UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022


☐			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: 001-36733

AXALTA COATING SYSTEMS LTD.

(Exact name of registrant as specified in its charter)

Bermuda

2851

98-1073028

(State or other jurisdiction of
incorporation or organization)

(Primary Standard Industrial
Classification Code Number)

(I.R.S. Employer
Identification No.)

50 Applied Bank Blvd

Suite 300

Glen Mills, Pennsylvania 19342

(855) 547-1461

(Address, including zip code, and telephone number, including area code, of the registrant’s principal executive offices)

~~Two Commerce Square, 2001 Market Street, Suite 3600, Philadelphia, Pennsylvania 19103~~

~~(Former name or former address, if changed since last report)~~

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

Common Shares, $1.00 par value

AXTA

New York Stock Exchange

(Title of class)

(Trading symbol)

(Exchange on which registered)

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 ☒ No ☐

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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 ☒ Non-accelerated filer ☐ 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 ☐

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October~~April 19, ~~2021,~~2022, there were ~~228,350,964~~221,467,603 shares of the registrant’s common shares outstanding.

Table of Contents


PART I		Financial Information
	ITEM 1.	Financial Statements (Unaudited)	3
		Condensed Consolidated Statements of Operations	3
		Condensed Consolidated Statements of Comprehensive Income (Loss)	4
		Condensed Consolidated Balance Sheets	5
		Condensed Consolidated Statements of Changes in Shareholders' Equity	6
		Condensed Consolidated Statements of Cash Flows	87
		Notes to Condensed Consolidated Financial Statements	98
	ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2524
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3935
	ITEM 4.	Controls and Procedures	3935
PART II		Other Information
	ITEM 1.	Legal Proceedings	4036
	ITEM 1A.	Risk Factors	4036
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4036
	ITEM 3.	Defaults Upon Senior Securities	4036
	ITEM 4.	Mine Safety Disclosures	4036
	ITEM 5.	Other Information	4036
	ITEM 6.	Exhibits	4137
		Signatures	4238

Table of Contents

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

AXALTA COATING SYSTEMS LTD.

Condensed Consolidated Statements of Operations (Unaudited)

(In millions, except per share data)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Net sales	Net sales	$	1,088.6	$	1,026.9	$	3,279.0	$	2,663.1	Net sales		$	1,174.1	$	1,063.6
Cost of goods sold	Cost of goods sold	745.3		634.1		2,182.6		1,780.1		Cost of goods sold		837.4		684.5
Selling, general and administrative expenses	Selling, general and administrative expenses	181.0		166.5		544.3		516.1		Selling, general and administrative expenses		193.5		179.1
Other operating (benefits) charges		(7.6)		42.6		49.5		98.9
Other operating charges										Other operating charges		7.7		102.8
Research and development expenses	Research and development expenses	15.4		13.4		46.8		41.2		Research and development expenses		16.4		15.6
Amortization of acquired intangibles	Amortization of acquired intangibles	29.8		28.6		88.1		84.5		Amortization of acquired intangibles		32.8		29.0
Income from operations	Income from operations	124.7		141.7		367.7		142.3		Income from operations		86.3		52.6
Interest expense, net	Interest expense, net	33.8		39.8		100.7		112.4		Interest expense, net		32.6		33.5
Other (income) expense, net		(2.4)		2.3		(10.9)		0.9
Other expense (income), net										Other expense (income), net		1.8		(0.4)
Income before income taxes	Income before income taxes	93.3		99.6		277.9		29.0		Income before income taxes		51.9		19.5
Provision (benefit) for income taxes		24.4		17.1		66.9		(22.7)
Provision for income taxes										Provision for income taxes		11.0		3.8
Net income	Net income	68.9		82.5		211.0		51.7		Net income		40.9		15.7
Less: Net (loss) income attributable to noncontrolling interests	Less: Net (loss) income attributable to noncontrolling interests	(0.2)		—		0.3		(0.2)		Less: Net (loss) income attributable to noncontrolling interests		(0.6)		0.5
Net income attributable to controlling interests	Net income attributable to controlling interests	$	69.1	$	82.5	$	210.7	$	51.9	Net income attributable to controlling interests		$	41.5	$	15.2
Basic net income per share	Basic net income per share	$	0.30	$	0.35	$	0.91	$	0.22	Basic net income per share		$	0.18	$	0.06
Diluted net income per share	Diluted net income per share	$	0.30	$	0.35	$	0.90	$	0.22	Diluted net income per share		$	0.18	$	0.06

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

Table of Contents

AXALTA COATING SYSTEMS LTD.

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(In millions)

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Net income $ 68.9 $ 82.5 $ 211.0 $ 51.7
Other comprehensive (loss) income, before tax:
Foreign currency translation adjustments (37.9) 33.4 (36.2) (46.1)
Unrealized gain (loss) on derivatives 7.4 7.0 23.5 (36.3)
Unrealized gain (loss) on pension and other benefit plan obligations 1.2 (0.5) 3.7 (0.5)
Other comprehensive (loss) income, before tax (29.3) 39.9 (9.0) (82.9)
Income tax provision (benefit) related to items of other comprehensive (loss) income 1.5 1.0 4.6 (5.4)
Other comprehensive (loss) income, net of tax (30.8) 38.9 (13.6) (77.5)
Comprehensive income (loss) 38.1 121.4 197.4 (25.8)
Less: Comprehensive (loss) income attributable to noncontrolling interests (0.7) (0.5) 0.2 (3.0)
Comprehensive income (loss) attributable to controlling interests $ 38.8 $ 121.9 $ 197.2 $ (22.8)


	Three Months Ended March 31,
		2022		2021
Net income		$	40.9	$	15.7
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments		(3.9)		(37.6)
Unrealized gain on derivatives		19.5		9.2
Unrealized gain on pension and other benefit plan obligations		0.9		1.2
Other comprehensive income (loss), before tax		16.5		(27.2)
Income tax provision related to items of other comprehensive income (loss)		3.0		1.8
Other comprehensive income (loss), net of tax		13.5		(29.0)
Comprehensive income (loss)		54.4		(13.3)
Less: Comprehensive (loss) income attributable to noncontrolling interests		(0.1)		0.3
Comprehensive income (loss) attributable to controlling interests		$	54.5	$	(13.6)

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

Table of Contents

AXALTA COATING SYSTEMS LTD.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except per share data)


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	627.7	$	1,360.9	Cash and cash equivalents	$	576.2	$	840.6
Restricted cash	Restricted cash	10.4		3.1		Restricted cash	10.6		10.6
Accounts and notes receivable, net	Accounts and notes receivable, net	1,050.1		869.8		Accounts and notes receivable, net	1,029.8		937.5
Inventories	Inventories	677.9		559.9		Inventories	764.0		669.7
Prepaid expenses and other current assets	Prepaid expenses and other current assets	147.7		132.2		Prepaid expenses and other current assets	135.7		117.2

Total current assets	Total current assets	2,513.8		2,925.9		Total current assets	2,516.3		2,575.6
Property, plant and equipment, net	Property, plant and equipment, net	1,193.5		1,194.5		Property, plant and equipment, net	1,184.4		1,186.2
Goodwill	Goodwill	1,619.8		1,294.9		Goodwill	1,574.4		1,592.7
Identifiable intangibles, net	Identifiable intangibles, net	1,323.0		1,148.8		Identifiable intangibles, net	1,237.5		1,278.2
Other assets	Other assets	582.9		593.1		Other assets	568.9		584.5

Total assets	Total assets	$	7,233.0	$	7,157.2	Total assets	$	7,081.5	$	7,217.2
Liabilities, Shareholders’ Equity	Liabilities, Shareholders’ Equity					Liabilities, Shareholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	622.5	$	564.4	Accounts payable	$	748.0	$	657.4
Current portion of borrowings	Current portion of borrowings	43.3		54.2		Current portion of borrowings	76.1		79.7
Other accrued liabilities	Other accrued liabilities	610.8		562.3		Other accrued liabilities	520.9		597.8

Total current liabilities	Total current liabilities	1,276.6		1,180.9		Total current liabilities	1,345.0		1,334.9
Long-term borrowings	Long-term borrowings	3,799.2		3,838.5		Long-term borrowings	3,739.2		3,749.9
Accrued pensions	Accrued pensions	288.0		309.9		Accrued pensions	261.4		269.3
Deferred income taxes	Deferred income taxes	177.9		114.0		Deferred income taxes	165.5		174.7
Other liabilities	Other liabilities	204.2		234.1		Other liabilities	149.2		149.7

Total liabilities	Total liabilities	5,745.9		5,677.4		Total liabilities	5,660.3		5,678.5
Commitments and contingent liabilities (Note 6)	Commitments and contingent liabilities (Note 6)	0		0		Commitments and contingent liabilities (Note 6)	0		0
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Common shares, $1.00 par, 1,000.0 shares authorized, 251.7 and 250.9 shares issued at September 30, 2021 and December 31, 2020, respectively		251.7		250.9
Common shares, $1.00 par, 1,000.0 shares authorized, 252.2 and 251.8 shares issued at March 31, 2022 and December 31, 2021, respectively						Common shares, $1.00 par, 1,000.0 shares authorized, 252.2 and 251.8 shares issued at March 31, 2022 and December 31, 2021, respectively	252.2		251.8
Capital in excess of par	Capital in excess of par	1,510.7		1,487.1		Capital in excess of par	1,518.2		1,515.5
Retained earnings	Retained earnings	774.0		563.3		Retained earnings	868.7		827.2
Treasury shares, at cost, 23.4 and 16.1 shares at September 30, 2021 and December 31, 2020, respectively		(657.3)		(443.5)
Treasury shares, at cost, 30.8 and 24.4 shares at March 31, 2022 and December 31, 2021, respectively						Treasury shares, at cost, 30.8 and 24.4 shares at March 31, 2022 and December 31, 2021, respectively	(862.3)		(687.2)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(438.3)		(424.8)		Accumulated other comprehensive loss	(401.4)		(414.4)
Total Axalta shareholders’ equity	Total Axalta shareholders’ equity	1,440.8		1,433.0		Total Axalta shareholders’ equity	1,375.4		1,492.9
Noncontrolling interests	Noncontrolling interests	46.3		46.8		Noncontrolling interests	45.8		45.8
Total shareholders’ equity	Total shareholders’ equity	1,487.1		1,479.8		Total shareholders’ equity	1,421.2		1,538.7
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	7,233.0	$	7,157.2	Total liabilities and shareholders’ equity	$	7,081.5	$	7,217.2

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

Table of Contents

AXALTA COATING SYSTEMS LTD.

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

(In millions)


		Common Stock																Common Stock
		Number of Shares	Par/Stated Value		Capital In Excess Of Par		Retained Earnings		Treasury Shares, at cost		Accumulated Other Comprehensive Loss		Non controlling Interests		Total			Number of Shares	Par/Stated Value		Capital In Excess Of Par		Retained Earnings		Treasury Shares, at cost		Accumulated Other Comprehensive Loss		Non controlling Interests		Total
Balance at December 31, 2020		234.8	$	250.9	$	1,487.1	$	563.3	$	(443.5)	$	(424.8)	$	46.8	$	1,479.8
Comprehensive loss:
Balance at December 31, 2021																	Balance at December 31, 2021	227.4	$	251.8	$	1,515.5	$	827.2	$	(687.2)	$	(414.4)	$	45.8	$	1,538.7
Comprehensive income:																	Comprehensive income:
Net income	Net income	—	—		—		15.2		—		—		0.5		15.7		Net income	—	—		—		41.5		—		—		(0.6)		40.9

Net realized and unrealized gain on derivatives, net of tax of $1.3 million		—	—		—		—		—		7.9		—		7.9
Long-term employee benefit plans, net of tax $0.5 million		—	—		—		—		—		0.7		—		0.7
Net realized and unrealized gain on derivatives, net of tax of $2.6 million																	Net realized and unrealized gain on derivatives, net of tax of $2.6 million	—	—		—		—		—		16.9		—		16.9
Long-term employee benefit plans, net of tax of $0.4 million																	Long-term employee benefit plans, net of tax of $0.4 million	—	—		—		—		—		0.5		—		0.5
Foreign currency translation, net of tax of $0.0 million	Foreign currency translation, net of tax of $0.0 million	—	—		—		—		—		(37.4)		(0.2)		(37.6)		Foreign currency translation, net of tax of $0.0 million	—	—		—		—		—		(4.4)		0.5		(3.9)
Total comprehensive loss		—	—		—		15.2		—		(28.8)		0.3		(13.3)
Total comprehensive income																	Total comprehensive income	—	—		—		41.5		—		13.0		(0.1)		54.4

Recognition of stock-based compensation	Recognition of stock-based compensation	—	—		3.6		—		—		—		—		3.6		Recognition of stock-based compensation	—	—		5.3		—		—		—		—		5.3
Shares issued under compensation plans	Shares issued under compensation plans	0.3	0.3		(0.2)		—		—		—		—		0.1		Shares issued under compensation plans	0.4	0.4		(2.3)		—		—		—		—		(1.9)

Changes in ownership of noncontrolling interests																	Changes in ownership of noncontrolling interests	—	—		(0.3)		—		—		—		0.2		(0.1)
Common stock purchases	Common stock purchases	(2.3)	—		—		—		(63.7)		—		—		(63.7)		Common stock purchases	(6.4)	—		—		—		(175.1)		—		—		(175.1)
Dividends declared to noncontrolling interests	Dividends declared to noncontrolling interests	—	—		—		—		—		—		(0.7)		(0.7)		Dividends declared to noncontrolling interests	—	—		—		—		—		—		(0.1)		(0.1)
Balance at March 31, 2021		232.8	251.2		1,490.5		578.5		(507.2)		(453.6)		46.4		1,405.8
Comprehensive income:
Net income		—	—		—		126.4		—		—		—		126.4
Balance at March 31, 2022																	Balance at March 31, 2022	221.4	252.2		$	1,518.2	$	868.7	$	(862.3)	$	(401.4)	$	45.8	$	1,421.2

Net realized and unrealized gain on derivatives, net of tax of $1.0 million		—	—		—		—		—		5.9		—		5.9
Long-term employee benefit plans, net of tax of $0.3 million		—	—		—		—		—		1.0		—		1.0
Foreign currency translation, net of tax of $0.0 million		—	—		—		—		—		38.7		0.6		39.3
Total comprehensive income		—	—		—		126.4		—		45.6		0.6		172.6
Recognition of stock-based compensation		—	—		4.2		—		—		—		—		4.2
Shares issued under compensation plans		0.5	0.5		12.2		—		—		—		—		12.7

Common stock purchases		(1.9)	—		—		—		(60.0)		—		—		(60.0)

Balance at June 30, 2021		231.4	251.7		1,506.9		704.9		(567.2)		(408.0)		47.0		1,535.3
Comprehensive income (loss):
Net income		—	—		—		69.1		—		—		(0.2)		68.9
Net realized and unrealized gain on derivatives, net of tax of $1.1 million		—	—		—		—		—		6.3		—		6.3
Long-term employee benefit plans, net of tax of $0.4 million		—	—		—		—		—		0.8		—		0.8
Foreign currency translation, net of tax of $0.0 million		—	—		—		—		—		(37.4)		(0.5)		(37.9)
Total comprehensive income (loss)		—	—		—		69.1		—		(30.3)		(0.7)		38.1
Recognition of stock-based compensation		—	—		3.9		—		—		—		—		3.9
Shares issued under compensation plans		—	—		(0.1)		—		—		—		—		(0.1)

Common stock purchases		(3.1)	—		—		—		(90.1)		—		—		(90.1)

Balance at September 30, 2021		228.3	$	251.7	$	1,510.7	$	774.0	$	(657.3)	$	(438.3)	$	46.3	$	1,487.1

~~Table of Contents~~

Common Stock
Number of Shares Par/Stated Value Capital In Excess Of Par Retained Earnings Treasury Shares, at cost Accumulated Other Comprehensive Loss Non controlling Interests Total
Balance at December 31, 2019 234.9 $ 249.9 $ 1,474.1 $ 443.2 $ (417.5) $ (395.5) $ 55.4 $ 1,409.6
Comprehensive income (loss):
Net income — — — 52.2 — — 0.2 52.4
Net realized and unrealized loss on derivatives, net of tax benefit of $6.0 million — — — — — (34.7) — (34.7)
Long-term employee benefit plans, net of tax of $0.2 million — — — — — (0.4) — (0.4)
Foreign currency translation, net of tax of $0.0 million — — — — — (83.3) (3.2) (86.5)
Total comprehensive loss — — — 52.2 — (118.4) (3.0) (69.2)
Cumulative effect of an accounting change — — — (1.5) — — — (1.5)
Recognition of stock-based compensation — — 5.1 — — — — 5.1
Shares issued under compensation plans 0.4 0.5 (1.6) — — — — (1.1)
Ownership changes relating to noncontrolling interests — — 0.5 — — — (2.1) (1.6)
Dividends declared to noncontrolling interests — — — — — — (0.5) (0.5)
Balance at March 31, 2020 235.3 250.4 1,478.1 493.9 (417.5) (513.9) 49.8 1,340.8
Comprehensive income (loss):
Net loss — — — (82.8) — — (0.4) (83.2)
Net realized and unrealized loss on derivatives, net of tax benefit of $0.4 million — — — — — (2.2) — (2.2)
Long-term employee benefit plans, net of tax benefit of $0.2 million — — — — — 0.4 — 0.4
Foreign currency translation, net of tax of $0.0 million — — — — — 6.1 0.9 7.0
Total comprehensive income (loss) — — — (82.8) — 4.3 0.5 (78.0)
Recognition of stock-based compensation — — 6.1 — — — — 6.1
Shares issued under compensation plans 0.1 0.1 1.1 — — — — 1.2
Changes in redeemable noncontrolling interests — — (5.8) — — — (4.8) (10.6)
Common stock purchases — — — — (0.9) — — (0.9)
Balance at June 30, 2020 235.4 250.5 1,479.5 411.1 (418.4) (509.6) 45.5 1,258.6
Comprehensive income (loss):
Net income — — — 82.5 — — — 82.5
Net realized and unrealized loss on derivatives, net of tax of $1.0 million — — — — — 6.0 — 6.0
Long-term employee benefit plans, net of tax of $0.0 million — — — — — (0.5) — (0.5)
Foreign currency translation, net of tax of $0.0 million — — — — — 33.9 (0.5) 33.4
Total comprehensive income (loss) — — — 82.5 — 39.4 (0.5) 121.4
Recognition of stock-based compensation — — 4.7 — — — — 4.7
Shares issued under compensation plans 0.1 0.1 (0.1) — — — — —
Balance at September 30, 2020 235.5 $ 250.6 $ 1,484.1 $ 493.6 $ (418.4) $ (470.2) $ 45.0 $ 1,384.7


