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 March 31, ~~2022~~2023


☐			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)

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 the 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 April ~~19, 2022,~~25, 2023, there were ~~221,467,603~~221,532,692 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	7
		Notes to Condensed Consolidated Financial Statements	8
	ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2422
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3533
	ITEM 4.	Controls and Procedures	3533
PART II		Other Information
	ITEM 1.	Legal Proceedings	3634
	ITEM 1A.	Risk Factors	3634
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3634
	ITEM 3.	Defaults Upon Senior Securities	3634
	ITEM 4.	Mine Safety Disclosures	3634
	ITEM 5.	Other Information	3634
	ITEM 6.	Exhibits	3735
		Signatures	3836

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 March 31,						Three Months Ended March 31,
			2022		2021				2023		2022
Net sales	Net sales		$	1,174.1	$	1,063.6	Net sales		$	1,283.9	$	1,174.1
Cost of goods sold	Cost of goods sold		837.4		684.5		Cost of goods sold		901.9		837.4
Selling, general and administrative expenses	Selling, general and administrative expenses		193.5		179.1		Selling, general and administrative expenses		206.0		193.5
Other operating charges	Other operating charges		7.7		102.8		Other operating charges		7.1		7.7
Research and development expenses	Research and development expenses		16.4		15.6		Research and development expenses		19.1		16.4
Amortization of acquired intangibles	Amortization of acquired intangibles		32.8		29.0		Amortization of acquired intangibles		24.5		32.8
Income from operations	Income from operations		86.3		52.6		Income from operations		125.3		86.3
Interest expense, net	Interest expense, net		32.6		33.5		Interest expense, net		48.2		32.6
Other expense (income), net			1.8		(0.4)
Other expense, net							Other expense, net		1.3		1.8
Income before income taxes	Income before income taxes		51.9		19.5		Income before income taxes		75.8		51.9
Provision for income taxes	Provision for income taxes		11.0		3.8		Provision for income taxes		15.3		11.0
Net income	Net income		40.9		15.7		Net income		60.5		40.9
Less: Net (loss) income attributable to noncontrolling interests			(0.6)		0.5
Less: Net income (loss) attributable to noncontrolling interests							Less: Net income (loss) attributable to noncontrolling interests		—		(0.6)
Net income attributable to controlling interests	Net income attributable to controlling interests		$	41.5	$	15.2	Net income attributable to controlling interests		$	60.5	$	41.5
Basic net income per share	Basic net income per share		$	0.18	$	0.06	Basic net income per share		$	0.27	$	0.18
Diluted net income per share	Diluted net income per share		$	0.18	$	0.06	Diluted net income per share		$	0.27	$	0.18

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 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)


	Three Months Ended March 31,
		2023		2022
Net income		$	60.5	$	40.9
Other comprehensive income, before tax:
Foreign currency translation adjustments		44.9		(3.9)
Unrealized (loss) gain on derivatives		(1.9)		19.5
Unrealized gain on pension and other benefit plan obligations		0.2		0.9
Other comprehensive income, before tax		43.2		16.5
Income tax (benefit) provision related to items of other comprehensive income		(0.4)		3.0
Other comprehensive income, net of tax		43.6		13.5
Comprehensive income		104.1		54.4
Less: Comprehensive loss attributable to noncontrolling interests		(0.8)		(0.1)
Comprehensive income attributable to controlling interests		$	104.9	$	54.5

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)


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	576.2	$	840.6	Cash and cash equivalents	$	512.1	$	645.2
Restricted cash	Restricted cash	10.6		10.6		Restricted cash	2.6		9.7
Accounts and notes receivable, net	Accounts and notes receivable, net	1,029.8		937.5		Accounts and notes receivable, net	1,169.6		1,067.4
Inventories	Inventories	764.0		669.7		Inventories	798.6		829.6
Prepaid expenses and other current assets	Prepaid expenses and other current assets	135.7		117.2		Prepaid expenses and other current assets	141.0		140.8

Total current assets	Total current assets	2,516.3		2,575.6		Total current assets	2,623.9		2,692.7
Property, plant and equipment, net	Property, plant and equipment, net	1,184.4		1,186.2		Property, plant and equipment, net	1,204.0		1,190.2
Goodwill	Goodwill	1,574.4		1,592.7		Goodwill	1,523.6		1,498.0
Identifiable intangibles, net	Identifiable intangibles, net	1,237.5		1,278.2		Identifiable intangibles, net	1,093.4		1,112.3
Other assets	Other assets	568.9		584.5		Other assets	555.7		566.0

Total assets	Total assets	$	7,081.5	$	7,217.2	Total assets	$	7,000.6	$	7,059.2
Liabilities, Shareholders’ Equity	Liabilities, Shareholders’ Equity					Liabilities, Shareholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	748.0	$	657.4	Accounts payable	$	703.5	$	733.5
Current portion of borrowings	Current portion of borrowings	76.1		79.7		Current portion of borrowings	41.6		31.0
Other accrued liabilities	Other accrued liabilities	520.9		597.8		Other accrued liabilities	534.6		620.2

Total current liabilities	Total current liabilities	1,345.0		1,334.9		Total current liabilities	1,279.7		1,384.7
Long-term borrowings	Long-term borrowings	3,739.2		3,749.9		Long-term borrowings	3,605.5		3,673.3
Accrued pensions	Accrued pensions	261.4		269.3		Accrued pensions	207.5		205.1
Deferred income taxes	Deferred income taxes	165.5		174.7		Deferred income taxes	163.1		162.1
Other liabilities	Other liabilities	149.2		149.7		Other liabilities	129.5		134.5

Total liabilities	Total liabilities	5,660.3		5,678.5		Total liabilities	5,385.3		5,559.7
Commitments and contingent liabilities (Note 6)		0		0
Commitments and contingent liabilities (Note 5)						Commitments and contingent liabilities (Note 5)
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
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
Common shares, $1.00 par, 1,000.0 shares authorized, 253.3 and 252.4 shares issued at March 31, 2023 and December 31, 2022, respectively						Common shares, $1.00 par, 1,000.0 shares authorized, 253.3 and 252.4 shares issued at March 31, 2023 and December 31, 2022, respectively	253.3		252.4
Capital in excess of par	Capital in excess of par	1,518.2		1,515.5		Capital in excess of par	1,547.3		1,536.5
Retained earnings	Retained earnings	868.7		827.2		Retained earnings	1,079.3		1,018.8
Treasury shares, at cost, 30.8 and 24.4 shares at March 31, 2022 and December 31, 2021, respectively		(862.3)		(687.2)
Treasury shares, at cost, 31.8 shares at March 31, 2023 and December 31, 2022						Treasury shares, at cost, 31.8 shares at March 31, 2023 and December 31, 2022	(887.3)		(887.3)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(401.4)		(414.4)		Accumulated other comprehensive loss	(422.5)		(466.9)
Total Axalta shareholders’ equity	Total Axalta shareholders’ equity	1,375.4		1,492.9		Total Axalta shareholders’ equity	1,570.1		1,453.5
Noncontrolling interests	Noncontrolling interests	45.8		45.8		Noncontrolling interests	45.2		46.0
Total shareholders’ equity	Total shareholders’ equity	1,421.2		1,538.7		Total shareholders’ equity	1,615.3		1,499.5
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	7,081.5	$	7,217.2	Total liabilities and shareholders’ equity	$	7,000.6	$	7,059.2

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

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AXALTA COATING SYSTEMS LTD.

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

(In millions)

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, 2021 227.4 $ 251.8 $ 1,515.5 $ 827.2 $ (687.2) $ (414.4) $ 45.8 $ 1,538.7
Comprehensive income:
Net income — — — 41.5 — — (0.6) 40.9
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 — — — — — 0.5 — 0.5
Foreign currency translation, net of tax of $0.0 million — — — — — (4.4) 0.5 (3.9)
Total comprehensive income — — — 41.5 — 13.0 (0.1) 54.4
Recognition of stock-based compensation — — 5.3 — — — — 5.3
Shares issued under compensation plans 0.4 0.4 (2.3) — — — — (1.9)
Changes in ownership of noncontrolling interests — — (0.3) — — — 0.2 (0.1)
Common stock purchases (6.4) — — — (175.1) — — (175.1)
Dividends declared to noncontrolling interests — — — — — — (0.1) (0.1)
Balance at March 31, 2022 221.4 252.2 $ 1,518.2 $ 868.7 $ (862.3) $ (401.4) $ 45.8 $ 1,421.2


	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, 2022	220.6	$	252.4	$	1,536.5	$	1,018.8	$	(887.3)	$	(466.9)	$	46.0	$	1,499.5
Comprehensive income:
Net income	—	—		—		60.5		—		—		—		60.5

Net realized and unrealized gain on derivatives, net of tax of $0.0 million	—	—		—		—		—		(1.9)		—		(1.9)
Long-term employee benefit plans, net of tax of $0.0 million	—	—		—		—		—		0.2		—		0.2
Foreign currency translation, net of tax benefit of $0.4 million	—	—		—		—		—		46.1		(0.8)		45.3
Total comprehensive income	—	—		—		60.5		—		44.4		(0.8)		104.1

Recognition of stock-based compensation	—	—		6.3		—		—		—		—		6.3
Shares issued under compensation plans	0.9	0.9		4.5		—		—		—		—		5.4



Balance at March 31, 2023	221.5	$	253.3	$	1,547.3	$	1,079.3	$	(887.3)	$	(422.5)	$	45.2	$	1,615.3


		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 of $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
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

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

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AXALTA COATING SYSTEMS LTD.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	40.9	$	15.7	Net income	$	60.5	$	40.9
Adjustment to reconcile net income to cash (used for) provided by operating activities:
Adjustment to reconcile net income to cash used for operating activities:						Adjustment to reconcile net income to cash used for operating activities:
Depreciation and amortization	Depreciation and amortization	77.7		76.4		Depreciation and amortization	69.5		77.7
Amortization of deferred financing costs and original issue discount	Amortization of deferred financing costs and original issue discount	2.4		2.2		Amortization of deferred financing costs and original issue discount	2.0		2.4

Debt extinguishment and refinancing related costs						Debt extinguishment and refinancing related costs	1.8		—
Deferred income taxes	Deferred income taxes	(2.7)		(18.3)		Deferred income taxes	2.4		(2.7)
Realized and unrealized foreign exchange losses, net	Realized and unrealized foreign exchange losses, net	2.4		8.6		Realized and unrealized foreign exchange losses, net	5.2		2.4
Stock-based compensation	Stock-based compensation	5.3		3.6		Stock-based compensation	6.3		5.3

Divestiture and impairment charges						Divestiture and impairment charges	7.1		0.3
Interest income on swaps designated as net investment hedges						Interest income on swaps designated as net investment hedges	(5.6)		(6.2)

