Replacement Term Loan, including transaction fees	Repayments of borrowings on Replacement Term Loan, including transaction fees	(94,940)		0		Repayments of borrowings on Replacement Term Loan, including transaction fees	—		(94,940)
Proceeds from Revolving Credit Facility, net of issuance costs	Proceeds from Revolving Credit Facility, net of issuance costs	4,450		54,680		Proceeds from Revolving Credit Facility, net of issuance costs	9,170		4,450
Proceeds from ABL revolving debt, net of issuance costs		0		8,000
Repayments of borrowings on ABL revolving debt		0		(27,920)
Proceeds from issuance of common stock warrants	Proceeds from issuance of common stock warrants	16,300		0		Proceeds from issuance of common stock warrants	3,040		16,300
Proceeds from exercise of common stock warrants	Proceeds from exercise of common stock warrants	420		0		Proceeds from exercise of common stock warrants	—		420
Other, net	Other, net	(650)		(60)		Other, net	(720)		(650)
Net cash provided by financing activities for continuing operations		1,690		34,650
Discontinued Operations:
Net cash used for discontinued operations		0		(500)
Net cash provided by financing activities						Net cash provided by financing activities	41,500		1,690
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(510)		(230)		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(310)		(510)
Cash, Cash Equivalents and Restricted Cash:	Cash, Cash Equivalents and Restricted Cash:					Cash, Cash Equivalents and Restricted Cash:
(Decrease) increase for the period		(20,430)		35,640
Increase (decrease) for the period						Increase (decrease) for the period	17,860		(20,430)
At beginning of period	At beginning of period	50,690		11,770		At beginning of period	17,270		50,690
At end of period	At end of period	$	30,260	$	47,410	At end of period	$	35,130	$	30,260
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid for interest	Cash paid for interest	$	7,270	$	3,150	Cash paid for interest	$	5,280	$	7,270
Cash paid for taxes, net of refunds	Cash paid for taxes, net of refunds	$	530	$	200	Cash paid for taxes, net of refunds	$	390	$	530

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

HORIZON GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(unaudited—dollars in thousands)

Common Stock Common Stock Warrants Paid-in Capital Treasury Stock Accumulated Deficit Accumulated Other Comprehensive Loss Total Horizon Global Shareholders' Deficit Noncontrolling Interest Total Shareholders' Deficit
Balances at January 1, 2021 $ 260 $ 9,510 $ 166,610 $ (10,000) $ (178,530) $ (6,540) $ (18,690) $ (5,160) $ (23,850)
Net loss — — — — (14,810) — (14,810) (340) (15,150)
Other comprehensive loss, net of tax — — — — — (2,290) (2,290) — (2,290)
Shares surrendered upon vesting of employees share based payment awards to cover tax obligations — — (650) — — — (650) — (650)
Non-cash compensation expense — — 960 — — — 960 — 960
Issuance of common stock warrants — 16,300 — — — — 16,300 — 16,300
Exercise of common stock warrants 10 (800) 1,210 — — — 420 — 420
Balances at March 31, 2021 $ 270 $ 25,010 $ 168,130 $ (10,000) $ (193,340) $ (8,830) $ (18,760) $ (5,500) $ (24,260)


	Common Stock		Common Stock Warrants		Paid-in Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Total Horizon Global Shareholders' Equity (Deficit)		Noncontrolling Interest		Total Shareholders' Equity (Deficit)
Balances at January 1, 2022	$	270	$	25,010	$	170,990	$	(10,000)	$	(210,250)	$	(9,710)	$	(33,690)	$	(6,560)	$	(40,250)
Net loss	—		—		—		—		(26,680)		—		(26,680)		(270)		(26,950)
Other comprehensive income, net of tax	—		—		—		—		—		4,990		4,990		—		4,990
Shares surrendered upon vesting of employee stock compensation awards to cover tax obligations	—		—		(640)		—		—		—		(640)		—		(640)
Non-cash compensation expense	10		—		1,250		—		—		—		1,260		—		1,260
Issuance of common stock warrants	—		3,040		—		—		—		—		3,040		—		3,040
Amounts reclassified from AOCI	—		—		—		—		—		(3,100)		(3,100)		—		(3,100)
Balances at March 31, 2022	280		28,050		171,600		(10,000)		(236,930)		(7,820)		(54,820)		(6,830)		(61,650)


		Common Stock		Common Stock Warrants		Paid-in Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Horizon Global Shareholders' Equity (Deficit)		Noncontrolling Interest		Total Shareholders' Equity (Deficit)			Common Stock		Common Stock Warrants		Paid-in Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Horizon Global Shareholders' Equity (Deficit)		Noncontrolling Interest		Total Shareholders' Equity (Deficit)
Balances 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, 2021																				Balances at January 1, 2021	$	260	$	9,510	$	166,610	$	(10,000)	$	(178,530)	$	(6,540)	$	(18,690)	$	(5,160)	$	(23,850)
Net loss	Net loss	—		—		—		—		(16,740)		—		(16,740)		(290)		(17,030)		Net loss	—		—		—		—		(14,810)		—		(14,810)		(340)		(15,150)
Other comprehensive loss, net of tax	Other 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 obligations		—		—		(60)		—		—		—		(60)		—		(60)
Shares surrendered upon vesting of employee stock compensation awards to cover tax obligations																				Shares surrendered upon vesting of employee stock compensation awards to cover tax obligations	—		—		(650)		—		—		—		(650)		—		(650)
Non-cash compensation expense	Non-cash compensation expense	—		—		420		—		—		—		420		—		420		Non-cash compensation expense	—		—		960		—		—		—		960		—		960
Balances at March 31, 2020		$	250	$	10,610	$	163,600	$	(10,000)	$	(158,710)	$	(14,130)	$	(8,380)	$	(4,030)	$	(12,410)
Issuance of common stock warrants																				Issuance of common stock warrants	—		16,300		—		—		—		—		16,300		—		16,300
Exercise of common stock warrants																				Exercise of common stock warrants	10		(800)		1,210		—		—		—		420		—		420
Balances at March 31, 2021																				Balances at March 31, 2021	270		25,010		168,130		(10,000)		(193,340)		(8,830)		(18,760)		(5,500)		(24,260)

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

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,” “our,” or the “Company”) are a ~~global~~ designer, manufacturer and distributor of a wide variety of high quality, custom-engineered towing, trailering, cargo management and other related ~~accessories.~~accessory products in the North American, European and African markets. These products are designed to support aftermarket, automotive original equipment manufacturers (“automotive OEMs”) and automotive original equipment servicers (“automotive OESs”) (collectively, “OEs”), ~~aftermarket~~retail, e-commerce and ~~retail~~industrial customers within the agricultural, automotive, construction, horse/livestock, industrial, marine, military, recreational, trailer and utility markets. The Company groups its business into operating segments generally by the region in which sales and manufacturing efforts are focused. The Company’s operating segments are Horizon Americas and Horizon Europe-Africa. See Note ~~14,~~13, Segment Information, for further information on ~~each of~~ the Company’s operating segments.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ~~(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 twelve months ended December 31, ~~2020.~~2021. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements. It is management’s opinion that these condensed consolidated financial statements contain all adjustments, including adjustments of a normal and recurring nature, necessary for a fair presentation of financial position and results of operations. Results of operations for interim periods are not necessarily indicative of results for the full year.

The preparation of financial statements in conformity with U.S. GAAP requires usthe Company to make ~~certain~~ estimates, judgments, and ~~assumptions. Management~~assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates, judgments, and assumptions also affect the reported amounts of revenues and expenses during the reporting periods. The Company believes ~~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~~stock compensation, the assessment of lower of cost or net realizable value on inventory, useful lives assigned to long-lived assets, ~~and~~ depreciation and amortization, estimates related to lease liability and operating lease right-of-use (“ROU”) asset valuations, estimated future unrecoverable lease costs, legal and product liability matters, valuation of debt instruments and warrants, assets and obligations related to employee benefits, and the respective allocation methods, are reasonable based on information available at the time they are made. To the extent there are differences between these estimates and actual results, our consolidated financial statements may be materially affected.

2. New Accounting Pronouncements

As of March 31, 2022, there have been no new accounting pronouncements recently issued or adopted that have had or are reasonably likely to have a material impact on the Company’s condensed consolidated financial statements.

3. Inventories

Inventories consist of the following components:


	March 31, 2022		December 31, 2021
	(dollars in thousands)
Finished goods	$	100,570	$	85,770
Work in process	14,490		15,570
Raw materials	63,780		61,490
Total	$	178,840	$	162,830

HORIZON GLOBAL CORPORATION

~~2. New Accounting Pronouncements~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~New accounting pronouncements not yet adopted~~4. Property and Equipment, Net

~~In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, “Debt—Debt with Conversion~~Property 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~~equipment, net consists of the ~~Effects of Reference Rate Reform on Financial Reporting~~following components:


	March 31, 2022		December 31, 2021
	(dollars in thousands)
Land and land improvements	$	470	$	480
Buildings and building improvements	21,800		22,210
Machinery and equipment	138,540		135,110
Gross property and equipment	160,810		157,800
Accumulated depreciation	(88,210)		(86,190)
Total	$	72,600	$	71,610

~~” (“ASU 2020-04”). ASU 2020-04 provides temporary optional guidance to ease the potential burden in accounting for (or recognize 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.~~

~~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 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~~During the three months ended March 31, ~~2021.~~

2022 and 2021, depreciation expense was $3.4 million and $4.2 million, respectively.

~~3. Revenues~~

The Company disaggregates revenue from contracts with customers by major sales channel. The Company determined that disaggregating revenue into these categories best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The automotive OEM channel represents sales to automotive vehicle manufacturers. The automotive OES channel primarily represents sales to automotive vehicle dealerships. The aftermarket channel represents sales to automotive installers and warehouse distributors. The retail channel represents sales to direct-to-consumer retailers. The industrial channel represents sales to non-automotive manufacturers and dealers of agricultural equipment, trailers, and other custom assemblies. The e-commerce channel represents sales to direct-to-consumer retailers who utilize the Internet to purchase the Company’s products. The other channel represents sales that do not fit into a category described above and these sales are considered ancillary to the Company’s core operating activities.

~~The Company’s net sales by segments and disaggregated by major sales channel are as follows:~~

Three Months Ended March 31, 2021
Horizon Americas Horizon Europe-Africa Total
(dollars in thousands)
Net Sales
Automotive OEM $ 27,520 $ 48,560 $ 76,080
Automotive OES 3,860 16,060 19,920
Aftermarket 31,690 22,420 54,110
Retail 22,580 0 22,580
E-commerce 14,520 1,430 15,950
Industrial 9,660 550 10,210
Other 0 340 340
Total $ 109,830 $ 89,360 $ 199,190

Three Months Ended March 31, 2020
Horizon Americas Horizon
Europe-Africa Total
(dollars in thousands)
Net Sales
Automotive OEM $ 20,360 $ 41,400 $ 61,760
Automotive OES 1,270 12,460 13,730
Aftermarket 26,770 15,710 42,480
Retail 23,570 0 23,570
E-commerce 12,510 430 12,940
Industrial 7,850 320 8,170
Other 40 560 600
Total $ 92,370 $ 70,880 $ 163,250

~~4. Goodwill and~~5. Other Intangible Assets

~~Changes in the carrying amount of goodwill are as follows:~~

Horizon Americas Horizon Europe-Africa Total
(dollars in thousands)
Balance at January 1, 2021 $ 3,360 $ 0 $ 3,360
Foreign currency translation (260) 0 (260)
Balance at March 31, 2021 $ 3,100 $ 0 $ 3,100

The gross carrying amounts and accumulated amortization of the Company’s other intangible assets are as follows:


		March 31, 2021							March 31, 2022
Intangible Category by Useful Life	Intangible Category by Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Intangible Category by Useful Life	Gross Carrying Amount		Accumulated Amortization		Net 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)	$	164,940	$	(135,950)	$	28,990	Customer relationships (2 – 20 years)	$	161,590	$	(138,050)	$	23,540
Technology and other (3 – 15 years)	Technology and other (3 – 15 years)	22,800		(16,990)		5,810		Technology and other (3 – 15 years)	23,750		(21,080)		2,670
Trademark/Trade names (1 – 8 years)		150		(150)		0
Total finite-lived intangible assets		187,890		(153,090)		34,800
Sub-total								Sub-total	185,340		(159,130)		26,210
Trademark/Trade names, indefinite-lived	Trademark/Trade names, indefinite-lived	21,190		—		21,190		Trademark/Trade names, indefinite-lived	20,650		—		20,650
Total other intangible assets		$	209,080	$	(153,090)	$	55,990
Total								Total	$	205,990	$	(159,130)	$	46,860


		December 31, 2020							December 31, 2021
Intangible Category by Useful Life	Intangible Category by Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Intangible Category by Useful Life	Gross Carrying Amount		Accumulated Amortization		Net 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)	$	166,420	$	(135,140)	$	31,280	Customer relationships (2 – 20 years)	$	162,390	$	(137,420)	$	24,970
Technology and other (3 – 15 years)	Technology and other (3 – 15 years)	22,250		(16,710)		5,540		Technology and other (3 – 15 years)	23,870		(20,830)		3,040
Trademark/Trade names (1 – 8 years)		150		(150)		0
Total finite-lived intangible assets		188,820		(152,000)		36,820
Sub-total								Sub-total	186,260		(158,250)		28,010
Trademark/Trade names, indefinite-lived	Trademark/Trade names, indefinite-lived	21,410		—		21,410		Trademark/Trade names, indefinite-lived	20,900		—		20,900
Total other intangible assets		$	210,230	$	(152,000)	$	58,230
Total								Total	$	207,160	$	(158,250)	$	48,910

~~Amortization~~During the three months ended March 31, 2022 and 2021, amortization expense related to other intangible assets ~~as included in the accompanying condensed consolidated statements of operations is as follows:~~

Three Months Ended March 31,
2021 2020
(dollars in thousands)
Technology and other, included in cost of sales $ 200 $ 120
Customer relationships, included in selling, general and administrative expenses 1,100 1,450
Total amortization expense $ 1,300 $ 1,570

was $1.3 million.