	Common Stock
	Number of Shares	Par/Stated Value		Capital In Excess Of Par		Retained Earnings		Treasury Shares, at cost		Accumulated Other Comprehensive Loss		Non controlling Interests		Total
Balance at December 31, 2020	234.8	$	250.9	$	1,487.1	$	563.3	$	(443.5)	$	(424.8)	$	46.8	$	1,479.8
Comprehensive loss:
Net income	—	—		—		15.2		—		—		0.5		15.7

Net realized and unrealized gain on derivatives, net of tax of $1.3 million	—	—		—		—		—		7.9		—		7.9
Long-term employee benefit plans, net of tax of $0.5 million	—	—		—		—		—		0.7		—		0.7
Foreign currency translation, net of tax of $0.0 million	—	—		—		—		—		(37.4)		(0.2)		(37.6)
Total comprehensive loss	—	—		—		15.2		—		(28.8)		0.3		(13.3)

Recognition of stock-based compensation	—	—		3.6		—		—		—		—		3.6
Shares issued under compensation plans	0.3	0.3		(0.2)		—		—		—		—		0.1

Common stock purchases	(2.3)	—		—		—		(63.7)		—		—		(63.7)
Dividends declared to noncontrolling interests	—	—		—		—		—		—		(0.7)		(0.7)
Balance at March 31, 2021	232.8	251.2		$	1,490.5	$	578.5	$	(507.2)	$	(453.6)	$	46.4	$	1,405.8

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

Table of Contents

AXALTA COATING SYSTEMS LTD.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	211.0	$	51.7	Net income	$	40.9	$	15.7
Adjustment to reconcile net income to cash provided by operating activities:
Adjustment to reconcile net income to cash (used for) provided by operating activities:						Adjustment to reconcile net income to cash (used for) provided by operating activities:
Depreciation and amortization	Depreciation and amortization	234.7		243.6		Depreciation and amortization	77.7		76.4
Amortization of deferred financing costs and original issue discount	Amortization of deferred financing costs and original issue discount	6.7		6.8		Amortization of deferred financing costs and original issue discount	2.4		2.2

Deferred income taxes	Deferred income taxes	9.3		(57.2)		Deferred income taxes	(2.7)		(18.3)
Realized and unrealized foreign exchange losses, net	Realized and unrealized foreign exchange losses, net	9.5		12.7		Realized and unrealized foreign exchange losses, net	2.4		8.6
Stock-based compensation	Stock-based compensation	11.7		15.9		Stock-based compensation	5.3		3.6

Gain on sale of facility		(8.9)		—

Interest income on swaps designated as net investment hedges	Interest income on swaps designated as net investment hedges	(14.3)		(11.0)		Interest income on swaps designated as net investment hedges	(6.2)		(3.5)
Other non-cash, net	Other non-cash, net	11.3		8.6		Other non-cash, net	(1.6)		1.4
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Trade accounts and notes receivable	Trade accounts and notes receivable	(168.5)		(14.0)		Trade accounts and notes receivable	(86.2)		(52.6)
Inventories	Inventories	(107.8)		43.2		Inventories	(91.5)		(36.2)
Prepaid expenses and other assets	Prepaid expenses and other assets	(64.3)		(60.8)		Prepaid expenses and other assets	(32.9)		(18.0)
Accounts payable	Accounts payable	88.3		15.2		Accounts payable	120.4		33.4
Other accrued liabilities	Other accrued liabilities	61.3		(40.9)		Other accrued liabilities	(66.7)		30.7
Other liabilities	Other liabilities	10.0		17.1		Other liabilities	(5.2)		(3.8)
Cash provided by operating activities		290.0		230.9
Cash (used for) provided by operating activities						Cash (used for) provided by operating activities	(43.9)		39.6
Investing activities:	Investing activities:					Investing activities:
Acquisitions, net of cash acquired		(647.3)		—

Purchase of property, plant and equipment	Purchase of property, plant and equipment	(98.7)		(56.2)		Purchase of property, plant and equipment	(42.5)		(31.8)

Interest proceeds on swaps designated as net investment hedges	Interest proceeds on swaps designated as net investment hedges	14.3		11.0		Interest proceeds on swaps designated as net investment hedges	6.2		3.5
Settlement proceeds on swaps designated as net investment hedges						Settlement proceeds on swaps designated as net investment hedges	25.0		—

Other investing activities, net	Other investing activities, net	11.8		5.9		Other investing activities, net	1.0		0.5
Cash used for investing activities	Cash used for investing activities	(719.9)		(39.3)		Cash used for investing activities	(10.3)		(27.8)
Financing activities:	Financing activities:					Financing activities:
Proceeds from long-term borrowings		—		500.0

Payments on short-term borrowings	Payments on short-term borrowings	(54.5)		(23.2)		Payments on short-term borrowings	(24.1)		(20.0)
Payments on long-term borrowings	Payments on long-term borrowings	(20.1)		(325.3)		Payments on long-term borrowings	(6.8)		(6.7)
Financing-related costs	Financing-related costs	(2.6)		(8.4)		Financing-related costs	—		(1.5)
Purchases of common stock	Purchases of common stock	(213.8)		(0.9)		Purchases of common stock	(175.1)		(63.7)
Net cash flows associated with stock-based awards	Net cash flows associated with stock-based awards	12.7		0.3		Net cash flows associated with stock-based awards	(1.9)		0.1

Purchase of noncontrolling interests		—		(5.8)

Other financing activities, net	Other financing activities, net	(1.2)		0.1		Other financing activities, net	(0.2)		(0.7)
Cash (used for) provided by financing activities		(279.5)		136.8
(Decrease) increase in cash		(709.4)		328.4
Cash used for financing activities						Cash used for financing activities	(208.1)		(92.5)
Decrease in cash						Decrease in cash	(262.3)		(80.7)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(16.5)		(4.7)		Effect of exchange rate changes on cash	(2.1)		(13.5)
Cash at beginning of period	Cash at beginning of period	1,364.0		1,020.5		Cash at beginning of period	851.2		1,364.0
Cash at end of period	Cash at end of period	$	638.1	$	1,344.2	Cash at end of period	$	586.8	$	1,269.8

Cash at end of period reconciliation:	Cash at end of period reconciliation:					Cash at end of period reconciliation:
Cash and cash equivalents	Cash and cash equivalents	$	627.7	$	1,341.3	Cash and cash equivalents	$	576.2	$	1,266.9
Restricted cash	Restricted cash	10.4		2.9		Restricted cash	10.6		2.9

Cash at end of period	Cash at end of period	$	638.1	$	1,344.2	Cash at end of period	$	586.8	$	1,269.8

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

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

Index

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The interim condensed consolidated financial statements included herein are unaudited. In the opinion of management, these statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair statement of the financial position and shareholders' equity of Axalta Coating Systems Ltd., a Bermuda exempted company limited by shares, and its consolidated subsidiaries ("Axalta," the "Company," "we," "our" and "us") at ~~September 30, 2021,~~March 31, 2022, the results of operations, comprehensive income (loss) ~~and~~, changes in shareholders' equity ~~for the three and nine months ended September 30, 2021 and 2020,~~ and cash flows for the ~~nine~~three months ~~then ended.~~ended March 31, 2022 and 2021. All intercompany balances and transactions have been eliminated.

These interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

The interim unaudited condensed consolidated financial statements include the accounts of Axalta and its subsidiaries, and entities in which a controlling interest is maintained. Certain of our ~~joint ventures~~entities are accounted for on a one-month lag basis, the effect of which is not material.

The results of operations for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 are not necessarily indicative of the results to be expected for a full year.

~~Summary of Significant Accounting Policies~~

~~Recently Adopted Accounting Guidance~~

In March 2020, we adopted ASU 2020-04, "Reference Rate Reform" which provides optional expedients exercisable through December 31, 2022 to ease the potential burden in accounting for the effects of reference rate reform on financial reporting. In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope,” which clarified the scope and application of the original guidance. As of September 30, 2021, the expedients provided in this standard do not impact the Company. We will continue to monitor for potential impacts on our financial statements.

In December 2020, we adopted ASU 2019-12, "Simplifying the Accounting for Income Taxes", which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and updating provisions related to accounting for franchise (or similar) tax partially based on income and interim recognition of enactment of tax law changes. The adoption of this standard did not have a material impact on our financial statements.

Risks and Uncertainties

In March 2020, the World Health Organization characterized the coronavirus ("COVID-19") a pandemic, and the COVID-19 outbreak was declared a national emergency in the United States. The rapid spread of the pandemic and the continuously evolving responsesAfter experiencing significant impacts to ~~combat it have had a negative impact on the global economy. The Company's~~our results of operations, financial condition and cash flows ~~were significantly impacted~~in 2020 from the coronavirus ("COVID-19") pandemic, we have seen a return to more stable quarter-over-quarter demand for our products and services during ~~2020 as a result of the pandemic~~2021 and into 2022, though we continue to see impacts to our business given the continued significant presence, and actual or potential spread, of the virus globally, as well as preventative measures enacted in certain regions of the world. We are currently unable to fully determine the future impact of COVID-19 on our business, though we believe the pandemic will continue to have a negative effect on our business during ~~2021,~~2022, and potentially longer. We are monitoring the progression of the pandemic and its ongoing and potential effect on our financial position, results of operations, and cash flows, which effects could be materially adverse in a particular quarterly reporting period as well as on an annual basis.

(2) REVENUE

Consideration for products in which control has transferred to our customers that is conditional on something other than the passage of time is recorded as a contract asset within prepaid expenses and other current assets on the balance sheet. The contract asset balances at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 were ~~$39.6~~$37.7 million and ~~$37.2~~$36.1 million, respectively.

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(In millions, unless otherwise noted)~~

We provide certain customers with incremental up-front consideration, subject to clawback provisions, including Business Incentive Plan assets ("BIPs"), which is capitalized as a component of other assets and amortized over the estimated life of the contractual arrangement as a reduction of net sales. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the total carrying value of BIPs were ~~$155.8~~$149.3 million and ~~$165.4~~$151.2 million, respectively, and are presented within other assets in the condensed consolidated balance sheets. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, $17.1 million, $46.1 million, $16.6~~$14.5 million and ~~$49.9~~$15.3 million, respectively, was amortized and reflected as reductions of net sales in the condensed consolidated statements of operations. The total carrying value of BIPs exclude other ~~upfront~~up-front incentives with repayment features made in conjunction with long-term customer commitments of ~~$77.0~~$69.7 million and ~~$79.8~~$72.7 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020, respectively, which we expect~~2021, respectively. These up-front incentives with repayment features are subject to ~~be repaid in future periods.~~the credit risk of our customers and depending on the financial condition of our customers, it is possible that some or all of the amounts may become uncollectible. We have no reserve for this risk at March 31, 2022 or December 31, 2021.

See Note 17 for disaggregated net sales by end-market.

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

(3) ACQUISITIONS

~~The pro-forma impacts on our results of operations, including the pro-forma effect of events that are directly attributable to the following acquisitions, were not significant.~~

Acquisition of U-POL Holdings Limited

On September 15, 2021, we completed the acquisition of U-POL Holdings Limited ~~(“U-POL”~~("U-POL") for an aggregate purchase price of $619.8 million. The acquisition of U-POL, a leading supplier of paint, protective coatings and accessories primarily for the automotive aftermarket, strengthens ~~Axalta’s~~Axalta's global refinish leadership position and supports its broader growth strategy. The results of the business are reported within our Performance Coatings segment. The U-POL acquisition was recorded as a business combination under ~~ASC~~Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 805, Business Combinations, with identifiable assets acquired and liabilities assumed recorded at their estimated fair values as of the acquisition date.

At ~~September 30, 2021,~~March 31, 2022, we have not finalized the purchase accounting related to the U-POL acquisition and these amounts represent preliminary values. The allocation of the purchase price may be modified up to one year from the closing date of the acquisition as more information is obtained about the fair value of assets acquired and liabilities assumed. The purchase price was allocated as follows:


	~~September 15, 2021~~
~~Cash~~	$	~~23.7~~
~~Accounts and notes receivable, net~~	~~22.5~~
~~Inventories~~	~~23.3~~
~~Prepaid expenses and other current assets, net~~	~~3.2~~
~~Property, plant and equipment, net~~	~~16.5~~
~~Identifiable intangible assets~~	~~273.0~~
~~Other assets~~	~~2.0~~
~~Accounts payable~~	~~(20.9)~~
~~Other accrued liabilities~~	~~(3.9)~~
~~Other liabilities~~	~~(0.9)~~
~~Deferred income taxes~~	~~(68.4)~~
~~Net assets before goodwill from acquisition~~	~~270.1~~
~~Goodwill from acquisition~~	~~349.7~~
~~Net assets acquired~~	$	~~619.8~~


	September 15, 2021 (As initially reported)		Measurement Period Adjustments		September 15, 2021 (Adjusted)
Cash	$	23.7	$	—	$	23.7
Accounts and notes receivable, net	22.5		—		22.5
Inventories	23.3		—		23.3
Prepaid expenses and other current assets, net	3.2		—		3.2
Property, plant and equipment, net	16.5		(1.5)		15.0
Identifiable intangible assets	273.0		1.0		274.0
Other assets	2.0		0.1		2.1
Accounts payable	(20.9)		—		(20.9)
Other accrued liabilities	(3.9)		(0.3)		(4.2)
Other liabilities	(0.9)		—		(0.9)
Deferred income taxes	(68.4)		(0.9)		(69.3)
Net assets before goodwill from acquisition	270.1		(1.6)		268.5
Goodwill from acquisition	349.7		1.6		351.3
Net assets acquired	$	619.8	$	—	$	619.8

Goodwill was recognized as the excess of the purchase price over the net identifiable assets recognized. The goodwill is primarily attributed to the assembled workforce and the anticipated future economic benefits and is allocated to our refinish reporting unit. The goodwill recognized at September 30, 2021 is not deductible for income tax purposes.

We incurred and expensed acquisition-related transaction costs for the U-POL acquisition of $8.8 million, included within other operating (benefits) charges on the condensed consolidated statements of operations for the three and nine months ended September 30, 2021.(4) GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

The fair value associated with definite-lived intangible assets was $273.0 million, comprised of $38.0 million in developed technology, $35.0 million in trademarks and $200.0 million in customer relationships. The definite-lived intangible assets will be amortized over an average term of 16.9 years.

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(In millions, unless otherwise noted)~~

~~Other Acquisitions~~

During April 2021, we acquired a producer of wire enamels used in a range of consumer electronics, electric vehicle and industrial applications, based in China. The acquisition was accounted for as a business combination within our industrial end-market and Performance Coatings segment. The overall impacts to our condensed consolidated financial statements were not considered material as of and for the three and nine months ended September 30, 2021. As of ~~September 30, 2021,~~March 31, 2022, we have not yet finalized the purchase accounting related to ~~the acquisition~~acquisitions completed after March 31, 2021 and the amounts recorded represent preliminary values. During the three months ended March 31, 2022, we made purchase accounting adjustments impacting goodwill, deferred income taxes and property, plant and equipment. We expect to finalize our purchase accounting during the measurement period which will be no later than one year following the acquisition date.

~~(4) GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS~~

Goodwill

The following table shows changes in the carrying amount of goodwill from December 31, ~~2020~~2021 to ~~September 30, 2021~~March 31, 2022 by reportable segment:

Performance
Coatings Mobility
Coatings Total
Balance at December 31, 2020 $ 1,211.3 $ 83.6 $ 1,294.9
Goodwill from acquisitions 372.8 — 372.8
Foreign currency translation (45.2) (2.7) (47.9)
Balance at September 30, 2021 $ 1,538.9 $ 80.9 $ 1,619.8


	Performance Coatings		Mobility Coatings		Total
Balance at December 31, 2021	$	1,513.4	$	79.3	$	1,592.7
Purchase accounting adjustments	1.8		—		1.8
Foreign currency translation	(19.4)		(0.7)		(20.1)
Balance at March 31, 2022	$	1,495.8	$	78.6	$	1,574.4

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

Identifiable Intangible Assets

The following tables summarize the gross carrying amounts and accumulated amortization of identifiable intangible assets by major class:


September 30, 2021		Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted average amortization periods (years)
March 31, 2022									March 31, 2022	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted average amortization periods (years)
Technology	Technology	$	592.8	$	(413.5)	$	179.3	10.2	Technology	$	570.7	$	(431.9)	$	138.8	10.2
Trademarks—indefinite-lived	Trademarks—indefinite-lived	272.8		—		272.8		Indefinite	Trademarks—indefinite-lived	264.1		—		264.1		Indefinite
Trademarks—definite-lived	Trademarks—definite-lived	136.1		(41.8)		94.3		14.4	Trademarks—definite-lived	132.8		(46.0)		86.8		14.4
Customer relationships	Customer relationships	1,130.3		(355.7)		774.6		19.2	Customer relationships	1,129.2		(381.9)		747.3		19.2
Other	Other	15.1		(13.1)		2.0		5.0	Other	14.1		(13.6)		0.5		5.0
Total	Total	$	2,147.1	$	(824.1)	$	1,323.0		Total	$	2,110.9	$	(873.4)	$	1,237.5

December 31, 2020 Gross Carrying
Amount Accumulated
Amortization Net Book
Value Weighted average
amortization periods (years)
Technology $ 564.8 $ (383.6) $ 181.2 10.4
Trademarks—indefinite-lived 282.9 — 282.9 Indefinite
Trademarks—definite-lived 103.6 (37.5) 66.1 16.0
Customer relationships 943.6 (329.3) 614.3 19.0
Other 15.3 (11.0) 4.3 5.0
Total $ 1,910.2 $ (761.4) $ 1,148.8

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(In millions, unless otherwise noted)~~


December 31, 2021	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted average amortization periods (years)
Technology	$	575.3	$	(420.9)	$	154.4	10.2
Trademarks—indefinite-lived	266.7		—		266.7		Indefinite
Trademarks—definite-lived	134.5		(43.8)		90.7		14.4
Customer relationships	1,131.8		(366.6)		765.2		19.2
Other	14.5		(13.3)		1.2		5.0
Total	$	2,122.8	$	(844.6)	$	1,278.2

The estimated amortization expense related to the fair value of acquired intangible assets for the remainder of ~~2021~~2022 and each of the succeeding five years is:


Remainder of 2021		$	33.6
2022		132.1
Remainder of 2022				Remainder of 2022	$	96.2
2023	2023	91.5		2023	89.6
2024	2024	86.7		2024	84.8
2025	2025	86.0		2025	84.2
2026	2026	85.4		2026	83.7
2027				2027	82.6

(5) RESTRUCTURING

In accordance with the applicable guidance for ASC 712, Nonretirement Postemployment Benefits, we accounted for ~~contractual~~ termination benefits and recognized liabilities when the loss was considered probable that employees were entitled to benefits and the amounts could be reasonably estimated.