Interest income on swaps designated as net investment hedges		(6.2)		(3.5)
Other non-cash, net	Other non-cash, net	(1.6)		1.4		Other non-cash, net	4.0		(1.9)
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	(86.2)		(52.6)		Trade accounts and notes receivable	(92.3)		(86.2)
Inventories	Inventories	(91.5)		(36.2)		Inventories	38.6		(91.5)
Prepaid expenses and other assets	Prepaid expenses and other assets	(32.9)		(18.0)		Prepaid expenses and other assets	(30.0)		(32.9)
Accounts payable	Accounts payable	120.4		33.4		Accounts payable	(21.7)		120.4
Other accrued liabilities	Other accrued liabilities	(66.7)		30.7		Other accrued liabilities	(96.3)		(66.7)
Other liabilities	Other liabilities	(5.2)		(3.8)		Other liabilities	(3.3)		(5.2)
Cash (used for) provided by operating activities		(43.9)		39.6
Cash used for operating activities						Cash used for operating activities	(51.8)		(43.9)
Investing activities:	Investing activities:					Investing activities:

Purchase of property, plant and equipment	Purchase of property, plant and equipment	(42.5)		(31.8)		Purchase of property, plant and equipment	(41.4)		(42.5)

Interest proceeds on swaps designated as net investment hedges	Interest proceeds on swaps designated as net investment hedges	6.2		3.5		Interest proceeds on swaps designated as net investment hedges	5.6		6.2
Settlement proceeds on swaps designated as net investment hedges	Settlement proceeds on swaps designated as net investment hedges	25.0		—		Settlement proceeds on swaps designated as net investment hedges	29.4		25.0

Other investing activities, net	Other investing activities, net	1.0		0.5		Other investing activities, net	0.9		1.0
Cash used for investing activities	Cash used for investing activities	(10.3)		(27.8)		Cash used for investing activities	(5.5)		(10.3)
Financing activities:	Financing activities:					Financing activities:
Proceeds from short-term borrowings						Proceeds from short-term borrowings	8.8		—

Payments on short-term borrowings	Payments on short-term borrowings	(24.1)		(20.0)		Payments on short-term borrowings	(13.6)		(24.1)
Payments on long-term borrowings	Payments on long-term borrowings	(6.8)		(6.7)		Payments on long-term borrowings	(75.8)		(6.8)
Financing-related costs	Financing-related costs	—		(1.5)		Financing-related costs	(5.8)		—
Purchases of common stock	Purchases of common stock	(175.1)		(63.7)		Purchases of common stock	—		(175.1)
Net cash flows associated with stock-based awards	Net cash flows associated with stock-based awards	(1.9)		0.1		Net cash flows associated with stock-based awards	5.4		(1.9)

Deferred acquisition-related consideration						Deferred acquisition-related consideration	(7.4)		—
Other financing activities, net	Other financing activities, net	(0.2)		(0.7)		Other financing activities, net	—		(0.2)
Cash used for financing activities	Cash used for financing activities	(208.1)		(92.5)		Cash used for financing activities	(88.4)		(208.1)
Decrease in cash	Decrease in cash	(262.3)		(80.7)		Decrease in cash	(145.7)		(262.3)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(2.1)		(13.5)		Effect of exchange rate changes on cash	5.5		(2.1)
Cash at beginning of period	Cash at beginning of period	851.2		1,364.0		Cash at beginning of period	654.9		851.2
Cash at end of period	Cash at end of period	$	586.8	$	1,269.8	Cash at end of period	$	514.7	$	586.8

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	$	576.2	$	1,266.9	Cash and cash equivalents	$	512.1	$	576.2
Restricted cash	Restricted cash	10.6		2.9		Restricted cash	2.6		10.6

Cash at end of period	Cash at end of period	$	586.8	$	1,269.8	Cash at end of period	$	514.7	$	586.8

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


Note						Page
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES						9
(2) REVENUE						9
~~(3) ACQUISITIONS~~						10
(43 ) GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS						10
(4 ) RESTRUCTURING						10
(5 ) ~~RESTRUCTURING~~COMMITMENTS AND CONTINGENCIES						11
(6 ) ~~COMMITMENTS AND CONTINGENCIES~~LONG-TERM EMPLOYEE BENEFITS						12
(7 ) ~~LONG-TERM EMPLOYEE BENEFITS~~STOCK-BASED COMPENSATION						12
(8 ) OTHER EXPENSE , NET						13
(89 ) ~~STOCK-BASED COMPENSATION~~INCOME TAXES						13
~~(9) OTHER EXPENSE (INCOME),~~(1 0 ) NET INCOME PER COMMON SHARE						14
(1 1 ) ACCOUNTS AND NOTES RECEIVABLE, NET						14
(1 102 ) ~~INCOME TAXES~~INVENTORIES						14
~~(11) NET INCOME PER COMMON SHARE~~						15
(1 23 ) ~~ACCOUNTS~~PROPERTY, PLANT AND ~~NOTES RECEIVABLE,~~EQUIPMENT, NET						15
(1(14) SUPPL 3I ~~) INVENTORIES~~ER FINANCE PROGRAMS						15
(1 4 ~~) PROPERTY, PLANT AND EQUIPMENT, NET~~						16
(1 5 ) BORROWINGS						1615
(1 6 ) FINANCIAL INSTRUMENTS, HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENTS						1716
(1 7 ) SEGMENTS						2018
(1 88)) ACCUMULATED OTHER COMPREHENSIVE LOSS						2321

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 March 31, ~~2022,~~2023, the results of operations, comprehensive income, ~~(loss),~~ changes in shareholders' equity and cash flows for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022. 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, ~~2021.~~2022. 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.~~America ("GAAP").

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 entities are accounted for on a one-month lag basis, the effect of which is not material.

The results of operations for the three months ended March 31, ~~2022~~2023 are not necessarily indicative of the results to be expected for the full year ended December 31, 2023 or any future period(s).

Summary of Significant Accounting Policies Updates

Recently Adopted Accounting Guidance

In January 2023, we adopted Accounting Standards Update ("ASU") 2022-04, Liabilities – Supplier Finance Programs, which codifies disclosure requirements for supplier financing programs. This ASU does not affect the recognition, measurement or financial statement presentation of obligations covered by supplier finance programs. Upon adoption of this ASU, we incorporated the required disclosures in Note 14. In addition to the disclosures included in Note 14, ASU 2022-04 requires a ~~full year.~~

~~Risks and Uncertainties~~

~~After experiencing significant impacts to our results~~rollforward of ~~operations, financial condition and cash flows in 2020 from~~activity for each supplier financing program beginning with reporting for the ~~coronavirus ("COVID-19") pandemic,~~year ended December 31, 2024, at which time we ~~have seen a return to more stable quarter-over-quarter demand for our products and services during 2021 and into 2022, though we continue to see impacts to our business given~~will incorporate 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 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.required rollforward disclosure.

(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 condensed consolidated balance ~~sheet.~~sheets. The contract asset balances at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 were ~~$37.7~~$42.3 million and ~~$36.1~~$40.6 million, respectively.

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. We do not receive a distinct service or good in return for these BIPs, but rather receive volume commitments and/or sole supplier status from our customers over the life of the contractual arrangements. The termination clauses in these contractual arrangements include standard clawback provisions that enable us to collect monetary damages in the event of a customer's failure to meet its commitments under the relevant contract. At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the total carrying value of BIPs were ~~$149.3~~$150.9 million and ~~$151.2~~$152.3 million, respectively, and are presented within other assets in the condensed consolidated balance sheets. For the three months ended March 31, 2023 and 2022, ~~and 2021, $14.5~~$16.0 million and ~~$15.3~~$14.5 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~~excludes other up-front incentives with repayment features made in conjunction with long-term customer commitments of ~~$69.7~~$40.2 million and ~~$72.7~~$42.1 million at March 31, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022, respectively, of which $5.2 million and $4.9 million is included in prepaid expenses and other current assets in the condensed consolidated balance sheets at March 31, 2023 and December 31, 2022, respectively, with the remainder included in other assets. These up-front incentives with repayment features are subject to 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~~

~~Acquisition of U-POL Holdings Limited~~

On September 15, 2021, we completed the acquisition of U-POL Holdings Limited ("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 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 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 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 (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

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

As of March 31, 2022, we have not yet finalized the purchase accounting related to 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.

Goodwill

The following table shows changes in the carrying amount of goodwill from December 31, ~~2021~~2022 to March 31, ~~2022~~2023 by reportable segment:

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)~~


	Performance Coatings		Mobility Coatings		Total
Balance at December 31, 2022	$	1,422.5	$	75.5	$	1,498.0
Purchase accounting adjustments	(0.4)		—		(0.4)
Foreign currency translation	24.9		1.1		26.0
Balance at March 31, 2023	$	1,447.0	$	76.6	$	1,523.6

Identifiable Intangible Assets

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


March 31, 2022		Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted average amortization periods (years)
March 31, 2023									March 31, 2023	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted average amortization periods (years)
Technology	Technology	$	570.7	$	(431.9)	$	138.8	10.2	Technology	$	163.2	$	(77.9)	$	85.3	11.2
Trademarks—indefinite-lived	Trademarks—indefinite-lived	264.1		—		264.1		Indefinite	Trademarks—indefinite-lived	259.4		—		259.4		Indefinite
Trademarks—definite-lived	Trademarks—definite-lived	132.8		(46.0)		86.8		14.4	Trademarks—definite-lived	127.2		(52.4)		74.8		14.5
Customer relationships	Customer relationships	1,129.2		(381.9)		747.3		19.2	Customer relationships	1,107.7		(433.8)		673.9		19.3
Other		14.1		(13.6)		0.5		5.0

Total	Total	$	2,110.9	$	(873.4)	$	1,237.5		Total	$	1,657.5	$	(564.1)	$	1,093.4

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
During the three months ended March 31, 2023, we retired fully amortized assets totaling $393.4 million consisting of technology, trademarks, and other intangible assets.


December 31, 2022	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted average amortization periods (years)
Technology	$	555.2	$	(462.3)	$	92.9	10.3
Trademarks—indefinite-lived	255.6		—		255.6		Indefinite
Trademarks—definite-lived	126.7		(50.8)		75.9		14.5
Customer relationships	1,106.7		(418.8)		687.9		19.2
Other	0.6		(0.6)		—		5.0
Total	$	2,044.8	$	(932.5)	$	1,112.3

The estimated amortization expense related to the fair value of acquired intangible assets for the remainder of ~~2022~~2023 and each of the succeeding five years is:


Remainder of 2022		$	96.2
2023		89.6
Remainder of 2023				Remainder of 2023	$	62.6
2024	2024	84.8		2024	82.4
2025	2025	84.2		2025	81.8
2026	2026	83.7		2026	81.4
2027	2027	82.6		2027	80.6
2028				2028	67.3

~~(5)~~(4) RESTRUCTURING

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

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

During the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, we incurred costs for termination benefits, net of ~~$2.4~~changes in estimates, of $0.4 million and ~~$4.5~~$2.4 million, respectively. The majority of our termination benefits are recorded within other operating charges in the condensed consolidated statements of operations. The remaining payments associated with these actions are expected to be substantially completed within 2412 months.