119

HORIZON GLOBAL CORPORATION

~~5. Inventories~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~Inventories consist of the following components:~~

March 31,
2021 December 31,
2020
(dollars in thousands)
Finished goods $ 68,350 $ 58,600
Work in process 16,210 13,070
Raw materials 49,800 43,650
Total inventories $ 134,360 $ 115,320

6. ~~Property and Equipment, Net~~

~~Property and equipment, net consists of the following components:~~

March 31,
2021 December 31,
2020
(dollars in thousands)
Land and land improvements $ 500 $ 520
Buildings 22,510 23,040
Machinery and equipment 134,030 134,750
Total property and equipment 157,040 158,310
Accumulated depreciation (86,320) (84,220)
Property and equipment, net $ 70,720 $ 74,090

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

Three Months Ended March 31,
2021 2020
(dollars in thousands)
Depreciation expense, included in cost of sales $ 3,860 $ 3,150
Depreciation expense, included in selling, general and administrative expenses 340 340
Total depreciation expense $ 4,200 $ 3,490

7. Accrued and Other Long-term Liabilities

Accrued liabilities consist of the following components:


		March 31, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(dollars in thousands)					(dollars in thousands)
Customer incentives	Customer incentives	$	17,120	$	15,870	Customer incentives	$	13,130	$	13,030
Accrued compensation	Accrued compensation	16,530		12,130		Accrued compensation	10,630		7,520
Accrued transportation costs						Accrued transportation costs	6,180		5,600
Accrued interest						Accrued interest	2,950		3,430
Short-term tax liabilities						Short-term tax liabilities	2,850		3,530
Customer claims	Customer claims	6,700		6,520		Customer claims	2,760		2,900
Short-term tax liabilities		5,260		5,570
Deferred purchase price		1,520		1,370
Accrued professional services						Accrued professional services	1,630		1,700
Litigation settlements	Litigation settlements	1,390		1,600		Litigation settlements	1,160		1,290
Accrued professional services		1,290		1,510
Restructuring		570		650
Other	Other	13,070		13,880		Other	8,390		5,870
Total accrued liabilities		$	63,450	$	59,100
Total						Total	$	49,680	$	44,870

Other long-term liabilities consist of the following components:


		March 31, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(dollars in thousands)					(dollars in thousands)
Litigation settlements	Litigation settlements	$	2,820	$	2,930	Litigation settlements	$	1,770	$	1,820
Deferred purchase price		1,470		1,650
Long-term tax liabilities	Long-term tax liabilities	370		130		Long-term tax liabilities	130		130
Restructuring		0		1,070
Other	Other	8,060		8,780		Other	6,900		6,970
Total other long-term liabilities		$	12,720	$	14,560
Total						Total	$	8,800	$	8,920

1310

HORIZON GLOBAL CORPORATION

8.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Long-term Debt

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

March 31,
2021 December 31,
2020
(dollars in thousands)
Revolving Credit Facility $ 28,680 $ 24,230
Senior Term Loan 100,000 0
Replacement Term Loan 0 90,210
Convertible Notes 125,000 125,000
Paycheck Protection Program Loan 8,670 8,670
Bank facilities, capital leases and other long-term debt 18,020 17,970
Gross debt 280,370 266,080
Less:
Short-term borrowings and current maturities, long-term debt 11,230 14,120
Gross long-term debt 269,140 251,960
Less:
Unamortized debt issuance costs and original issuance discount on Senior Term Loan 24,230 0
Unamortized debt issuance costs and original issuance discount on Replacement Term Loan 0 9,100
Unamortized debt issuance costs and discount on Convertible Notes 9,690 11,470
Unamortized debt issuance costs and discount 33,920 20,570
Long-term debt $ 235,220 $ 231,390

~~ABL Facility~~

In December 2015, the Company entered into an Amended and Restated Loan Agreement with certain subsidiaries of the Company party thereto as guarantors, the lenders party thereto and Bank of America, N.A., as agent for the lenders, under which the lenders party thereto agreed to provide the Company and certain of its subsidiaries with a committed asset-based revolving credit facility (the “ABL Facility”) providing for revolving loans up to an aggregate principal amount of $99.0 million.

~~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 three months ended March 31, 2020, the Company recognized $0.8 million of unamortized debt issuance costs in interest expense and $0.6 million of additional costs in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations, in accordance with ASC 470-50, ~~“Modifications and Extinguishments”~~ ~~(“ASC 470-50”).~~

During the three months ended March 31, 2021 and 2020, the Company recognized 0 amortization of debt issuance costs and $0.4 million of amortization of debt issuance costs, respectively, in the accompanying condensed consolidated statements of operations.


	March 31, 2022		December 31, 2021
	(dollars in thousands)
Revolving Credit Facility	$	67,220	$	58,050
Senior Term Loan	135,000		100,000
Convertible Notes	125,000		125,000
Bank facilities, finance leases and other long-term debt	16,420		17,800
Gross debt	343,640		300,850
Less:
Short-term borrowings and current maturities, long-term debt	3,670		3,780
Gross long-term debt	339,970		297,070
Unamortized debt issuance costs and discount:
Unamortized debt issuance costs and original issuance discount on Senior Term Loan	(25,410)		(22,170)
Unamortized debt issuance costs and discount on Convertible Notes	(2,420)		(4,350)
Total	(27,830)		(26,520)
Long-term debt	$	312,140	$	270,550

Revolving Credit Facility

In March 2020, the Company, as guarantor, entered into a Loan and Security Agreement (the “Loan Agreement”) with Eclipse Business Capital LLC, formerly known as Encina Business Credit, LLC, ~~(“Encina”),~~ as agent for the lenders party thereto, and ~~HGA~~Horizon Global Americas Inc. and Cequent Towing Products of Canada Ltd., as borrowers (the “ABL Borrowers”). The Loan Agreement provides for an asset-based revolving credit facility (the “Revolving Credit Facility”) in the maximum aggregate principal amount of $75.0 million subject to customary borrowing base limitations contained therein, and may be increased at the ABL Borrowers’ request in increments of $5.0 million, up to a maximum of five times over the life of the Revolving Credit Facility, for a total increase of up to $25.0 million. The Loan Agreement has been amended on several occasions that, among other things, increased the maximum credit available under the Revolving Credit Facility to $95.0 million.

On March 31, 2022, the Company entered into an amendment to the Loan Agreement that, among other things, temporarily increased the Company’s ability to borrow against receivables and in-transit inventory as well as inventory located in the Company’s Mexico facilities, which is effective through June 30, 2022. The amendment also replaced the London Interbank Offered Rate (“LIBOR”) based interest rate with the Adjusted Term Secured Overnight Financing Rate (“Adjusted Term SOFR”). As a result of the amendment, interest on the loans under the Loan Agreement is payable in cash at the interest rate of ~~LIBOR~~Adjusted Term SOFR plus 4.00% per annum, subject to a 1.00% ~~LIBOR~~Adjusted Term SOFR 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~~annum through June 30, 2022. Beginning June 30, 2022, the interest fees, and other monetary obligations due may, in 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. All outstanding borrowings under the Loan Agreement maturerate on ~~March 13, 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~~loans under the Loan Agreement will ~~not make capital expenditures exceeding $30.0 million during any fiscal year.~~

~~Debt issuance costs of $2.3 million were incurred~~be 3.50% to 4.00% per annum, subject to certain conditions defined in ~~connection with the Loan Agreement. These debt issuance costs will be amortized into interest expense over the contractual term of~~ the Loan Agreement.

During the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, the Company recognized ~~$0.2~~$0.1 million and $0.2 million, respectively, of amortization of debt issuance costs ~~respectively,~~ in the accompanying condensed consolidated statements of operations.

As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, there was ~~$1.0~~$0.7 million and ~~$1.1~~$0.8 million, respectively, of unamortized debt issuance costs included in other assets in the accompanying condensed consolidated balance sheets.

As of March 31, ~~2021~~2022 and December 31, ~~2020, there was $28.7 million and $24.2 million outstanding, respectively, under the Revolving Credit Facility with a weighted average interest rate of 5.3% and 5.0%, respectively. As of March 31,~~ 2021, ~~and December 31, 2020,~~ the Company had ~~$38.8~~$17.7 million and ~~$38.4~~$27.4 million of availability, respectively, under the Revolving Credit Facility.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had ~~$2.2~~$0.8 million and ~~$3.1~~$2.1 million, respectively, of letters of credit issued and outstanding under the Revolving Credit Facility with no cash collateral requirement. As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company also had ~~$4.9~~$4.2 million of other letters of credit issued and outstanding under the Revolving Credit Facility with a cash collateral requirement. The cash collateral requirement is 105% of the outstanding letters of credit. As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had cash collateral of ~~$5.1~~$4.9 million. Cash collateral is ~~presented~~included in restricted cash in the accompanying condensed consolidated balance sheets.

Replacement Term Loan

In ~~May~~July 2020, the Company entered into ~~amendments, limited waivers and consents in connection with the Loan Agreement, with~~ an ~~effective date~~amendment of ~~April 1, 2020, that, among other things, consented to~~ the Company’s ~~applying for, obtaining~~former term loan agreement (the “Replacement Term Loan Amendment”). The Replacement Term Loan Amendment provided a replacement term loan (the “Replacement Term Loan”) that refinanced and ~~incurring~~replaced the ~~PPP Loan and French Loan, each as defined and described below.~~

~~On February 2, 2021,~~outstanding balances under the ~~Company entered into~~Company’s former term loan agreement, plus any accrued interest thereon. As a ~~limited consent~~result 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,~~below, in the first quarter of 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.

~~First Lien Term Loan Agreement~~

In June 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 been subsequently amended and restated on several occasions and is collectively referred to as the “First Lien Term Loan Agreement”. The Original Term B Loan has also been subsequently amended on several occasions and is collectively referred to as the “First Lien Term Loan”.

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.

~~As a result of~~ the Replacement Term Loan ~~Amendment, as defined~~was terminated and ~~described below, the outstanding balance and any accrued interest was replaced by the Replacement Term Loan, as defined and described below.~~

is no longer in effect.

During the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, the Company recognized 0no amortization of debt issuance costs and ~~$0.1~~$0.4 million of amortization of debt issuance costs, respectively, in the accompanying condensed consolidated statements of operations.

During the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, the Company recognized 0no paid-in-kind (“PIK”) interest and ~~$0.2~~$0.7 million of PIK interest, respectively, in the accompanying condensed consolidated statements of operations.

~~Second Lien Term Loan Agreement~~

In March 2019, the Company entered into a credit agreement (the “Second Lien Term Loan Agreement”) with Cortland Capital Markets Services LLC, as administrative agent and collateral agent, and Corre Partners Management L.L.C., as representativeAs 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.

As a result of the Replacement Term Loan Amendment, as defined and described below, the outstanding balance and any accrued interest was replaced by the Replacement Term Loan, as defined and described below.

~~During the three months ended~~ March 31, ~~2021~~2022 and 2020, the Company recognized 0 amortization of debt issuance costs and $1.2 million of amortization of debt issuance costs, respectively, in the accompanying condensed consolidated statements of operations.

During the three months ended March 31, 2021 and 2020, the Company recognized 0 PIK interest and $1.4 million of PIK interest, respectively, in the accompanying condensed consolidated statements of operations.

~~Replacement Term Loan~~

In July 2020, the Company entered into the 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 was LIBOR plus 10.75% per annum, subject to a 1.00% LIBOR floor, of which 4.00% was payable in cash and 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). The Eleventh 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 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.~~

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 Term Loan Agreement was terminated and is no longer in effect. During the three months ended March 31, 2021, the Company recognized $11.7 million as 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 issuancehad no aggregate principal outstanding and ~~others costs and a $2.8 million prepayment penalty.~~

During the three months ended March 31, 2021 and 2020, the Company recognized $0.4 million amortization of debt issuance costs and 0 amortization of debt issuance costs, respectively, in the accompanying condensed consolidated statements of operations.

~~As of December 31, 2020, the Company had total~~no unamortized debt issuance and discount ~~costs of $9.1 million, all of which were recorded as a reduction of the long-term debt balance on the Company’s accompanying condensed consolidated balance sheets.~~

During the three months ended March 31, 2021 and 2020, the Company recognized $0.7 million of PIK interest and 0 PIK interest, respectively, in the accompanying condensed consolidated statements of operations.

~~As of March 31, 2021 and December 31, 2020, the Company had 0 and $90.2 million, respectively, of aggregate principal outstanding.~~costs.

Senior Term Loan Credit Agreement

OnIn 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”).~~thereto. The Senior Term Loan Credit Agreement ~~provides~~provided for an initial term loan facility (the “Senior Term Loan”) in the aggregate principal amount of $100.0 million, all of which ~~has been~~was borrowed by the Company and was used to repay the Replacement Term Loan 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~~

On February 10, 2022, the ~~undrawn portion of the delayed draw term loan facility.~~

~~Interest on the~~Company entered into an amendment to its Senior Term Loan Credit Agreement ~~is payable in cash on~~with Atlantic Park. The amendment provided for 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 negative 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$35.0 million delayed draw facility, which the Company ~~will not make capital expenditures exceeding $27.5 million during any fiscal year. To~~borrowed in full (the “Delayed Draw Term Loan”) under 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 capital expenditures in the immediately succeeding fiscal year.

~~All of~~and allows the ~~indebtedness under~~net proceeds to be used for working capital purposes and to fund low-cost country expansion in the ~~Senior~~Company’s Horizon Europe-Africa operating segment. The Company accounted for the Delayed Draw Term Loan ~~Credit Agreement is~~as a debt modification in accordance with guidance in Accounting Standards Codification (“ASC”) 470-50, “Modifications and ~~will be guaranteed by~~Extinguishments”.

In connection with 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 the assets of the Company and such guarantors.

~~Pursuant to the Senior~~Delayed Draw Term Loan, ~~Credit Agreement,~~ the Company issued warrants ~~(the “Senior~~(“Senior Term Loan Amendment Warrants”) to Atlantic Park to purchase ~~in the aggregate~~ up to ~~3,905,486~~975,000 shares of the Company’s common stock, with an exercise price of $9.00 per ~~share, subject to adjustment as provided in the~~share. The Senior Term Loan ~~Warrants. The Senior Term Loan~~Amendment Warrants are exercisable at any time prior to February ~~2, 2026.~~10, 2027, provided that the warrants may not be exercised and shares of common stock may not be issued pursuant to the warrants unless and until the Company obtains shareholder approval permitting the issuance of such shares of common stock in accordance with the rules of the New York Stock Exchange.

In accordance with guidance in ASC 480, “Distinguishing Liabilities from ~~Equity”~~Equity” (“ASC 480”), and ASC 815, ““Derivatives and ~~Hedging”~~Hedging”, the Delayed Draw Term Loan and Senior Term Loan ~~Credit Agreement and the Senior Term Loan~~Amendment Warrants issued are each freestanding instruments and proceeds were allocated to each instrument on a relative fair value basis of ~~$82.4~~$31.9 million and ~~$17.6~~$3.1 million, respectively.

The Senior Term Loan Amendment Warrants are not within the scope of ASC 480 and do not meet the criteria for liability classification. However, the Senior Term Loan Amendment Warrants are determined to be indexed to the Company’s common stock and meet the requirements for equity classification pursuant to ASC 815-40, “Derivatives and Hedging - Contracts in Entity’s Own ~~Equity~~Equity””. The ~~fair value of~~$3.1 million allocated to the Senior Term Loan Amendment Warrants was determined ~~to be $17.6 million~~ using an option pricing method and is recorded in common stock warrants in the accompanying condensed consolidated balance sheets.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Debt issuance costs of ~~$5.4~~$0.5 million and original ~~issue~~issuance discount of ~~$3.0~~$1.1 million were incurred in connection with ~~entry into~~ the ~~Senior~~Delayed Draw Term ~~Loan Credit Agreement.~~Loan. During the three months ended March 31, 2022, the $0.5 million of debt issuance costs were included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. The ~~total costs of $8.4~~$1.1 million ~~were~~original issuance discount was allocated to each instrument on a relative fair value basis. The ~~$7.1~~$1.0 million allocated to the ~~Senior~~Delayed Draw 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~~$0.1 million allocated to the Senior Term Loan Amendment Warrants was recorded as a reduction of equity.