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we incurred costs for termination benefits of ~~$9.5 million, $36.5 million, $35.2~~$2.4 million and ~~$67.4~~$4.5 million, respectively. Pretax charges during the nine months ended September 30, 2021 primarily relate to additional employee severance charges within Europe that were not included in the previously announced global restructuring made in July 2020 as the required works council consultations and other local legal requirements were completed during the quarter. The majority of our termination benefits are recorded within other operating ~~(benefits)~~ charges in the condensed consolidated statements of operations. The remaining payments associated with these actions are expected to be substantially completed within 24 months.

The following table summarizes the activity related to termination benefit reserves and expenses from December 31, ~~2020~~2021 to ~~September 30, 2021:~~March 31, 2022:


	~~2021~~2022 Activity
Balance at December 31, ~~2020~~2021	$	~~55.8~~57.5
Expenses, net of changes to estimates	~~36.5~~2.4
Payments made	~~(27.3)~~(15.0)
Foreign currency translation	~~(2.2)~~(0.5)
Balance at ~~September 30, 2021~~March 31, 2022	$	~~62.8~~44.4

~~During September 2021, we completed the sale~~

Table of ~~our manufacturing facility in Mechelen, Belgium, which stopped operations during 2020 as a result of actions taken~~Contents

Notes to reduce operational costs via a manufacturing footprint rationalization announced in 2018. During the three and nine months ended September 30, 2021, the sale resulted in a gain of $8.9 million, of which $1.0 million is included in cost of goods sold and $7.9 million is included in other operating (benefits) charges in the condensed consolidated statements of operations.Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

(6) COMMITMENTS AND CONTINGENCIES

Guarantees

We guarantee certain of our customers’ obligations to third parties, whereby any default by our customers on their obligations could force us to make payments to the applicable creditors. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had outstanding bank guarantees of ~~$6.2~~$5.1 million and ~~$8.5~~$5.7 million, respectively. A portion of our bank guarantees expire between ~~2021~~2022 and 2036, while others do not have specified expiration dates. We monitor the customer obligations and bank guarantees to evaluate whether we have a liability at the balance sheet date. ~~During the nine months ended September 30, 2020, we incurred a $1.0 million charge related to our outstanding bank guarantees.~~ We did not have any liabilities related to our outstanding bank guarantees recorded at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

Operational Matter

In January 2021, we became aware of an operational matter affecting certain North America Mobility Coatings customer manufacturing sites. The matter involves the use and application of certain of our products in combination with and incorporated within ~~third party~~third-party products. The matter occurred over a discrete period during the fourth quarter of 2020.

~~When we filed, and as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, we estimated that it was reasonably possible that losses associated with the matter could~~We have ~~been up to $250 million.~~ ~~Subsequent to the~~

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(In millions, unless otherwise noted)~~

filing of our Annual Report on Form 10-K and through the filing of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021, there were further developments which led us to concludeconcluded that losses from this matter ~~were~~are probable and that ~~certain~~a majority of losses would be covered under our insurance policies, subject to deductible and policy limits as defined in our policies.

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and March 31, 2021, we recorded ~~a benefit~~expenses of ~~$18.7~~$0.1 million and ~~expense of $3.9~~$94.4 million, respectively, within other operating ~~(benefits)~~ charges in the condensed consolidated ~~statement~~statements of operations. ~~The benefit in the three months ended September 30, 2021, primarily resulted from incremental anticipated insurance recoveries as a result of clarification of coverages under our policies.~~ At ~~September 30,~~March 31, 2022 and December 31, 2021, we ~~have~~had $38.2 million and $52.7 million, respectively, recorded anfor estimated ~~$48.7 million for~~ insurance receivables within accounts and notes receivable, net in the condensed consolidated balance sheets. Liabilities of ~~$48.0~~$48.6 million and $49.7 million are recorded as other accrued liabilities in the condensed consolidated balance sheets at ~~September 30,~~March 31, 2022 and December 31, 2021, respectively. The recorded probable losses remain an estimate and actual costs arising from this matter could be materially lower or higher depending on the actual costs incurred to repair the impacted products as well as the availability of additional insurance coverage.

Other

We are subject to various pending lawsuits, legal proceedings and other claims in the ordinary course of business, including civil, regulatory and environmental matters. These matters may involve third-party indemnification obligations and/or insurance covering all or part of any potential damage incurred by us. All of these matters are subject to many uncertainties and, accordingly, we cannot determine the ultimate outcome of the proceedings and other claims at this time. The potential effects, if any, on our condensed consolidated financial statements will be recorded in the period in which these matters are probable and estimable. Except as set forth in the "Operational Matter" section above, we believe that any sum we may be required to pay in connection with proceedings or claims in excess of the amounts recorded would likely not have a material adverse effect upon our results of operations, financial conditions or cash flows on a consolidated annual basis but could have a material adverse impact in a particular quarterly reporting period.

We are involved in environmental remediation and ongoing compliance activities at several sites. The timing and duration of remediation and ongoing compliance activities are determined on a site by site basis depending on local regulations. The liabilities recorded represent our estimable future remediation costs and other anticipated environmental liabilities. We have not recorded liabilities at sites where a liability is probable, but that a range of loss is not reasonably estimable. We believe that any sum we may be required to pay in connection with environmental remediation matters in excess of the amounts recorded would likely occur over a period of time and would likely not have a material adverse effect upon our results of operations, financial condition or cash flows on a consolidated annual basis but could have a material adverse impact in a particular quarterly reporting period.

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

(7) LONG-TERM EMPLOYEE BENEFITS

Components of Net Periodic Benefit Cost

The following table sets forth the components of net periodic benefit costs for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Components of net periodic benefit cost:	Components of net periodic benefit cost:									Components of net periodic benefit cost:
Net periodic benefit cost:	Net periodic benefit cost:									Net periodic benefit cost:
Service cost	Service cost	$	2.0	$	1.8	$	5.8	$	5.5	Service cost		$	1.7	$	1.8
Interest cost	Interest cost	1.9		2.6		5.8		7.2		Interest cost		2.4		2.0
Expected return on plan assets	Expected return on plan assets	(3.4)		(3.2)		(10.3)		(9.5)		Expected return on plan assets		(3.2)		(3.4)
Amortization of actuarial loss, net		1.3		0.7		3.8		2.5
Amortization of prior service cost, net		(0.1)		—		(0.1)		—
Plan curtailments		—		(0.7)		—		(2.5)
Amortization of actuarial losses, net										Amortization of actuarial losses, net		0.9		1.2

Net periodic benefit cost	Net periodic benefit cost	$	1.7	$	1.2	$	5.0	$	3.2	Net periodic benefit cost		$	1.8	$	1.6

All non-service components of net periodic benefit cost are recorded in other ~~income,~~expense (income), net within the accompanying condensed consolidated statements of operations.

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(In millions, unless otherwise noted)~~

(8) STOCK-BASED COMPENSATION

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we recognized expenses of ~~$3.9 million, $11.7~~$5.3 million ~~$4.7 million~~ and ~~$15.9~~$3.6 million, respectively, in stock-based compensation, which was allocated between costs of goods sold and selling, general and administrative expenses on the condensed consolidated statements of operations. We recognized tax benefits on stock-based compensation of ~~$0.5 million, $1.2 million, $0.1~~$0.6 million and ~~$1.6~~$0.3 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

~~2021~~2022 Activity

A summary of award activity by type for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 is presented below.

Stock Options Awards
(in millions) Weighted-
Average
Exercise
Price Aggregate
Intrinsic
Value
(in millions) Weighted
Average
Remaining
Contractual
Life (years)
Outstanding at January 1, 2021 2.5 $ 27.34
Granted — $ —
Exercised (0.5) $ 28.26
Forfeited / Expired (0.4) $ 31.92
Outstanding at September 30, 2021 1.6 $ 25.65
Vested and expected to vest at September 30, 2021 1.6 $ 25.65 $ 6.4 5.14
Exercisable at September 30, 2021 1.4 $ 25.50 $ 6.0 4.86

~~Cash received by the Company upon exercise of options for the nine months ended September 30, 2021 was $14.1 million. Tax shortfall expenses on these exercises were $0.5 million.~~


Stock Options	Awards (in millions)	Weighted- Average Exercise Price		Aggregate Intrinsic Value (in millions)		Weighted Average Remaining Contractual Life (years)
Outstanding at January 1, 2022	1.4	$	26.30
Granted	—	$	—
Exercised	—	$	—
Forfeited / Expired	—	$	—
Outstanding at March 31, 2022	1.4	$	26.30
Vested and expected to vest at March 31, 2022	1.4	$	26.30	$	2.5	4.36
Exercisable at March 31, 2022	1.4	$	26.30	$	2.5	4.30

At ~~September 30, 2021,~~March 31, 2022, there was ~~$0.2 million~~an immaterial amount of unrecognized expense relating to unvested stock options that is expected to be amortized over the weighted average period of ~~0.5~~0.2 years.


Restricted Stock Awards and Restricted Stock Units (1)		Awards/Units (millions)	Weighted-Average Fair Value
Outstanding at January 1, 2021		1.0	$	28.84
Restricted Stock Units					Restricted Stock Units	Units (millions)	Weighted-Average Fair Value
Outstanding at January 1, 2022					Outstanding at January 1, 2022	1.1	$	28.85
Granted	Granted	0.6	$	28.85	Granted	0.6	$	28.87
Vested	Vested	(0.4)	$	29.04	Vested	(0.4)	$	28.43
Forfeited(1)	Forfeited(1)	(0.1)	$	28.92	Forfeited(1)	—	$	28.78
Outstanding at September 30, 2021		1.1	$	28.75
Outstanding at March 31, 2022					Outstanding at March 31, 2022	1.3	$	29.00

(1) ~~As of September 30, 2021, there are no restricted stock awards outstanding and only restricted stock units remain.~~

~~Tax shortfall expenses on the vesting of restricted stock awards and restricted stock units~~Activity during the ~~nine~~three months ended ~~September 30, 2021 was $0.1 million.~~March 31, 2022 rounds to zero.

1513

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

Tax shortfall expenses on the vesting of restricted stock awards and restricted stock units during the three months ended March 31, 2022 was $0.1 million.

At ~~September 30, 2021,~~March 31, 2022, there was ~~$16.2~~$25.7 million of unamortized expense relating to unvested restricted stock units that is expected to be amortized over a weighted average period of ~~1.6~~1.7 years.

Performance Stock Awards and Performance Share Units (1)
Awards/Units
(millions) Weighted-Average
Fair Value
Outstanding at January 1, 2021 0.5 $ 31.07
Granted 0.4 $ 29.53
Vested — $ —
Forfeited (0.2) $ 31.84
Outstanding at September 30, 2021 0.7 $ 30.11

~~(1) As of September 30, 2021, there are no performance stock awards outstanding and only performance share units remain~~.


Performance Share Units	Units (millions)	Weighted-Average Fair Value
Outstanding at January 1, 2022	0.8	$	30.10
Granted	0.4	$	30.61
Vested	(0.1)	$	29.12
Forfeited	(0.2)	$	29.61
Outstanding at March 31, 2022	0.9	$	30.46

Our ~~performance stock awards and~~ performance share units allow for participants to vest in more or less than the targeted number of shares granted. ~~All~~Some of our performance ~~awards~~share units are performing at the applicable target while others are currently performing below the applicable targets. We currently expect a total of ~~0.4~~0.5 million shares with a weighted average fair value per share of ~~$29.74~~$30.30 to vest at the respective vesting dates for such awards. At ~~September 30, 2021,~~March 31, 2022, there is ~~$8.9~~$14.4 million of unamortized expense relating to unvested performance share units that is expected to be amortized over a weighted average period of ~~2.3~~2.7 years. The forfeitures include ~~performance stock awards and~~ performance share units that vested below threshold payout.

(9) OTHER EXPENSE (INCOME) ~~EXPENSE,~~, NET

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Foreign exchange (gain) losses, net $ (0.7) $ 5.5 $ 2.9 $ 7.5
Debt extinguishment and refinancing related costs — — 0.2 2.4
Other miscellaneous income, net (1)
(1.7) (3.2) (14.0) (9.0)
Total $ (2.4) $ 2.3 $ (10.9) $ 0.9

~~(1) Activity during the nine months ended September 30, 2021 includes income of $8.3 million related to a law change with respect to certain Brazilian indirect taxes.~~


	Three Months Ended March 31,
		2022		2021
Foreign exchange losses, net		$	2.6	$	1.8


Other miscellaneous income, net		(0.8)		(2.2)

Total		$	1.8	$	(0.4)

(10) INCOME TAXES

Our effective income tax rates for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ are as follows:

Nine Months Ended September 30,
2021 2020
Effective Tax Rate 24.1 % (78.3) %


	Three Months Ended March 31,
	2022		2021
Effective Tax Rate	21.2	%	19.5	%

The ~~Company's~~higher effective tax rate for the ~~periods reflected in the condensed consolidated financial statements are not directly comparable~~three months ended March 31, 2022 was primarily due to the ~~intra-entity asset transfers~~unfavorable impact of ~~certain~~net currency exchange losses in 2022. These adjustments are partially offset by the favorable impact of ~~its intellectual property~~changes in valuation allowance and ~~the impacts of certain ongoing~~unrecognized tax ~~audits, which occurred during the nine months ended September 30, 2020 and are discussed below.~~benefits.

On January 1, 2020, we completed an intra-entity transfer of certain intellectual property rights (the “IP”) to our Swiss subsidiary, where our EMEA regional headquarters is located. The transfer of the IP did not result in a taxable gain; however, it did result in step-up of the Swiss tax-deductible basis in the transferred assets and, accordingly, created a temporary difference between the book basis and the tax basis of the IP, which was transferred at fair value. We applied significant judgment when determining the fair value of the IP, which serves as the tax basis of the deferred tax asset. Consequently, this transaction resulted in the recognition of a deferred tax asset at the applicable Swiss tax rate, resulting in a one-time tax benefit of $50.5 million during the nine months ended September 30, 2020. The Company expects to be able to realize the deferred tax assets resulting from these intra-entity asset transfers.

~~Table of Contents~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(In millions, unless otherwise noted)~~

~~In connection with the income~~The effective tax ~~audit in Germany~~rate for the tax period 2010-2013, the Germany Tax Authority (“GTA”) indicated that it believed that certain positions taken on the 2010-2013 corporate income tax returns were not in compliance with German tax law. While the Company disagrees with the conclusions of the GTA based on the technical merits of our positions, after extensive discussions with the GTA and to avoid a potentially long and costly litigation process, in March 2020 the Company expressed a willingness to settle with the GTA on certain matters. The Company has reached a formal agreement with the GTA and is expecting to settle the final assessment in the coming months. The Company recorded a charge to income tax expense of $14.3 million during the ninethree months ended ~~September 30, 2020. The Company~~March 31, 2022 differs from the U.S. Federal statutory rate due to various items that impacted the effective rate both favorably and unfavorably. We recorded the unfavorable impact of net currency exchange losses, increase in valuation allowance and foreign taxes. These adjustments were offset by the favorable adjustments for earnings in jurisdictions where the statutory rate is ~~also currently under audit~~lower than the U.S. Federal statutory rate and decrease in ~~Germany for~~unrecognized tax ~~years 2014-2017 and is prepared to vigorously defend itself on these matters.~~benefits.

The Company anticipates that it is reasonably possible it will settle up to ~~$24.0~~$11.2 million, exclusive of interest and penalties, of its current unrecognized tax benefits within the next 12 months due to the expected conclusion of ongoing tax audits.

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

(11) NET INCOME PER COMMON SHARE

Basic net income per common share excludes the dilutive impact of potentially dilutive securities and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted net income per common share includes the effect of potential dilution from the hypothetical exercise of outstanding stock options and vesting of restricted stock ~~awards, restricted stock~~ units ~~performance stock awards~~ and performance share units. A reconciliation of our basic and diluted net income per common share is as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(In millions, except per share data)	(In millions, except per share data)	2021		2020		2021		2020		(In millions, except per share data)		2022		2021
Net income to common shareholders	Net income to common shareholders	$	69.1	$	82.5	$	210.7	$	51.9	Net income to common shareholders		$	41.5	$	15.2
Basic weighted average shares outstanding	Basic weighted average shares outstanding	229.9		235.3		232.1		235.1		Basic weighted average shares outstanding		224.7		233.9
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	230.7		236.0		233.0		235.9		Diluted weighted average shares outstanding		225.2		234.7
Net income per common share:	Net income per common share:									Net income per common share:
Basic net income per share	Basic net income per share	$	0.30	$	0.35	$	0.91	$	0.22	Basic net income per share		$	0.18	$	0.06
Diluted net income per share	Diluted net income per share	$	0.30	$	0.35	$	0.90	$	0.22	Diluted net income per share		$	0.18	$	0.06

The number of anti-dilutive shares that have been excluded in the computation of diluted net income per share for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~0.3 million, 0.8 million, 2.8~~1.0 million and ~~2.9~~1.5 million, respectively.

(12) ACCOUNTS AND NOTES RECEIVABLE, NET

Trade accounts receivable are stated at the amount we expect to collect. We maintain allowances for doubtful accounts for estimated losses by applying historical loss percentages, combined with reasonable and supportable forecasts of future losses, to respective aging categories. Management considers the following factors in developing its current estimate of expected credit losses: customer credit-worthiness, past transaction history with the customer, current economic industry trends, changes in market or regulatory matters, changes in geopolitical matters, and changes in customer payment terms, including the ongoing impacts from COVID-19.


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Accounts receivable - trade, net (1)	Accounts receivable - trade, net (1)	$	859.2	$	738.3	Accounts receivable - trade, net (1)	$	854.0	$	760.4
Notes receivable	Notes receivable	23.2		30.3		Notes receivable	25.3		24.7
Other (2)	Other (2)	167.7		101.2		Other (2)	150.5		152.4
Total	Total	$	1,050.1	$	869.8	Total	$	1,029.8	$	937.5

(1) Allowance for doubtful accounts was ~~$24.5~~$25.5 million and ~~$26.5~~$22.0 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

(2) Includes ~~$48.7~~$38.2 million and $52.7 million at ~~September 30,~~March 31, 2022 and December 31, 2021, respectively, of insurance recoveries related to the operational matter as discussed further in Note 6.