The following table summarizes the activity related to the termination benefit reserves and expenses from December 31, ~~2021~~2022 to March 31, ~~2022:~~2023:


	~~2022~~2023 Activity
Balance at December 31, ~~2021~~2022	$	~~57.5~~48.7
Expenses, net of changes to estimates	~~2.4~~0.4
Payments made	~~(15.0)~~(21.1)
Foreign currency translation	~~(0.5)~~0.5
Balance at March 31, ~~2022~~2023	$	~~44.4~~28.5

~~Table of Contents~~

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

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

~~(6)~~(5) 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.~~creditors ("Customer Obligation Guarantees"). At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, we had outstanding ~~bank guarantees~~Customer Obligation Guarantees of ~~$5.1~~$5.8 million and ~~$5.7~~$7.1 million, respectively. ~~A portion~~Approximately one-fifth of our ~~bank guarantees~~Customer Obligation Guarantees expire between ~~2022~~2023 and 2036, while ~~others~~the remainder do not have specified expiration dates. We monitor the ~~customer obligations and bank guarantees~~Customer Obligation Guarantees to evaluate whether we have a liability at the balance sheet date. We did not have any liabilities related to our outstanding ~~bank guarantees~~Customer Obligation Guarantees recorded at either March 31, ~~2022 and~~2023 or December 31, ~~2021.~~2022.

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 products. The matter occurred over a discrete period during the fourth quarter of 2020. We ~~have~~ concluded that losses from this matter ~~are~~were probable and that 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 months ended March 31, 2022 ~~and March 31, 2021~~, we recorded expenses of $0.1 million ~~and $94.4 million, respectively,~~ within other operating charges in the condensed consolidated statements of operations. No expenses were recorded for the three months ended March 31, 2023. At each of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, we had ~~$38.2~~$38.7 million ~~and $52.7 million, respectively,~~ recorded for estimated insurance receivables within accounts and notes receivable, net in the condensed consolidated balance sheets. Liabilities of ~~$48.6~~$40.5 million and ~~$49.7~~$42.3 million are recorded as other accrued liabilities in the condensed consolidated balance sheets at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, 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~~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)

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.

(6) LONG-TERM EMPLOYEE BENEFITS

Components of Net Periodic Benefit Cost

The following table sets forth the pre-tax components of net periodic benefit costs for our defined benefit plans for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
		2023		2022
Components of net periodic benefit cost:
Net periodic benefit cost:
Service cost		$	1.5	$	1.7
Interest cost		4.7		2.4
Expected return on plan assets		(2.7)		(3.2)
Amortization of actuarial losses, net		0.2		0.9


Net periodic benefit cost		$	3.7	$	1.8

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

(7) STOCK-BASED COMPENSATION

During the three months ended March 31, 2023 and 2022, we recognized $6.3 million and $5.3 million, respectively, in stock-based compensation expense, which was allocated between costs of goods sold and selling, general and administrative expenses in the condensed consolidated statements of operations. We recognized tax benefits on stock-based compensation of $0.9 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively.

2023 Activity

A summary of stock option award activity as of and for the three months ended March 31, 2023 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, 2023	1.1	$	26.56
Granted	—	$	—
Exercised	(0.3)	$	24.61
Forfeited / Expired	(0.1)	$	32.50
Outstanding at March 31, 2023	0.7	$	26.83
Vested and expected to vest at March 31, 2023	0.7	$	26.83	$	2.8	3.52
Exercisable at March 31, 2023	0.7	$	26.83	$	2.8	3.52

Cash received by the Company upon exercise of options for the three months ended March 31, 2023 was $8.1 million. No excess tax benefits or shortfall expenses were recorded related to these exercises.

At March 31, 2023, there was no unrecognized expense relating to unvested stock options.

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)


Restricted Stock Units	Units (in millions)	Weighted Average Fair Value
Outstanding at January 1, 2023	1.6	$	27.38
Granted	0.6	$	29.80
Vested	(0.6)	$	27.84
Forfeited (1)	—	$	28.65
Outstanding at March 31, 2023	1.6	$	28.14

(1) Activity during the three months ended March 31, 2023 rounds to zero.

Tax windfall benefits on the vesting of restricted stock units during the three months ended March 31, 2023 were $0.1 million.

At March 31, 2023, there was $30.0 million of unamortized expense relating to unvested restricted stock units that is expected to be amortized over a weighted average period of 1.6 years.


Performance Share Units	Units (millions)	Weighted Average Fair Value
Outstanding at January 1, 2023	0.6	$	30.44
Granted	0.4	$	36.38
Vested	—	$	—
Forfeited	(0.1)	$	31.29
Outstanding at March 31, 2023	0.9	$	33.06

Our performance share units allow for participants to vest in more or fewer than the targeted number of shares granted. At March 31, 2023, there is $15.9 million of unamortized expense relating to unvested performance share units that is expected to be amortized over a weighted average period of 2.8 years. The forfeitures include portions of performance share unit grants that were determined to not have vested during the period as a result of not meeting established financial performance thresholds.

(8) OTHER EXPENSE, NET


	Three Months Ended March 31,
		2023		2022
Foreign exchange losses, net		$	2.3	$	2.6

Debt extinguishment and refinancing related costs		1.8		—
Other miscellaneous income, net		(2.8)		(0.8)

Total		$	1.3	$	1.8

(9) INCOME TAXES

Our effective income tax rates for the three months ended March 31, 2023 and 2022 are as follows:


	Three Months Ended March 31,
	2023		2022
Effective Tax Rate	20.2	%	21.2	%

The lower effective tax rate for the three months ended March 31, 2023 was primarily due to the favorable impact of changes in unrecognized tax benefits in 2023.

The effective tax rate for the three months ended March 31, 2023 differs from the U.S. Federal statutory rate due to various items that impacted the effective rate both favorably and unfavorably. We recorded the favorable adjustments for earnings in jurisdictions where the statutory rate is lower than the U.S. Federal statutory rate and a decrease in unrecognized tax benefits. These adjustments were primarily offset by the unfavorable impacts for the changes in valuation allowance.

The Company anticipates that it is reasonably possible its unrecognized tax benefits will decrease by $14.1 million, exclusive of interest and penalties, within the next 12 months mainly due to the conclusion of the 2010-2013 German income tax audit.

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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 months ended March 31, 2022 and 2021:~~

Three Months Ended March 31,
2022 2021
Components of net periodic benefit cost:
Net periodic benefit cost:
Service cost $ 1.7 $ 1.8
Interest cost 2.4 2.0
Expected return on plan assets (3.2) (3.4)
Amortization of actuarial losses, net 0.9 1.2
Net periodic benefit cost $ 1.8 $ 1.6

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

~~(8) STOCK-BASED COMPENSATION~~

~~During the three months ended March 31, 2022 and 2021, we recognized expenses of $5.3 million~~ ~~and~~ $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 $0.6 million and $0.3 million for the three months ended March 31, 2022 and 2021, respectively.

~~2022 Activity~~

~~A summary of award activity by type for the three months ended 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, 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 March 31, 2022, there was an immaterial amount of unrecognized expense relating to unvested stock options that is expected to be amortized over the weighted average period of 0.2 years.~~

Restricted Stock Units Units
(millions) Weighted-Average
Fair Value
Outstanding at January 1, 2022 1.1 $ 28.85
Granted 0.6 $ 28.87
Vested (0.4) $ 28.43
Forfeited (1)
— $ 28.78
Outstanding at March 31, 2022 1.3 $ 29.00

~~(1) Activity during the three months ended March 31, 2022 rounds to zero.~~

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

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

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

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 three months ended March 31, 2022 and 2021 are as follows:~~

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

The higher effective tax rate for the three months ended March 31, 2022 was primarily due to the unfavorable impact of net currency exchange losses in 2022. These adjustments are partially offset by the favorable impact of changes in valuation allowance and unrecognized tax benefits.

The effective tax rate for the three months ended 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 lower than the U.S. Federal statutory rate and decrease in unrecognized tax benefits.

The Company anticipates that it is reasonably possible it will settle up to $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 units and performance share units. A reconciliation of our basic and diluted net income per common share is as follows:


		Three Months Ended March 31,						Three Months Ended March 31,
(In millions, except per share data)	(In millions, except per share data)		2022		2021		(In millions, except per share data)		2023		2022
Net income to common shareholders	Net income to common shareholders		$	41.5	$	15.2	Net income to common shareholders		$	60.5	$	41.5
Basic weighted average shares outstanding	Basic weighted average shares outstanding		224.7		233.9		Basic weighted average shares outstanding		221.2		224.7
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding		225.2		234.7		Diluted weighted average shares outstanding		222.1		225.2
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		$	0.18	$	0.06	Basic net income per share		$	0.27	$	0.18
Diluted net income per share	Diluted net income per share		$	0.18	$	0.06	Diluted net income per share		$	0.27	$	0.18

The number of anti-dilutive shares that have been excluded in the computation of diluted net income per share for the three months ended March 31, 2023 and 2022 ~~and 2021~~ were ~~1.0~~0.8 million and ~~1.5~~1.0 million, respectively.

~~(12)~~(11) 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.~~as well as other macroeconomic factors.


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Accounts receivable - trade, net (1)	Accounts receivable - trade, net (1)	$	854.0	$	760.4	Accounts receivable - trade, net (1)	$	998.8	$	909.3
Notes receivable	Notes receivable	25.3		24.7		Notes receivable	25.0		23.1
Other (2)	Other (2)	150.5		152.4		Other (2)	145.8		135.0
Total	Total	$	1,029.8	$	937.5	Total	$	1,169.6	$	1,067.4

(1) Allowance for doubtful accounts was ~~$25.5~~$24.0 million and ~~$22.0~~$22.6 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

(2) Includes ~~$38.2 million and $52.7~~$38.7 million at each of March 31, ~~2022~~2023 and December 31, ~~2021, respectively,~~2022 of insurance recoveries related to ~~the~~an operational matter as discussed further in Note 6.5.

Bad debt expense of ~~$(0.5)~~$4.1 million and ~~$0.7~~$(0.5) million was included within selling, general and administrative expenses for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~an additional~~benefits of $1.3 million and expense of $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.~~2023 and 2022, respectively.

