HORIZON GLOBAL CORPORATION 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 theSecurities and Exchange Commission , including our Annual Report on Form 10-K for the twelve months endedDecember 31, 2021 (See Item 1A. Risk Factors).
Overview
Headquartered inPlymouth, Michigan ,Horizon Global Corporation and its consolidated subsidiaries ("Horizon Global ," "we," "our," or the "Company") are a leading designer, manufacturer and distributor of a wide variety of high-quality, custom-engineered towing, trailering, cargo management and other related accessory products in the North American, European and African markets, primarily servicing the aftermarket, automotive original equipment manufacturers ("automotive OEMs") and automotive original equipment servicers ("automotive OESs") (collectively, "OEs"), retail, e-commerce and industrial channels, supporting our customers generally through a regional service and delivery model.
Critical factors affecting our ability to succeed include:
•Our ability to realize the expected future economic benefits resulting from the changes made to our manufacturing operations, distribution footprint and management team in recent years, including the implementation of operational improvement initiatives, which are continuously ongoing to support margin expansion; •Our ability to continue to manage our liquidity, including continuing to service our debt obligations and comply with the applicable financial covenants thereto, especially given our recent debt refinancing activities and capital structure alignment to support business growth and our long-term strategic plan;
•Our ability to quickly and cost-effectively introduce new products to our customers and end-user market with a resulting streamlined customer service model and improved operating margins;
•Our ability to continue to successfully launch new products and customer programs to expand or realign our geographic coverage or distribution channels and realize desired operating efficiencies and product line or customer content penetration;
•Our ability to efficiently manage our cost structure via global supply base management, internal sourcing and/or purchasing of materials, freight and logistics management, selective outsourcing of support functions, working capital management and a global approach to leverage our administrative functions; and
•Our ability to manage liquidity and other economic and business uncertainties that may result in future business disruption, including inflation and deflation rates, interest rate volatility, the ongoing global semiconductor shortage, rising energy costs, as well as transportation and other logistic constraints.
If we are unable to do any of the foregoing successfully, our financial condition and results of operations could be materially and adversely impacted.
Horizon Global reports its business in two operating segments: Horizon Americas and Horizon Europe-Africa. See Note 13, Segment Information, included in Part I, Item 1, "Notes to Condensed Consolidated Financial Statements," within this Quarterly Report on Form 10-Q for further description of the Company's operating segments. Shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost and are included in cost of sales in our condensed consolidated statements of operations. Other shipping and handling expenses, which primarily relate to Horizon Americas' distribution network, are included in selling, general and administrative expenses in our condensed consolidated statements of operations. 22 --------------------------------------------------------------------------------
Supplemental Analysis and Segment Information
Non-GAAP Financial Measures
The Company's management utilizes Adjusted EBITDA as the key measure of company and segment performance and for planning and forecasting purposes, as management believes this measure is most reflective of the operational profitability or loss of the Company and its operating segments and provides management and investors with information to evaluate the operating performance of its business and is representative of its performance used to measure certain of its financial covenants, further discussed in the Liquidity and Capital Resources section below. Adjusted EBITDA should not be considered a substitute for results prepared in accordance withU.S. GAAP and should not be considered an alternative to net income attributable toHorizon Global , which is the most directly comparable financial measure to Adjusted EBITDA that is prepared in accordance withU.S. GAAP. Adjusted EBITDA, as determined and measured byHorizon 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 toHorizon Global before interest expense, income taxes, depreciation and amortization, and before certain items, as applicable, such as severance, restructuring, relocation and related business disruption costs, gains (losses) on extinguishment of debt, impairment of goodwill and other intangibles, non-cash stock compensation, certain product liability and litigation claims, acquisition and integration costs, gains (losses) on business divestitures and other assets, debt issuance costs, board transition support and non-cash unrealized foreign currency remeasurement costs.
Adjusted EBITDA for our operating segments for the three months ended
Three Months Ended
Horizon
Horizon Americas Europe-Africa Corporate Consolidated
(dollars in thousands)
Net loss attributable to Horizon Global $ (25,460)
Net loss attributable to noncontrolling
interest (220)
Net loss $ (25,680)
Interest expense 10,230
Income tax expense 1,070
Depreciation and amortization 4,300
EBITDA $ (2,610) $
(4,490)
- 220 - 220
Severance 200 40 10 250
Restructuring, relocation and related
business disruption costs 90 20 220 330
Non-cash stock compensation - - (2,470) (2,470)
Loss (gain) on business divestitures and
other assets 580 20 (30) 570
Unrealized foreign currency
remeasurement costs 370 3,950 920 5,240
Adjusted EBITDA $ (1,370) $
(240) $ (4,330) $ (5,940)
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Adjusted EBITDA for our operating segments for the three months ended
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