Bad debt expense of ~~$0.4 million, $1.3 million, $2.4~~$(0.5) million and ~~$12.8~~$0.7 million was included within selling, general and administrative expenses for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, respectively, and ~~2020,~~an additional $4.1 million related to sanctions imposed on Russia in response to the conflict with Ukraine was included in other operating charges for the three months ended March 31, 2022.

(13) INVENTORIES


	March 31, 2022		December 31, 2021
Finished products	$	416.9	$	355.9
Semi-finished products	100.9		109.7
Raw materials	220.1		180.8
Stores and supplies	26.1		23.3
Total	$	764.0	$	669.7

Inventory reserves were $17.1 million and $15.6 million at March 31, 2022 and December 31, 2021, respectively.

1715

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

~~(13) INVENTORIES~~

September 30, 2021 December 31, 2020
Finished products $ 364.0 $ 319.3
Semi-finished products 112.5 92.2
Raw materials 178.4 127.2
Stores and supplies 23.0 21.2
Total $ 677.9 $ 559.9

~~Inventory reserves were $16.6 million and $17.0 million at September 30, 2021 and December 31, 2020, respectively.~~

(14) PROPERTY, PLANT AND EQUIPMENT, NET


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Property, plant and equipment	Property, plant and equipment	$	2,293.8	$	2,317.9	Property, plant and equipment	$	2,333.1	$	2,299.4
Accumulated depreciation	Accumulated depreciation	(1,100.3)		(1,123.4)		Accumulated depreciation	(1,148.7)		(1,113.2)
Property, plant, and equipment, net	Property, plant, and equipment, net	$	1,193.5	$	1,194.5	Property, plant, and equipment, net	$	1,184.4	$	1,186.2

Depreciation expense amounted to ~~$31.5 million, $96.3 million, $31.1~~$30.1 million and ~~$104.4~~$31.9 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

During May 2021, approximately $55.0 million of capitalized project costs related to an enterprise resource planning system previously classified as construction in progress were placed in service and depreciation was initiated. The majority of the costs will be depreciated over a 15-year useful life.

(15) BORROWINGS

Borrowings are summarized as follows:


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
2024 Dollar Term Loans	2024 Dollar Term Loans	$	2,045.0	$	2,063.2	2024 Dollar Term Loans	$	2,032.8	$	2,038.9

2025 Euro Senior Notes	2025 Euro Senior Notes	525.2		552.1		2025 Euro Senior Notes	501.8		508.8
2027 Dollar Senior Notes	2027 Dollar Senior Notes	500.0		500.0		2027 Dollar Senior Notes	500.0		500.0
2029 Dollar Senior Notes	2029 Dollar Senior Notes	700.0		700.0		2029 Dollar Senior Notes	700.0		700.0
Short-term and other borrowings	Short-term and other borrowings	106.4		118.0		Short-term and other borrowings	110.6		113.8
Unamortized original issue discount	Unamortized original issue discount	(5.1)		(6.3)		Unamortized original issue discount	(4.1)		(4.6)
Unamortized deferred financing costs	Unamortized deferred financing costs	(29.0)		(34.3)		Unamortized deferred financing costs	(25.8)		(27.3)
Total borrowings, net	Total borrowings, net	3,842.5		3,892.7		Total borrowings, net	3,815.3		3,829.6
Less:	Less:					Less:
Short-term borrowings	Short-term borrowings	19.0		29.9		Short-term borrowings	51.8		55.4
Current portion of long-term borrowings	Current portion of long-term borrowings	24.3		24.3		Current portion of long-term borrowings	24.3		24.3
Long-term debt	Long-term debt	$	3,799.2	$	3,838.5	Long-term debt	$	3,739.2	$	3,749.9

Revolving Credit Facility

During May 2021, we entered into the Tenth Amendment to the Credit Agreement (the "Tenth Amendment") to, among other things, increase commitments available pursuant to the Revolving Credit Facility from $400.0 million to $550.0 million and extend the maturity of the Revolving Credit Facility from 2024 to 2026, provided that such date will be accelerated in certain circumstances as set forth in the Tenth Amendment. As a result, we recorded $1.4 million of incremental deferred financing costs.

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, letters of credit issued under the Revolving Credit Facility totaled ~~$34.0~~$22.1 million, which reduced the availability under the Revolving Credit Facility. Availability under the Revolving Credit Facility was ~~$516.0 million and $366.0~~$527.9 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020, respectively.~~2021.

1816

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

Supplier financing arrangements

We have a financing program in China which is utilized to finance the purchases of goods and services from our suppliers through local banking institutions. The payment terms under the financing program vary, but the program has a weighted average maturity date that approximates 90 days. These financing arrangements are included in current portion of borrowings within the consolidated balance sheets and at the time of issuance each transaction is treated as a non-cash financing activity within the consolidated statements of cash flows. Upon settlement of the financing, the cash outflow is classified as a financing activity within the consolidated statements of cash flows. Amounts outstanding under this program were $21.2 million and $18.4 million at March 31, 2022 and March 31, 2021, respectively, including $4.2 million and $2.6 million, respectively, related to purchases of property, plant and equipment. Cash outflows under this program were $24.1 million and $13.7 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

Future repayments

Below is a schedule of required future repayments of all borrowings outstanding at ~~September 30, 2021.~~March 31, 2022.


Remainder of 2021		$	21.6
2022		54.4
Remainder of 2022				Remainder of 2022	$	68.1
2023	2023	27.3		2023	27.5
2024	2024	1,993.3		2024	1,993.5
2025	2025	528.5		2025	505.1
2026				2026	3.6
Thereafter	Thereafter	1,251.5		Thereafter	1,247.4
Total borrowings	Total borrowings	3,876.6		Total borrowings	3,845.2
Unamortized original issue discount	Unamortized original issue discount	(5.1)		Unamortized original issue discount	(4.1)
Unamortized deferred financing costs	Unamortized deferred financing costs	(29.0)		Unamortized deferred financing costs	(25.8)
Total borrowings, net	Total borrowings, net	$	3,842.5	Total borrowings, net	$	3,815.3

(16) FINANCIAL INSTRUMENTS, HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENTS

Fair value of financial instruments

Equity securities with readily determinable fair values - Balances of equity securities are recorded within other assets, with any changes in fair value recorded within other ~~income,~~expense (income), net. The fair values of equity securities are based upon quoted market prices, which are considered Level 1 inputs.

Long-term borrowings - The estimated fair values of these borrowings are based on recent trades, as reported by a third-party pricing service. Due to the infrequency of trades, these inputs are considered to be Level 2 inputs.

Derivative instruments - The Company’s interest rate caps, interest rate swaps, cross-currency swaps, and foreign currency forward contracts are valued using broker quotations, or market transactions in either the listed or over-the-counter markets. As such, these derivative instruments are included in the Level 2 hierarchy.

Fair value of contingent consideration

The fair value of contingent consideration associated with an acquisition completed in the ~~current~~ year is valued at each balance sheet date, until amounts become payable, with adjustments recorded within other ~~operating (benefits) charges~~expense (income) in the condensed consolidated statements of operations. During ~~the nine months ended September 30,~~April 2021, in conjunction with ~~the~~an acquisition in China, ~~described in Note 3,~~ we recorded fair value of contingent consideration of $7.3 million. As of March 31, 2022, the contingent consideration had increased to $7.8 million ~~which remained unchanged~~ as a result of ~~September 30, 2021.~~accretion for the passage of time and currency translation. The contingent consideration was valued using a probability-weighted expected payment method. The analysis considered the timing of expected future cash flows and the probability of whether key elements of the contingent event are completed. Due to the significant unobservable inputs used in the valuations, these liabilities are categorized within Level 3 of the fair value hierarchy.

1917

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

The table below presents the fair values of our financial instruments measured on a recurring basis by level within the fair value hierarchy at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.


		September 30, 2021								December 31, 2020									March 31, 2022								December 31, 2021
		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:	Assets:																	Assets:
Prepaid expenses and other current assets:	Prepaid expenses and other current assets:																	Prepaid expenses and other current assets:

Interest rate swaps (1)																		Interest rate swaps (1)	$	—	$	0.7	$	—	$	0.7	$	—	$	—	$	—	$	—
Cross-currency swaps (2)	Cross-currency swaps (2)	$	—	$	18.6	$	—	$	18.6	$	—	$	16.7	$	—	$	16.7	Cross-currency swaps (2)	—		18.6		—		18.6		—		17.7		—		17.7
Foreign currency forward contracts (1)		—		0.1		—		0.1		—		—		—		—
Foreign currency forward contracts (1)(3)																		Foreign currency forward contracts (1)(3)	—		—		—		—		—		—		—		—
Other assets:	Other assets:																	Other assets:

Cross-currency swaps (2)																		Cross-currency swaps (2)	—		—		—		—		—		8.3		—		8.3
Investments in equity securities	Investments in equity securities	0.7		—		—		0.7		0.8		—		—		0.8		Investments in equity securities	0.7		—		—		0.7		0.7		—		—		0.7
Liabilities:	Liabilities:																	Liabilities:
Other accrued liabilities:	Other accrued liabilities:																	Other accrued liabilities:
Interest rate caps (1)		—		0.5		—		0.5		—		2.0		—		2.0

Interest rate swaps (1)	Interest rate swaps (1)	—		29.3		—		29.3		—		28.9		—		28.9		Interest rate swaps (1)	—		7.5		—		7.5		—		24.3		—		24.3

Contingent consideration	Contingent consideration	—		—		7.3		7.3		—		—		—		—		Contingent consideration	—		—		7.8		7.8		—		—		7.8		7.8
Other liabilities:	Other liabilities:																	Other liabilities:

Interest rate swaps (1)	Interest rate swaps (1)	—		9.3		—		9.3		—		31.1		—		31.1		Interest rate swaps (1)	—		—		—		—		—		1.9		—		1.9
Cross-currency swaps (2)	Cross-currency swaps (2)	—		17.8		—		17.8		—		52.0		—		52.0		Cross-currency swaps (2)	—		16.4		—		16.4		—		—		—		—

Long-term borrowings:	Long-term borrowings:																	Long-term borrowings:
2024 Dollar Term Loans	2024 Dollar Term Loans	—		2,039.6		—		2,039.6		—		2,043.0		—		2,043.0		2024 Dollar Term Loans	—		1,998.9		—		1,998.9		—		2,038.5		—		2,038.5
2025 Euro Senior Notes	2025 Euro Senior Notes	—		534.8		—		534.8		—		564.3		—		564.3		2025 Euro Senior Notes	—		494.6		—		494.6		—		513.7		—		513.7
2027 Dollar Senior Notes	2027 Dollar Senior Notes	—		521.6		—		521.6		—		533.1		—		533.1		2027 Dollar Senior Notes	—		480.9		—		480.9		—		522.9		—		522.9
2029 Dollar Senior Notes	2029 Dollar Senior Notes	—		684.6		—		684.6		—		704.6		—		704.6		2029 Dollar Senior Notes	—		615.6		—		615.6		—		679.5		—		679.5

(1) Cash flow hedge

(2) Net investment hedge

(3) Balances at March 31, 2022 round to zero

The table below presents a roll forward of activity for the Level 3 liabilities ~~for~~during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.


		Fair Value Using Significant Unobservable Inputs (Level 3)
Beginning balance ~~January 1,~~December 31, 2021		$	7.8
Change in fair value		—






~~Business acquisition~~Ending balance at March 31, 2022		~~7.3~~$	7.8










~~Ending balance at September 30, 2021~~		$
	~~7.3~~

Derivative Financial Instruments

We selectively use derivative instruments to reduce market risk associated with changes in foreign currency exchange rates and interest rates. The use of derivatives is intended for hedging purposes only, and we do not enter into derivative instruments for speculative purposes.

Certain derivative instruments in use are contingent upon changes in LIBOR, which is the subject of recent reform and will cease being published in June 2023. The derivative instruments under LIBOR terms that we are currently party to will either mature before June 2023 or the agreements contain transitional language to a different reference rate.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

Derivative Instruments Qualifying and Designated as Cash Flow and Net Investment Hedges

Cross-Currency Swaps Designated as Net Investment Hedges

During the three months ended March 31, 2022, we settled 2 fixed-for-fixed cross-currency swaps with an aggregate notional amount totaling €335.0 million previously executed in 2020 resulting in cash proceeds of $25.0 million. Concurrently, we entered into 2 fixed-for-fixed cross-currency swaps with an aggregate notional amount totaling €335.0 million to hedge the variability of exchange rate impacts between the U.S. Dollar and Euro. Under the terms of the new cross-currency swap agreements, the Company notionally exchanged $365.5 million at a weighted average interest rate of 3.375% for €335.0 million at a weighted average interest rate of 2.04%. The cross-currency swaps are designated as net investment hedges and expire on February 15, 2029. These cross-currency swaps are marked to market at each reporting date and any unrealized gains or losses are included in unrealized currency translation adjustments, within accumulated other comprehensive loss ("AOCI").

Foreign Currency Forward Contracts Designated as Cash Flow Hedges

During the three months ended March 31, 2022, we designated foreign currency forward contracts with a notional value of $3.0 million as cash flow hedges of the Company’s exposure to variability in exchange rates on forecasted purchases of inventory denominated in foreign currencies. These forward currency contracts are marked to market at each reporting date and any unrealized gains or losses are included in AOCI and reclassified to cost of goods sold in the same period or periods during which the hedged transactions affect earnings.

The following table presents the fair values of derivative instruments that qualify and have been designated as cash flow and net investment hedges included in ~~accumulated other comprehensive loss ("AOCI"):~~AOCI:


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
AOCI:	AOCI:					AOCI:
Interest rate caps (cash flow hedges)		$	0.7	$	2.6

Interest rate swaps (cash flow hedges)	Interest rate swaps (cash flow hedges)	38.6		60.0		Interest rate swaps (cash flow hedges)	$	6.8	$	26.3
Foreign currency forward contracts (cash flow hedges)(1)	Foreign currency forward contracts (cash flow hedges)(1)	0.1		0.3		Foreign currency forward contracts (cash flow hedges)(1)	—		—
Cross-currency swaps (net investment hedges)	Cross-currency swaps (net investment hedges)	(0.8)		35.2		Cross-currency swaps (net investment hedges)	(26.8)		(26.0)
Total AOCI	Total AOCI	$	38.6	$	98.1	Total AOCI	$	(20.0)	$	0.3

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~~Notes~~(1) Activity during the three months ended March 31, 2022 rounds to ~~Condensed Consolidated Financial Statements (Unaudited)~~

~~(In millions, unless otherwise noted)~~

zero

Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis.

The following tables set forth the locations and amounts recognized during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ for these cash flow and net investment hedges.


			For the Three Months Ended September 30,										For the Three Months Ended March 31,
			2021				2020						2022				2021
Derivatives in Cash Flow and Net Investment Hedges	Derivatives in Cash Flow and Net Investment Hedges	Location of Loss (Gain) Recognized in Income on Derivatives	Net Amount of Loss (Gain) Recognized in OCI on Derivatives		Amount of Loss (Gain) Recognized in Income		Net Amount of Loss Recognized in OCI on Derivatives		Amount of Loss (Gain) Recognized in Income		Derivatives in Cash Flow and Net Investment Hedges	Location of Loss (Gain) Recognized in Income on Derivatives	Net Amount of (Gain) Recognized in OCI on Derivatives		Amount of Loss (Gain) Recognized in Income		Net Amount of (Gain) Recognized in OCI on Derivatives		Amount of Loss (Gain) Recognized in Income
Interest rate caps	Interest rate caps	Interest expense, net	$	—	$	0.7	$	0.1	$	0.6	Interest rate caps	Interest expense, net	$	—	$	—	$	—	$	0.6
Interest rate swaps	Interest rate swaps	Interest expense, net	0.9		7.5		0.4		7.0		Interest rate swaps	Interest expense, net	(12.4)		7.1		(1.5)		7.0
Foreign currency forward contracts(1)	Foreign currency forward contracts(1)	Cost of goods sold	—		0.1		0.1		—		Foreign currency forward contracts(1)	Cost of goods sold	—		—		(0.1)		—
Cross-currency swaps	Cross-currency swaps	Interest expense, net	(20.4)		(4.8)		16.9		(3.6)		Cross-currency swaps	Interest expense, net	(5.6)		(4.8)		(29.6)		(4.8)

For the Nine Months Ended September 30,
2021 2020
Derivatives in Cash Flow and Net Investment Hedges Location of Loss (Gain) Recognized in Income on Derivatives Net Amount of (Gain) Recognized in OCI on Derivatives Amount of Loss (Gain) Recognized in Income Net Amount of Loss (Gain) Recognized in OCI on Derivatives Amount of Loss (Gain) Recognized in Income
Interest rate caps Interest expense, net $ — $ 1.9 $ 1.2 $ 1.5
Interest rate swaps Interest expense, net 0.3 21.7 48.0 11.5
Foreign currency forward contracts Cost of goods sold — 0.2 0.1 —
Cross-currency swaps Interest expense, net (50.3) (14.3) (2.5) (11.0)
(1) Activity during the three months ended March 31, 2022 rounds to zero

Over the next 12 months, we expect losses of ~~$30.1~~$6.7 million pertaining to cash flow hedges to be reclassified from AOCI into earnings, related to our interest rate ~~caps, interest rate~~ swaps and foreign currency forward contracts.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

Derivative Instruments Not Designated as Cash Flow Hedges

We periodically enter into foreign currency forward and option contracts to reduce market risk and hedge our balance sheet exposures and cash flows for subsidiaries with exposures denominated in currencies different from the functional currency of the relevant subsidiary. These contracts have not been designated as hedges and all gains and losses are marked to market through other ~~income,~~expense (income), net in the condensed consolidated statements ~~of operations.~~

During July 2021, we entered into two foreign currency forward contracts with a total notional value of £259.1 million to hedge the variability in exchange rates between the execution date of the agreement to purchase U-POL and the closing of the transaction. The contracts were settled in September 2021, and we realized a loss of $0.6 million within Other (income) expense, net on the condensed consolidated statement of operations.