~~(13)~~(12) INVENTORIES


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Finished products	Finished products	$	416.9	$	355.9	Finished products	$	429.0	$	438.6
Semi-finished products	Semi-finished products	100.9		109.7		Semi-finished products	132.7		130.8
Raw materials	Raw materials	220.1		180.8		Raw materials	210.3		233.7
Stores and supplies	Stores and supplies	26.1		23.3		Stores and supplies	26.6		26.5
Total	Total	$	764.0	$	669.7	Total	$	798.6	$	829.6

Inventory reserves were ~~$17.1~~$19.2 million and ~~$15.6~~$16.6 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

1514

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

~~(14)~~(13) PROPERTY, PLANT AND EQUIPMENT, NET


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Property, plant and equipment	Property, plant and equipment	$	2,333.1	$	2,299.4	Property, plant and equipment	$	2,410.9	$	2,368.9
Accumulated depreciation	Accumulated depreciation	(1,148.7)		(1,113.2)		Accumulated depreciation	(1,206.9)		(1,178.7)
Property, plant, and equipment, net	Property, plant, and equipment, net	$	1,184.4	$	1,186.2	Property, plant, and equipment, net	$	1,204.0	$	1,190.2

Depreciation expense amounted to ~~$30.1~~$29.0 million and ~~$31.9~~$30.1 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

~~(15) BORROWINGS~~

~~Borrowings are summarized as follows:~~

March 31, 2022 December 31, 2021
2024 Dollar Term Loans $ 2,032.8 $ 2,038.9
2025 Euro Senior Notes 501.8 508.8
2027 Dollar Senior Notes 500.0 500.0
2029 Dollar Senior Notes 700.0 700.0
Short-term and other borrowings 110.6 113.8
Unamortized original issue discount (4.1) (4.6)
Unamortized deferred financing costs (25.8) (27.3)
Total borrowings, net 3,815.3 3,829.6
Less:
Short-term borrowings 51.8 55.4
Current portion of long-term borrowings 24.3 24.3
Long-term debt $ 3,739.2 $ 3,749.9

~~Revolving Credit Facility~~

At March 31, 2022 and December 31, 2021, letters of credit issued under the Revolving Credit Facility totaled $22.1 million, which reduced the availability under the Revolving Credit Facility. Availability under the Revolving Credit Facility was $527.9 million at March 31, 2022 and December 31, 2021.

~~Table of Contents~~

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

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

~~Supplier financing arrangements~~(14) SUPPLIER FINANCE PROGRAMS

We have a supplier 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~~is approximately 90 ~~days.~~days from each respective financing inception. These financing arrangements are included in the current portion of borrowings within the condensed consolidated balance sheets and at the time of issuance each transaction is treated as a non-cash financing activity within the condensed consolidated statements of cash flows. Upon settlement of the financing, the cash outflow is classified as a financing activity within the condensed consolidated statements of cash flows. Amounts outstanding under this program were ~~$21.2~~$10.1 million and ~~$18.4~~$21.2 million at March 31, ~~2022~~2023 and ~~March 31, 2021,~~2022, respectively, including ~~$4.2~~$2.3 million and ~~$2.6~~$4.2 million, respectively, related to purchases of property, plant and equipment. Cash outflows under this program were ~~$24.1~~$13.6 million and ~~$13.7~~$24.1 million for the three months ended March 31, 2023 and 2022, respectively.

We maintain a voluntary supply chain financing ("SCF") program with a global financial institution that allows a select group of suppliers to sell their receivables to the participating financial institution at the discretion of both parties on terms that are negotiated between the supplier and the financial institution. The supplier invoices that have been confirmed as valid under the program are paid by us to the financial institution according to the terms we have with the supplier. Amounts outstanding under the SCF program were $28.7 million and $29.8 million at March 31, ~~2021,~~2023 and December 31, 2022, respectively.

We also participate in a virtual card program with a global financial institution, in which we pay supplier invoices on the due date using a Virtual Card Account ("VCA") and subsequently pay the balance in full 25 days after the billing statement date of the VCA. The program allows for suppliers to receive accelerated payment for a fee at each supplier's discretion. Fees paid by our suppliers are negotiated directly with the financial institution without our involvement. Amounts outstanding under the VCA program were $8.1 million and $6.8 million at March 31, 2023 and December 31, 2022, respectively.

The payment terms we have with our suppliers who participate in the SCF and VCA programs are consistent with the typical terms we have with our suppliers who do not participate. These financing arrangements are included in accounts payable within the condensed consolidated balance sheets and the associated payments are included in operating activities within the condensed consolidated statements of cash flows.

(15) BORROWINGS

Borrowings are summarized as follows:


	March 31, 2023		December 31, 2022

2029 Dollar Term Loans	$	1,925.0	$	2,000.0
2025 Euro Senior Notes	489.3		479.1
2027 Dollar Senior Notes	500.0		500.0
2029 Dollar Senior Notes	700.0		700.0
Short-term and other borrowings	79.4		74.5
Unamortized original issue discount	(21.0)		(22.4)
Unamortized deferred financing costs	(25.6)		(26.9)
Total borrowings, net	3,647.1		3,704.3
Less:
Short-term borrowings	21.6		16.0
Current portion of long-term borrowings	20.0		15.0
Long-term debt	$	3,605.5	$	3,673.3

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

Our senior secured credit facilities (the "Senior Secured Credit Facilities") consist of a term loan due 2029 (the "2029 Dollar Term Loans"), formerly a term loan due 2024 (the "2024 Dollar Term Loans"), and a revolving credit facility (the "Revolving Credit Facility") that is governed by a credit agreement (the "Credit Agreement").

Revolving Credit Facility

At March 31, 2023 and December 31, 2022, letters of credit issued under the Revolving Credit Facility totaled $20.4 million and $20.7 million, respectively, which reduced the availability under the Revolving Credit Facility. Availability under the Revolving Credit Facility was $529.6 million and $529.3 million at March 31, 2023 and December 31, 2022, respectively.

Significant Transactions

During March 2023, we voluntarily prepaid $75.0 million of the outstanding principal amount of the 2029 Dollar Term Loans. As a result of the prepayment, we recorded a loss on extinguishment of debt of $1.2 million, which comprised the proportionate write off of unamortized deferred financing costs and original issue discounts. During April 2023, we voluntarily prepaid an additional $25.0 million of outstanding principal amount of the 2029 Dollar Term Loans.

Future repayments

Below is a schedule of required future repayments of all borrowings outstanding at March 31, ~~2022.~~2023.


Remainder of 2022		$	68.1
2023		27.5
Remainder of 2023				Remainder of 2023	$	35.0
2024	2024	1,993.5		2024	24.4
2025	2025	505.1		2025	512.8
2026	2026	3.6		2026	23.7
2027				2027	524.0
Thereafter	Thereafter	1,247.4		Thereafter	2,573.8
Total borrowings	Total borrowings	3,845.2		Total borrowings	3,693.7
Unamortized original issue discount	Unamortized original issue discount	(4.1)		Unamortized original issue discount	(21.0)
Unamortized deferred financing costs	Unamortized deferred financing costs	(25.8)		Unamortized deferred financing costs	(25.6)
Total borrowings, net	Total borrowings, net	$	3,815.3	Total borrowings, net	$	3,647.1

(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 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 year is valued at each balance sheet date, until amounts become payable, with adjustments recorded within other expense (income) in the condensed consolidated statements of operations. During April 2021, in conjunction with an acquisition in China, we recorded the fair value of contingent consideration of $7.3 million. ~~As of March 31, 2022, the contingent consideration had increased to $7.8 million as a result of accretion for the passage of time and currency translation.~~ The contingent consideration was valued using a probability-weighted expected payment ~~method. The analysis~~method that considered the timing of expected future cash flows and the probability of whether key elements of the contingent event are completed. The fair value of contingent consideration is valued at each balance sheet date, until amounts become payable, with adjustments recorded within other expense, net in the condensed consolidated statements of operations. Due to the significant unobservable inputs used in the valuations, these liabilities ~~are~~were categorized within Level 3 of the fair value hierarchy. During the three months ended March 31, 2023, the contingent consideration was settled for $6.9 million.

1716

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 March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.


		March 31, 2022								December 31, 2021									March 31, 2023								December 31, 2022
		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	$	—	$	—	$	—	$	—	Interest rate swaps (1)	$	—	$	0.5	$	—	$	0.5	$	—	$	2.3	$	—	$	2.3
Cross-currency swaps (2)	Cross-currency swaps (2)	—		18.6		—		18.6		—		17.7		—		17.7		Cross-currency swaps (2)	—		4.1		—		4.1		—		35.0		—		35.0
Foreign currency forward contracts (1)(3)		—		—		—		—		—		—		—		—

Other assets:	Other assets:																	Other assets:

Cross-currency swaps (2)	Cross-currency swaps (2)	—		—		—		—		—		8.3		—		8.3		Cross-currency swaps (2)	—		9.4		—		9.4		—		14.0		—		14.0
Investments in equity securities	Investments in equity securities	0.7		—		—		0.7		0.7		—		—		0.7		Investments in equity securities	0.5		—		—		0.5		1.0		—		—		1.0
Liabilities:	Liabilities:																	Liabilities:
Other accrued liabilities:	Other accrued liabilities:																	Other accrued liabilities:

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

Cross-currency swaps (2)																		Cross-currency swaps (2)	—		4.8		—		4.8		—		—		—		—

Contingent consideration	Contingent consideration	—		—		7.8		7.8		—		—		7.8		7.8		Contingent consideration	—		—		—		—		—		—		7.2		7.2
Other liabilities:

Interest rate swaps (1)		—		—		—		—		—		1.9		—		1.9
Cross-currency swaps (2)		—		16.4		—		16.4		—		—		—		—

Long-term borrowings:	Long-term borrowings:																	Long-term borrowings:
2024 Dollar Term Loans		—		1,998.9		—		1,998.9		—		2,038.5		—		2,038.5

2029 Dollar Term Loans																		2029 Dollar Term Loans	—		1,928.6		—		1,928.6		—		1,976.3		—		1,976.3
2025 Euro Senior Notes	2025 Euro Senior Notes	—		494.6		—		494.6		—		513.7		—		513.7		2025 Euro Senior Notes	—		483.3		—		483.3		—		460.8		—		460.8
2027 Dollar Senior Notes	2027 Dollar Senior Notes	—		480.9		—		480.9		—		522.9		—		522.9		2027 Dollar Senior Notes	—		476.8		—		476.8		—		462.8		—		462.8
2029 Dollar Senior Notes	2029 Dollar Senior Notes	—		615.6		—		615.6		—		679.5		—		679.5		2029 Dollar Senior Notes	—		610.8		—		610.8		—		581.1		—		581.1

(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 during the three months ended March 31, ~~2022.~~2023.


	Fair Value Using Significant Unobservable Inputs (Level 3)
Beginning balance December 31, ~~2021~~2022	$	~~7.8~~ 7.2
Payments	(6.9)
Change in fair value	— (0.3)
Ending balance at March 31, ~~2022~~2023	$	~~7.8~~—

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.