The Company determined the fair value of the ~~Senior~~Delayed Draw Term Loan ~~Credit Agreement~~ using a discount rate build up approach. The debt discount of ~~$17.6~~$3.1 million created by the relative fair value allocation of the equity component is being amortized as additional non-cash interest expense using the effective interest method over the contractual term of the loan. The debt discount is recorded as a reduction of ~~the~~ long-term debt ~~balance~~ in the accompanying condensed consolidated balance sheets.

We collectively refer to the Delayed Draw Term Loan and the Senior Term Loan as the Senior Term Loan. During the three months ended March 31, 2022 and 2021, the Company recognized $0.9 million and $0.5 million, respectively, of amortization of debt issuance and discount costs in the accompanying condensed consolidated statements of ~~operations.~~

~~As of March 31, 2021,~~operations associated with the Company had total unamortized debt issuance and discount costs of $24.2 million, all of which were recorded as a reduction of the long-term debt balance on the Company’s accompanying condensed consolidated balance sheets.

~~As of March 31, 2021, the Company had $100.0 million aggregate principal outstanding.~~Senior Term Loan.

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~~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~~

The Convertible Notes ~~the Company entered into~~were not 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~~during the first quarter of ~~2021,~~2022, as no conditions allowing holders of the Convertible Notes to convert have been met. ~~Therefore, the Convertible Notes were not convertible during the first quarter of 2021 and are classified as long-term debt.~~ Should conditions allowing holders of the Convertible Notes to convert be met in a future quarter, the Convertible Notes will be convertible at their holders’ option during the immediately following quarter. As of March 31, ~~2021,~~2022, the if-converted value of the Convertible Notes did not exceed the principal value of those Convertible Notes.

Upon conversion by the holders, the Company may elect to settle such conversion in shares of its common stock, cash, or a combination thereof. Because the Company may elect to settle conversion in cash, the Company separated the Convertible Notes into their liability and equity components by allocating the issuance proceeds to each of those components in accordance with ASC 470-20. 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 months ended March 31, ~~2021~~2022 and ~~2020,~~2021, the Company recognized total interest expense of ~~$2.6~~$2.8 million and ~~$2.5~~$2.6 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 March 31,					Three Months Ended March 31,
		2021		2020				2022		2021
		(dollars in thousands)						(dollars in thousands)
Contractual interest coupon on convertible debt	Contractual interest coupon on convertible debt	$	860	$	870	Contractual interest coupon on convertible debt		$	860	$	860
Amortization of debt issuance costs	Amortization of debt issuance costs	130		130		Amortization of debt issuance costs		130		130
Amortization of "equity discount" related to debt	Amortization of "equity discount" related to debt	1,650		1,520		Amortization of "equity discount" related to debt		1,790		1,650
Total	Total	$	2,640	$	2,520	Total		$	2,780	$	2,640

As ~~of March 31, 2021 and December 31, 2020, the Company had total unamortized debt issuance and discount costs of $9.7 million and $11.5 million, respectively, all of which were recorded as~~ a ~~reduction of the long-term debt balance on the Company’s accompanying condensed consolidated balance sheets.~~

~~As of March 31, 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 “U.S. Borrower”), a direct U.S.-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 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.

In December 2020, the Company filed its application of loan forgiveness with PNC Bank, National Association. The potential loan forgiveness for all or a portion of the PPP Loan 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 our PPP Loan, if any, is payable monthly over two years at an interest rate of 1.0% per annum. The Company has deferred any interest payments until the Company’s application for forgiveness is completed in accordance with the guidance issued by the SBA and Treasury and the termsresult of the Company’s ~~PPP Loan. While we currently believe that our use of~~Senior Term Loan Credit Agreement, which includes the ~~loan proceeds will meet~~Delayed Draw Term Loan facility described above and 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.~~

~~The French Loan~~

~~In April 2020, S.I.A.R.R. SAS (the “French Borrower”)~~Series B Preferred Stock commitment letter, executed in February 2022 and described in Note9, Commitments and Contingencies, ~~an indirect subsidiary of~~ the Company ~~received a loan from BNP Paribas (the “French Loan”) for $5.5 million. On February 17, 2021,~~has the ~~French Borrower entered into an amendment~~ability and intent to repay 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, 2021. In addition, the interest rateConvertible Notes when they mature on ~~the French Loan was amended to a rate of 1.0% per annum and interest is payable monthly beginning April 2021.~~July 1, 2022.

Covenant and Liquidity Matters

~~The~~As of March 31, 2022, the Company is in compliance with all ofapplicable covenants in agreements governing its ~~financial covenants as of March 31, 2021.~~

debt.

98. Leases

The Company leases certain facilities, automobiles and equipment under non-cancellable operating leases. Our leases have remaining lease terms of one ~~year~~ to ~~eight~~seven years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheets; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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”)~~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. 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 Annual Report on Form 10-K for the twelve months ended December 31, ~~2020,~~2021, for more information.

~~Additional cost, cash flow and balance sheet~~Supplemental information for the Company’s leases ~~are~~is as follows:

Three Months Ended March 31,
2021 2020
(dollars in thousands)
Operating lease cost $ 3,870 $ 3,600
Operating cash flows from operating leases $ 3,360 $ 4,010
ROU assets obtained in exchange for operating lease obligations $ 200 $ 1,570


	Three Months Ended March 31,
		2022		2021
		(dollars in thousands)
Operating lease cost		$	3,670	$	3,870

March 31, 2021 December 31, 2020
Weighted average remaining lease term (years) 5.4 6.0
Weighted average discount rate 8.5 % 8.4 %


	Three Months Ended March 31,
	2022		2021
Operating cash flows from operating leases	$	3,570	$	3,360
ROU assets obtained in exchange for operating lease obligations	$	260	$	200


	March 31, 2022		December 31, 2021
Weighted average remaining lease term (years)	4.9		5.1
Weighted average discount rate	8.4	%	8.4	%

~~10.~~9. Commitments and Contingencies

~~In April 2020,~~Series B Preferred Stock Commitment Letter

On February 10, 2022, the Company ~~agreed~~executed a commitment letter with Corre Partners Management L.L.C. (“Corre”) to ~~a settlement (the “Settlement”) related~~issue, solely at the Company’s option, up to ~~certain intellectual property infringement claims made against one~~$40.0 million of Series B Preferred Stock. To the extent issued, the net proceeds of the Series B Preferred Stock may be used to repay up to $35.0 million of the Company’s ~~subsidiaries~~outstanding Convertible Notes at maturity and, following such repayment, for general corporate purposes. If issued, the Series B Preferred Stock would accrue dividends in ~~its Horizon Europe-Africa operating segment.~~kind at a rate of 11.0% per annum. The Series B Preferred Stock would be perpetual, but subject to voluntary redemption at the Company’s option and subject to mandatory redemption upon a change in control or the one-year anniversary of the maturity of the Senior Term Loan. Additionally, if issued, if the Series B Preferred Stock is not redeemed after the occurrence of certain events, it would be convertible into shares of the Company’s common stock, at the option of Corre and subject to shareholder approval. The commitment letter expires on July 1, 2022.

As of March 31, 2022, 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~~had not issued any shares of ~~each year through December 31, 2024.~~Series B Preferred Stock. During the three months ended March 31, ~~2021 and 2020,~~2022, the Company ~~recorded $0.2~~recognized a commitment fee of $1.0 million, ~~of royalties and a $1.5 million charge~~ as ~~a result~~required under the terms of the ~~Settlement, respectively,~~commitment letter, in other expense, net in the accompanying condensed consolidated statements of operations.

As of March 31, 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 $1.6 million and $1.8 million, respectively, in other assets, in the accompanying condensed consolidated balance sheets related to the royalties to be recognized by the Company over the life of future programs connected to the Settlement. In addition, as of March 31, 2021 and December 31, 2020, the Company had $0.9 million and The $1.0 million ~~respectively,~~commitment fee is payable either in ~~accrued liabilities and $2.8 million and $2.9 million, respectively, in other long-term liabilities, in~~cash if no portion of the ~~accompanying condensed consolidated balance sheets related to~~Series B Preferred Stock is issued or additional shares of Series B Preferred Stock, no later than the ~~remaining semi-annual installment payments.~~commitment expiration.

~~11.~~10. Earnings (Loss) per Share

Basic earnings (loss) per share is computed using net income (loss) attributable to Horizon Global and the number of weighted average shares outstanding. Diluted earnings (loss) per share is computed using net income (loss) attributable to Horizon Global and the number of weighted average shares outstanding, adjusted to give effect to the assumed exercise of outstanding stock options and warrants, vesting of restricted shares outstanding, and conversion of the Convertible Notes, where dilutive to earnings per share.

2014

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A reconciliation of the numerator and the denominator of basic ~~loss~~income (loss) per share attributable to Horizon Global and diluted ~~loss~~income (loss) per share attributable to Horizon Global is as follows:


		Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020				2022		2021
		(dollars in thousands, except for per share amounts)					(dollars in thousands, except for per share amounts)
Numerator:	Numerator:					Numerator:
Net loss from continuing operations		$	(15,150)	$	(16,530)
Add: Loss from discontinued operations, net of tax		0		(500)
Net loss						Net loss		$	(26,950)	$	(15,150)
Less: Net loss attributable to noncontrolling interest	Less: Net loss attributable to noncontrolling interest	(340)		(290)		Less: Net loss attributable to noncontrolling interest		(270)		(340)
Net loss attributable to Horizon Global	Net loss attributable to Horizon Global	$	(14,810)	$	(16,740)	Net loss attributable to Horizon Global		$	(26,680)	$	(14,810)
Denominator:	Denominator:					Denominator:
Weighted average shares outstanding, basic	Weighted average shares outstanding, basic	26,743,441		25,393,668		Weighted average shares outstanding, basic		27,341,135		26,743,441
Dilutive effect of common stock equivalents	Dilutive effect of common stock equivalents	0		0		Dilutive effect of common stock equivalents		—		—
Weighted average shares outstanding, diluted	Weighted average shares outstanding, diluted	26,743,441		25,393,668		Weighted average shares outstanding, diluted		27,341,135		26,743,441

Basic loss per share attributable to Horizon Global	Basic loss per share attributable to Horizon Global					Basic loss per share attributable to Horizon Global		$	(0.98)	$	(0.55)
Continuing operations		$	(0.55)	$	(0.64)
Discontinued operations		0		(0.02)
Total		$	(0.55)	$	(0.66)
Diluted loss per share attributable to Horizon Global	Diluted loss per share attributable to Horizon Global					Diluted loss per share attributable to Horizon Global		$	(0.98)	$	(0.55)
Continuing operations		$	(0.55)	$	(0.64)
Discontinued operations		0		(0.02)
Total		$	(0.55)	$	(0.66)

~~Due to losses from continuing operations~~As a result of the net loss for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, the effect of certain dilutive securities was excluded from the computation of weighted average diluted shares outstanding, as inclusion would have resulted in anti-dilution. A summary of these anti-dilutive common stock equivalents are as follows:


		Three Months Ended March 31,			Three Months Ended March 31,
		2021	2020			2022	2021
Number of options	Number of options	18,961	18,961	Number of options		18,961	18,961
Exercise price of options	Exercise price of options	$9.20 - $11.02	$9.20 - $11.02	Exercise price of options		$9.20 - $11.02	$9.20 - $11.02
Restricted stock units	Restricted stock units	1,857,793	1,407,984	Restricted stock units		2,018,448	1,857,793
Convertible Notes	Convertible Notes	5,005,000	5,005,000	Convertible Notes		5,005,000	5,005,000
Convertible Notes warrants	Convertible Notes warrants	5,005,000	5,005,000	Convertible Notes warrants		5,005,000	5,005,000
Common stock warrants	Common stock warrants	7,954,167	6,487,674	Common stock warrants		9,761,979	7,954,167

For purposes of determining diluted loss per share, the Company has elected a policy to assume that the principal portion of the Convertible Notes, as described in Note 8,7, 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 loss per share effect of the Convertible Notes using the treasury stock method. As a result, the dilutive effect of the Convertible Notes is limited to the conversion premium, which is reflected in the calculation of diluted loss per share as if it were a freestanding written call option on the Company’s shares. Using the treasury stock method, the warrants issued in connection with the issuance of the Convertible Notes are considered to be dilutive when they are in the money relative to the Company’s average common stock price during the period. The Convertible Note Hedges purchased in connection with the issuance of the Convertible Notes are always considered to be anti-dilutive and therefore do not impact the Company’s calculation of diluted loss per share.

HORIZON GLOBAL CORPORATION

~~12.~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Equity Awards

~~Description of the Plans~~

~~In June 2020, the shareholders approved~~Horizon Global employees, non-employee directors and certain consultants participate in the Horizon Global Corporation 2020 Equity and Incentive Compensation Plan (the “Horizon 2020 Plan”). ~~Horizon employees, non-employee directors and certain consultants participate in the Horizon 2020 Plan.~~ The Horizon 2020 Plan authorizes the Compensation Committee of the Horizon Global Board of Directors to grant stock options (including “incentive stock options” as defined in Section 422 of the U.S. Internal Revenue Code), appreciation rights, restricted shares, restricted stock units, performance shares, performance stock units, cash incentive awards, dividend equivalents and certain other awards based upon terms and conditions described in the Horizon 2020 Plan. ~~No more than 4.1 million Horizon common shares may be delivered under~~The Company generally awards grants on an annual basis.

In March 2022, the ~~Horizon 2020 Plan, plus (A) the total number of shares remaining available for awards under the Horizon 2015 Plan, as defined~~Company granted restricted stock units (“RSUs”) and ~~described below, as of June 19, 2020, plus (B) the shares that are subject~~performance stock units (“PSUs”) 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,~~certain key employees and non-employee ~~directors participated in~~directors. The grant date fair values for the ~~Horizon Global Corporation 2015 Equity~~RSUs and ~~Incentive Compensation Plan (as amended and restated,~~PSUs are based on the ~~“Horizon 2015 Plan”). The Horizon 2015 Plan authorized the Compensation Committee~~closing trading price of the ~~Horizon Board~~Company’s common stock on the date of ~~Directors to grant stock options (including “incentive stock options” as defined in Section 422 of~~grant. The RSUs vest ratably over a three-year period, while the ~~U.S. Internal Revenue Code), restricted shares, restricted stock units,~~PSUs cliff vest after a three-year period, upon achieving the performance ~~shares,~~criteria. The performance ~~stock units, cash incentive awards, and certain other awards~~criteria for the PSUs is based on ~~or related to our common stock to Horizon employees and non-employee directors.~~the Company’s three-year cumulative EBITDA.