Fair value gains and losses of derivative contracts, as determined using Level 2 inputs, that have not been designated for hedge accounting treatment are recorded in earnings as follows:


Derivatives Not Designated as Hedging Instruments under ASC 815	Derivatives Not Designated as Hedging Instruments under ASC 815	Location of Loss Recognized in Income on Derivatives		Three Months Ended September 30,					Nine Months Ended September 30,			Derivatives Not Designated as Hedging Instruments under ASC 815			Location of Loss Recognized in Income on Derivatives				Three Months Ended March 31,
			2021		2020		2021			2020								2022		2021

Foreign currency forward contracts	Foreign currency forward contracts		Other (income) expense, net		$	(0.9)	$	(4.4)		$	(6.8)		$	(5.3)		Foreign currency forward contracts	Other expense (income), net				$	0.3	$	(6.8)

(17) SEGMENTS

The Company identifies an operating segment as a component: (i) that engages in business activities from which it may earn revenues and incur expenses; (ii) whose operating results are regularly reviewed by the Chief Operating Decision Maker ("CODM") to make decisions about resources to be allocated to the segment and assess its performance; and (iii) that has available discrete financial information.

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~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(In millions, unless otherwise noted)~~

We have 2 operating segments, which are also our reportable segments: Performance Coatings and Mobility Coatings. ~~Previously named Transportation Coatings, our Mobility Coatings segment was renamed earlier in 2021 with no changes to the underlying business or segment structure.~~ The CODM reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment. Our CODM is identified as the Chief Executive Officer because he has final authority over performance assessment and resource allocation decisions. Our segments are based on the type and concentration of customers served, service requirements, methods of distribution and major product lines.

Through our Performance Coatings segment, we provide high-quality liquid and powder coatings solutions to a fragmented and local customer base. We are one of only a few suppliers with the technology to provide precise color matching and highly durable coatings systems. The end-markets within this segment are refinish and industrial.

Through our Mobility Coatings segment, we provide ~~advanced coating~~coatings technologies ~~to OEMs~~while focusing on supporting the accelerating demand for e-mobility and the evolving coatings needs of established and emerging light and commercial ~~vehicles.~~vehicle OEMs, fleet owners and shared mobility providers. These ~~increasingly~~ global customers are faced with evolving megatrends in sustainability, personalization and autonomous driving that require a high level of technical support coupled with ~~cost-effective,~~productive, environmentally responsible coatings systems that can be applied with a high degree of precision, consistency and speed. The end-markets within this segment are light vehicle and commercial vehicle.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

Adjusted EBIT is the primary measure to evaluate financial performance of the operating segments and allocate resources. Asset information is not reviewed or included with our internal management reporting. Therefore, the Company has not disclosed asset information for each reportable segment. The following table presents relevant information of our reportable segments.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Net sales (1):	Net sales (1):									Net sales (1):
Refinish	Refinish	$	443.4	$	401.7	$	1,305.5	$	1,031.4	Refinish		$	461.4	$	399.0
Industrial	Industrial	335.8		281.0		986.8		781.1		Industrial		353.0		308.3
Total Net sales Performance Coatings	Total Net sales Performance Coatings	779.2		682.7		2,292.3		1,812.5		Total Net sales Performance Coatings		814.4		707.3
Light Vehicle	Light Vehicle	235.4		276.3		758.2		662.7		Light Vehicle		275.6		278.9
Commercial Vehicle	Commercial Vehicle	74.0		67.9		228.5		187.9		Commercial Vehicle		84.1		77.4
Total Net sales Mobility Coatings	Total Net sales Mobility Coatings	309.4		344.2		986.7		850.6		Total Net sales Mobility Coatings		359.7		356.3
Total Net sales	Total Net sales	$	1,088.6	$	1,026.9	$	3,279.0	$	2,663.1	Total Net sales		$	1,174.1	$	1,063.6
Depreciation and amortization expense (2):	Depreciation and amortization expense (2):									Depreciation and amortization expense (2):
Performance Coatings	Performance Coatings	$	57.0	$	57.4	$	167.4	$	175.3	Performance Coatings		$	58.0	$	54.0
Mobility Coatings	Mobility Coatings	22.3		23.0		67.3		68.3		Mobility Coatings		19.7		22.4
Total Depreciation and amortization expense	Total Depreciation and amortization expense	$	79.3	$	80.4	$	234.7	$	243.6	Total Depreciation and amortization expense		$	77.7	$	76.4

(1)The Company has no intercompany sales between segments.

(2)Depreciation and amortization expenses relating to assets used within the operations of a specifically identifiable segment are recorded to the appropriate segment, while depreciation and amortization expenses relating to assets shared in our integrated supply chain are allocated to the appropriate segments on a consistent basis reflecting their use.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

The following table reconciles our segment operating performance to income before income taxes for the periods presented:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Segment Adjusted EBIT (1):	Segment Adjusted EBIT (1):									Segment Adjusted EBIT (1):
Performance Coatings	Performance Coatings	$	122.8	$	133.9	$	379.7	$	214.8	Performance Coatings		$	94.6	$	117.2
Mobility Coatings	Mobility Coatings	(2.7)		48.5		42.2		35.0		Mobility Coatings		0.5		39.2
Total (2)	Total (2)	120.1		182.4		421.9		249.8		Total (2)		95.1		156.4
Interest expense, net	Interest expense, net	33.8		39.8		100.7		112.4		Interest expense, net		32.6		33.5
Debt extinguishment and refinancing related costs (a)		—		—		0.2		2.4

Termination benefits and other employee related costs ~~(b)~~(a)	Termination benefits and other employee related costs ~~(b)~~(a)	9.6		35.7		35.1		70.4		Termination benefits and other employee related costs ~~(b)~~(a)		2.4		2.8
Strategic review and retention costs ~~(c)~~(b)	Strategic review and retention costs ~~(c)~~(b)	2.1		6.9		9.7		25.1		Strategic review and retention costs ~~(c)~~(b)		—		5.4
Acquisition and divestiture-related costs ~~(d)~~(c)	Acquisition and divestiture-related costs ~~(d)~~(c)	9.2		0.1		10.8		0.3		Acquisition and divestiture-related costs ~~(d)~~(c)		0.4		0.2
Impairment (benefits) charges(e)		(0.8)		0.3		(0.8)		3.5
Pension special events (f)		—		(0.7)		—		(2.5)
Accelerated depreciation (g)		0.6		0.4		1.8		8.9
Indemnity (income) loss (h)		(0.1)		0.3		(0.2)		0.3
Impairment charges (d)										Impairment charges (d)		0.3		—

Accelerated depreciation and site closure costs (e)										Accelerated depreciation and site closure costs (e)		1.3		0.6
Indemnity loss (f)										Indemnity loss (f)		0.3		—

Operational matter ~~(i)~~(g)	Operational matter ~~(i)~~(g)	(18.7)		—		3.9		—		Operational matter ~~(i)~~(g)		0.1		94.4
Brazil indirect tax (j)		—		—		(8.3)		—
Gain on sale of facility (k)		(8.9)		—		(8.9)		—

Russia sanction-related impacts (h)										Russia sanction-related impacts (h)		5.8		—
Income before income taxes	Income before income taxes	$	93.3	$	99.6	$	277.9	$	29.0	Income before income taxes		$	51.9	$	19.5


(1)			The primary measure of segment operating performance is Adjusted EBIT, which is defined as net income before interest, taxes and select other items impacting operating results. These other items impacting operating results are items that management has concluded are (1) non-cash items included within net income, (2) items the Company does not believe are indicative of ongoing operating performance or (3) non-recurring, unusual or infrequent items that have not occurred within the last two years or we believe are not reasonably likely to recur within the next two years. Adjusted EBIT is a key metric that is used by management to evaluate business performance in comparison to budgets, forecasts and prior year financial results, providing a measure that management believes reflects the ~~Company’s~~Company's core operating performance, which represents Adjusted EBIT adjusted for the select items referred to above.

(2)			Does not represent Adjusted EBIT referenced elsewhere by the Company as there are additional adjustments that are not allocated to the segments.

~~(a)~~			Represents expenses and associated changes to estimates related to the prepayment, restructuring, and refinancing of our indebtedness, which are not considered indicative of our ongoing operating performance.

~~(b)~~(a)			Represents expenses and associated changes to estimates related to employee termination benefits and other employee-related costs. Employee termination benefits are primarily associated with Axalta Way initiatives. These amounts are not considered indicative of our ongoing operating performance.

~~(c)~~(b)			Represents costs for legal, tax and other advisory fees pertaining to our review of strategic alternatives that was concluded in March 2020, as well as retention awards for certain employees, ~~that~~which were earned over a period of 18-24 months, which ended ~~during~~in September 2021. These amounts are not considered indicative of our ongoing performance.

~~(d)~~(c)			Represents acquisition and divestiture-related expenses and ~~non-cash fair value inventory adjustments~~integration activities associated with our business combinations, all of which are not considered indicative of our ongoing operating performance.

~~(e)~~(d)			Represents impairment ~~(benefits)~~ charges, which are not considered indicative of our ongoing performance. ~~The current year benefit primarily reflects a recovered gain on a previously impaired asset.~~

~~(f)~~			Represents certain defined benefit pension costs associated with special events, including pension curtailments, settlements and special termination benefits, which we do not consider indicative of our ongoing operating performance.

~~(g)~~(e)			Represents incremental depreciation expense resulting from truncated useful lives of the assets impacted by our manufacturing footprint assessments and costs related to the closure of certain manufacturing sites, which we do not consider indicative of our ongoing operating performance.

~~(h)~~(f)			Represents indemnity ~~income~~loss associated with acquisitions, which we do not consider indicative of our ongoing operating performance.

~~(i)~~(g)			Represents expenses, changes in estimates and insurance recoveries for probable liabilities related to an operational matter in the Mobility Coatings segment discussed further in Note 6, which iswe do not consider indicative of our ongoing operating performance.

~~(j)~~			~~Represents non-recurring income related to a law change with respect to certain Brazilian indirect taxes which was recorded within other (income) expense, net.~~

~~(k)~~			~~Represents non-recurring income related to the sale of a previously closed manufacturing facility.~~





(h)			Represents expenses related to sanctions imposed on Russia in response to the conflict with Ukraine as a result of incremental reserves for accounts receivable and incremental inventory obsolescence, which we do not consider indicative of our ongoing operating performance.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

(18) ACCUMULATED OTHER COMPREHENSIVE LOSS


		Unrealized Currency Translation Adjustments		Pension Adjustments		Unrealized (Loss) Gain on Derivatives		Accumulated Other Comprehensive (Loss) Income			Unrealized Currency Translation Adjustments		Pension Adjustments		Unrealized (Loss) Gain on Derivatives		Accumulated Other Comprehensive (Loss) Income
Balance at December 31, 2020		$	(282.0)	$	(88.7)	$	(54.1)	$	(424.8)
Balance, December 31, 2021										Balance, December 31, 2021	$	(331.3)	$	(60.4)	$	(22.7)	$	(414.4)
Current year deferrals to AOCI	Current year deferrals to AOCI	(37.4)		—		1.3		(36.1)		Current year deferrals to AOCI	0.4		—		10.8		11.2
Reclassifications from AOCI to Net income	Reclassifications from AOCI to Net income	—		0.7		6.6		7.3		Reclassifications from AOCI to Net income	(4.8)		0.5		6.1		1.8
Net Change	Net Change	(37.4)		0.7		7.9		(28.8)		Net Change	(4.4)		0.5		16.9		13.0
Balance at March 31, 2021		(319.4)		(88.0)		(46.2)		(453.6)
Current year deferrals to AOCI		38.7		—		(0.8)		37.9
Reclassifications from AOCI to Net income		—		1.0		6.7		7.7
Net Change		38.7		1.0		5.9		45.6
Balance at June 30, 2021		(280.7)		(87.0)		(40.3)		(408.0)
Current year deferrals to AOCI		(37.4)		—		(0.8)		(38.2)
Reclassifications from AOCI to Net income		—		0.8		7.1		7.9
Net Change		(37.4)		0.8		6.3		(30.3)
Balance at September 30, 2021		$	(318.1)	$	(86.2)	$	(34.0)	$	(438.3)
Balance, March 31, 2022										Balance, March 31, 2022	$	(335.7)	$	(59.9)	$	(5.8)	$	(401.4)

The cumulative income tax benefit related to the adjustments for pension ~~benefits~~benefit at ~~September 30, 2021~~March 31, 2022 was ~~$32.3~~$24.4 million. The cumulative income tax benefit related to the adjustments for unrealized loss on derivatives at ~~September 30, 2021~~March 31, 2022 was ~~$5.4~~$1.0 million.

Unrealized
Currency
Translation
Adjustments Pension
Adjustments Unrealized
(Loss) Gain on
Derivatives Accumulated
Other
Comprehensive
(Loss) Income
Balance at December 31, 2019 $ (297.0) $ (69.9) $ (28.6) $ (395.5)
Current year deferrals to AOCI (83.3) — (36.3) (119.6)
Reclassifications from AOCI to Net income — (0.4) 1.6 1.2
Net Change (83.3) (0.4) (34.7) (118.4)
Balance at March 31, 2020 (380.3) (70.3) (63.3) (513.9)
Current year deferrals to AOCI 6.1 — (5.2) 0.9
Reclassifications from AOCI to Net loss — 0.4 3.0 3.4
Net Change 6.1 0.4 (2.2) 4.3
Balance at June 30, 2020 (374.2) (69.9) (65.5) (509.6)
Current year deferrals to AOCI 33.9 (0.2) (0.5) 33.2
Reclassifications from AOCI to Net income — (0.3) 6.5 6.2
Net Change 33.9 (0.5) 6.0 39.4
Balance at September 30, 2020 $ (340.3) $ (70.4) $ (59.5) $ (470.2)

~~Included~~ See Note 16 for classification within the ~~reclassification~~consolidated statements of operations of the gains and losses on derivatives reclassified from ~~AOCI to Net Income for the three and nine months ended September 30, 2020 were curtailment and settlement impacts of $1.3 million and $3.1 million, respectively.~~ AOCI.


	Unrealized Currency Translation Adjustments		Pension Adjustments		Unrealized (Loss) Gain on Derivatives		Accumulated Other Comprehensive (Loss) Income
Balance, December 31, 2020	$	(282.0)	$	(88.7)	$	(54.1)	$	(424.8)
Current year deferrals to AOCI	(32.6)		—		1.3		(31.3)
Reclassifications from AOCI to Net income	(4.8)		0.7		6.6		2.5
Net Change	(37.4)		0.7		7.9		(28.8)
Balance, March 31, 2021	$	(319.4)	$	(88.0)	$	(46.2)	$	(453.6)

The cumulative income tax benefit related to the adjustments for pension benefits at ~~September 30, 2020~~March 31, 2021 was ~~$27.0~~$33.0 million. The cumulative income tax benefit related to the adjustments for unrealized loss on derivatives at ~~September 30, 2020~~March 31, 2021 was ~~$9.7~~$7.5 million. See Note 16 for classification within the consolidated statements of operations of the gains and losses on derivatives reclassified from AOCI.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the interim unaudited condensed consolidated financial statements and the condensed notes thereto included elsewhere in this Quarterly Report on Form 10-Q, as well as the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

FORWARD-LOOKING STATEMENTS

Many statements made in the following discussion and analysis of our financial condition and results of operations and elsewhere in this Quarterly Report on Form 10-Q that are not statements of historical fact, including statements about our beliefs and expectations, are "forward-looking statements" within the meaning of federal securities laws and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan, strategies and capital structure. These statements often include words such as "anticipate," "expect," ~~"suggests," "plan,"~~ "believe," "intend," "estimates," "targets," ~~"projects,~~"projections," ~~"should,~~"can," "could," "would," "may," "will," ~~"forecast"~~"forecasts" and the negative of these words or other comparable or similar terminology. We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this Quarterly Report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions, including, but not limited to, the risks and uncertainties described in "Forward-Looking Statements," as well as "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors, including, but not limited to, those described in "Risk Factors", could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections.

These cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

OVERVIEW

We are a leading global manufacturer, marketer and distributor of high performance coatings systems and products. We have over a 150-year heritage in the coatings industry and are known for manufacturing high-quality products with well-recognized brands supported by market-leading technology and customer service. Our diverse global footprint of 47 manufacturing facilities, four technology centers, 48 customer training centers and approximately ~~13,000 people~~12,000 employees allows us to meet the needs of customers in over 140 countries. We serve our customer base through an extensive sales force and technical support organization, as well as through approximately 4,000 independent, locally based distributors.

We operate our business in two operating segments, Performance Coatings and Mobility Coatings. ~~Previously named Transportation Coatings, our Mobility Coatings segment was renamed earlier in 2021 with no changes to the underlying business or segment structure.~~ Our segments are based on the type and concentration of customers served, service requirements, methods of distribution and major product lines.

Through our Mobility Coatings segment, we provide ~~advanced coating~~coatings technologies ~~to original equipment manufacturers ("OEMs")~~while focusing on supporting the accelerating demand for e-mobility and the evolving coatings needs of established and emerging light and commercial ~~vehicles.~~vehicle OEMs, fleet owners and shared mobility providers. These ~~increasingly~~ global customers are faced with evolving megatrends in sustainability, personalization and autonomous driving that require a high level of technical support coupled with ~~cost-effective,~~productive, environmentally responsible coatings systems that can be applied with a high degree of precision, consistency and speed. The end-markets within this segment are light vehicle and commercial vehicle.

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BUSINESS HIGHLIGHTS

General Business Highlights

Our net sales increased ~~23.1%~~10.4%, including a 3.0% ~~benefit~~headwind from foreign currency translation, for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 compared with the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. The increased sales were primarily driven by higher ~~volumes of 14.9% as a result of demand recovery from the impacts of COVID-19, partially offset by the impacts of semiconductor chip and other supply chain shortages on our customers, as well as higher~~ average selling price and product mix of ~~4.1%~~8.8%, contributions from acquisitions of 3.6% and higher volumes of 1.0%. The following trends have impacted our segment and end-market net sales performance:

•Performance Coatings: Net sales increased ~~26.5%, including a 3.4% benefit from foreign currency translation,~~15.1% for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 compared with the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. The increased sales were primarily driven by higher ~~volumes of 16.3% as a result of demand recovery from the impacts of COVID-19 and higher~~ average selling ~~prices~~price and product mix of ~~5.2%. The favorable~~10.7%, contributions from acquisitions of 5.4% and higher sales volume of 2.5%, partially offset by a 3.5% headwind from unfavorable foreign currency translation is driven primarily by fluctuations of the Euro and ~~Chinese Renminbi~~Turkish Lira compared to the U.S. Dollar.

•Mobility Coatings: Net sales increased ~~16.0%, including a 2.1% benefit from foreign currency translation,~~1.0% for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 compared with the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. The increased sales were ~~primarily due to~~driven by higher ~~volumes~~average selling price and product mix of ~~12.0%~~4.9%, partially offset by lower sales volume of 1.9% as a result of ~~demand recovery from the impacts of COVID-19, partially offset by~~continued semiconductor chip and other supply chain shortages ~~as well as higher average selling prices~~that dampened customer demand and ~~product mix~~unfavorable currency impact of ~~1.9%~~2.0%. The ~~favorable~~unfavorable foreign currency translation iswas driven primarily by fluctuations of the Euro and ~~Chinese Renminbi~~Turkish Lira compared to the U.S. Dollar.