~~Table of Contents~~

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

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

Derivative Instruments Qualifying and Designated as Net Investment and 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~~2023, three fixed-for-fixed ~~cross-currency~~cross currency swaps with an aggregate notional amount totaling ~~€335.0~~$475.0 million, previously executed in ~~2020~~2018, matured resulting in net cash proceeds of ~~$25.0~~$29.4 million. Concurrently, we entered into 2one fixed-for-fixed cross-currency ~~swaps~~swap with ~~an aggregate~~a notional amount ~~totaling €335.0~~of $150.0 million to hedge the variability of exchange rate impacts between the U.S. Dollar and Euro. Under the terms of ~~the~~this new cross-currency swap ~~agreements,~~agreement, the Company notionally exchanged ~~$365.5~~$150.0 million at ~~a weighted average~~an interest rate of ~~3.375%~~7.256% for ~~€335.0~~€142.3 million at ~~a weighted average~~an interest rate of ~~2.04%~~5.697%. The cross-currency ~~swaps are~~swap is designated as a net investment ~~hedges~~hedge and ~~expire~~expires on ~~February 15, 2029. These~~March 31, 2024. This cross-currency ~~swaps are~~swap is 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~~

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

Interest Rate Swaps Designated as Cash Flow Hedges

During the three months ended March 31, ~~2022,~~2023, three interest rate swaps with an aggregate notional amount of $475.0 million, previously executed in 2018, matured. Concurrently, we ~~designated foreign currency forward contracts~~entered into one interest rate swap with a notional amount of $150.0 million to hedge interest rate exposures associated with the 2029 Dollar Term Loans. Under the terms of the interest rate swap agreement, the Company is required to pay the counter-party a stream of fixed interest payments at rates of 4.256% subject to a floor of 0.5% on $150.0 million of notional value, ~~of $3.0 million~~and in turn, receives variable interest payments based on 3-month Secured Overnight Financing Rate (SOFR) from the counter-party. The interest rate swap is designated as a cash flow ~~hedges of the Company’s exposure to variability in exchange rates~~hedge and expires on ~~forecasted purchases of inventory denominated in foreign currencies. These forward currency contracts are~~March 31, 2024. This interest rate swap is marked to market at each reporting date and any unrealized gains or losses are included in AOCI and reclassified to ~~cost of goods sold~~interest expense 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 AOCI:~~

March 31, 2022 December 31, 2021
AOCI:
Interest rate swaps (cash flow hedges) $ 6.8 $ 26.3
Foreign currency forward contracts (cash flow hedges) (1)
— —
Cross-currency swaps (net investment hedges) (26.8) (26.0)
Total AOCI $ (20.0) $ 0.3

~~(1) Activity during the three months ended March 31, 2022 rounds to zero~~

Gains and losses ~~on the derivative representing~~for 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~~table sets forth the locations and amounts recognized during the three months ended March 31, 2023 and 2022 ~~and 2021~~ for ~~these~~the Company's cash flow and net investment hedges.

For the Three Months Ended March 31,
2022 2021
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 expense, net $ — $ — $ — $ 0.6
Interest rate swaps Interest expense, net (12.4) 7.1 (1.5) 7.0
Foreign currency forward contracts (1)
Cost of goods sold — — (0.1) —
Cross-currency swaps Interest expense, net (5.6) (4.8) (29.6) (4.8)

~~(1) Activity during the three months ended March 31, 2022 rounds to zero~~


		Three Months Ended March 31,
		2023				2022
Derivatives in Cash Flow and Net Investment Hedges	Location of (Gain) Loss Recognized in Income on Derivatives	Net Amount of (Gain) Loss Recognized in OCI on Derivatives		Amount of Gain Recognized in Income		Net Amount of Gain Recognized in OCI on Derivatives		Amount of Loss (Gain) Recognized in Income

Interest rate swaps	Interest expense, net	$	(0.6)	$	(2.4)	$	(12.4)	$	7.1
Foreign currency forward contracts	Cost of goods sold	—		(0.1)		—		—
Cross-currency swaps	Interest expense, net	6.7		(4.2)		(5.6)		(4.8)

Over the next 12 months, we expect ~~losses~~a gain of ~~$6.7~~$0.6 million pertaining to cash flow hedges to be reclassified from AOCI into earnings, related to our interest rate swaps and foreign currency forward contracts.

~~Table of Contents~~

~~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 expense, ~~(income),~~ net in the condensed consolidated statements 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 under ASC 815, Derivatives and hedging, 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 March 31,			Derivatives Not Designated as Hedging Instruments under ASC 815		Location of (Gain) Loss Recognized in Income on Derivatives					Three Months Ended March 31,
					2022	2021						Location of (Gain) Loss Recognized in Income on Derivatives			2023	2022

Foreign currency forward contracts	Foreign currency forward contracts		Other expense (income), net				$	0.3		$	(6.8)		Foreign currency forward contracts	Other expense, net			$	(2.9)	$	0.3

(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.

We have 2two operating segments, which are also our reportable segments: Performance Coatings and Mobility Coatings. 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.

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

Through our Performance Coatings segment, we provide high-quality liquid and powder coatings solutions to both large regional and global original equipment manufacturers ("OEMs") and to a fragmented and local customer base. These customers comprise independent or multi-shop operator body shops as well as a wide variety of industrial manufacturers. 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~~Refinish and ~~industrial.~~Industrial.

Through our Mobility Coatings segment, we provide coatings technologies ~~while focusing on supporting the accelerating demand~~ for ~~e-mobility and the evolving coatings needs of established and emerging~~ light vehicle and commercial vehicle ~~OEMs, fleet owners and shared mobility providers.~~OEMs. These global customers are faced with evolving megatrends in electrification, sustainability, personalization and autonomous driving that require a high level of technical ~~support coupled with productive,~~expertise. The OEMs require efficient, 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~~Light Vehicle and ~~commercial vehicle.~~Commercial Vehicle.

~~Table of Contents~~

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

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

Adjusted EBIT is the primary measure used by our CODM to evaluate financial performance of the operating segments and allocate ~~resources.~~resources and is therefore our measure of segment profitability in accordance with GAAP under ASC 280, "Segment Reporting." Asset information is not reviewed or included with our internal management reporting. Therefore, ~~the Company has~~we have not disclosed asset information for each reportable segment. The following table presents relevant information of our reportable segments.

Three Months Ended March 31,
2022 2021
Net sales (1):
Refinish $ 461.4 $ 399.0
Industrial 353.0 308.3
Total Net sales Performance Coatings 814.4 707.3
Light Vehicle 275.6 278.9
Commercial Vehicle 84.1 77.4
Total Net sales Mobility Coatings 359.7 356.3
Total Net sales $ 1,174.1 $ 1,063.6
Depreciation and amortization expense (2):
Performance Coatings $ 58.0 $ 54.0
Mobility Coatings 19.7 22.4
Total Depreciation and amortization expense $ 77.7 $ 76.4


	Three Months Ended March 31,
		2023		2022
Net sales (1):
Refinish		$	497.6	$	461.4
Industrial		349.5		353.0
Total Net sales Performance Coatings		847.1		814.4
Light Vehicle		328.5		275.6
Commercial Vehicle		108.3		84.1
Total Net sales Mobility Coatings		436.8		359.7
Total Net sales		$	1,283.9	$	1,174.1
Depreciation and amortization expense (2):
Performance Coatings		$	52.6	$	58.0
Mobility Coatings		16.9		19.7
Total Depreciation and amortization expense		$	69.5	$	77.7

(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 March 31,						Three Months Ended March 31,
			2022		2021				2023		2022
Segment Adjusted EBIT (1):	Segment Adjusted EBIT (1):						Segment Adjusted EBIT (1):
Performance Coatings	Performance Coatings		$	94.6	$	117.2	Performance Coatings		$	109.3	$	94.6
Mobility Coatings	Mobility Coatings		0.5		39.2		Mobility Coatings		23.5		0.5
Total (2)	Total (2)		95.1		156.4		Total (2)		132.8		95.1
Interest expense, net	Interest expense, net		32.6		33.5		Interest expense, net		48.2		32.6
Debt extinguishment and refinancing-related costs (a)							Debt extinguishment and refinancing-related costs (a)		1.8		—
Termination benefits and other employee-related (benefits) costs (b)							Termination benefits and other employee-related (benefits) costs (b)		(0.2)		2.4

Termination benefits and other employee related costs (a)			2.4		2.8
Strategic review and retention costs (b)			—		5.4
Acquisition and divestiture-related costs (c)	Acquisition and divestiture-related costs (c)		0.4		0.2		Acquisition and divestiture-related costs (c)		0.5		0.4
Impairment charges (d)	Impairment charges (d)		0.3		—		Impairment charges (d)		7.1		0.3

Accelerated depreciation and site closure costs (e)	Accelerated depreciation and site closure costs (e)		1.3		0.6		Accelerated depreciation and site closure costs (e)		1.1		1.3
Indemnity loss (f)			0.3		—

Operational matter (g)			0.1		94.4

Russia sanction-related impacts ~~(h)~~(f)	Russia sanction-related impacts ~~(h)~~(f)		5.8		—		Russia sanction-related impacts ~~(h)~~(f)		(1.4)		5.8

Other adjustments (g)							Other adjustments (g)		(0.1)		0.4
Income before income taxes	Income before income taxes		$	51.9	$	19.5	Income before income taxes		$	75.8	$	51.9


(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) certain non-cash items included within net income, (2) certain items the Company does not believe are indicative of ongoing operating performance or (3) certain 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 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.

~~(a)~~(b)			Represents expenses and associated changes to estimates related to employee termination benefits associated with restructuring programs 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.

~~(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, which were earned over a period of 18-24 months, which ended in September 2021. These amounts are not considered indicative of our ongoing performance.

(c)			Represents acquisition and divestiture-related expenses and integration activities associated with our business combinations, all of which are not considered indicative of our ongoing operating performance. The amount for the three months ended March 31, 2023 includes $0.8 million of due diligence and other related costs associated with unconsummated merger and acquisition transactions.

(d)			Represents impairment charges, which are not considered indicative of our ongoing operating performance. The amount recorded during the three months ended March 31, 2023 relates to a $7.1 million loss due to the anticipated exit of a non-core business category in the Mobility Coatings segment.



(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.

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

~~(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 we do not consider indicative of our ongoing operating performance.







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





(g)			Represents costs for certain non-operational or non-cash (gains) losses, unrelated to our core business and 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 Gain (Loss) on Derivatives		Accumulated Other Comprehensive (Loss) Income
Balance, December 31, 2021		$	(331.3)	$	(60.4)	$	(22.7)	$	(414.4)
Balance, December 31, 2022										Balance, December 31, 2022	$	(433.5)	$	(36.3)	$	2.9	$	(466.9)
Current year deferrals to AOCI	Current year deferrals to AOCI	0.4		—		10.8		11.2		Current year deferrals to AOCI	50.3		—		0.6		50.9
Reclassifications from AOCI to Net income	Reclassifications from AOCI to Net income	(4.8)		0.5		6.1		1.8		Reclassifications from AOCI to Net income	(4.2)		0.2		(2.5)		(6.5)
Net Change	Net Change	(4.4)		0.5		16.9		13.0		Net Change	46.1		0.2		(1.9)		44.4
Balance, March 31, 2022		$	(335.7)	$	(59.9)	$	(5.8)	$	(401.4)
Balance, March 31, 2023										Balance, March 31, 2023	$	(387.4)	$	(36.1)	$	1.0	$	(422.5)

The cumulative income tax benefit related to the adjustments for foreign exchange at March 31, 2023 was $0.9 million. The cumulative income tax benefit related to the adjustments for pension benefits at March 31, 2023 was $14.1 million. The cumulative income tax benefit related to the adjustments for the unrealized gain on derivatives at March 31, 2023 was $0.4 million. See Note 16 for classification within the condensed consolidated statements of operations of the gains and losses on derivatives reclassified from AOCI.