~~Stock Options~~

~~Horizon’s stock option activity is as follows:~~

Number of Stock Options Weighted Average Exercise Price Average Remaining Contractual Life (Years) Aggregate Intrinsic Value
Outstanding at December 31, 2020 18,961 $ 10.43
Granted 0 0
Exercised 0 0
Canceled, forfeited 0 0
Expired 0 0
Outstanding at March 31, 2021 18,961 $ 10.43 4.7 $ 0

~~As of March 31, 2021, there was no unrecognized compensation cost related to stock options.~~ During the three months ended March 31, 2022 and 2021, the Company recognized $1.3 million and ~~2020, there was no stock-based~~$0.9 million, respectively, of stock compensation expense ~~recognized by the Company~~ related to ~~stock options. As of March 31, 2021, the aggregate intrinsic value of outstanding stock options was immaterial. Stock-based~~RSUs and PSUs. Stock compensation expense is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

~~Restricted Stock Units~~

During the three months ended March 31, 2021, the Company granted an aggregate of 467,395 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 and (iii) 230,350 PSUs that vest on April 1, 2024.

During 2020, the Company granted an aggregate of 1,502,072 RSUs and PSUs to certain key employees and non-employee directors. The total grants consisted of: (i) 284,859 time-based RSUs vesting on a ratable basis on March 3, 2021, March 3, 2022 and March 3, 2023; (ii) 277,228 time-based RSUs vesting on June 24, 2021; (iii) 21,351 time-based RSUs vesting on a ratable basis on April 2, 2021, March 3, 2022 and March 3, 2023 and (iv) 918,634 PSUs that vest on March 3, 2023.

The performance criteria for the PSUs granted is based on the Company’s three-year cumulative EBITDA. The grant date fair values for the PSUs and RSUs are based on the closing trading price of the Company’s common stock on the date of grant.

~~The grant date fair value of RSUs~~ is expensed over the vesting period. RSU 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 RSUs outstanding for the three months ended March 31, 2021 are as follows:

Number of Restricted Stock Units(a)
Weighted Average Grant Date Fair Value
Outstanding at December 31, 2020 1,800,682 $ 3.14
Granted 467,395 8.87
Vested (212,220) 3.46
Canceled, forfeited (54,528) 5.50
Outstanding at March 31, 2021 2,001,329 $ 4.38

~~(a)Includes PSUs at 100% attainment.~~

~~As of March 31, 2021, there was $6.2 million in unrecognized compensation costs related to unvested RSUs that is expected to be recognized over a weighted-average period of 2.5 years.~~

During the three months ended March 31, 2021 and 2020, the Company recognized $0.9 million and $0.4 million, 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.

~~13.~~12. Shareholders’ Equity

~~Preferred Stock~~

~~The Company is authorized to issue 100,000,000 shares of preferred stock, par value of $0.01 per share. As of March 31, 2021 and December 31, 2020, there were 0 preferred shares 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 March 31, 2021, there were 27,688,689 shares of common stock issued and 27,002,183 shares of common stock outstanding. As of December 31, 2020, there were 27,089,673 shares of common stock issued and 26,403,167 shares of common stock outstanding.

Common Stock Warrants

In ~~March 2019,~~February 2022, in connection with the ~~Second Lien~~Delayed Draw Term Loan, the Company became obligated to issue detachable warrants to purchase up to 6.25 million shares of the 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.

~~In February 2021, in connection with the Senior Term Loan Credit Agreement,~~ the Company issued the Senior Term Loan Amendment Warrants to purchase up to ~~3,905,486~~975,000 shares of the Company’s common stock, ~~which can be exercised on a cashless basis over a five year term~~ with an exercise price of $9.00 per share. See Note 8,7, Long-term Debt, for additional information.

~~As of~~During the three months ended March 31, ~~2021,~~2022, no warrants to purchase 1,228,490 shares of the Company’s common stock have been exercised, resulting in the issuance of 972,924 shares of the Company’s common stock. As of March 31, 2021, warrants to purchase 9,231,146 shares of the Company’s common stock were ~~issued and remain outstanding.~~exercised. During the three months ended March 31, 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 three months ended March 31, 2021 and 2020, the Company recognized $0.3 million and $0.1 million, respectively, of non-cash transactions in connection with warrants exercised.~~

~~Accumulated Other Comprehensive Income (Loss) (“AOCI”)~~

~~The change in AOCI attributable to Horizon Global by component, net of tax, for the three months ended March 31, 2021 is as follows:~~


	~~Foreign Currency Translation and Other~~
	~~(dollars in thousands)~~
~~Balance at January 1, 2021~~	$	~~(6,540)~~
~~Net unrealized losses arising during the period~~	~~(2,290)~~
~~Net change~~	~~(2,290)~~
~~Balance at March 31, 2021~~	$	~~(8,830)~~

~~The change in AOCI attributable to Horizon Global by component, net of tax, for the three months ended March 31, 2020 is as follows:~~


	~~Foreign Currency Translation and Other~~
	~~(dollars in thousands)~~
~~Balance at January 1, 2020~~	$	~~(9,790)~~
~~Net unrealized losses arising during the period~~	~~(4,340)~~
~~Net change~~	~~(4,340)~~
~~Balance at March 31, 2020~~	$	~~(14,130)~~

~~14.~~13. Segment Information

The Company groups its business into operating segments generally by the region in which sales and manufacturing efforts are focused, which are grouped on the basis of similar product, market and operating factors. Each operating segment has discrete financial information evaluated regularly by the Company’s chief operating decision maker in determining resource allocation and assessing performance. The Company reports the results of its business in 2 operating segments: Horizon Americas and Horizon Europe-Africa. Horizon Americas is comprised of the Company’s North American ~~and South American~~ operations. Horizon Europe-Africa is comprised of the Company’s European and South African operations. See below for further information regarding the types of products and services provided within each operating ~~segment.~~

~~The Company previously had a third~~segment and the disaggregation of sales channels within each operating segment, Horizon Asia-Pacific (“APAC”); however, the APAC segment was sold on September 19, 2019, and is presented as a discontinued operation in the accompanying condensed consolidated financial statements. During the three months ended March 31, 2020, the remaining post-closing conditions of the sale were completed, resulting in a true up to 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 Operations”~~.segment.

Horizon Americas - A market leader in the design, manufacture and distribution of a wide variety of high-quality, custom engineered towing, trailering and cargo management products and related accessories. These products are designed to support aftermarket, automotive OEMs, automotive OESs, ~~aftermarket~~industrial and retail customers in the agricultural, automotive, construction, industrial, marine, military, recreational vehicle, trailer and utility end markets. Products include vehicle trailer hitches, brake controllers, cargo management, heavy-duty towing products, jacks and couplers, protection/securing systems, trailer structural and electrical components, tow bars, vehicle roof racks ~~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.

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s operating segment activity is as follows:


		Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020					2022		2021
		(dollars in thousands)				(dollars in thousands)
Net Sales	Net Sales							Net Sales
Horizon Americas	Horizon Americas	$	109,830	$	92,370			Horizon Americas	$	101,940	$	109,830
Horizon Europe-Africa	Horizon Europe-Africa	89,360		70,880				Horizon Europe-Africa	78,920		89,360
Total	Total	$	199,190	$	163,250			Total	$	180,860	$	199,190
Operating Profit (Loss)
Operating (Loss) Profit								Operating (Loss) Profit
Horizon Americas	Horizon Americas	$	11,840	$	2,730			Horizon Americas	$	(4,300)	$	11,840
Horizon Europe-Africa	Horizon Europe-Africa	1,460		(2,510)				Horizon Europe-Africa	(1,540)		1,460
Corporate	Corporate	(6,520)		(6,900)				Corporate	(7,720)		(6,520)
Total	Total	$	6,780	$	(6,680)			Total	$	(13,560)	$	6,780

Disaggregation of Sales

The Company disaggregates net sales from contracts with customers by major sales channel. The Company determined that disaggregating its net sales into these categories best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The aftermarket channel represents sales to automotive installers and warehouse distributors. The automotive OEM channel represents sales to automotive vehicle manufacturers. The automotive OES channel primarily represents sales to automotive vehicle dealerships. The retail channel represents sales to direct-to-consumer retailers. The e-commerce channel represents sales to retailers whose customers utilize the Internet to purchase the Company’s products. The industrial channel represents sales to non-automotive manufacturers and dealers of agricultural equipment, trailers, and other custom assemblies. The other channel represents sales that do not fit into a category described above and these sales are considered ancillary to the Company’s core operating activities.

The Company’s net sales by segment and disaggregated by major sales channel are as follows:


	Three Months Ended March 31, 2022
	Horizon Americas		Horizon Europe-Africa		Total
	(dollars in thousands)
Net Sales
Aftermarket	$	28,440	$	19,170	$	47,610
Automotive OEM	22,550		39,920		62,470
Automotive OES	3,730		16,780		20,510
Retail	19,820		—		19,820
E-commerce	16,070		1,680		17,750
Industrial	11,330		410		11,740
Other	—		960		960
Total	$	101,940	$	78,920	$	180,860

2517

HORIZON GLOBAL CORPORATION

~~15.~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Three Months Ended March 31, 2021
	Horizon Americas		Horizon Europe-Africa		Total
	(dollars in thousands)
Net Sales
Aftermarket	$	31,690	$	22,420	$	54,110
Automotive OEM	27,520		48,560		76,080
Automotive OES	3,860		16,060		19,920
Retail	22,580		—		22,580
E-commerce	14,520		1,430		15,950
Industrial	9,660		550		10,210
Other	—		340		340
Total	$	109,830	$	89,360	$	199,190

14. Income Taxes

At the end of each interim reporting period, the Company makes an estimate of the annual effective income tax rate. Tax items included in the annual effective income tax rate are pro-rated for the full year and tax items discrete to a specific quarter are included in the effective income tax rate for that quarter. Effective tax rates vary from period to period as separate calculations are performed for those countries where the Company's operations are profitable and whose results continue to be tax-effected and for those countries where full deferred tax valuation allowances exist and are maintained. In determining the estimated annual effective tax rate, the Company analyzes various factors, including but not limited to, forecasts of projected annual earnings, taxing jurisdictions in which the pretax income and/or pretax losses will be generated, available tax planning strategies.

During the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, the effective income tax rate was ~~(7.1)~~(0.9)% and ~~0.1%~~(7.1)%, respectively. The ~~lower~~differences in the effective tax rate compared to the statutory tax rate ~~for both periods~~ is attributable to the valuation allowance recorded in the U.S. and several foreign jurisdictions, which resulted in no income tax benefit recognized for jurisdictional pretax losses, ~~which~~and therefore, are excluded from the estimated effective tax rate.

The Company evaluates the realizability of its deferred tax assets on a quarterly basis. In completing this evaluation, the Company considers all available evidence in order to determine whether, based on the weight of the evidence, a valuation allowance is necessary. Full valuation allowances that are recorded for deferred tax assets in the U.S. and certain foreign jurisdictions will be maintained until sufficient positive evidence exists to reduce or eliminate them. The factors considered by management in its determination of the probability of the realization of the deferred tax assets include, but are not limited to, recent historical financial results, historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences, and tax planning strategies. If, based upon the weight of available evidence, it is more likely than not the deferred tax assets will not be realized, a valuation allowance is recorded. The Company has recently experienced pre-tax losses. As of March 31, ~~2021,~~2022, the Company believes that it is more likely than not that the recorded deferred tax assets will be realized.

~~16.~~

HORIZON GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Other Expense, Net

Other expense, net consists of the following components:


		Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020				2022		2021
		(dollars in thousands)					(dollars in thousands)
Net loss on disposition of business						Net loss on disposition of business		$	(3,090)	$	—
Foreign currency loss	Foreign currency loss	$	(2,110)	$	(1,530)	Foreign currency loss		(1,350)		(2,110)
Customer pay discounts		(240)		(270)
Other		120		130
Series B commitment fee						Series B commitment fee		(1,000)		—
Customer early pay discounts						Customer early pay discounts		(250)		(240)
Other, net						Other, net		200		120
Total	Total	$	(2,230)	$	(1,670)	Total		$	(5,490)	$	(2,230)

2619

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~~including our Annual Report on Form 10-K for the twelve months ended December 31, ~~2020~~2021 (See Item 1A. Risk Factors).

Overview

Headquartered in Plymouth, Michigan, Horizon Global Corporation and its consolidated subsidiaries (“Horizon~~” “Horizon~~ Global,” “we,” “our,” or the “Company”) are a leading designer, manufacturer and distributor of a wide variety of high-quality, custom-engineered towing, trailering, cargo management and other related accessory products ~~on a global basis,~~in the North American, European and African markets, primarily servicing the aftermarket, ~~retail, e-commerce,~~ automotive original equipment manufacturers (“automotive OEMs”) and automotive original equipment servicers (“automotive OESs”) (collectively, “OEs”), retail, e-commerce and industrial channels, supporting our customers generally through a regional service and delivery model.

Critical factors affecting our ability to succeed include:

•Our ability to realize the expected future economic benefits resulting from the changes made to our manufacturing operations, distribution footprint and management team in recent years, including the implementation of operational improvement initiatives, ~~implemented in 2019-2020,~~ which are continuously ongoing to support margin expansion;

•Our ability to continue to manage our liquidity, including continuing to service our debt obligations and comply with the applicable financial covenants thereto, especially given our recent debt refinancing 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 and product line or customer content penetration;

•Our ability to efficiently manage our cost structure ~~more efficiently~~ via global supply base management, internal sourcing and/or purchasing of materials, freight and logistics management, selective outsourcing of support functions, working capital management and a global approach to leverage our administrative functions; and

•Our ability to manage liquidity and other economic and business uncertainties, including those related to the ongoing global semiconductor shortage, global shipping container and other transportation and logistics constraints, as well as the COVID-19 pandemic that may result in future business disruption, including any mandated operating restrictions such as 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.

Horizon Global reports its business in two operating segments: Horizon Americas and Horizon Europe-Africa. See Note ~~14,~~13, Segment Information, included in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” within this Quarterly Report on Form 10-Q for further description of the Company’s operating segments.

Shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost and are included in cost of sales in our condensed consolidated statements of operations. Other shipping and handling expenses, which primarily relate to Horizon Americas’ distribution network, are included in selling, general and administrative expenses in our condensed consolidated statements of operations.