Our business serves four end-markets globally with net sales for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ as follows:


(In millions)	(In millions)	Three Months Ended September 30,				2021 vs 2020		Nine Months Ended September 30,				2021 vs 2020		(In millions)	Three Months Ended March 31,			2022 vs 2021
		2021		2020		% change		2021		2020		% change				2022		2021		% change
Performance Coatings	Performance Coatings													Performance Coatings
Refinish	Refinish	$	443.4	$	401.7	10.4	%	$	1,305.5	$	1,031.4	26.6	%	Refinish		$	461.4	$	399.0	15.6	%
Industrial	Industrial	335.8		281.0		19.5	%	986.8		781.1		26.3	%	Industrial		353.0		308.3		14.5	%
Total Net sales Performance Coatings	Total Net sales Performance Coatings	779.2		682.7		14.1	%	2,292.3		1,812.5		26.5	%	Total Net sales Performance Coatings		814.4		707.3		15.1	%
Mobility Coatings	Mobility Coatings													Mobility Coatings
Light Vehicle	Light Vehicle	235.4		276.3		(14.8)	%	758.2		662.7		14.4	%	Light Vehicle		275.6		278.9		(1.2)	%
Commercial Vehicle	Commercial Vehicle	74.0		67.9		9.0	%	228.5		187.9		21.6	%	Commercial Vehicle		84.1		77.4		8.7	%
Total Net sales Mobility Coatings	Total Net sales Mobility Coatings	309.4		344.2		(10.1)	%	986.7		850.6		16.0	%	Total Net sales Mobility Coatings		359.7		356.3		1.0	%
Total Net sales	Total Net sales	$	1,088.6	$	1,026.9	6.0	%	$	3,279.0	$	2,663.1	23.1	%	Total Net sales		$	1,174.1	$	1,063.6	10.4	%

Semiconductor chip shortages, supply chain shortages and raw material inflation

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we were negatively impacted globally by semiconductor chip shortages, primarily affecting production levels of our automotive original equipment manufacturer customers in our Light Vehicle end-market, as well as other supply chain shortages, ~~as a result of semiconductor chip shortages affecting Light Vehicle production globally, severe weather in the U.S.,~~ inflation of raw material and other costs and logistics constraints. We anticipate ~~these conditions~~the semiconductor chip and other supply chain constraints, including the tightness of raw materials and freight and logistic challenges, and raw material inflation will continue to impact our results ~~into 2022.~~throughout the year. We will continue to monitor these conditions and take appropriate actions that we believe will help mitigate costs and other operational impacts.

Russia conflict with Ukraine

Russia's conflict with Ukraine and the sanctions and other measures being imposed by various governments in response to this conflict have increased the level of economic and political uncertainty globally. While our operations in Russia and Ukraine do not constitute a material portion of our business, a significant escalation or expansion of economic disruption or countries subject to sanctions or the conflict's current scope could have a material adverse effect on our results of operations, financial condition and cash flows. We are actively monitoring the broader economic impact on commodities and currency exchange rates from the current crisis, especially on the price and supply of raw materials. During the three months ended March 31, 2022, we recorded $5.8 million of incremental reserves for accounts receivable and inventory as a result of sanctions imposed on Russia.

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Coronavirus (COVID-19) Pandemic

During the ~~nine~~three months ended ~~September 30, 2021, we~~March 31, 2022, our business continued to recover from the significant adverse impact on the demand for our products and, thus, our income from operations, caused by the COVID-19 pandemic, which began in early 2020. While we have seen a return to more stable quarter-over-quarter demand for our products and services, we remain cognizant of ~~the potential~~future COVID-19 developments, such as impacts offrom new variants, employee absenteeism, shutdowns or other restrictions, ~~put in place on~~that could impact our future results of operations, financial condition and cash flows. Our manufacturing sites and operations in China have been temporarily impacted by the lockdowns imposed by the local authorities in response to COVID-19 and we are actively managing through these disruptions. The risks and uncertainties related to the COVID-19 pandemic are discussed in further detail within Note 1 to the interim unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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~~Acquisitions Highlights~~

During the nine months ended September 30, 2021, we successfully completed two strategic acquisitions within our Performance Coatings segment, including the acquisition of U-POL Holdings Limited, which are discussed in further detail within Note 3 to the interim unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Capital and Liquidity Highlights

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we repurchased ~~7.3~~6.4 million shares of our common stock for total consideration of ~~$213.7~~$175.1 million as we continue to execute against our previously-approved share repurchase program.

Environmental, Social and Governance ("ESG") Framework

In ~~April 2021,~~January 2022, we announced a new ESG framework that details longer-term ESG goals and strategies. For additional information, see Part I, Item 1, "Business—Environmental, Social and Governance" of our Board of Directors authorized an increase in our common share repurchase program of $625.0 million, bringing the size of the program, initially announced in March 2017, to a total of $1.3 billion, of which we have already repurchased $652.6 million through September 30, 2021.

During the nine months ended September 30, 2021, in connection with the Tenth Amendment to the Credit Agreement (the "Tenth Amendment") discussed within Note 15 to the condensed consolidated financial statements included elsewhere in this QuarterlyAnnual Report on Form ~~10-Q, we increased~~10-K for the borrowing capacity under our revolving credit facility from $400.0 million to $550.0 million and extended the maturity of the revolving credit facility from 2024 to 2026, provided that such date will be accelerated in certain circumstances as set forth in the Tenth Amendment.year ended December 31, 2021.

FACTORS AFFECTING OUR OPERATING RESULTS

There have been no changes in the factors affecting our operating results previously reported in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the information contained in the accompanying financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. Our historical results of operations summarized and analyzed below may not necessarily reflect what will occur in the future.

Net sales


		Three Months Ended September 30,				2021 vs 2020				Nine Months Ended September 30,				2021 vs 2020					Three Months Ended March 31,	2022 vs 2021
		2021		2020		$ Change		% Change		2021		2020		$ Change		% Change				2022		2021		$ Change		% Change
Net sales	Net sales	$	1,088.6	$	1,026.9	$	61.7	6.0	%	$	3,279.0	$	2,663.1	$	615.9	23.1	%	Net sales		$	1,174.1	$	1,063.6	$	110.5	10.4	%
Price/Mix effect																		Price/Mix effect								8.8	%
Impact of acquisitions																		Impact of acquisitions								3.6	%
Volume effect	Volume effect							(1.6)	%							14.9	%	Volume effect								1.0	%
Impact of acquisitions								1.8	%							1.1	%
Price/Mix effect								4.5	%							4.1	%
Exchange rate effect	Exchange rate effect							1.3	%							3.0	%	Exchange rate effect								(3.0)	%

Three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020~~March 31, 2021


Net sales increased due to the following:
n Higher average selling price ~~across~~driven in both segments and ~~most~~all regions as a result of pricing actions taken to offset input price inflation
n ~~Favorable impact~~Increased sales from ~~acquisitions~~companies acquired in 2021
n ~~Favorable~~Higher sales volumes driven by Performance Coatings, partially muted by customer production limitations resulting from significant impacts of semiconductor chip and other supply chain constraints within Mobility Coatings
Partially offset by:
n Unfavorable impacts of currency translation, due primarily to the fluctuations of the Euro and ~~Chinese Renminbi compared to the U.S. dollar~~
~~Partially offset by:~~
n ~~Lower sales volumes driven by Mobility Coatings as a result of customer production limitations due to semiconductor chip and other supply chain shortages~~

~~Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020~~


~~Net sales increased due to the following:~~
n Higher sales volumes across both segments as a result of demand recovery from the impacts of COVID-19, muted by customer production limitations resulting from semiconductor and other supply-chain shortages
n ~~Higher average selling price driven in both segments and most regions as a result of pricing actions taken to offset input price inflation~~
n ~~Favorable impacts of currency translation, due primarily to the fluctuations of the Euro and Chinese Renminbi~~Turkish Lira compared to the U.S. dollar

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Cost of sales


		Three Months Ended September 30,						2021 vs 2020				Nine Months Ended September 30,						2021 vs 2020					Three Months Ended March 31,	2022 vs 2021
		2021			2020			$ Change		% Change		2021			2020			$ Change		% Change				2022			2021			$ Change		% Change

Cost of sales	Cost of sales	$	745.3		$	634.1		$	111.2	17.5	%	$	2,182.6		$	1,780.1		$	402.5	22.6	%	Cost of sales		$	837.4		$	684.5		$	152.9	22.3	%

% of net sales	% of net sales	68.5		%	61.7		%					66.6		%	66.8		%					% of net sales		71.3		%	64.4		%

Three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020~~March 31, 2021


Cost of sales increased due to the following:
n Higher variable input costs due to raw material, ~~inflation~~logistics and ~~supply chain impacts~~energy inflation
n Increased ~~compensation-related expenses compared to the prior year, which were lower due to temporary COVID-19 related cost reduction actions~~costs from companies acquired in 2021
n Higher operating costs ~~due to the lapse of~~as temporary COVID-19 related cost savings ~~in the prior year, partially offset by the reduction in costs resulting from operational efficiencies~~initiatives have lapsed
nIncrease of $1.7 million associated with ~~our structural cost savings initiatives~~incremental inventory obsolescence related to sanctions imposed on Russia
Partially offset by:
n ~~Unfavorable~~Favorable impacts of currency translation, due primarily to the fluctuations of the Euro and ~~Chinese Renminbi~~Turkish Lira compared to the U.S. dollar
n ~~Increased costs associated with the acquisitions~~
~~Partially offset by:~~

n ~~Lower sales volumes driven by Mobility Coatings as a result of customer production limitations due to semiconductor chip and other supply chain shortages~~
Cost of sales as a percentage of net sales increased due to the following:
n Higher variable input costs due to raw material, ~~inflation~~logistics and ~~supply chain impacts~~
n ~~Increased compensation-related expenses compared to the prior year, which were lower due to temporary COVID-19 related cost reduction actions~~
n Higher operating costs due to the lapse of temporary cost savings in the prior year, partially offset by the reduction in costs resulting from operational efficiencies associated with our structural cost savings initiatives
n ~~Lower sales volume covering fixed costs~~
~~Partially offset by:~~

n ~~Higher average selling prices~~

~~Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020~~


~~Cost of sales increased due to the following:~~
n ~~Higher sales volumes across both segments as a result of demand recovery from the impacts of COVID-19~~
n ~~Higher variable input costs due to raw material~~energy inflation ~~and supply chain impacts~~
n ~~Increased compensation-related expenses compared to the prior year, which were lower due to temporary COVID-19 related cost reduction actions~~
n ~~Unfavorable impacts of currency translation, due primarily to the fluctuations of the Euro and Chinese Renminbi compared to the U.S. dollar~~
n ~~Increased costs associated with the acquisitions~~
Partially offset by:
n ~~Reduction in costs resulting from operational efficiencies associated with our structural cost savings initiatives, partially offset~~Higher average selling price driven by ~~the lapse of temporary cost savings in the prior year~~
n Decreased expenses of $35.2 million associated with improved utilization at manufacturing sites in the current year as manufacturing utilization was negatively impacted in the 2020 period due to impacts from COVID-19
n ~~Lower expenses in 2021 compared to 2020 of $7.9 million resulting from fewer inventory write-offs~~
~~Cost of sales~~both segments and all regions as a ~~percentage~~result of ~~net sales decreased due~~pricing actions taken to ~~the following:~~
n ~~Higher sales volume covering fixed costs~~
n Decreased expenses of $35.2 million associated with improved utilization at manufacturing sites in the current year as manufacturing utilization was negatively impacted in the 2020 period due to impacts from COVID-19
~~Partially~~ offset ~~by:~~
n ~~Higher~~ variable input ~~costs due to raw material~~cost inflation
n ~~Increased compensation-related expenses compared to the prior year, which were lower due to temporary COVID-19 related cost reduction actions~~

~~Table of Contents~~

Selling, general and administrative expenses

Three Months Ended September 30, 2021 vs 2020 Nine Months Ended September 30, 2021 vs 2020
2021 2020 $ Change % Change 2021 2020 $ Change % Change
SG&A $ 181.0 $ 166.5 $ 14.5 8.7 % $ 544.3 $ 516.1 $ 28.2 5.5 %


	Three Months Ended March 31,	2022 vs 2021
		2022			2021			$ Change		% Change

SG&A		$	193.5		$	179.1		$	14.4	8.0	%
% of net sales		16.5		%	16.8		%

Three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020~~March 31, 2021


Selling, general and administrative expenses increased due to the following:
n Higher operating costs ~~due to the lapse of~~as temporary COVID-19 related cost savings ~~in the prior year, partially offset by the reduction in costs resulting from operational efficiencies associated with our structural cost savings~~ initiatives
n ~~Increased expenses as a result of acquisitions~~ have lapsed
n Increased ~~compensation-related expenses compared to the prior year, which were lower due to temporary COVID-19 related cost reduction actions~~
n ~~Unfavorable impacts of currency translation, due primarily to the fluctuations of the Euro and Chinese Renminbi compared to the U.S. dollar~~
~~Partially offset by:~~

n ~~Lower bad debt expenses~~costs from companies acquired in 2021 ~~compared to 2020 of $2.0 million associated with trade receivables~~

~~Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020~~


~~Selling, general and administrative expenses increased due to the following:~~
n Higher operating costs due to the lapse of temporary cost savings in the prior year, partially offset by the reduction in costs resulting from operational efficiencies associated with our structural cost savings initiatives
n Increase in commissions and sales incentive compensation driven by increased sales volume
Partially offset by:
n ~~Increased expenses as a result of acquisitions~~
n ~~Increased compensation-related expenses compared to the prior year, which were lower due to temporary COVID-19 related cost reduction actions~~
n ~~Unfavorable~~Favorable impacts of currency translation, due primarily to the fluctuations of the Euro ~~and Chinese Renminbi~~ compared to the U.S. dollar
~~Partially offset by:~~
n ~~Lower bad debt expenses in 2021 compared to 2020 of $11.5 million associated with trade receivables~~

Other operating ~~(benefits)~~ charges

Three Months Ended September 30, 2021 vs 2020 Nine Months Ended September 30, 2021 vs 2020
2021 2020 $ Change % Change 2021 2020 $ Change % Change
Other operating (benefits) charges $ (7.6) $ 42.6 $ (50.2) (117.8) % $ 49.5 $ 98.9 $ (49.4) (49.9) %


	Three Months Ended March 31,	2022 vs 2021
		2022		2021		$ Change		% Change
Other operating charges		$	7.7	$	102.8	$	(95.1)	(92.5)	%

Three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020~~March 31, 2021


Other operating ~~(benefits)~~ charges changed due to the following:
n Decrease of ~~$26.1~~$94.3 million ~~in termination benefits and other employee related costs associated with our cost saving initiatives from $35.7 million in the prior year to $9.6 million in the current year~~
n~~Benefits of $18.7 million in the current year~~ related to a charge recorded in 2021 related to probable liabilities for an operational matter in our Mobility Coatings segment discussed further in Note 6 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q
n ~~Gain~~Decrease of ~~$7.9~~$5.4 million associated with retention awards earned in ~~the current year related to the sale of a manufacturing facility~~2021

n ~~Decrease~~Impacts of ~~$4.8 million associated with retention award amortization, from $6.9 million in the prior year~~currency translation were immaterial when compared to ~~$2.1 million the current year~~2021
Partially offset by:
n Increase of ~~$7.9~~$4.1 million as a result of incremental reserves for accounts receivable related to ~~expenses for acquisition activity during the current year~~sanctions imposed on Russia

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~~Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020~~


~~Other operating (benefits) charges changed due to the following:~~
n~~Decrease of $35.3 million in termination benefits and other employee related costs associated with our cost saving initiatives from $70.4 million in the prior year to $35.1 million in the current year~~
nDecrease of $15.4 million associated with the review of strategic alternatives that was concluded in March 2020 and retention awards, from $25.1 million in the prior year to $9.7 million in the current year
n ~~Gain of $7.9 million in the current year related to the sale of a manufacturing facility~~
nDecrease of $4.3 in impairment charges primarily related to impairments and associated write-downs in the prior year resulting from our decision to exit the Performance Coatings segment business in Argentina, which did not exist in the current year
~~Partially offset by:~~
n~~Increase of $9.3 million related to expenses for acquisition activity during the current year~~
nIncrease of $3.9 million in the current year as a result of a charge recorded in relation to probable liabilities for an operational matter in our Mobility Coatings segment discussed further in Note 6 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q

Research and development expenses

Three Months Ended September 30, 2021 vs 2020 Nine Months Ended September 30, 2021 vs 2020
2021 2020 $ Change % Change 2021 2020 $ Change % Change
Research and development expenses $ 15.4 $ 13.4 $ 2.0 14.9 % $ 46.8 $ 41.2 $ 5.6 13.6 %


	Three Months Ended March 31,	2022 vs 2021
		2022		2021		$ Change		% Change
Research and development expenses		$	16.4	$	15.6	$	0.8	5.1	%

Three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020~~March 31, 2021


Research and development expenses increased due to the following:
n ~~Increase in compensation-related~~Increased operating expenses ~~and other spending due to the absence of temporary cost savings initiatives that were in place during 2020~~

~~Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020~~


~~Research~~driven by increased research and development ~~expenses increased due to the following:~~activity
n ~~Increase~~Increased costs from companies acquired in ~~compensation-related expenses and other spending due to the absence of temporary cost savings initiatives that were in place during 2020~~2021
n Impacts of currency translation were immaterial when compared to 2021

Amortization of acquired intangibles

Three Months Ended September 30, 2021 vs 2020 Nine Months Ended September 30, 2021 vs 2020
2021 2020 $ Change % Change 2021 2020 $ Change % Change
Amortization of acquired intangibles $ 29.8 $ 28.6 $ 1.2 4.2 % $ 88.1 $ 84.5 $ 3.6 4.3 %


	Three Months Ended March 31,	2022 vs 2021
		2022		2021		$ Change		% Change
Amortization of acquired intangibles		$	32.8	$	29.0	$	3.8	13.1	%

Three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020~~


~~Amortization of acquired intangibles increased due to the following:~~
n ~~Amortization related to intangible assets acquired in our recent acquisitions~~
n ~~Unfavorable impacts of foreign currency translation, primarily related to fluctuations of the Euro compared to the U.S. dollar~~