	Unrealized Currency Translation Adjustments		Pension Adjustments		Unrealized (Loss) Gain on Derivatives		Accumulated Other Comprehensive (Loss) Income
Balance, December 31, 2021	$	(331.3)	$	(60.4)	$	(22.7)	$	(414.4)
Current year deferrals to AOCI	0.4		—		10.8		11.2
Reclassifications from AOCI to Net income	(4.8)		0.5		6.1		1.8
Net Change	(4.4)		0.5		16.9		13.0
Balance, March 31, 2022	$	(335.7)	$	(59.9)	$	(5.8)	$	(401.4)

The cumulative income tax benefit related to the adjustments for pension ~~benefit~~benefits at March 31, 2022 was $24.4 million. The cumulative income tax benefit related to the adjustments for the unrealized loss on derivatives at March 31, 2022 was $1.0 million. See Note 16 for classification within the condensed consolidated statements of operations of the gains and losses on derivatives reclassified from 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 March 31, 2021 was $33.0 million. The cumulative income tax benefit related to the adjustments for unrealized loss on derivatives at March 31, 2021 was $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, ~~2021.~~2022.

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,~~"anticipated," "assumed," "expect," "believe," ~~"intend,~~"intended," "estimates," ~~"targets,"~~ "projections," ~~"can,~~"plans," "could," "should," "would," "may," "will," "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,~~uncertainties, including, but not limited to, economic, competitive, governmental, geopolitical and technological factors outside of our control that may cause our business, industry, strategy, financing activities or actual results to differ materially. More information on potential factors that could affect our financial results is available in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the ~~risks and uncertainties described in "Forward-Looking Statements,"~~year ended December 31, 2022 as well as "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022 and in other documents we have filed with, or furnished to, the Securities and Exchange Commission ("SEC"), 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",~~Factors," in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, 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~~forward-looking 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 of the forward-looking statements contained herein, whether as a result of new information, future events or otherwise.

We intend to use our investor relations page at ir.axalta.com as a means of disclosing material information to the public in a broad, non-exclusionary manner for purposes of the SEC’s Regulation Fair Disclosure (or Reg. FD). Investors should routinely monitor that site, in addition to our press releases, SEC filings and public conference calls and webcasts, as information posted on that page could be deemed to be material information.

OVERVIEW

We are a leading global manufacturer, marketer and distributor of ~~high performance~~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 4745 manufacturing facilities, four technology centers, 48 customer training centers and approximately 12,000 ~~employees~~team members 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. 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 both large regional and global OEMs and to a fragmented and local customer base. These customers comprise independent or multi-shop operator body shops as well as a wide variety of industrial manufacturers. 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~~Refinish and ~~industrial.~~Industrial.

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BUSINESS HIGHLIGHTS

General Business Highlights

Our net sales increased ~~10.4%~~9.4%, including a ~~3.0%~~2.7% headwind from foreign currency translation, for the three months ended March 31, ~~2022~~2023 compared with the three months ended March 31, ~~2021.~~2022. The increased net sales were driven primarily by higher average selling price and product mix of 9.4% and higher volumes of 2.7%. The following trends impacted our segment net sales performance for the three months ended March 31, 2023:

•Performance Coatings:Net sales increased 4.0% for the three months ended March 31, 2023 compared with the three months ended March 31, 2022. The increased net sales were driven by higher average selling price and product mix of ~~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 15.1% for the three months ended March 31, 2022 compared with the three months ended March 31, 2021. The increased sales were primarily driven by higher average selling price and product mix of 10.7%, contributions from acquisitions of 5.4% and higher sales volume of 2.5%10.3%, partially offset by lower sales volumes of 3.4% driven by the Industrial end-market, which was partially offset by slightly higher volumes in Refinish, and a ~~3.5%~~2.9% headwind from unfavorable foreign currency translation driven primarily by the fluctuations of the Euro, Chinese Yuan, British Pound and Turkish Lira, partially offset by Mexican Peso, compared to the U.S. Dollar.

•Mobility Coatings: Net sales increased ~~1.0%~~21.4% for the three months ended March 31, ~~2022~~2023 compared with the three months ended March 31, ~~2021.~~2022. The increased net sales were driven by higher sales volumes of 16.5% and higher average selling price and product mix of ~~4.9%~~7.2%, partially offset by ~~lower sales volume of 1.9% as a result of continued semiconductor chip and other supply chain shortages that dampened customer demand and~~ unfavorable currency impact of ~~2.0%. The unfavorable foreign currency translation was~~2.3%, driven primarily by the fluctuations of the Chinese Yuan, Euro and Turkish Lira, partially offset by the Mexican Peso, compared to the U.S. Dollar.

Our business serves four end-markets globally with net sales for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, as follows:

(In millions) Three Months Ended March 31, 2022 vs 2021
2022 2021 % change
Performance Coatings
Refinish $ 461.4 $ 399.0 15.6 %
Industrial 353.0 308.3 14.5 %
Total Net sales Performance Coatings 814.4 707.3 15.1 %
Mobility Coatings
Light Vehicle 275.6 278.9 (1.2) %
Commercial Vehicle 84.1 77.4 8.7 %
Total Net sales Mobility Coatings 359.7 356.3 1.0 %
Total Net sales $ 1,174.1 $ 1,063.6 10.4 %

~~Semiconductor chip shortages, supply chain shortages and raw material inflation~~

During the three months ended 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, inflation of raw material and other costs and logistics constraints. We anticipate 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 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.


(In millions)	Three Months Ended March 31,			2023 vs 2022
		2023		2022		% change
Performance Coatings
Refinish		$	497.6	$	461.4	7.8	%
Industrial		349.5		353.0		(1.0)	%
Total Net sales Performance Coatings		847.1		814.4		4.0	%
Mobility Coatings
Light Vehicle		328.5		275.6		19.2	%
Commercial Vehicle		108.3		84.1		28.8	%
Total Net sales Mobility Coatings		436.8		359.7		21.4	%
Total Net sales		$	1,283.9	$	1,174.1	9.4	%

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~~historically constituted less than 1.5% of our ~~business,~~net sales, 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,~~conflict, especially on the price and supply of raw materials. ~~During~~We recorded benefits of $1.4 million related to changes in estimates of reserves for accounts receivable during the three months ended March 31, ~~2022, we recorded $5.8 million~~2023. Net assets of ~~incremental reserves for accounts receivable and inventory as a result of sanctions imposed on Russia.~~

~~Table of Contents~~

~~Coronavirus (COVID-19) Pandemic~~

~~During the three months ended~~our Russian subsidiaries at 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 future COVID-19 developments, such as impacts from new variants, employee absenteeism, shutdowns or other restrictions, that could impact our future results of operations, financial condition2023 were approximately $10.7 million, with $11.1 million comprising cash 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.equivalents.

Capital and Liquidity Highlights

During the three months ended March 31, ~~2022,~~2023, we ~~repurchased 6.4~~voluntarily prepaid $75.0 million ~~shares~~ of ~~our common stock for total consideration~~the outstanding principal of ~~$175.1~~the 2029 Dollar Term Loans, and during April 2023, we voluntarily prepaid an additional $25.0 million ~~as we continue~~of outstanding principal amount of the 2029 Dollar Term Loans. See Note 15 to ~~execute against our previously-approved share repurchase program.~~

~~Environmental, Social and Governance ("ESG") Framework~~

In 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 Annualthe condensed consolidated unaudited financial statements included elsewhere in this Quarterly Report on Form ~~10-K~~10-Q for additional information.

Raw material inflation

During the ~~year~~three months ended ~~December~~March 31, ~~2021.~~2023, we were negatively impacted by continued raw material inflation as compared to the three months ended March 31, 2022, although we have seen stabilization in raw material pricing sequentially and have continued to offset these increased costs through the realization of improved pricing on our products. We will continue to monitor inflation and take actions that we believe will help mitigate costs and other operational impacts.

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FACTORS AFFECTING OUR OPERATING RESULTS

There have been no changes in the factors affecting our operating results previously ~~reported~~disclosed under such heading in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the information contained in the accompanying unaudited condensed consolidated 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 March 31,	2022 vs 2021									Three Months Ended March 31,	2023 vs 2022
			2022		2021		$ Change		% Change					2023		2022		$ Change		% Change
Net sales	Net sales		$	1,174.1	$	1,063.6	$	110.5	10.4	%	Net sales			$	1,283.9	$	1,174.1	$	109.8	9.4	%
Price/Mix effect	Price/Mix effect								8.8	%	Price/Mix effect									9.4	%
Impact of acquisitions									3.6	%
Volume effect	Volume effect								1.0	%	Volume effect									2.7	%

Exchange rate effect	Exchange rate effect								(3.0)	%	Exchange rate effect									(2.7)	%

Three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021~~2022


Net sales increased primarily due to the following:
n Higher average selling ~~price driven~~prices in both segments and all regions as a result of pricing actions taken to offset ~~input price~~raw material and variable freight inflation
n ~~Increased sales from companies acquired in 2021~~
n Higher sales volumes ~~driven by Performance~~in Mobility Coatings partially ~~muted~~offset by ~~customer production limitations resulting from significant impacts of semiconductor chip and other supply chain constraints within Mobility~~lower sales volumes in Performance Coatings
Partially offset by:
n Unfavorable impacts of currency translation due primarily to the fluctuations of the Euro, ~~and~~Chinese Yuan, Turkish Lira and British Pound, partially offset by the Mexican Peso, compared to the U.S. ~~dollar~~Dollar

~~Table of Contents~~

Cost of sales


		Three Months Ended March 31,	2022 vs 2021											Three Months Ended March 31,	2023 vs 2022
			2022			2021			$ Change		% Change					2023			2022			$ Change		% Change

Cost of sales	Cost of sales		$	837.4		$	684.5		$	152.9	22.3	%	Cost of sales			$	901.9		$	837.4		$	64.5	7.7	%

% of net sales	% of net sales		71.3		%	64.4		%					% of net sales			70.2		%	71.3		%