2720

Supplemental Analysis and Segment Information

Non-GAAP Financial Measures

The Company’s management utilizes Adjusted EBITDA as the key measure of company and segment performance and for planning and forecasting purposes, as management believes this measure is most reflective of the operational profitability or loss of the Company and its operating segments and provides management and investors with information to evaluate the operating performance of its business and is representative of its performance used to measure certain of its financial covenants, further discussed in the Liquidity and Capital Resources section below. Adjusted EBITDA should not be considered a substitute for results prepared in accordance with U.S. GAAP and should not be considered an alternative to net income attributable to Horizon Global, which is the most directly comparable financial measure to Adjusted EBITDA that is prepared in accordance with U.S. GAAP. Adjusted EBITDA, as determined and measured by Horizon Global, should also not be compared to similarly titled measures reported by other companies. The Company also uses operating profit (loss) to measure stand-alone segment performance.

Adjusted EBITDA is defined as net income (loss) attributable to Horizon Global before interest expense, income taxes, depreciation and amortization, and before certain items, as applicable, such as severance, restructuring, relocation and related business disruption costs, gains (losses) on extinguishment of debt, ~~extinguishment,~~ impairment of goodwill and other intangibles, non-cash stock compensation, certain product liability and litigation claims, acquisition and integration costs, gains (losses) on business divestitures and other assets, debt issuance costs, board transition support and non-cash unrealized foreign currency remeasurement costs.

~~The following table summarizes~~ Adjusted EBITDA for our operating segments for the three months ended March 31, ~~2021:~~2022 is as follows:


		Three Months Ended March 31, 2021									Three Months Ended March 31, 2022
		Horizon Americas		Horizon Europe-Africa		Corporate		Consolidated			Horizon Americas		Horizon Europe-Africa		Corporate		Consolidated
		(dollars in thousands)									(dollars in thousands)
Net loss attributable to Horizon Global	Net loss attributable to Horizon Global							$	(14,810)	Net loss attributable to Horizon Global							$	(26,680)
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest							(340)		Net loss attributable to noncontrolling interest							(270)
Net loss	Net loss							$	(15,150)	Net loss							$	(26,950)
Interest expense	Interest expense							7,050		Interest expense							7,670
Income tax expense	Income tax expense							1,000		Income tax expense							230
Depreciation and amortization	Depreciation and amortization							5,500		Depreciation and amortization							4,620
EBITDA	EBITDA	$	13,200	$	3,790	$	(18,590)	$	(1,600)	EBITDA	$	(2,830)	$	610	$	(12,210)	$	(14,430)
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	—		340		—		340		Net loss attributable to noncontrolling interest	—		270		—		270

Severance										Severance	—		—		(20)		(20)
Restructuring, relocation and related business disruption costs	Restructuring, relocation and related business disruption costs	(860)		(70)		—		(930)		Restructuring, relocation and related business disruption costs	60		20		(20)		60
Loss on debt extinguishment		—		—		11,650		11,650
Non-cash stock compensation	Non-cash stock compensation	—		—		860		860		Non-cash stock compensation	—		—		1,250		1,250
Loss on business divestitures and other assets		240		—		—		240

Loss (gain) on business divestitures and other assets										Loss (gain) on business divestitures and other assets	250		(60)		3,160		3,350
Debt issuance costs										Debt issuance costs	—		—		1,570		1,570
Unrealized foreign currency remeasurement costs	Unrealized foreign currency remeasurement costs	270		1,290		530		2,090		Unrealized foreign currency remeasurement costs	270		650		410		1,330
Adjusted EBITDA	Adjusted EBITDA	$	12,850	$	5,350	$	(5,550)	$	12,650	Adjusted EBITDA	$	(2,250)	$	1,490	$	(5,860)	$	(6,620)

2821

~~The following table summarizes~~

Adjusted EBITDA for our operating segments for the three months ended March 31, ~~2020:~~2021 is as follows:


		Three Months Ended March 31, 2020									Three Months Ended March 31, 2021
		Horizon Americas		Horizon Europe-Africa		Corporate		Consolidated			Horizon Americas		Horizon Europe-Africa		Corporate		Consolidated
		(dollars in thousands)									(dollars in thousands)
Net loss attributable to Horizon Global	Net loss attributable to Horizon Global							$	(16,740)	Net loss attributable to Horizon Global							$	(14,810)
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest							(290)		Net loss attributable to noncontrolling interest							(340)
Net loss	Net loss							$	(17,030)	Net loss							$	(15,150)
Interest expense	Interest expense							8,190		Interest expense							7,050
Income tax benefit								(10)
Income tax expense										Income tax expense							1,000
Depreciation and amortization	Depreciation and amortization							5,060		Depreciation and amortization							5,500
EBITDA	EBITDA	$	4,940	$	(1,090)	$	(7,640)	$	(3,790)	EBITDA	$	13,200	$	3,790	$	(18,590)	$	(1,600)
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	—		290		—		290		Net loss attributable to noncontrolling interest	—		340		—		340
Loss from discontinued operations, net of tax		—		—		500		500
Severance		530		20		(10)		540
Restructuring, relocation and related business disruption costs	Restructuring, relocation and related business disruption costs	890		—		110		1,000		Restructuring, relocation and related business disruption costs	(860)		(70)		—		(930)
Loss on extinguishment of debt										Loss on extinguishment of debt	—		—		11,650		11,650
Non-cash stock compensation	Non-cash stock compensation	—		—		420		420		Non-cash stock compensation	—		—		860		860
Loss (gain) on business divestitures and other assets		360		(180)		—		180
Product liability and litigation claims		—		1,510		—		1,510
Debt issuance costs		—		—		750		750
Loss on business divestitures and other assets										Loss on business divestitures and other assets	240		—		—		240
Unrealized foreign currency remeasurement costs	Unrealized foreign currency remeasurement costs	(600)		1,750		380		1,530		Unrealized foreign currency remeasurement costs	270		1,290		530		2,090
Adjusted EBITDA	Adjusted EBITDA	$	6,120	$	2,300	$	(5,490)	$	2,930	Adjusted EBITDA	$	12,850	$	5,350	$	(5,550)	$	12,650

2922

Segment and Other Supplemental Information

~~Financial~~A summary of operating segment and other supplemental financial information ~~for our operating segments~~ for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 is as follows:


		Three Months Ended March 31,								Change				Constant Currency Change					Three Months Ended March 31,								Change				Constant Currency Change
		2021		As a Percentage of Net Sales		2020		As a Percentage of Net Sales		$		%		$		%			2022		As a Percentage of Net Sales		2021		As a Percentage of Net Sales		$		%		$		%
		(dollars in thousands)																	(dollars in thousands)
Net Sales	Net Sales																	Net Sales
Horizon Americas	Horizon Americas	$	109,830	55.1	%	$	92,370	56.6	%	$	17,460	18.9	%	$	17,900	19.4	%	Horizon Americas	$	101,940	56.4	%	$	109,830	55.1	%	$	(7,890)	(7.2	%)	$	(7,890)	(7.2	%)
Horizon Europe-Africa	Horizon Europe-Africa	89,360		44.9	%	70,880		43.4	%	18,480		26.1	%	11,550		16.3	%	Horizon Europe-Africa	78,920		43.6	%	89,360		44.9	%	(10,440)		(11.7	%)	(4,770)		(5.3	%)
Total	Total	$	199,190	100.0	%	$	163,250	100.0	%	$	35,940	22.0	%	$	29,450	18.0	%	Total	$	180,860	100.0	%	$	199,190	100.0	%	$	(18,330)	(9.2	%)	$	(12,660)	(6.4	%)
Gross Profit	Gross Profit																	Gross Profit
Horizon Americas	Horizon Americas	$	29,270	26.7	%	$	19,620	21.2	%	$	9,650	49.2	%	$	9,750	49.7	%	Horizon Americas	$	12,880	12.6	%	$	29,270	26.7	%	$	(16,390)	(56.0	%)	$	(16,390)	(56.0	%)
Horizon Europe-Africa	Horizon Europe-Africa	11,290		12.6	%	6,630		9.4	%	4,660		70.3	%	3,780		57.0	%	Horizon Europe-Africa	7,330		9.3	%	11,290		12.6	%	(3,960)		(35.1	%)	(3,380)		(29.9	%)
Total	Total	$	40,560	20.4	%	$	26,250	16.1	%	$	14,310	54.5	%	$	13,530	51.5	%	Total	$	20,210	11.2	%	$	40,560	20.4	%	$	(20,350)	(50.2	%)	$	(19,770)	(48.7	%)
Selling, General and Administrative Expenses	Selling, General and Administrative Expenses																	Selling, General and Administrative Expenses
Horizon Americas	Horizon Americas	$	17,430	15.9	%	$	16,890	18.3	%	$	540	3.2	%	$	630	3.7	%	Horizon Americas	$	17,180	16.9	%	$	17,430	15.9	%	$	(250)	(1.4	%)	$	(240)	(1.4	%)
Horizon Europe-Africa	Horizon Europe-Africa	9,830		11.0	%	9,150		12.9	%	680		7.4	%	(70)		(0.8	%)	Horizon Europe-Africa	8,870		11.2	%	9,830		11.0	%	(960)		(9.8	%)	(350)		(3.6	%)
Corporate	Corporate	6,520		N/A		6,890		N/A		(370)		(5.4	%)	(370)		(5.4	%)	Corporate	7,720		N/A		6,520		N/A		1,200		18.4	%	1,200		18.4	%
Total	Total	$	33,780	17.0	%	$	32,930	20.2	%	$	850	2.6	%	$	190	0.6	%	Total	$	33,770	18.7	%	$	33,780	17.0	%	$	(10)	—	%	$	610	1.8	%
Operating Profit (Loss)
Operating (Loss) Profit																		Operating (Loss) Profit
Horizon Americas	Horizon Americas	$	11,840	10.8	%	$	2,730	3.0	%	$	9,110	333.7	%	$	9,110	333.7	%	Horizon Americas	$	(4,300)	(4.2)	%	$	11,840	10.8	%	$	(16,140)	(136.3	%)	$	(16,150)	(136.4	%)
Horizon Europe-Africa	Horizon Europe-Africa	1,460		1.6	%	(2,510)		(3.5)	%	3,970		158.2	%	3,840		153.0	%	Horizon Europe-Africa	(1,540)		(2.0)	%	1,460		1.6	%	(3,000)		(205.5	%)	(3,020)		(206.8	%)
Corporate	Corporate	(6,520)		N/A		(6,900)		N/A		380		5.5	%	380		5.5	%	Corporate	(7,720)		N/A		(6,520)		N/A		(1,200)		(18.4	%)	(1,200)		(18.4	%)
Total	Total	$	6,780	3.4	%	$	(6,680)	(4.1)	%	$	13,460	201.5	%	$	13,330	199.6	%	Total	$	(13,560)	(7.5)	%	$	6,780	3.4	%	$	(20,340)	(300.0	%)	$	(20,370)	(300.4	%)
Capital Expenditures	Capital Expenditures																	Capital Expenditures
Horizon Americas	Horizon Americas	$	1,500	1.4	%	$	570	0.6	%	$	930	163.2	%	$	930	163.2	%	Horizon Americas	$	510	0.5	%	$	1,500	1.4	%	$	(990)	(66.0	%)	$	(990)	(66.0	%)
Horizon Europe-Africa	Horizon Europe-Africa	1,860		2.1	%	3,490		4.9	%	(1,630)		(46.7	%)	(1,770)		(50.7	%)	Horizon Europe-Africa	4,490		5.7	%	1,860		2.1	%	2,630		141.4	%	2,960		159.1	%
Corporate	Corporate	—		N/A		—		N/A		—		—	%	—		—	%	Corporate	—		N/A		—		N/A		—		—	%	—		—	%
Total	Total	$	3,360	1.7	%	$	4,060	2.5	%	$	(700)	(17.2	%)	$	(840)	(20.7	%)	Total	$	5,000	2.8	%	$	3,360	1.7	%	$	1,640	48.8	%	$	1,970	58.6	%
Depreciation of Property and Equipment and Amortization of Intangibles	Depreciation of Property and Equipment and Amortization of Intangibles																	Depreciation of Property and Equipment and Amortization of Intangibles
Horizon Americas	Horizon Americas	$	1,910	1.7	%	$	2,160	2.3	%	$	(250)	(11.6	%)	$	(230)	(10.6	%)	Horizon Americas	$	1,930	1.9	%	$	1,910	1.7	%	$	20	1.0	%	$	20	1.0	%
Horizon Europe-Africa	Horizon Europe-Africa	3,540		4.0	%	2,850		4.0	%	690		24.2	%	420		14.7	%	Horizon Europe-Africa	2,660		3.4	%	3,540		4.0	%	(880)		(24.9	%)	(690)		(19.5	%)
Corporate	Corporate	50		N/A		50		N/A		—		—	%	—		—	%	Corporate	30		N/A		50		N/A		(20)		(40.0	%)	(20)		(40.0	%)
Total	Total	$	5,500	2.8	%	$	5,060	3.1	%	$	440	8.7	%	$	190	3.8	%	Total	$	4,620	2.6	%	$	5,500	2.8	%	$	(880)	(16.0	%)	$	(690)	(12.5	%)
Adjusted EBITDA	Adjusted EBITDA																	Adjusted EBITDA
Horizon Americas	Horizon Americas	$	12,850	11.7	%	$	6,120	6.6	%	$	6,730	110.0	%	N/A		N/A		Horizon Americas	$	(2,250)	(2.2)	%	$	12,850	11.7	%	$	(15,100)	(117.5	%)	N/A		N/A
Horizon Europe-Africa	Horizon Europe-Africa	5,350		6.0	%	2,300		3.2	%	3,050		132.6	%	N/A		N/A		Horizon Europe-Africa	1,490		1.9	%	5,350		6.0	%	(3,860)		(72.1	%)	N/A		N/A
Corporate	Corporate	(5,550)		N/A		(5,490)		N/A		(60)		(1.1	%)	N/A		N/A		Corporate	(5,860)		N/A		(5,550)		N/A		(310)		(5.6	%)	N/A		N/A
Total	Total	$	12,650	6.4	%	$	2,930	1.8	%	$	9,720	331.7	%	N/A		N/A		Total	$	(6,620)	(3.7)	%	$	12,650	6.4	%	$	(19,270)	(152.3	%)	N/A		N/A

3023

Results of Operations

Three Months Ended March 31, ~~2021~~2022 Compared with Three Months Ended March 31, ~~2020~~2021

Consolidated net sales ~~increased $35.9~~decreased $18.3 million, or ~~22.0%~~9.2%, to $180.9 million during the three months ended March 31, 2022, as compared to $199.2 million during the three months ended March 31, 2021, as compared to $163.3 million during the three months ended March 31, 2020. The impact was driven by an increase in net sales in Horizon Americas and Horizon Europe-Africa primarily as a result of the initial 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 2020.2021. Net sales for Horizon Americas ~~increased $17.4~~decreased $7.9 million, driven primarily by ~~increases in~~lower sales volumes in the ~~automotive OEM, automotive OES~~aftermarket, OE and ~~aftermarket~~retail sales ~~channels.~~channels, partially offset by customer pricing recovery initiatives put in place in response to commodity and input cost increases. Net sales for Horizon Europe-Africa ~~increased $18.5~~decreased $10.4 million, driven primarily by ~~increases in~~lower sales volumes in the aftermarket and automotive OEM ~~automotive OES and aftermarket~~ sales channels ~~as well as $6.9 million of favorable~~and unfavorable currency ~~translation.~~translation, partially offset by customer pricing recovery initiatives in response to commodity and input cost increases.