~~Nine months ended September 30,~~March 31, 2021 ~~compared to the nine months ended September 30, 2020~~


Amortization of acquired intangibles increased due to the following:
n Amortization related to ~~intangible assets acquired in our recent~~2021 acquisitions
n~~Unfavorable impacts~~ Impacts of ~~foreign~~ currency translation ~~primarily related to fluctuations of the Euro~~were immaterial when compared to ~~the U.S. dollar~~2021

~~Table of Contents~~

Interest expense, net

Three Months Ended September 30, 2021 vs 2020 Nine Months Ended September 30, 2021 vs 2020
2021 2020 $ Change % Change 2021 2020 $ Change % Change
Interest expense, net $ 33.8 $ 39.8 $ (6.0) (15.1) % $ 100.7 $ 112.4 $ (11.7) (10.4) %


	Three Months Ended March 31,	2022 vs 2021
		2022		2021		$ Change		% Change
Interest expense, net		$	32.6	$	33.5	$	(0.9)	(2.7)	%

Three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020~~March 31, 2021


Interest expense, net decreased primarily due to the following:
n Decrease in variable and fixed interest rates due to LIBOR decreases on our variable rate debt over the comparable period and benefits on our fixed rate debt obtained during our debt refinancing activity in November 2020
n Favorable impacts of our derivative instruments used to hedge the variable interest rate exposure on certain debt arrangements

~~Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020~~


~~Interest expense, net decreased primarily due to the following:~~
n ~~Decrease in variable and fixed interest rates due~~Impacts of currency translation were immaterial when compared to ~~LIBOR decreases on our variable rate debt over the comparable period and benefits on our fixed rate debt obtained during our debt refinancing activity in November 2020~~2021
~~Partially offset by:~~
n ~~Unfavorable impacts of our derivative instruments used to hedge the variable interest rate exposure on certain debt arrangements~~

Other expense (income) ~~expense,~~, net

Three Months Ended September 30, 2021 vs 2020 Nine Months Ended September 30, 2021 vs 2020
2021 2020 $ Change % Change 2021 2020 $ Change % Change
Other (income) expense, net $ (2.4) $ 2.3 $ (4.7) 204.3 % $ (10.9) $ 0.9 $ (11.8) (1,311.1) %


	Three Months Ended March 31,	2022 vs 2021
		2022		2021		$ Change		% Change
Other expense (income), net		$	1.8	$	(0.4)	$	2.2	(550.0)	%

Three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020~~

March 31, 2021


Other expense (income) ~~expense,~~, net changed due to the following:


n ~~Favorable~~Unfavorable impact of foreign exchange ~~gain~~losses of ~~$6.2~~$0.8 million when compared with the prior year period
~~Partially offset by:~~
n ~~A net benefit~~Increased expenses of ~~$0.7~~$0.3 million during ~~the prior period~~2022 as a result of non-service pension ~~curtailment and settlements released from accumulated other comprehensive loss, partially offset by special termination benefits, which does not exist in the current year~~

~~Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020~~


~~Other (income) expense, net changed due to the following:~~
n ~~Income of $8.3 million recorded in 2021 related to a law change with respect to certain Brazilian indirect taxes~~costs
n ~~Reduction in debt extinguishment and refinancing related costs~~Indemnity loss of ~~$2.2~~$0.3 million
n ~~Favorable impact~~ during 2022 as a result of ~~foreign exchange losses of $4.6 million when compared with~~offsetting tax reserves released during the ~~prior year~~ period
~~Partially offset by:~~
n A net benefit of $2.5 million during the prior period as a result of pension curtailment and settlements released from accumulated other comprehensive loss, partially offset by special termination benefits, which does not exist in the current year

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Provision ~~(benefit)~~ for income taxes


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2021			2020			2021			2020					2022			2021
Income before income taxes	Income before income taxes	$	93.3		$	99.6		$	277.9		$	29.0		Income before income taxes		$	51.9		$	19.5
Provision (benefit) for income taxes		24.4			17.1			66.9			(22.7)
Provision for income taxes														Provision for income taxes		11.0			3.8
Statutory U.S. Federal income tax rate	Statutory U.S. Federal income tax rate	21.0		%	21.0		%	21.0		%	21.0		%	Statutory U.S. Federal income tax rate		21.0		%	21.0		%
Effective tax rate	Effective tax rate	26.2		%	17.2		%	24.1		%	(78.3)		%	Effective tax rate		21.2		%	19.5		%
Effective tax rate vs. statutory U.S. Federal income tax rate	Effective tax rate vs. statutory U.S. Federal income tax rate	5.2		%	(3.8)		%	3.1		%	(99.3)		%	Effective tax rate vs. statutory U.S. Federal income tax rate		0.2		%	(1.5)		%


		(Favorable) Unfavorable Impact										(Favorable) Unfavorable Impact
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
Items impacting the effective tax rate vs. statutory U.S. federal income tax rate	Items impacting the effective tax rate vs. statutory U.S. federal income tax rate	2021		2020		2021		2020		Items impacting the effective tax rate vs. statutory U.S. federal income tax rate		2022		2021
Earnings generated in jurisdictions where the statutory rate is different from the U.S. Federal rate (1)	Earnings generated in jurisdictions where the statutory rate is different from the U.S. Federal rate (1)	$	(3.7)	$	(7.0)	$	(10.7)	$	(12.9)	Earnings generated in jurisdictions where the statutory rate is different from the U.S. Federal rate (1)		$	(6.0)	$	(4.9)
Changes in valuation allowance	Changes in valuation allowance	4.7		(1.1)		17.2		(3.5)		Changes in valuation allowance		1.1		7.0
Foreign exchange gain (loss), net	Foreign exchange gain (loss), net	(0.6)		2.1		(1.2)		10.6		Foreign exchange gain (loss), net		2.3		(1.4)
Non-deductible expenses and interest	Non-deductible expenses and interest	2.1		0.9		4.2		4.0		Non-deductible expenses and interest		0.5		0.7
Increase in unrecognized tax benefits(2)		1.8		1.8		5.5		21.1
Intra-entity asset transfer (3)		—		—		—		(50.5)
Foreign taxes		1.2		0.9		4.5		4.4
Changes in unrecognized tax benefits										Changes in unrecognized tax benefits		0.2		2.2

(1) Primarily related to earnings in Bermuda, Germany, Luxembourg, and Switzerland.

~~(2) In 2020, the Company recorded charges of $14.3 million related to tax positions in Germany.~~

~~(3) In 2020, the Company recorded a tax benefit related to the step-up of tax-deductible basis upon transfer of certain intellectual property rights to our Swiss subsidiary.~~

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SEGMENT RESULTS

The Company's products and operations are managed and reported in two operating segments: Performance Coatings and Mobility Coatings. See Note 17 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

Performance Coatings Segment


		Three Months Ended September 30,						2021 vs 2020				Nine Months Ended September 30,						2021 vs 2020					Three Months Ended March 31,	2022 vs 2021
		2021			2020			$ Change		% Change		2021			2020			$ Change		% Change				2022			2021			$ Change		% Change
Net sales	Net sales	$	779.2		$	682.7		$	96.5	14.1	%	$	2,292.3		$	1,812.5		$	479.8	26.5	%	Net sales		$	814.4		$	707.3		$	107.1	15.1	%
Price/Mix effect																						Price/Mix effect										10.7	%
Impact of acquisitions																						Impact of acquisitions										5.4	%
Volume effect	Volume effect									5.2	%									16.3	%	Volume effect										2.5	%
Impact of acquisitions										2.7	%									1.6	%
Price/Mix effect										5.0	%									5.2	%
Exchange rate effect	Exchange rate effect									1.2	%									3.4	%	Exchange rate effect										(3.5)	%

Adjusted EBIT	Adjusted EBIT	$	122.8		$	133.9		$	(11.1)	(8.3)	%	$	379.7		$	214.8		$	164.9	76.8	%	Adjusted EBIT		$	94.6		$	117.2		$	(22.6)	(19.3)	%
Adjusted EBIT Margin	Adjusted EBIT Margin	15.8		%	19.6		%					16.6		%	11.9		%					Adjusted EBIT Margin		11.6		%	16.6		%

Three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020~~

March 31, 2021


Net sales increased due to the following:
n Higher ~~sales volumes across both end-markets as a result of demand recovery from the impacts of COVID-19~~
n ~~Higher~~ average selling prices and product mix across both end-markets ~~driven by~~and all regions, primarily as a result of pricing actions taken to offset input price ~~actions~~inflation within both end-markets ~~to offset raw material inflation~~
n ~~Favorable impact~~Increased sales from ~~acquisitions closed during~~companies acquired in 2021
n ~~Favorable~~Higher sales volumes across most regions driven primarily by Refinish
Partially offset by:
n Unfavorable impacts of currency translation, due primarily to the fluctuations of the Euro and ~~Chinese Renminbi~~Turkish Lira compared to the U.S. dollar


Adjusted EBIT and Adjusted EBIT margins decreased due to the following:
n Higher variable input costs across both end-markets and all regions due to raw material, logistics and energy inflation
n Higher operating ~~costs~~expenses across both end-markets and all regions due to ~~the lapse of~~inflation and increased activity as temporary COVID-19 related cost savings ininitiatives have lapsed
n Unfavorable impacts of currency translation, due primarily to the ~~prior year, partially offset by~~fluctuations of the ~~reduction in costs resulting from operational efficiencies associated with our structural cost savings initiatives~~Euro compared to the U.S. dollar
Partially offset by:
n Higher average selling prices and product mix across both end-markets and ~~most~~all regions
n ~~Higher sales volumes across both end-markets as a result of demand recovery from the impacts of COVID-19~~

Table of Contents

Mobility Coatings Segment


	Three Months Ended March 31,	2022 vs 2021
		2022			2021			$ Change		% Change
Net sales		$	359.7		$	356.3		$	3.4	1.0	%
Price/Mix effect										4.9	%
Exchange rate effect										(2.0)	%
Volume effect										(1.9)	%


Adjusted EBIT		$	0.5		$	39.2		$	(38.7)	(98.7)	%
Adjusted EBIT Margin		0.1		%	11.0		%

Three months ended March 31, 2022 compared to the three months ended March 31, 2021


Net sales increased due to the following:
n Higher average selling prices and product mix across both end-markets and most regions, primarily as a result of pricing actions taken to offset input price inflation
Partially offset by:
n Unfavorable impacts of currency translation, due primarily to the fluctuations of the Euro and Turkish Lira compared to the U.S. dollar
n Lower sales volumes across most regions driven by Light Vehicle as a result of customer production restraints, partially offset by increased volumes in Commercial Vehicle


Adjusted EBIT and Adjusted EBIT margins decreased ~~during the three months ended September 30, 2021~~ due to the following:
n Higher variable input costs across both end-markets and all regions due to raw material, logistics and energy inflation
n Higher operating costs due to the lapse of temporary cost savings in the prior year, partially offset by the reduction in costs resulting from operational efficiencies associated with our structural cost savings initiatives
~~Partially offset by:~~
n ~~Higher average selling prices and product mix across both end-markets and most regions~~

~~Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020~~


~~Net sales increased due to the following:~~
n ~~Higher sales volumes across both end-markets as a result of demand recovery from the impacts of COVID-19~~
n ~~Higher average selling prices and product mix across both end-markets, driven by price actions within both end-markets and improved product mix in Refinish North America~~
n ~~Favorable impacts of currency translation, due primarily to the fluctuations of the Euro and Chinese Renminbi compared to the U.S. dollar~~
n ~~Favorable impact from acquisitions closed during 2021~~

~~Table of Contents~~


~~Adjusted EBIT increased due to the following:~~
n ~~Higher sales volumes across both end-markets as a result of demand recovery from the impacts of COVID-19~~
n ~~Lower manufacturing expenses of $14.3 million compared to the prior year as a result of underutilized manufacturing assets in the prior year period due to COVID-19 demand impacts~~
n ~~Higher average selling prices and product mix across both end-markets and most regions~~
n ~~Favorable impacts of currency translation, due primarily to the fluctuations of the Euro, Chinese Renminbi, and Canadian Dollar compared to the U.S. dollar~~
~~Partially offset by:~~
n ~~Higher variable input costs across both end-markets and all regions due to raw material inflation~~

~~Adjusted EBIT margins increased during the nine months ended September 30, 2021 due to the following:~~
n ~~Higher sales volumes across both end-markets as a result of demand recovery from the impacts of COVID-19~~
n ~~Lower manufacturing expenses of $14.3 million compared to the prior year as a result of underutilized manufacturing assets in the prior year period due to COVID-19 demand impacts~~
n ~~Higher average selling prices and product mix across both end-markets, driven by price actions within both end-markets and improved product mix in Refinish North America~~
~~Partially offset by:~~
n ~~Higher variable input costs across both end-markets and all regions due to raw material inflation~~

~~Mobility Coatings Segment~~

Three Months Ended September 30, 2021 vs 2020 Nine Months Ended September 30, 2021 vs 2020
2021 2020 $ Change % Change 2021 2020 $ Change % Change
Net sales $ 309.4 $ 344.2 $ (34.8) (10.1) % $ 986.7 $ 850.6 $ 136.1 16.0 %
Volume effect (15.2) % 12.0 %
Price/Mix effect 3.6 % 1.9 %
Exchange rate effect 1.5 % 2.1 %
Adjusted EBIT $ (2.7) $ 48.5 $ (51.2) (105.6) % $ 42.2 $ 35.0 $ 7.2 (20.6) %
Adjusted EBIT Margin (0.9) % 14.1 % 4.3 % 4.1 %

~~Three months ended September 30, 2021 compared to the three months ended September 30, 2020~~


~~Net sales decreased due to the following:~~
n Lower sales volumes across most regions driven by Light Vehicle as a result of customer production ~~limitations due to semiconductor chip and other supply chain shortages~~restraints, partially offset by increased volumes in Commercial Vehicle
Partially offset by:
n Higher average selling prices and product mix across both end-markets and most regions, ~~driven by price actions~~
n ~~Favorable impacts of currency translation, due~~ primarily ~~to the fluctuations of the Chinese Renminbi, Brazilian Real and Euro compared to the U.S. dollar~~


~~Adjusted EBIT decreased due to the following:~~
n ~~Lower sales volumes driven by Light Vehicle~~ as a result of ~~customer production limitations due~~pricing actions taken to ~~semiconductor chip and other supply chain shortages~~
n ~~Higher variable~~offset input ~~costs across both end-markets and all regions due to raw material~~price inflation
n Higher operating costs due to the lapse of temporary cost savings in the prior year, partially offset by the reduction in costs resulting from operational efficiencies associated with our structural cost savings initiatives
~~Partially offset by:~~
n ~~Higher average selling prices and product mix driven by driven by price actions in Light Vehicle~~
~~Adjusted EBIT margins decreased during the three months ended September 30, 2021 due to the following:~~
n ~~Lower sales volumes to cover fixed costs~~
n ~~Higher variable input costs across both end-markets and all regions due to raw material inflation~~
n Higher operating costs due to the lapse of temporary cost savings in the prior year, partially offset by the reduction in costs resulting from operational efficiencies associated with our structural cost savings initiatives

~~Table of Contents~~

~~Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020~~


~~Net sales increased due to the following:~~
n Higher sales volumes across both end-markets as a result of demand recovery from the impacts of COVID-19, partially offset by customer production limitations due to semiconductor chip and other supply chain shortages
n ~~Favorable impacts of currency translation, due primarily to the fluctuations of the Euro and Chinese Renminbi compared to the U.S. dollar~~
n ~~Higher average selling prices and product mix driven by driven by Light Vehicle price actions within most regions~~


~~Adjusted EBIT increased due to the following:~~
n Higher sales volumes across both end-markets as a result of demand recovery from the impacts of COVID-19, partially offset by customer production limitations due to semiconductor chip and other supply chain shortages
n ~~Higher average selling price and product mix driven by price actions~~
n ~~Lower manufacturing expenses of $20.9 million compared to the prior year as a result of underutilized manufacturing assets in the prior year period due to COVID-19 demand impacts~~
~~Partially offset by:~~
n ~~Higher variable input costs due to raw material inflation~~
~~Adjusted EBIT margins remained roughly the same during the nine months ended September 30, 2021 due to the following:~~
n ~~Higher sales volumes across both end-markets as a result of demand recovery from the impacts of COVID-19 to cover fixed costs~~
n ~~Higher average selling price and product mix driven by driven by price actions~~
n ~~Lower manufacturing expenses of $20.9 million compared to the prior year as a result of underutilized manufacturing assets in the prior year period due to COVID-19 demand impacts~~
~~Largely offset by:~~
n ~~Higher variable input costs due to raw material inflation~~

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash on hand, cash flow from operations and available borrowing capacity under our Senior Secured Credit Facilities.

At ~~September 30, 2021,~~March 31, 2022, availability under the Revolving Credit Facility was ~~$516.0~~$527.9 million, net of ~~$34.0~~$22.1 million of letters of credit outstanding. All such availability may be utilized without violating any covenants under the credit agreement governing such facility or the indentures governing the Senior Notes. At ~~September 30, 2021,~~March 31, 2022, we had ~~$14.9~~$21.2 million of outstanding borrowings under other lines of credit. Our remaining available borrowing capacity under other lines of credit in certain non-U.S. jurisdictions totaled ~~$31.6~~$25.2 million.

We, or our affiliates, at any time and from time to time, may purchase shares of our common stock or the Senior Notes, and may prepay our Term Loans or other indebtedness. Any such purchases of our common stock or Senior Notes may be made through the open market or privately negotiated transactions with third parties or pursuant to one or more redemption, tender or exchange offers or otherwise, upon such terms and at such prices, as well as with such consideration, as we, or any of our affiliates, may determine.