Three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021~~2022


Cost of sales primarily increased due to the following:
n Higher variable input costs due to raw material ~~logistics and energy~~ inflation
n ~~Increased costs from companies acquired in 2021~~
n Higher operating ~~costs as temporary COVID-19 related cost savings initiatives have lapsed~~expenses due primarily to inflation
nCosts associated with higher sales volumes within Mobility Coatings
n Increase of ~~$1.7~~$2.6 million ~~associated with incremental~~in inventory obsolescence ~~related~~charges compared to ~~sanctions imposed on Russia~~the prior period
Partially offset by:
n Favorable ~~impacts~~currency translation impact of ~~currency translation,~~approximately 3%, due primarily to the fluctuations of the Euro, ~~and~~Chinese Yuan, Turkish Lira and British Pound, partially offset by the Mexican Peso, compared to the U.S. ~~dollar~~Dollar
Cost of sales as a percentage of net sales ~~increased~~decreased primarily due to the following:
n Higher ~~variable input costs due to raw material, logistics and energy inflation~~
~~Partially offset by:~~
n ~~Higher~~ average selling price ~~driven by~~in both segments and all regions as a result of pricing actions taken to offset ~~variable~~ input cost inflation
n More effective coverage of fixed costs as a result of higher sales volumes within Mobility Coatings
Partially offset by:
n Higher variable input costs due to raw material inflation
n Higher operating expenses due primarily to inflation

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Selling, general and administrative expenses

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 March 31,	2023 vs 2022
		2023		2022		$ Change		% Change

SG&A		$	206.0	$	193.5	$	12.5	6.5	%

Three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021~~2022


Selling, general and administrative expenses increased primarily due to the following:
n Higher operating expenses due primarily to inflation, including labor costs ~~as temporary COVID-19 related cost savings initiatives have lapsed~~
n ~~Increased costs from companies acquired in 2021~~
n Increase of $4.6 million in year over year bad debt expense
n Increased commissions ~~and~~from higher sales ~~incentive compensation driven by increased sales volume~~volumes within Mobility Coatings
Partially offset by:
n Favorable ~~impacts~~currency translation impact of approximately 4%, due primarily to the fluctuations of the Euro and Chinese Yuan compared to the U.S. Dollar

Other operating charges


	Three Months Ended March 31,	2023 vs 2022
		2023		2022		$ Change		% Change
Other operating charges		$	7.1	$	7.7	$	(0.6)	(7.8)	%

Three months ended March 31, 2023 compared to the three months ended March 31, 2022


Other operating charges decreased primarily due to the following:
nDecrease of $5.4 million from an expense of $4.1 million in the prior year period to a benefit of $1.3 million in the current period as a result of changes in estimates of reserves for accounts receivable related to Russia's conflict with Ukraine
nDecrease of $2.6 million in termination benefits and other employee-related costs associated with our cost saving initiatives in the prior period



Partially offset by:
nImpairment charges of $7.1 million related to the anticipated exit of a non-core business category in the Mobility Coatings segment
nIncrease of $0.5 million of site closure costs

Research and development expenses


	Three Months Ended March 31,	2023 vs 2022
		2023		2022		$ Change		% Change
Research and development expenses		$	19.1	$	16.4	$	2.7	16.5	%

Three months ended March 31, 2023 compared to the three months ended March 31, 2022


Research and development expenses increased primarily due to the following:
n Increased research and development activity
n Increased labor costs as a result of inflation
Partially offset by:
n Favorable currency translation impact of approximately 1%, due primarily to the fluctuations of the Euro compared to the U.S. ~~dollar~~

~~Other operating charges~~

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


~~Other operating charges changed due to the following:~~
n Decrease of $94.3 million 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~~Decrease of $5.4 million associated with retention awards earned in 2021~~

n ~~Impacts of currency translation were immaterial when compared to 2021~~
~~Partially offset by:~~
n~~Increase of $4.1 million as a result of incremental reserves for accounts receivable related to sanctions imposed on Russia~~Dollar

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~~Research and development expenses~~Amortization of acquired intangibles

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 March 31,	2023 vs 2022
		2023		2022		$ Change		% Change
Amortization of acquired intangibles		$	24.5	$	32.8	$	(8.3)	(25.3)	%

Three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021~~


~~Research and development expenses increased due to the following:~~
n ~~Increased operating expenses driven by increased research and development activity~~
n ~~Increased costs from companies acquired in 2021~~
n ~~Impacts of currency translation were immaterial when compared to 2021~~

~~Amortization of acquired intangibles~~

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


Amortization of acquired intangibles ~~increased due to the following:~~
n ~~Amortization related to 2021 acquisitions~~
n ~~Impacts of currency translation were immaterial when compared to 2021~~

~~Interest expense, net~~

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


~~Interest expense, net~~ decreased primarily due to the following:
n Reduced amortization from intangibles reaching the end of their useful lives
n Favorable ~~impacts~~currency translation impact of ~~our~~approximately 2%, due primarily to the fluctuations of the Euro compared to the U.S. Dollar

Interest expense, net


	Three Months Ended March 31,	2023 vs 2022
		2023		2022		$ Change		% Change
Interest expense, net		$	48.2	$	32.6	$	15.6	47.9	%

Three months ended March 31, 2023 compared to the three months ended March 31, 2022


Interest expense, net increased primarily due to the following:
•Unfavorable impact of approximately $28.0 million due to the interest rate on the 2029 Dollar Term Loans, which were issued in December 2022 to replace the 2024 Dollar Term Loans
Partially offset by:
n Favorable impact of $8.8 million from derivative instruments used to hedge the variable interest rate exposure on certain debt arrangements

n ~~Impacts of~~Favorable currency translation ~~were immaterial when~~impact of approximately 1%, due to the fluctuations of the Euro compared to ~~2021~~the U.S. Dollar

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

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 March 31,	2023 vs 2022
		2023		2022		$ Change		% Change
Other expense, net		$	1.3	$	1.8	$	(0.5)	27.8	%

Three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021~~2022


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

n Increased miscellaneous income, net of $2.0 million
n ~~Unfavorable~~Favorable impact of foreign exchange losses of ~~$0.8~~$0.3 million when compared with the prior year period
n ~~Increased expenses of $0.3 million during 2022 as a result of non-service pension costs~~ Partially offset by:
n ~~Indemnity loss~~Increased debt extinguishment and refinancing related costs of ~~$0.3~~$1.8 million ~~during 2022 as a result~~associated with the refinancing of ~~offsetting tax reserves released during~~ the ~~period~~2024 Dollar Term Loans

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Provision for income taxes


		Three Months Ended March 31,								Three Months Ended March 31,
			2022			2021					2023			2022
Income before income taxes	Income before income taxes		$	51.9		$	19.5		Income before income taxes		$	75.8		$	51.9
Provision for income taxes	Provision for income taxes		11.0			3.8			Provision for income taxes		15.3			11.0
Statutory U.S. Federal income tax rate	Statutory U.S. Federal income tax rate		21.0		%	21.0		%	Statutory U.S. Federal income tax rate		21.0		%	21.0		%
Effective tax rate	Effective tax rate		21.2		%	19.5		%	Effective tax rate		20.2		%	21.2		%
Effective tax rate vs. statutory U.S. Federal income tax rate	Effective tax rate vs. statutory U.S. Federal income tax rate		0.2		%	(1.5)		%	Effective tax rate vs. statutory U.S. Federal income tax rate		(0.8)		%	0.2		%


			(Favorable) Unfavorable Impact						(Favorable) Unfavorable Impact
		Three Months Ended March 31,						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		2022		2021		Items impacting the effective tax rate vs. statutory U.S. federal income tax rate		2023		2022
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)		$	(6.0)	$	(4.9)	Earnings generated in jurisdictions where the statutory rate is different from the U.S. Federal rate (1)		$	(6.5)	$	(6.0)
Changes in valuation allowance	Changes in valuation allowance		1.1		7.0		Changes in valuation allowance		7.8		1.1
Foreign exchange gain (loss), net			2.3		(1.4)
Foreign exchange losses, net							Foreign exchange losses, net		0.4		2.3
Non-deductible expenses and interest	Non-deductible expenses and interest		0.5		0.7		Non-deductible expenses and interest		1.1		0.5
Changes in unrecognized tax benefits	Changes in unrecognized tax benefits		0.2		2.2		Changes in unrecognized tax benefits		(2.2)		0.2

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

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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 March 31,	2022 vs 2021											Three Months Ended March 31,	2023 vs 2022
			2022			2021			$ Change		% Change					2023			2022			$ Change		% Change
Net sales	Net sales		$	814.4		$	707.3		$	107.1	15.1	%	Net sales			$	847.1		$	814.4		$	32.7	4.0	%
Price/Mix effect	Price/Mix effect										10.7	%	Price/Mix effect											10.3	%
Impact of acquisitions											5.4	%

Volume effect	Volume effect										2.5	%	Volume effect											(3.4)	%
Exchange rate effect	Exchange rate effect										(3.5)	%	Exchange rate effect											(2.9)	%

Adjusted EBIT	Adjusted EBIT		$	94.6		$	117.2		$	(22.6)	(19.3)	%	Adjusted EBIT			$	109.3		$	94.6		$	14.7	15.5	%
Adjusted EBIT Margin	Adjusted EBIT Margin		11.6		%	16.6		%					Adjusted EBIT Margin			12.9		%	11.6		%

Three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021~~2022


Net sales increased primarily due to the following:
n Higher average selling prices and product mix across both end-markets and all regions, primarily as a result of pricing actions taken to offset input price inflation within both end-markets
n ~~Increased sales from companies acquired in 2021~~ Partially offset by:
n ~~Higher~~Lower sales volumes ~~across most regions~~ driven ~~primarily~~ by ~~Refinish~~the Industrial end-market
~~Partially offset by:~~
n Unfavorable impacts of currency translation due primarily to the fluctuations of the Euro, Chinese Yuan, British Pound and Turkish Lira, partially offset by Mexican Peso, compared to the U.S. ~~dollar~~Dollar


Adjusted EBIT and Adjusted EBIT ~~margins decreased~~margin increased due to the following:
n Higher average selling prices and product mix across both end-markets and all regions, which were in excess of variable input cost inflation
Partially offset by:
n Higher variable input costs across both end-markets and ~~all~~most regions due to raw material ~~logistics and energy~~ inflation
n Lower sales volumes driven by the Industrial end-market
n Higher operating expenses ~~across both end-markets and all regions~~ due to inflation ~~and increased activity as temporary COVID-19 related cost savings initiatives have lapsed~~
n Unfavorable impacts of currency translation due primarily to the fluctuations of the Euro compared to the U.S. ~~dollar~~Dollar

Table of Contents

Mobility Coatings Segment


	Three Months Ended March 31,	2023 vs 2022
		2023			2022			$ Change		% Change
Net sales		$	436.8		$	359.7		$	77.1	21.4	%
Volume effect										16.5	%
Price/Mix effect										7.2	%
Exchange rate effect										(2.3)	%


Adjusted EBIT		$	23.5		$	0.5		$	23.0	4,600.0	%
Adjusted EBIT Margin		5.4		%	0.1		%