Gross profit margin (gross profit as a percentage of net sales) was ~~20.4%~~11.2% and ~~16.1%~~20.4% during the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~improved~~decline in gross profit margin is primarily due to ~~higher~~lower net sales in Horizon Americas and Horizon Europe-Africa as detailed above, ~~as well as improved operating efficiency~~coupled with unfavorable cost performance, primarily attributable to unfavorable material, supply chain and ~~favorable sales mix.~~other manufacturing input costs associated with global macroeconomic factors experienced during 2022.

Selling, general and administrative (“SG&A”) expenses ~~increased $0.9~~were $33.8 million ~~primarily attributable~~during the three months ended March 31, 2022 and 2021. SG&A expenses during the three months ended March 31, 2022 as compared to ~~$2.4 million higher~~three months ended March 31, 2021 were impacted by lower distribution center lease, operating and support costs in Horizon Americas, lower personnel and other variable ~~compensation~~compensations costs ~~combined in Horizon Americas~~ and ~~Corporate as well as $0.8 million of unfavorable~~favorable currency translation in Horizon ~~Europe-Africa. The increase was~~Europe-Africa, and were partially offset by ~~$2.5 million lower~~increased Corporate costs associated with outside professional fees and other administrative ~~costs, including costs incurred associated with new debt issuance, amendments and modifications, primarily in Horizon Americas and Corporate.~~costs.

Operating margin (operating profit (loss) as a percentage of net sales) was ~~3.4%~~(7.5)% and ~~(4.1)%~~3.4% during the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. Operating profit ~~improved by $13.5~~declined $20.4 million to an operating loss of $(13.6) million during the three months ended March 31, 2022, as compared to an operating profit of $6.8 million during the three months ended March 31, ~~2021, from an~~2021. The changes in operating ~~loss of $(6.7)~~profit and operating margin were primarily due to the operational results detailed above.

Other expense, net increased $3.3 million to $5.5 million during the three months ended March 31, ~~2020, primarily~~2022, as ~~a result of the operational results detailed above.~~

~~Other expense, net increased $0.5 million~~compared to $2.2 million during the three months ended March 31, 2021, ~~as compared~~primarily attributable to ~~$1.7~~the $3.1 million loss on the disposition of a business and a $1.0 million commitment fee associated with the Company’s Series B Preferred Stock commitment letter during the three months ended March 31, 2022. Refer to Note 9, Commitments and Contingencies, 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 Series B Preferred Stock commitment letter.

Interest expense increased $0.6 million to $7.7 million during the three months ended March 31, ~~2020 primarily attributable to $0.6 million of higher foreign currency loss during the three months ended March 31, 2021~~2022, as compared ~~to the three months ended March 31, 2020.~~

In February 2021, the Company entered into a new term loan agreement which replaced the Company’s existing term loan agreement. The proceeds received from the initial borrowings under the new term loan were used to repay in full all outstanding debt and accrued interest on the existing term loan. As a result, the Company incurred an $11.7 million loss on debt extinguishment. The new term loan included a lower interest rate, and removed paid-in-kind interest, which resulted in a decrease of $1.1 million in interest expense to $7.1 million during the three months ended March 31, 2021, primarily as ~~compared~~a result of the Company’s amendment to ~~$8.2 million during~~its Senior Term Loan Credit Agreement in February 2022, which resulted in increased borrowings as well as additional interest expense for the three months ended March 31, ~~2020.~~2022, as compared to the three months ended March 31, 2021. Interest expense was also increased as a result of additional borrowings on the Company’s Revolving Credit Facility. Refer to Note 8,7, 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.~~information of the Company’s long-term debt.

The effective income tax rate for the three months ended March 31, 2022 and 2021 ~~and 2020~~ was ~~(7.1)~~(0.9)% and ~~0.1%~~(7.1)%, respectively. The ~~increase in tax expense and related impacts on the~~ effective income tax rate for the three months ended March 31, 2021 was 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 lower effective tax rate compared to the statutory tax rate for both periods is attributable to the Company’s valuation allowance recorded in the U.S. and several foreign jurisdictions, which resulted in no income tax benefit recognized for jurisdictional pretax losses, ~~which are excluded from the estimated effective tax rate.~~coupled with jurisdictional income mix.

Net loss ~~from continuing operations decreased $1.3~~increased $11.8 million to $27.0 million during the three months ended March 31, 2022, compared to a net loss of $15.2 million during the three months ended March 31, ~~2021, compared to a~~2021. The change in net loss ~~from continuing operations of $16.5 million during the three months ended March 31, 2020. The decrease~~ was ~~primarily~~ attributable to the operational results detailed above.

Loss 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 three months ended March 31, 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, in accordance with Accounting Standards Codification 205, “~~Discontinued Operations”~~.

See below for a discussion of operating results by segment.

3124

Horizon Americas

Net sales by sales channel, in thousands, for Horizon Americas are as follows:


		Three Months Ended March 31,				Change					Three Months Ended March 31,				Change
		2021		2020		$		%			2022		2021		$		%
Net Sales	Net Sales									Net Sales
Aftermarket	Aftermarket	$	31,690	$	26,770	$	4,920	18.4	%	Aftermarket	$	28,440	$	31,690	$	(3,250)	(10.3)	%
Automotive OEM	Automotive OEM	27,520		20,360		7,160		35.2	%	Automotive OEM	22,550		27,520		(4,970)		(18.1)	%
Automotive OES	Automotive OES	3,860		1,270		2,590		203.9	%	Automotive OES	3,730		3,860		(130)		(3.4)	%
Retail	Retail	22,580		23,570		(990)		(4.2)	%	Retail	19,820		22,580		(2,760)		(12.2)	%
E-commerce	E-commerce	14,520		12,510		2,010		16.1	%	E-commerce	16,070		14,520		1,550		10.7	%
Industrial	Industrial	9,660		7,850		1,810		23.1	%	Industrial	11,330		9,660		1,670		17.3	%
Other		—		40		(40)		(100.0)	%

Total	Total	$	109,830	$	92,370	$	17,460	18.9	%	Total	$	101,940	$	109,830	$	(7,890)	(7.2)	%

Net sales ~~increased $17.4~~decreased $7.9 million, or ~~18.9%~~7.2%, to $101.9 million during the three months ended March 31, 2022, as compared to $109.8 million during the three months ended March 31, 2021, ~~as compared~~primarily attributable to ~~$92.4~~lower sales volumes in the aftermarket, OE and retail sales channels. The lower net sales also reflects a $1.8 million impact attributable to the Company’s sale of its Brazil business, which was completed in the second quarter of 2021. The decrease in net sales was partially offset by $12.6 million of customer pricing recoveries, primarily in the aftermarket, OE, retail and e-commerce sales channels, to recover increased material and input costs. The decrease was also partially offset by a $2.7 million reduction in sales returns and allowances.

Horizon Americas’ gross profit decreased $16.4 million, or 56.0%, to $12.9 million, or 12.6% of net sales, during the three months ended March 31, ~~2020, primarily attributable to higher sales volumes in the automotive OEM, automotive OES, aftermarket, e-commerce and industrial sales channels~~2022, as Horizon Americas began to experience near the end of the first quarter of 2020 the initial impacts of economic uncertainty and business disruptions of the COVID-19 pandemic. In addition, the increase was also due to a $1.3 million reduction in sales returns and allowances during the three months ended March 31, 2021, as compared ~~with the three months ended March 31, 2020.~~

~~Horizon Americas’ gross profit increased $9.7 million, or 49.2%,~~ to $29.3 million, or 26.7% of net sales, during the three months ended March 31, ~~2021, as compared~~2021. The decrease in gross profit and gross profit margin reflects the changes in net sales detailed above, and includes the unfavorable impact of increased material, supply chain and other manufacturing input costs, net of customer pricing recoveries, attributable to ~~$19.6~~significant commodity and logistics cost increases in the Company’s supply chain due to global macroeconomic factors. These global macroeconomic factors impacted business performance and were not able to be fully passed through to our customers during the first quarter of 2022, given there is generally a delay in such recoveries due to market pressures and restrictions within certain customer contracts.

SG&A expenses decreased $0.2 million to $17.2 million, or ~~21.2%~~16.9% of net sales, during the three months ended March 31, ~~2020. The increase in gross profit margin reflects the changes in sales detailed above. Additionally, gross profit was impacted by the following:~~

–~~$1.7 million favorable manufacturing costs; and~~

–~~$1.2 million of tariff recoveries; partially offset by:~~

–~~$1.7 million higher outbound freight costs.~~

~~SG&A expenses increased $0.5 million~~2022, as compared to $17.4 million, or 15.9% of net sales, during the three months ended March 31, ~~2021, as compared~~2021. The decrease in SG&A expenses is primarily attributable to ~~$16.9~~the following:

–$0.4 million lower distribution center lease, operating and support costs.

Horizon Americas’ operating profit decreased $16.1 million to an operating loss of $(4.3) million, or ~~18.3%~~(4.2)% of net sales, during the three months ended March 31, ~~2020. The increase in SG&A expenses was attributable to the following:~~

–~~$1.4 million higher personnel and other variable compensation costs; partially offset by:~~

–~~$1.0 million lower outside professional fees and other administrative costs.~~

~~Horizon Americas’ operating profit increased $9.1 million~~2022, as compared to an operating profit of $11.8 million, or 10.8% of net sales, during the three months ended March 31, ~~2021, as compared to an~~2021. The decline in operating profit ~~of $2.7 million, or 3.0% of net sales, during the three months ended March 31, 2020. Operating~~and operating margin ~~increased~~were primarily due to the operational results detailed above.

Horizon Americas’ Adjusted EBITDA ~~increased $6.8~~was $(2.3) million during the three months ended March 31, 2022, as compared to Adjusted EBITDA of $12.9 million during the three months ended March 31, ~~2021, as compared to~~2021. Adjusted EBITDA ~~of $6.1 million during the three months ended March 31, 2020. Adjusted EBITDA increased~~declined primarily due to the operational results detailed above.

3225

Horizon Europe-Africa

Net sales by sales channel, in thousands, for Horizon Europe-Africa are as follows:


		Three Months Ended March 31,				Change					Three Months Ended March 31,				Change
		2021		2020		$		%			2022		2021		$		%
Net Sales	Net Sales									Net Sales
Aftermarket										Aftermarket	$	19,170	$	22,420	$	(3,250)	(14.5)	%
Automotive OEM	Automotive OEM	$	48,560	$	41,400	$	7,160	17.3	%	Automotive OEM	39,920		48,560		(8,640)		(17.8)	%
Automotive OES	Automotive OES	16,060		12,460		3,600		28.9	%	Automotive OES	16,780		16,060		720		4.5	%
Aftermarket		22,420		15,710		6,710		42.7	%
E-commerce	E-commerce	1,430		430		1,000		232.6	%	E-commerce	1,680		1,430		250		17.5	%
Industrial	Industrial	550		320		230		71.9	%	Industrial	410		550		(140)		(25.5)	%
Other	Other	340		560		(220)		(39.3)	%	Other	960		340		620		182.4	%
Total	Total	$	89,360	$	70,880	$	18,480	26.1	%	Total	$	78,920	$	89,360	$	(10,440)	(11.7)	%

Net sales ~~increased $18.5~~decreased $10.4 million, or ~~26.1%~~11.7%, to $78.9 million during the three months ended March 31, 2022, as compared to $89.4 million, during the three months ended March 31, 2021, ~~as compared~~primarily attributable to ~~$70.9~~lower sales volumes in the aftermarket and automotive OEM sales channels. The decrease also includes $5.7 million of unfavorable currency translation. The decrease was partially offset by $6.5 million of customer pricing recoveries, primarily in the aftermarket and automotive OEM sales channels, to recover increased material and input costs.

Horizon Europe-Africa’s gross profit decreased $4.0 million, or 35.1%, to $7.3 million, or 9.3% of net sales, during the three months ended March 31, ~~2020, primarily attributable to higher sales volumes in the automotive OEM, automotive OES and aftermarket sales channels~~2022, as Horizon Europe-Africa began to experience near the end of the first quarter of 2020 the initial impacts of economic uncertainty and business disruptions of the COVID-19 pandemic. In addition, the increase was also due to $6.9 million of favorable currency translation.

~~Horizon Europe-Africa’s gross profit increased $4.7 million, or 70.3%,~~compared to $11.3 million, or 12.6% of net sales, during the three months ended March 31, ~~2021, from $6.6~~2021. The decrease in gross profit and gross profit margin reflects the changes in net sales detailed above, and includes the unfavorable impact of increased material, supply chain and other manufacturing input costs, net of customer pricing recoveries, coupled with the inability to flex costs efficiently based on OEM customer production schedule changes that negatively impacted business performance in the first quarter of 2022. The input cost increases were not able to be fully passed through to our customers during the first quarter of 2022, given there is generally a delay in such recoveries due to market pressures and restrictions within certain customer contracts.

SG&A expenses decreased $0.9 million to $8.9 million, or ~~9.4%~~11.2% of net sales, during the three months ended March 31, ~~2020. The increase in gross profit margin reflects the changes in sales detailed above. In addition, gross profit was impacted by the following:~~

–~~$4.5 million favorable manufacturing costs; and~~

–~~$1.5 million favorable litigation settlement costs related to the charge incurred in the prior year for settlement of intellectual property infringement claims, see Note 10,~~ ~~Contingencies, included in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements”~~ ~~for more information, partially offset by:~~

–~~$1.4 million higher labor costs, primarily~~2022, as ~~a result of payroll costs reimbursed in the prior year under terms of certain government payroll reimbursement programs.~~

~~SG&A expenses increased $0.6 million~~compared to $9.8 million, or 11.0% of net sales, during the three months ended March 31, ~~2021, as compared~~2021. The decrease in SG&A expenses is primarily attributable to ~~$9.2~~the following:

–$0.6 million of favorable currency translation; and

–$0.4 million of lower personnel and other variable compensation costs.

Horizon Europe-Africa’s operating profit decreased $3.0 million to an operating loss of $(1.5) million, or ~~12.9%~~(2.0)% of net sales, during the three months ended March 31, ~~2020. The increase in SG&A expenses was primarily attributable to the following:~~

–~~$0.8 million unfavorable currency translation.~~

~~Horizon Europe-Africa’s operating profit increased $4.0 million~~2022, as compared to an operating profit of $1.5 million, or 1.6% of net sales, during the three months ended March 31, ~~2021, as compared to an~~2021. The decline in operating ~~loss of $(2.5) million, or (3.5)% of net sales, during the three months ended March 31, 2020. Operating~~ profit ~~increased~~and operating margin were primarily due to the operational results detailed above.