We have various supplier finance programs in place around the world. We partner with large banking institutions and utilize these programs to enhance our liquidity profile. Depending on the program, the liabilities under the program are classified either as accounts payable or current portion of borrowings on our consolidated balance sheets. Our facility in China is more fully described in Note 15 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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Cash Flows


		Nine Months Ended September 30,					Three Months Ended March 31,
(In millions)	(In millions)	2021		2020		(In millions)	2022		2021
Net cash provided by (used for):	Net cash provided by (used for):					Net cash provided by (used for):
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	211.0	$	51.7	Net income	$	40.9	$	15.7
Depreciation and amortization	Depreciation and amortization	234.7		243.6		Depreciation and amortization	77.7		76.4
Amortization of deferred financing costs and original issue discount	Amortization of deferred financing costs and original issue discount	6.7		6.8		Amortization of deferred financing costs and original issue discount	2.4		2.2

Deferred income taxes	Deferred income taxes	9.3		(57.2)		Deferred income taxes	(2.7)		(18.3)
Realized and unrealized foreign exchange losses, net	Realized and unrealized foreign exchange losses, net	9.5		12.7		Realized and unrealized foreign exchange losses, net	2.4		8.6
Stock-based compensation	Stock-based compensation	11.7		15.9		Stock-based compensation	5.3		3.6

Gain on sale of facility		(8.9)		—

Interest income on swaps designated as net investment hedges	Interest income on swaps designated as net investment hedges	(14.3)		(11.0)		Interest income on swaps designated as net investment hedges	(6.2)		(3.5)
Other non-cash, net	Other non-cash, net	11.3		8.6		Other non-cash, net	(1.6)		1.4
Net income adjusted for non-cash items	Net income adjusted for non-cash items	471.0		271.1		Net income adjusted for non-cash items	118.2		86.1
Changes in operating assets and liabilities	Changes in operating assets and liabilities	(181.0)		(40.2)		Changes in operating assets and liabilities	(162.1)		(46.5)
Operating activities	Operating activities	290.0		230.9		Operating activities	(43.9)		39.6
Investing activities	Investing activities	(719.9)		(39.3)		Investing activities	(10.3)		(27.8)
Financing activities	Financing activities	(279.5)		136.8		Financing activities	(208.1)		(92.5)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(16.5)		(4.7)		Effect of exchange rate changes on cash	(2.1)		(13.5)

Net (decrease) increase in cash, cash equivalents and restricted cash		$	(725.9)	$	323.7
Net decrease in cash						Net decrease in cash	$	(264.4)	$	(94.2)

~~Nine~~Three months ended ~~September 30,~~March 31, 2022

Net Cash Used for Operating Activities

Net cash used for operating activities for the three months ended March 31, 2022 was $43.9 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $118.2 million. This was offset by net uses of working capital of $162.1 million, for which the most significant drivers were increases in inventories, accounts and notes receivable, other accruals and prepaid expenses and other assets of $91.5 million, $86.2 million, $66.7 million and $32.9 million, respectively. These outflows were primarily driven by inflation of raw material, logistics and energy costs, timing of collections and largely seasonal cash payments for employee related benefits. The outflows were partially offset by increases in accounts payable of $120.4 million primarily due to raw material cost inflation, as well as elevated logistics and energy costs.

Net Cash Used for Investing Activities

Net cash used for investing activities for the three months ended March 31, 2022 was $10.3 million. The primary use was for purchases of property, plant and equipment of $42.5 million, partially offset by $25.0 million of proceeds from settlements of swaps designated as net investment hedges, which are discussed further in Note 16 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Net Cash Used for Financing Activities

Net cash used for financing activities for the three months ended March 31, 2022 was $208.1 million. The primary uses were for the purchase of our common stock totaling $175.1 million and payments of $30.9 million on borrowings.

Other Impacts on Cash

Currency exchange impact on cash for the three months ended March 31, 2022 were unfavorable by $2.1 million, which was driven primarily by fluctuations in the Euro, Russian Ruble and British Pound compared to the U.S. Dollar, partially offset by fluctuations in the Brazilian Real and Mexican Peso compared to the U.S. Dollar.

Table of Contents

Three months ended March 31, 2021

Net Cash Provided by Operating Activities

Net cash provided by operating activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 was ~~$290.0~~$39.6 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of ~~$471.0~~$86.1 million. This was offset by net uses of working capital of ~~$181.0~~$46.5 million, for which the most significant drivers were increases in accounts and notes receivable, inventory and prepaid expenses and other assets of ~~$168.5~~$52.6 million, ~~$107.8~~$36.2 million and ~~$64.3~~$18.0 million, respectively. These outflows were primarily driven by ~~insurance receivables~~timing of collections and building inventory to pre-COVID levels to align with returning demand and inflation of raw material costs. The outflows were partially offset by increases in accounts payable of $33.4 million due to increased production and inflation of raw material costs and other accruals of $30.7 million due to accruals related to the operational matter within the Mobility Coatings segment, which is discussed further in Note 6 to the ~~unaudited~~ condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, ~~inflation of raw material costs and building inventory to pre-COVID-19 levels to align with returning demand. The outflows were~~ partially offset by ~~increases in accounts payable~~the timing of ~~$88.3 million due to increased production~~cash payments for employee related benefits, customer incentive payments and ~~inflation of raw material costs and other accruals of $61.3 million primarily due to accruals~~payments related to ~~the operational matter within the Mobility Coatings segment.~~normal seasonal operating activities.

Net Cash Used for Investing Activities

Net cash used for investing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 was ~~$719.9~~$27.8 million. The primary ~~uses were $647.3 million~~use was for business acquisitions during April and September 2021, which are discussed further in Note 3 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, and purchases of property, plant and equipment of ~~$98.7~~$31.8 million, partially offset by interest proceeds on swaps designated as net investment hedges of $3.5 million.

Net Cash Used for Financing Activities

Net cash used for financing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 was ~~$279.5~~$92.5 million. The primary uses were for the purchase of our common stock totaling ~~$213.8~~$63.7 million and payments of ~~$74.6~~$26.7 million on borrowings.

Other Impacts on Cash

Currency exchange ~~impacts~~impact on cash for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 were unfavorable by ~~$16.5 million, which was driven primarily by fluctuations in the Euro compared to the U.S. Dollar.~~

~~Table of Contents~~

~~Nine months ended September 30, 2020~~

~~Net Cash Provided by Operating Activities~~

Net cash provided by operating activities for the nine months ended September 30, 2020 was $230.9 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $271.1 million. This was offset by net uses of working capital of $40.2 million, for which the most significant drivers were increases in prepaid expenses and other assets of $60.8 million and other accrued liabilities of $40.9 million, partially offset by decreases in inventory of $43.2 million during the nine months ended September 30, 2020. These outflows were primarily related to the timing of cash payments for employee-related benefits, customer incentive payments, payments of normal seasonal operating activities and decreased business activity associated with the COVID-19 downturn.

~~Net Cash Used for Investing Activities~~

Net cash used for investing activities for the nine months ended September 30, 2020 was $39.3 million. The primary use was for purchases of property, plant and equipment of $56.2 million, partially offset by interest proceeds on swaps designated as net investment hedges of $11.0 million.

~~Net Cash Provided by Financing Activities~~

Net cash provided by financing activities for the nine months ended September 30, 2020 was $136.8 million. This change was driven primarily by cash proceeds of $500.0 million from the issuance of our 2027 Senior Notes, partially offset by the voluntary prepayment of $300.0 million of the outstanding principal on the 2024 Dollar Term Loans. Also offsetting the net inflows were routine repayments of $48.5 million on short-term and long-term borrowings, payments of financing related costs of $8.4 million and purchases of noncontrolling interests of $5.8 million.

~~Other Impacts on Cash~~

~~Currency exchange impacts on cash for the nine months ended September 30, 2020 were unfavorable by $4.7~~$13.5 million, which was driven primarily by weakening of the ~~Mexican Peso, South African Rand, Brazilian Real and Russian Ruble~~Euro compared to the U.S. Dollar.

Financial Condition

We had cash and cash equivalents at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 of ~~$627.7~~$576.2 million and ~~$1,360.9~~$840.6 million, respectively. Of these balances, ~~$393.3~~$385.0 million and ~~$761.7~~$471.9 million were maintained in non-U.S. jurisdictions as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. We believe our organizational structure allows us the necessary flexibility to move funds throughout our subsidiaries to meet our operational working capital needs.

Our business may not generate sufficient cash flow from operations and future borrowings may not be available under our Senior Secured Credit Facilities in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs, including planned capital expenditures. In such circumstances, we may need to refinance all or a portion of our indebtedness on or before maturity. We may not be able to refinance any of our indebtedness on commercially reasonable terms or at all. If we cannot service our indebtedness, we may have to take actions such as selling assets, selling additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances. Our primary sources of liquidity are cash on hand, cash flow from operations and available borrowing capacity under our Senior Secured Credit Facilities. Based on our forecasts, we believe that cash flow from operations, available cash on hand and available borrowing capacity under our Senior Secured Credit Facilities and existing lines of credit will be adequate to service debt, fund our cost saving initiatives, meet liquidity needs and fund necessary capital expenditures for the next twelve months.

Our ability to make scheduled payments of principal or interest on, or to refinance, our indebtedness or to fund working capital requirements, capital expenditures and other current obligations will depend on our ability to generate cash from operations. Such cash generation is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, including the effects of ~~COVID-19.~~COVID-19 and Russia's conflict with Ukraine.

If required, our ability to raise additional financing and our borrowing costs may be impacted by short and long-term debt ratings assigned by independent rating agencies, which are based, in significant part, on our performance as measured by certain credit metrics such as interest coverage and leverage ratios. Our highly leveraged nature may limit our ability to procure additional financing in the future.

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The following table details our borrowings outstanding at the periods indicated:


(In millions)	(In millions)	September 30, 2021		December 31, 2020		(In millions)	March 31, 2022		December 31, 2021
2024 Dollar Term Loans	2024 Dollar Term Loans	$	2,045.0	$	2,063.2	2024 Dollar Term Loans	$	2,032.8	$	2,038.9

2025 Euro Senior Notes	2025 Euro Senior Notes	525.2		552.1		2025 Euro Senior Notes	501.8		508.8
2027 Dollar Senior Notes	2027 Dollar Senior Notes	500.0		500.0		2027 Dollar Senior Notes	500.0		500.0
2029 Dollar Senior Notes	2029 Dollar Senior Notes	700.0		700.0		2029 Dollar Senior Notes	700.0		700.0
Short-term and other borrowings	Short-term and other borrowings	106.4		118.0		Short-term and other borrowings	110.6		113.8
Unamortized original issue discount	Unamortized original issue discount	(5.1)		(6.3)		Unamortized original issue discount	(4.1)		(4.6)
Unamortized deferred financing costs	Unamortized deferred financing costs	(29.0)		(34.3)		Unamortized deferred financing costs	(25.8)		(27.3)
Total borrowings, net	Total borrowings, net	3,842.5		3,892.7		Total borrowings, net	3,815.3		3,829.6
Less:	Less:					Less:
Short-term borrowings	Short-term borrowings	19.0		29.9		Short-term borrowings	51.8		55.4
Current portion of long-term borrowings	Current portion of long-term borrowings	24.3		24.3		Current portion of long-term borrowings	24.3		24.3
Long-term debt	Long-term debt	$	3,799.2	$	3,838.5	Long-term debt	$	3,739.2	$	3,749.9

Our indebtedness, including the Senior Secured Credit Facilities and Senior Notes, is more fully described in Note 18 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

We believe that we continue to maintain sufficient liquidity to meet our requirements, including our leverage and associated interest as well as our working capital needs. During the nine months ended September 30, 2021, we entered into the Tenth Amendment to the Credit Agreement in order to, among other things, increase the commitments available pursuant to the Revolving Credit Facility from $400.0 million to $550.0 million and extend the maturity from 2024 to 2026, provided that such date will be accelerated in certain circumstances as set forth in the Tenth Amendment. As a result, availabilityAvailability under the Revolving Credit Facility was ~~$516.0 million and $366.0~~$527.9 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020, respectively,~~2021, all of which may be borrowed by us without violating any covenants under the Credit Agreement governing such facility or the indentures governing the Senior Notes.

Contractual Obligations

Information related to our material contractual obligations and cash requirements can be found in Note 7 and Note 18 of the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. There have been no material changes in the Company's contractual obligations ~~since~~and cash requirements as reported in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Off-Balance Sheet Arrangements

See Note 6 ~~"Commitments and Contingencies"~~ to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for disclosure of our guarantees of certain customers’ obligations to third parties.

Recent Accounting Guidance

See Note 1 "Basis of Presentation and Summary of Significant Accounting Policies" to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a summary of recent accounting guidance.None.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical accounting policies are those accounting policies that can have a significant impact on the presentation of our financial condition and results of operations, and that require the use of complex and subjective estimates based upon past experience and management’s judgment. Because of the uncertainty inherent in such estimates, actual results may differ materially from these estimates. The policies applied in preparing our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q are those that management believes are the most dependent on estimates and assumptions. There have been no material changes to our critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. For a description of our critical accounting policies and estimates as well as a listing of our significant accounting policies, see “Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” and “Note 1 - Basis of Presentation and Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the market risks previously disclosed in our financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As required by Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), the Company carried out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of ~~September 30, 2021.~~March 31, 2022.

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 ~~September 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are from time to time party to legal proceedings that arise in the ordinary course of business. We are not involved in any litigation other than that which has arisen in the ordinary course of business. We do not expect that any currently pending lawsuits will have a material adverse effect upon our results of operations, financial condition or cash flows on a consolidated annual ~~basis.~~basis except as is set forth in Note 6 to the interim unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Company reasonably believes will exceed a specified threshold. Consistent with SEC rules, the Company will continue to use a threshold of $1 million for such proceedings. At this time, the Company is not aware of any matters that exceed this threshold and that meet the other conditions for disclosure except for the matter summarized below.

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, in January 2022, the Company entered into a settlement agreement with the California South Coast Air Quality Management District (the "District") in order to settle claims by the District alleging that certain of the Company's products failed to comply with applicable volatile organic compound limits imposed under California law. Pursuant to the terms of the settlement agreement, the Company agreed to pay the District $1,377,328 (the “Settlement Amount”) in full settlement of the claims and without admitting any liability or wrongdoing. In February 2022, the Company paid the Settlement Amount to the District.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from the risks previously reported in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table summarizes the Company's share repurchase activity through its share repurchase program for the three months ended ~~September 30, 2021:~~March 31, 2022:


(in millions, except per share data)	(in millions, except per share data)							(in millions, except per share data)
Month	Month	Total Number of Shares Purchased(1)	Average Price Paid per Share(1)		Total Number of Shares Purchased as Part of Publicly Announced Programs(1)	Approximate Dollar Value of Shares That May Yet Be Purchased Under Our Share Repurchase Program(1)(2)		Month	Total Number of Shares Purchased(1)	Average Price Paid per Share(1)		Total Number of Shares Purchased as Part of Publicly Announced Programs(1)	Approximate Dollar Value of Shares That May Yet Be Purchased Under Our Share Repurchase Program(1)
July 2021		1.4	$	28.97	1.4	$	697.5
August 2021		—	—		—	697.5
September 2021		1.7	29.09		1.7	647.4
January 2022								January 2022	0.3	$	28.70	0.3	$	607.4
February 2022								February 2022	3.1	28.99		3.1	517.4
March 2022								March 2022	3.0	25.24		3.0	442.3
Total	Total	3.1	$	29.04	3.1	$	647.4	Total	6.4	$	27.24	6.4	$	442.3

(1) All shares were repurchased through the share repurchase program announced in March 2017 (the "Program"). Under the Program, we repurchased $90.1 million of our common shares during the three months ended September 30, 2021. At September 30, 2021, the Company had remaining authorization to repurchase $647.4 million of shares. There is no expiration date on the Program.

~~(2)~~ In April 2021, our Board of Directors authorized an increase in the Program by $625.0 million, bringing the total size of the Program to $1.3 billion, of which we have already purchased ~~$652.6~~$857.7 million. Under the Program, we repurchased $175.1 million of our common shares during the three months ended March 31, 2022. At March 31, 2022, the Company had remaining authorization to repurchase $442.3 million of shares. There is no expiration date on the Program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS


EXHIBIT NO.			DESCRIPTION OF EXHIBITS

2.1*10.1			~~Sale and Purchase~~Form of Performance Share Unit Award Agreement ~~related to U-POL Holdings Limited, dated as of July 6, 2021, by and between the Institutional and Management Sellers and Axalta Coating Systems UK Holding Limited and Axalta Coating Systems Ltd.~~for U.S. Employees

2.2*10.2			~~Minority Sale and Purchase~~Form of Restricted Stock Unit Award Agreement ~~related to U-POL Holdings Limited, dated as of July 6, 2021, by and between the Minority Sellers and Axalta Coating Systems UK Holding Limited and Axalta Coating Systems Ltd.~~for U.S. Employees

31.1			Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2			Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1†			Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2†			Certification of Chief Financial Officer 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. The document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document

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)

*			Certain schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

†			This certificate is being furnished solely to accompany the report pursuant to 18 U.S.C. Section 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.



		AXALTA COATING SYSTEMS LTD.

Date:	~~October 25, 2021~~April 26, 2022	By: /s/ Robert W. Bryant
		Robert W. Bryant
		Chief Executive Officer and President
		(Principal Executive Officer)

Date:	~~October 25, 2021~~April 26, 2022	By: /s/ Sean M. Lannon
		Sean M. Lannon
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

Date:	~~October 25, 2021~~April 26, 2022	By: /s/ Anthony Massey
		Anthony Massey
		Vice President and Global Controller
		(Principal Accounting Officer)

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Note						Page
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES						109
(2) REVENUE						109
(3) ACQUISITIONS						1110
(4 ) GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS						1210
(5 ) RESTRUCTURING						1311
(6 ) COMMITMENTS AND CONTINGENCIES						1312
(7 ) LONG-TERM EMPLOYEE BENEFITS						1413
(8 ) STOCK-BASED COMPENSATION						1513
(9) OTHER EXPENSE (INCOME) ~~EXPENSE,~~, NET						1614
(10 ) INCOME TAXES						1614
(1 1 )(11) NET INCOME ~~(LOSS)~~ PER COMMON SHARE						1715
(1 2 ) ACCOUNTS AND NOTES RECEIVABLE, NET						1715
(1 3 ) INVENTORIES						1815
(1 4 ) PROPERTY, PLANT AND EQUIPMENT, NET						1816
(1 5 ) BORROWINGS						1816
(1 6 ) FINANCIAL INSTRUMENTS, HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENTS						1917
(1 7 ) SEGMENTS						2120
(1 8 ) ACCUMULATED OTHER COMPREHENSIVE LOSS						2423


		For the Nine Months Ended September 30,
		2021				2020
Derivatives in Cash Flow and Net Investment Hedges	Location of Loss (Gain) Recognized in Income on Derivatives	Net Amount of (Gain) Recognized in OCI on Derivatives		Amount of Loss (Gain) Recognized in Income		Net Amount of Loss (Gain) Recognized in OCI on Derivatives		Amount of Loss (Gain) Recognized in Income
Interest rate caps	Interest expense, net	$	—	$	1.9	$	1.2	$	1.5
Interest rate swaps	Interest expense, net	0.3		21.7		48.0		11.5
Foreign currency forward contracts	Cost of goods sold	—		0.2		0.1		—
Cross-currency swaps	Interest expense, net	(50.3)		(14.3)		(2.5)		(11.0)