Horizon Europe-Africa’s Adjusted EBITDA ~~increased $3.1~~was $1.5 million ~~to $5.4 million in~~during the three months ended March 31, ~~2021,~~2022, as compared to Adjusted EBITDA of ~~$2.3~~$5.4 million induring the three months ended March 31, ~~2020.~~2021. Adjusted EBITDA ~~increased~~declined primarily due to the operational results ~~described~~detailed above.

Corporate Expenses

Corporate expenses included in operating ~~profit decreased $0.4~~loss increased $1.2 million to $7.7 million during the three months ended March 31, 2022, as compared to $6.5 million during the three months ended March 31, ~~2021, as compared to $6.9 million during the three months ended March 31, 2020.~~2021. The ~~decrease~~increase was primarily attributable to the following:

–$~~0.8~~0.6 million ~~lower~~higher costs incurred related to professional service fees and other costs associated with new debt issuance, amendments, and modifications and related structure changes; and

–$~~0.7~~0.4 million ~~lower~~higher outside professional fees and other administrative ~~costs; partially offset by:~~

–~~$1.0 million higher personnel and other variable compensation~~ costs.

Corporate Adjusted EBITDA was $(5.9) million during the three months ended March 31, 2022, as compared to Adjusted EBITDA of $(5.6) million during the three months ended March 31, ~~2021, as compared to Adjusted EBITDA of $(5.5) million during the three months ended March 31, 2020.~~2021. The change in Adjusted EBITDA was primarily due to the higher ~~personnel and compensation cost, partially offset by the lower~~ outside professional fees and other administrative costs ~~as described~~discussed above.

3426

Liquidity and Capital Resources

Our capital and working capital requirements are funded through a combination of cash on hand, cash flows from operations, and various borrowings and factoring arrangements described below, including our asset-based Revolving Credit Facility (as defined below). As of March 31, ~~2021,~~2022 and December 31, ~~2020,~~2021, we had ~~$13.8~~$12.8 million and ~~$18.2~~$8.2 million, respectively, of cash and cash equivalents held at foreign subsidiaries. There may be country specific regulations, which may restrict or result in increased costs in the repatriation of these funds.

In March 2020, the Company, as guarantor, entered into a Loan and Security Agreement (the “Loan Agreement”) with Eclipse Business Capital LLC, formerly known as Encina Business Credit, LLC, ~~(“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. The Loan Agreement has been amended on several occasions that, among other things, increased the maximum credit available under the Revolving Credit Facility to $95.0 million. As of March 31, ~~2021,~~2022, the Company had availability of ~~$38.8~~$17.7 million under the Revolving Credit Facility and ~~$10.8~~$16.9 million of cash and cash equivalents in the United States.

As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, total cash and availability was ~~$63.4~~$47.4 million and ~~$83.4~~$39.2 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 the 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.

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.

In December 2020, the Company filed its application of loan forgiveness with PNC Bank, National Association. The potential loan forgiveness for all or a portion of the PPP Loan 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 our PPP Loan, if any, is payable monthly over two years at an interest rate of 1.0% per annum. The Company has deferred any interest payments until after 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, 2021. 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”), 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 the COVID-19 pandemic 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 was reimbursed $3.3 million for qualifying payroll costs under terms of the KUG for the twelve months ended December 31, 2020.

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

We believe the combination of these sources, as well as the changes to our capital structure following our recent refinancing activities, ~~and fully summarized~~as described below, will enable us to meet our working capital, capital expenditures and other funding ~~requirements.~~requirements for at least the next twelve months and for the foreseeable future thereafter. 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, 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~~ operating activities during the three months ended March 31, 2022 and 2021 ~~and 2020~~ was ~~$(18.3) million and $5.7 million, respectively.~~$18.3 million.

During the three months ended March 31, ~~2021,~~2022, the Company ~~generated $7.4~~used $15.7 million in cash flows, based on the reported net loss of ~~$(15.2)~~$27.0 million and after considering the effects of non-cash items related to depreciation, amortization of intangible assets, ~~loss on debt extinguishment,~~ amortization of original issuance discount and debt issuance costs, deferred income taxes, non-cash compensation expense, paid-in-kind interest, and other, net. During the three months ended March 31, ~~2020,~~2021, the Company ~~used $(3.5)~~generated $7.4 million in cash flows, based on the reported net loss of ~~$(16.5)~~$15.2 million and after considering the effects of similar non-cash items previously ~~described.~~described, in addition to loss on debt extinguishment during the first quarter of 2021.

Changes in operating assets and liabilities used ~~$(25.6)~~$2.6 million and ~~sourced $9.2~~$25.6 million of cash during the three months ended March 31, 2022 and 2021, ~~and 2020,~~ respectively. ~~Increases~~

Changes in accounts receivable resulted in a net use of cash of ~~$(26.9)~~$16.3 million and ~~$(15.6)~~use of $26.9 million during the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. The increase in accounts receivable ~~is higher~~was lower in the three months ended March 31, ~~2021~~2022 as compared ~~with the three months ended March 31, 2020 as a result of higher net sales activity in~~to the three months ended March 31, 2021 ~~as compared with~~driven primarily by lower net sales activity in the ~~three months ended March 31, 2020.~~current year.

Changes in ~~inventory~~inventories resulted in a use of cash of ~~$(21.0)~~$17.0 million and $21.0 million during the three months ended March 31, 2022 and 2021, ~~and source of cash of $15.4 million~~respectively. The increase in inventories during the three months ended March 31, ~~2020.~~2022 was driven primarily by recent macroeconomic factors experienced, including increased costs of raw materials, such as steel; constraints on shipping container availability and port congestion leading to higher inventory costs and levels of in-transit inventory. The increase in ~~inventory~~inventories during the three months ended March 31, 2021 was ~~due to~~driven primarily by seasonal activity as we built inventory in preparation of the typical upcoming peak selling season. ~~The decrease~~

Changes in ~~inventory~~prepaid expenses and other assets resulted in a net use of cash of $2.7 million and $0.9 million during the three months ended March 31, ~~2020~~ 2022 and 2021, respectively. The increase in prepaid expenses and other assets during the three months ended March 31, 2022 and 2021 was primarily due to ~~improved inventory management coupled with~~ the ~~COVID-19 business disruptions that began at the end~~mix of ~~the first quarter of 2020.~~invoicing from vendors and subsequent payments.

~~Increases~~

Changes in accounts payable and accrued liabilities resulted in a source of cash of $33.4 million and $23.1 million during the three months ended March 31, 2022 and 2021, ~~and source of cash of $11.6 million during the three months ended March 31, 2020.~~respectively. The higher source of cash for the three months ended March 31, ~~2021~~2022 as compared to the three months ended March 31, ~~2020~~2021 is primarily due to the ~~working capital build during the three months ended March 31, 2021 in preparation of the typical upcoming peak selling season coupled with the mix~~timing of payments made to suppliers, ~~and~~mix of vendors and related ~~terms.~~terms coupled with macroeconomic factors impacting inventories discussed above, including increased costs of raw materials.

Cash Flows - Investing Activities

Net cash used for investing activities during the three months ended March 31, 2022 and 2021 ~~and 2020~~ was ~~$(3.4)~~$5.0 million and ~~$(4.0)~~$3.4 million, respectively. ~~Capital expenditures were $(3.4) million for~~

During the three months ended March 31, 2022 and 2021, capital expenditures were $5.0 million and $3.4 million, respectively, related to growth, capacity and productivity-related projects within Horizon Americas and Horizon Europe-Africa. ~~Capital~~The increase in capital expenditures ~~were $(4.1) million for~~during the three months ended March 31, ~~2020,~~2022 is primarily due to growth and ~~related to similar capital projects primarily within~~capacity expenditures associated with the Company’s planned low-cost country expansion in Horizon Europe-Africa.

Cash Flows - Financing Activities

Net cash provided by financing activities was ~~$1.7~~$41.5 million and ~~$34.7~~$1.7 million during the three months ended March 31, 2022 and 2021, ~~and 2020,~~ respectively.

During the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, net proceeds from the Revolving Credit Facility, net of issuance costs, were $9.2 million and $4.5 million, ~~and $54.7 million,~~ respectively.

During the three months ended March 31, ~~2020, net repayments on~~2022, proceeds from the Company’s ~~former asset based lending facility totaled $(19.9) million.~~term loan, net of issuance costs and related issuance of common stock warrants were $30.9 million and $3.0 million, respectively. During the three months ended March 31, 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 $16.3 million, respectively. ~~Additionally, during~~During the three months ended March 31, 2021, repayments of borrowings on ~~Replacement Term Loan,~~the Company’s former term loan, including transaction fees, were ~~$(94.9)~~$94.9 million.

Factoring Arrangements

The Company has factoring arrangements with financial institutions to sell certain accounts receivable. ~~Total~~During the three months ended March 31, 2022 and 2021, total receivables sold under certain non-recourse factoring arrangements ~~was~~were $67.9 million and $78.2 million, ~~and $59.1 million during the three months ended March 31, 2021 and 2020,~~ respectively. We utilize factoring arrangements as part of our working capital needs. The costs of participating in these arrangements are immaterial to our results. Refer to Note 3, Summary of Significant Accounting Policies, in Item 8, “Financial Statements and Supplementary Data,” included within our Annual Report on Form 10-K for the twelve months ended December 31, ~~2020,~~2021, for additional information.

Our Debt and Other Commitments

We and certain of our subsidiaries are party to the asset-based Revolving Credit Facility governed by the Loan Agreement, each as defined and described above. The Revolving Credit Facility provides ~~for $75.0~~$95.0 million of funding on a revolving basis, subject to borrowing base availability, and matures on March 13, ~~2023.~~2024. As of March 31, ~~2021,~~2022, there was ~~$28.7~~$67.2 million outstanding on the Revolving Credit ~~Facility bearing interest at a weighted average rate of 5.3%.~~Facility.

On February 2, 2021, the Company entered 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,~~March 31, 2022, the Company entered into an amendment to the Loan Agreement ~~governing its Revolving Credit Facility,~~ that, among other ~~modifications,~~things, temporarily increased the ~~maximum amount~~Company’s ability to borrow against receivables and in-transit inventory as well as inventory located in the Company’s Mexico facilities, which is effective through June 30, 2022.

The amendment also replaced the London Interbank Offered Rate (“LIBOR”) based interest rate with Adjusted Term Secured Overnight Financing Rate (“Adjusted Term SOFR”), effective June 30, 2022. As a result of ~~credit available~~the amendment, interest on the loans under the ~~Revolving Credit Facility from $75.0 million~~Loan Agreement is payable in cash at the interest rate of Adjusted Term SOFR plus 4.00% per annum, subject to ~~$85.0 million.~~a 1.00% Adjusted Term SOFR 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 through June 30, 2022. Beginning June 30, 2022, the interest rate on all loans under the Loan Agreement will be 3.50% to 4.00% per annum, subject to certain conditions defined in the Loan Agreement.

In addition, the Company and certain 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 March 31, ~~2021,~~2022, there was ~~$100.0~~$135.0 million outstanding on the Senior Term Loan Credit Agreement bearing cash interest at ~~7.50%.~~

~~In February 2017,~~ the ~~Company completed~~interest rate of LIBOR plus 7.50%, subject to a ~~public offering~~1.00% LIBOR floor. As ofMarch 31, 2022, there was $125.0 million outstanding on the Company’s 2.75% Convertible Senior Notes due 2022 (the “Convertible Notes”) ~~in an aggregate principal amount of $125.0 million. Interest is payable~~. The Convertible Notes will mature on ~~January 1 and~~ July 1, ~~of each year.~~2022 unless earlier converted.

~~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 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~~an amendment of the Company’s former term loan agreement (the “Replacement Term Loan ~~Agreement governing its Revolving Credit Facility and the~~Amendment”). 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 a replacement term ~~loans~~loan (the “Replacement Term Loan”) that refinanced and replaced the outstanding balances under the ~~First Lien Term Loan Agreement and Second Lien Term Loan Agreement,~~Company’s former term loan agreement, plus any accrued interest thereon.

~~In February 2021,~~ As a result of the ~~Company entered~~Company’s entering into the Senior Term Loan Credit Agreement, as defined ~~and described below. The proceeds received from~~below, in the ~~initial borrowings under~~first quarter of 2021, 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.

Senior Term Loan Credit Agreement

OnIn 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”).~~thereto. The Senior Term Loan Credit Agreement provides for an initial term loan facility (the “Senior Term Loan”) in the aggregate principal amount of $100.0 million, all of which ~~has been~~was borrowed by the Company and used to repay the Replacement Term Loan 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~~

On February 10, 2022, the ~~undrawn portion of the delayed draw term loan facility.~~

~~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 made~~Company’s existing delayed draw term loan facility under the Senior Term Loan Credit Agreement ~~mature on February 2, 2027.~~and allows the net proceeds to be used for working capital purposes and to fund low-cost country expansion in the Company’s Horizon Europe-Africa operating segment.

~~All~~In connection with the Delayed Draw Term Loan, the Company issued warrants (“Senior Term Loan Amendment Warrants”) to Atlantic Park to purchase up to 975,000 shares of the ~~indebtedness under~~Company’s common stock, with an exercise price of $9.00 per share. The Senior Term Loan Amendment Warrants are exercisable at any time prior to February 10, 2027, provided that the warrants may not be exercised and shares of common stock may not be issued pursuant to the warrants unless and until the Company obtains shareholder approval permitting the issuance of such shares of common stock in accordance with the rules of the New York Stock Exchange. We collectively refer to the Delayed Draw Term Loan and the Senior Term Loan ~~Credit Agreement is and will be guaranteed by~~as the Senior Term Loan.

Series B Preferred Stock Commitment Letter

On February 10, 2022, the Company executed a commitment letter with Corre Partners Management L.L.C. (“Corre”) to issue, solely at 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~~option, up to $40.0 million of Series B Preferred Stock. To the extent issued, the net proceeds of the ~~assets~~Series B Preferred Stock may be used to repay up to $35.0 million of the Company’s outstanding Convertible Notes at maturity and, following such repayment, for general corporate purposes. If issued, the Series B Preferred Stock would accrue dividends in kind at a rate of 11.0% per annum. The Series B Preferred Stock would be perpetual, but subject to voluntary redemption at the Company’s option and subject to mandatory redemption upon a change in control or the one-year anniversary of the maturity of the Senior Term Loan. Additionally, if issued, if the Series B Preferred Stock is not redeemed after the occurrence of certain events, it would be convertible into shares of the Company’s common stock, at the option of Corre and subject to shareholder approval. The commitment letter expires on July 1, 2022. As of March 31, 2022, the Company ~~and such guarantors.~~had not issued any shares of Series B Preferred Stock.

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.

The Senior Term Loan Credit Agreement includes customary affirmative and negative 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 capital expenditures in the immediately succeeding fiscal year.

As of March 31, 2022, the Company is in compliance with all applicable covenants in agreements governing its debt.

We are subject to variable interest rates on our Senior Term Loan Credit Agreement and Revolving Credit ~~Facility.~~Facility. At March 31, ~~2021,~~2022, 1-Month LIBOR and 3-Month LIBOR approximated ~~0.11%~~0.45% and ~~0.19%~~0.96%, respectively.

~~The Company is in compliance with all of its financial covenants as of~~ At March 31, ~~2021.~~2022, the Adjusted Term SOFR approximated 0.29%.

As a result of the Company’s Senior Term Loan Credit Agreement, which includes the Delayed Draw Term Loan facility, and the Series B Preferred Stock commitment letter, the Company has the ability and intent to repay the Convertible Notes when they mature on July 1, 2022.

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 three months ended March 31, 2022 and 2021 ~~and 2020~~ was ~~$3.9~~$3.7 million and ~~$3.6~~$3.9 million, 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 8,7, Long-term Debt, and Note 9,8, Leases, in Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” included within this Quarterly Report on Form 10-Q for additional information.

3830

Consolidated EBITDA

Consolidated EBITDA (defined as “Consolidated EBITDA” in our Senior Term Loan Agreement) is a comparable measure to how the Company assesses performance. As discussed further in the Segment Information and Supplemental Analysis section above, we use certain non-GAAP financial measures to assess performance and measure our covenant compliance in accordance with the Senior Term Loan Agreement, which includes Adjusted EBITDA at the operating segment level. For the measurement of our Senior Term Loan Agreement financial covenants, the definition of Consolidated EBITDA limits the amount of non-recurring expenses or costs including restructuring, moving and severance that can be excluded to $10 million in any cumulative four fiscal quarter period. Similarly, the definition limits the amount of fees, costs and expenses incurred in connection with any proposed asset sale, offering of equity interests or any indebtedness, lender agent fees, and fees in connection with the maintenance and/or forgiveness of the PPP Loan, in aggregate, that can be excluded to $8 million in any cumulative four fiscal quarter period.

The reconciliations of net income (loss) attributable to Horizon Global to EBITDA, EBITDA to Adjusted EBITDA and Adjusted EBITDA to Consolidated EBITDA are as follows:


		Three Months Ended March 31,						Last Twelve Months Ended March 31,							Three Months Ended March 31,						Last Twelve Months Ended March 31,
		2021		2020		Change		2021		2020		Change			2022		2021		Change			2022		2021		Change
		(dollars in thousands)						(dollars in thousands)							(dollars in thousands)						(dollars in thousands)
Net (loss) income attributable to Horizon Global		$	(14,810)	$	(16,740)	$	1,930	$	(34,630)	$	89,110	$	(123,740)
Net loss attributable to Horizon Global														Net loss attributable to Horizon Global	$	(26,680)	$	(14,810)	$	(11,870)		$	(43,590)	$	(34,630)	$	(8,960)
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	(340)		(290)		(50)		(1,470)		(1,010)		(460)		Net loss attributable to noncontrolling interest	(270)		(340)		70			(1,330)		(1,470)		140
Net (loss) income		$	(15,150)	$	(17,030)	$	1,880	$	(36,100)	$	88,100	$	(124,200)
Net loss														Net loss	$	(26,950)	$	(15,150)	$	(11,800)		$	(44,920)	$	(36,100)	$	(8,820)
Interest expense	Interest expense	7,050		8,190		(1,140)		30,540		55,630		(25,090)		Interest expense	7,670		7,050		620			28,590		30,540		(1,950)
Income tax expense (benefit)	Income tax expense (benefit)	1,000		(10)		1,010		(570)		(10,560)		9,990		Income tax expense (benefit)	230		1,000		(770)			(930)		(570)		(360)
Depreciation and amortization	Depreciation and amortization	5,500		5,060		440		23,350		21,530		1,820		Depreciation and amortization	4,620		5,500		(880)			21,120		23,350		(2,230)
EBITDA	EBITDA	$	(1,600)	$	(3,790)	$	2,190	$	17,220	$	154,700	$	(137,480)	EBITDA	$	(14,430)	$	(1,600)	$	(12,830)		$	3,860	$	17,220	$	(13,360)
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	340		290		50		1,470		1,010		460		Net loss attributable to noncontrolling interest	270		340		(70)			1,330		1,470		(140)
Loss (income) from discontinued operations, net of tax		—		500		(500)		—		(185,250)		185,250
EBITDA from continuing operations		$	(1,260)	$	(3,000)	$	1,740	$	18,690	$	(29,540)	$	48,230
EBITDA attributable to Horizon Global														EBITDA attributable to Horizon Global	$	(14,160)	$	(1,260)	$	(12,900)		$	5,190	$	18,690	$	(13,500)
Adjustments pursuant to Senior Term Loan Agreement:	Adjustments pursuant to Senior Term Loan Agreement:													Adjustments pursuant to Senior Term Loan Agreement:
Losses on sale of receivables	Losses on sale of receivables	230		290		(60)		1,350		1,360		(10)		Losses on sale of receivables	250		230		20			980		1,350		(370)
Debt extinguishment losses	Debt extinguishment losses	11,650		—		11,650		11,650		—		11,650		Debt extinguishment losses	—		11,650		(11,650)			—		11,650		(11,650)
Non-cash equity grant expenses	Non-cash equity grant expenses	860		420		440		3,440		2,200		1,240		Non-cash equity grant expenses	1,250		860		390			3,910		3,440		470
Other non-cash expenses or losses (gains)	Other non-cash expenses or losses (gains)	2,130		1,530		600		(210)		270		(480)		Other non-cash expenses or losses (gains)	4,440		2,130		2,310			9,050		(210)		9,260
Term Loans related fees, costs and expenses		—		—		—		—		1,180		(1,180)

Lender agent related professional fees, costs, and expenses(a)	Lender agent related professional fees, costs, and expenses(a)	10		110		(100)		280		950		(670)		Lender agent related professional fees, costs, and expenses(a)	10		10		—			180		280		(100)
Non-recurring expenses or costs(b)	Non-recurring expenses or costs(b)	(950)		3,510		(4,460)		950		17,600		(16,650)		Non-recurring expenses or costs(b)	1,590		(950)		2,540			3,160		950		2,210

Non-cash losses on asset sales	Non-cash losses on asset sales	—		70		(70)		20		1,210		(1,190)		Non-cash losses on asset sales	—		—		—			1,470		20		1,450

Debt extinguishment gains														Debt extinguishment gains	—		—		—			(7,530)		—		(7,530)
Other	Other	(20)		—		(20)		(40)		450		(490)		Other	—		(20)		20			(10)		(40)		30
Adjusted EBITDA	Adjusted EBITDA	$	12,650	$	2,930	$	9,720	$	36,130	$	(4,320)	$	40,450	Adjusted EBITDA	$	(6,620)	$	12,650	$	(19,270)		$	16,400	$	36,130	$	(19,730)
Non-recurring expense limitation(a)(b)	Non-recurring expense limitation(a)(b)	N/A		N/A		N/A		N/A		(6,090)		6,090		Non-recurring expense limitation(a)(b)	N/A		N/A		N/A			N/A		N/A		N/A
Other	Other	20		—		20		40		(450)		490		Other	—		20		(20)			10		40		(30)
Consolidated EBITDA	Consolidated EBITDA	$	12,670	$	2,930	$	9,740	$	36,170	$	(10,860)	$	47,030	Consolidated EBITDA	$	(6,620)	$	12,670	$	(19,290)		$	16,410	$	36,170	$	(19,760)

(a) Fees, costs and expenses incurred in connection with any proposed asset sale, offering of equity interests or any indebtedness, lender agent fees, and fees in connection with the maintenance and/or forgiveness of the PPP Loan are not to, in aggregate, exceed $8 million in adjustments in determining Consolidated EBITDA in any four fiscal quarter period.

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

Credit Rating

The Company’s ~~debt~~credit agreements do not require that we maintain a credit rating.

3931

Outlook

Our business remains susceptible to ~~economic~~macroeconomic conditions that could adversely affect our results, including ~~potential negative impacts~~the ongoing global semiconductor shortage and the current inflationary environment as well as global shipping container and other transportation and logistics constraints. The recent conflict between Russia and Ukraine has also placed added constraints on the global automotive supply chain that may adversely impact our business. These recent macroeconomic and geopolitical factors have resulted in a delay of receiving raw materials by the ~~COVID-19 pandemic.~~Company, or some of our OE customers, which has resulted in retiming some customer orders to future periods. We have also experienced ~~rising pricing to~~increased costs for certain raw materials, including steel, and while the Company endeavors to recover incremental input costs through pricing ~~actions,~~recovery initiatives, the recoveries generally occur over time and are not guaranteed. ~~In the near term,~~Consumer spending may also be adversely affected by higher inflation, including high fuel prices. However, the trend of customer orders in the economies that most significantly affect our demand has been strong, including the United States and ~~Europe, has been strong,~~Europe. We also continue to monitor the ongoing COVID-19 pandemic and ~~we are~~potential impacts to our operations, employees, customers and other stakeholders, as well as prioritizing the health and safety of our employees. We continue to monitor these macroeconomic factors and remain committed to fulfilling and delivering ~~upon these orders.~~our customers’ orders driven by the strong product demand we have experienced.

We also remain focused on maintaining liquidity to fund our operations, while considering future maturities in our capital structure, which have been addressed and will continue to be addressed as the Company continues to execute ~~upon its~~our business plan and operational improvement initiatives in ~~2021.~~2022. These initiatives were put in place to streamline and simplify ~~its~~the Company’s 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 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 twelve months ended December 31, ~~2020.~~2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

4032

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 ~~March 31, 2021,~~the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by management, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) pursuant to Rule 13a-15 of the Exchange Act. The Company’s disclosure controls and procedures are designed only to provide reasonable assurance that they will meet their objectives. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, ~~2021,~~2022, the Company’s disclosure controls and procedures are effective to provide reasonable assurance that they would meet their objectives.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the three months ended March 31, ~~2021,~~2022, that have materially affected, or isare reasonably likely to materially affect, its internal control over financial reporting.

4133

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to claims and litigation in the ordinary course of business, but we do not believe that any such claim or litigation is likely to have a material adverse effect on our financial position, results of operations, or cash flows. For a description of risks related to various legal proceedings and claims, see the section entitled “Risk Factors,” in our Annual Report on Form 10-K for the twelve months ended December 31, 2021. For additional information regarding legal proceedings, refer to Note ~~10,~~11, Contingencies, ~~included~~ in ~~Part I, Item 1, “Notes to Condensed Consolidated Financial Statements,” within this Quarterly~~our Annual Report on Form ~~10-Q.~~10-K for the twelve months ended December 31, 2021.

Item 1A. Risk Factors

A discussion of our risk factors, which could materially affect our business, financial condition or future results, can be found in the section entitled “Risk Factors,” in our Annual Report on Form 10-K for the twelve months ended December 31, ~~2020.~~2021. There have been no significant changes in our risk factors disclosed in our ~~2020~~2021 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 5. Other Information

None.

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Item 6. Exhibits.

Exhibits Index:


3.1(b)			Amended and Restated Certificate of Incorporation of Horizon Global Corporation, as amended.
3.2(a)			Amended and Restated By-laws of Horizon Global Corporation.
~~4.1(c)~~			~~Form of Warrant (Relating to Term Loan Agreement)~~
~~10.1(d)~~10.1(c)*			Limited Consent and ~~Third~~Seventh Amendment to Loan and Security Agreement dated February ~~2, 2021,~~10, 2022, by and among Horizon Global Americas Inc.and Cequent Towing Products of Canada Ltd., as borrowers, Horizon Global Corporation, ~~and~~ Horizon Global Company LLC, Cequent Electrical Products de Mexico, S. de R.L. de C.V., and Cequent Sales Company de Mexico, S. de R.L. de C.V., as guarantors, the ~~lenders~~Lenders party thereto and Eclipse Business Capital LLC (f/k/a Encina Business Credit, ~~LLC,~~LLC), as agent for the Lenders.
~~10.2(d)~~10.2(c)*			~~Term Loan~~Consent and First Amendment to Credit Agreement dated February ~~2, 2021,~~10, 2022, by and among Horizon Global Corporation, the Lenders party thereto, and Atlantic Park Strategic Capital Fund, L.P., as Administrative Agent and Collateral Agent.
10.3*			Eighth Amendment to Loan and Security Agreement dated April 4, 2022, by and among Horizon Global Americas Inc. and Cequent Towing Products of Canada Ltd., as borrowers, Horizon Global Corporation, Horizon Global Company LLC, Cequent Electrical Products de Mexico, S. de R.L. de C.V., and Cequent Sales Company de Mexico, S. de R.L. de C.V., as guarantors, the lenders party thereto and Eclipse Business Capital LLC (f/k/a Encina Business Credit, LLC), as agent for the Lenders.
31.1			Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2			Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			Inline XBRL Instance Document. (not part of filing)
101.SCH			Inline XBRL Taxonomy Extension Schema Document.
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104			Cover Page Interactive Data File (embedded within the Inline XBRL document).


(a)						Incorporated by reference to the Exhibit filed with our Current Report on Form 8-K filed on February 20, 2019 (File No. 001-37427).
(b)						Incorporated by reference to the Exhibit filed with our Quarterly Report on Form 10-Q filed on August 8, 2019 (File No. 001-37427).
(c)						Incorporated by reference to the Exhibit filed with our ~~Current Report on Form 8-K filed on February 8, 2021 (File No. 001-37427).~~
~~(d)~~						~~Incorporated by reference to the Exhibit filed with our~~ Annual Report on Form 10-K filed on March ~~11, 2021~~10, 2022 (File No. 001-37427).

* Certain exhibits and schedules are omitted pursuant to Item 601(a)(5) of Regulation S-K, and the Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted exhibits and schedules upon request.

4335

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:

May ~~6, 2021~~5, 2022

By:

Dennis E. Richardville

Chief Financial Officer

4436


	Three Months Ended March 31, 2020
	Horizon Americas		Horizon Europe-Africa		Total
	(dollars in thousands)
Net Sales
Automotive OEM	$	20,360	$	41,400	$	61,760
Automotive OES	1,270		12,460		13,730
Aftermarket	26,770		15,710		42,480
Retail	23,570		0		23,570
E-commerce	12,510		430		12,940
Industrial	7,850		320		8,170
Other	40		560		600
Total	$	92,370	$	70,880	$	163,250


	Number of Stock Options	Weighted Average Exercise Price		Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2020	18,961	$	10.43
Granted	0	0
Exercised	0	0
Canceled, forfeited	0	0
Expired	0	0
Outstanding at March 31, 2021	18,961	$	10.43	4.7	$	0


	Number of Restricted Stock Units(a)	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2020	1,800,682	$	3.14
Granted	467,395	8.87
Vested	(212,220)	3.46
Canceled, forfeited	(54,528)	5.50
Outstanding at March 31, 2021	2,001,329	$	4.38