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

~~Partially offset by:~~
Net sales increased primarily due to the following:
n Higher sales volumes across both end-markets and all regions
n Higher average selling prices and product mix across both end-markets and all ~~regions~~

~~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 Chinese Yuan, Euro and Turkish Lira, partially offset by the Mexican Peso, 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~~Dollar


Adjusted EBIT and Adjusted EBIT ~~margins decreased~~margin increased 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 ~~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~~
~~Partially offset by:~~
n Higher average selling prices and product mix across both end-markets and ~~most~~all regions, primarily as a result of pricing actions taken to offset input price inflation
n Higher sales volumes across both end-markets and all regions
Partially offset by:
n Higher operating expenses across most regions due to inflation

n Higher variable input costs across both end-markets due to raw material inflation

LIQUIDITY AND CAPITAL RESOURCES

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

At March 31, ~~2022,~~2023, availability under the Revolving Credit Facility was ~~$527.9~~$529.6 million, net of ~~$22.1~~$20.4 million of letters of credit outstanding. All such availability may be utilized without violating any covenants under the ~~credit agreement governing such facility~~Credit Agreement or the indentures governing ~~the Senior Notes.~~our senior notes (the "Senior Notes"). At March 31, ~~2022,~~2023, we had ~~$21.2~~$10.1 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 ~~$25.2~~$50.3 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 2029 Dollar 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,~~redemptions, 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 unaudited condensed consolidated balance sheets. Our ~~facility in China is~~supplier financing programs are more fully described in Note 1514 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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Cash Flows


		Three Months Ended March 31,					Three Months Ended March 31,
(In millions)	(In millions)	2022		2021		(In millions)	2023		2022
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	$	40.9	$	15.7	Net income	$	60.5	$	40.9
Depreciation and amortization	Depreciation and amortization	77.7		76.4		Depreciation and amortization	69.5		77.7
Amortization of deferred financing costs and original issue discount	Amortization of deferred financing costs and original issue discount	2.4		2.2		Amortization of deferred financing costs and original issue discount	2.0		2.4

Debt extinguishment and refinancing related costs						Debt extinguishment and refinancing related costs	1.8		—
Deferred income taxes	Deferred income taxes	(2.7)		(18.3)		Deferred income taxes	2.4		(2.7)
Realized and unrealized foreign exchange losses, net	Realized and unrealized foreign exchange losses, net	2.4		8.6		Realized and unrealized foreign exchange losses, net	5.2		2.4
Stock-based compensation	Stock-based compensation	5.3		3.6		Stock-based compensation	6.3		5.3

Divestiture and impairment charges						Divestiture and impairment charges	7.1		0.3

Interest income on swaps designated as net investment hedges	Interest income on swaps designated as net investment hedges	(6.2)		(3.5)		Interest income on swaps designated as net investment hedges	(5.6)		(6.2)

Other non-cash, net	Other non-cash, net	(1.6)		1.4		Other non-cash, net	4.0		(1.9)
Net income adjusted for non-cash items	Net income adjusted for non-cash items	118.2		86.1		Net income adjusted for non-cash items	153.2		118.2
Changes in operating assets and liabilities	Changes in operating assets and liabilities	(162.1)		(46.5)		Changes in operating assets and liabilities	(205.0)		(162.1)
Operating activities	Operating activities	(43.9)		39.6		Operating activities	(51.8)		(43.9)
Investing activities	Investing activities	(10.3)		(27.8)		Investing activities	(5.5)		(10.3)
Financing activities	Financing activities	(208.1)		(92.5)		Financing activities	(88.4)		(208.1)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(2.1)		(13.5)		Effect of exchange rate changes on cash	5.5		(2.1)

Net decrease in cash	Net decrease in cash	$	(264.4)	$	(94.2)	Net decrease in cash	$	(140.2)	$	(264.4)

Three months ended March 31, 2023

Net Cash Used for Operating Activities

Net cash used for operating activities for the three months ended March 31, 2023 was $51.8 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $153.2 million. This was offset by net uses of working capital of $205.0 million, for which the most significant drivers were increases in accounts and notes receivable and prepaid expenses and other assets of $92.3 million and $30.0 million, respectively, as well as decreases in other accrued liabilities and accounts payable of $96.3 million and $21.7 million, respectively. These outflows were driven primarily by timing of collections and payments, payments of Business Incentive Plan assets and largely seasonal cash payments for employee-related benefits and were partially offset by decreases in inventories of $38.6 million as a result of lower production levels as we intentionally managed inventory levels.

Net Cash Used for Investing Activities

Net cash used for investing activities for the three months ended March 31, 2023 was $5.5 million. The primary use was for purchases of property, plant and equipment of $41.4 million, partially offset by proceeds of $35.0 million from settlements and interest from swaps designated as net investment hedges, which are discussed further in Note 16 to the unaudited 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, 2023 was $88.4 million. This change was primarily driven by voluntary prepayments of $75.0 million of outstanding principal of the 2029 Dollar Term Loans, routine repayments of $14.4 million on borrowings, payments totaling $7.4 million for acquisition-related consideration and payments of $5.8 million for fees associated with refinancing our 2024 Dollar Term Loans, partially offset by proceeds of $8.8 million from a short-term borrowing and $5.4 million net cash received from our stock-based compensation program.

Other Impacts on Cash

Currency exchange impacts on cash for the three months ended March 31, 2023 were favorable by $5.5 million, which was driven primarily by the fluctuations of the Mexican Peso and Euro compared to the U.S. Dollar.

Table of Contents

Three months ended 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~~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 unaudited 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 three months ended March 31, 2021 was $39.6 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $86.1 million. This was offset by net uses of working capital of $46.5 million, for which the most significant drivers were increases in accounts and notes receivable, inventory and prepaid expenses and other assets of $52.6 million, $36.2 million and $18.0 million, respectively. These outflows were primarily driven by 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 condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, partially offset by the timing of cash payments for employee related benefits, customer incentive payments and payments related to normal seasonal operating activities.

~~Net Cash Used for Investing Activities~~

Net cash used for investing activities for the three months ended March 31, 2021 was $27.8 million. The primary use was for purchases of property, plant and equipment of $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 three months ended March 31, 2021 was $92.5 million. The primary uses were for the purchase of our common stock totaling $63.7 million and payments of $26.7 million on borrowings.

~~Other Impacts on Cash~~

~~Currency exchange impact on cash for the three months ended March 31, 2021 were unfavorable by $13.5 million, which was driven primarily by weakening of the Euro compared to the U.S. Dollar.~~

Financial Condition

We had cash and cash equivalents at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 of ~~$576.2~~$512.1 million and ~~$840.6~~$645.2 million, respectively. Of these balances, ~~$385.0~~$383.4 million and ~~$471.9~~$433.6 million were maintained in non-U.S. jurisdictions as of March 31, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022, respectively, with $11.1 million and $12.9 million, respectively, within Russia. We believe at this time our organizational structure allows us the necessary flexibility to move funds throughout our subsidiaries to meet our operational and working capital needs.

Our business may not generate sufficient net cash ~~flow from operations~~provided by operating activities 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, net cash ~~flow from operations~~provided by operating activities 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~~inflationary pressures 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.~~future and elevated interest rates, as experienced during 2022 and continuing in 2023, may increase our interest expense and weaken our financial condition.

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


(In millions)	(In millions)	March 31, 2022		December 31, 2021		(In millions)	March 31, 2023		December 31, 2022
2024 Dollar Term Loans		$	2,032.8	$	2,038.9

2029 Dollar Term Loans						2029 Dollar Term Loans	$	1,925.0	$	2,000.0
2025 Euro Senior Notes	2025 Euro Senior Notes	501.8		508.8		2025 Euro Senior Notes	489.3		479.1
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	110.6		113.8		Short-term and other borrowings	79.4		74.5
Unamortized original issue discount	Unamortized original issue discount	(4.1)		(4.6)		Unamortized original issue discount	(21.0)		(22.4)
Unamortized deferred financing costs	Unamortized deferred financing costs	(25.8)		(27.3)		Unamortized deferred financing costs	(25.6)		(26.9)
Total borrowings, net	Total borrowings, net	3,815.3		3,829.6		Total borrowings, net	3,647.1		3,704.3
Less:	Less:					Less:
Short-term borrowings	Short-term borrowings	51.8		55.4		Short-term borrowings	21.6		16.0
Current portion of long-term borrowings	Current portion of long-term borrowings	24.3		24.3		Current portion of long-term borrowings	20.0		15.0
Long-term debt	Long-term debt	$	3,739.2	$	3,749.9	Long-term debt	$	3,605.5	$	3,673.3

Our indebtedness, including the Senior Secured Credit Facilities, ~~and~~ Senior Notes and short-term borrowings, is more fully described in Note 18 to the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

We believe that we continue to maintain sufficient liquidity to meet our cash requirements, including our ~~leverage and associated interest~~debt service obligations as well as our working capital needs. Availability under the Revolving Credit Facility was ~~$527.9~~$529.6 million and $529.3 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, all of which may be borrowed by us without violating any covenants under the ~~Credit Agreement~~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 ofto the ~~Company's~~audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. There have been no material changes in the Company's contractual obligations and cash requirements as ~~reported~~disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Off-Balance Sheet Arrangements

See Note 65 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

~~None.~~See Note 1 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a summary of recent accounting guidance.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

~~Critical~~An accounting ~~policies~~policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are ~~those~~highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting ~~policies~~estimates that ~~can have a significant~~are reasonably likely to occur periodically, could materially impact on the ~~presentation~~financial statements. The preparation 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~~requires us to make estimates and ~~assumptions.~~judgments that affect the amounts reported in the financial statements. We base our estimates and judgments on historical experiences and assumptions believed to be reasonable under the circumstances and re-evaluate them on an ongoing basis. Actual results could differ from our estimates under different assumptions or conditions. There have been no material changes to our critical accounting policies and estimates previously disclosed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 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, 2021.2022.

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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~~Part II, Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. No matter how well designed and operated, disclosure controls and procedures can provide only reasonable, rather than absolute, assurance of achieving the desired control objectives. 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 March 31, ~~2022.~~2023.

Changes in internal control over financial reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the three months ended March 31, ~~2022~~2023 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 except~~us as ~~is set forth~~discussed in Note 65 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~~we will ~~continue to use~~be using 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 orderpursuant 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.this requirement.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from ~~the risks~~those previously ~~reported~~disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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 March 31, 2022:~~

(in millions, except per share data)
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)
January 2022 0.3 $ 28.70 0.3 $ 607.4
February 2022 3.1 28.99 3.1 517.4
March 2022 3.0 25.24 3.0 442.3
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"). 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 $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.None.

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

~~10.1~~10.1^			Form of Performance Share Unit Award Agreement for U.S. Employees (Adjusted EBITDA)

~~10.2~~10.2^			Form of Performance Share Unit Award Agreement for U.S. Employees (Relative TSR)

10.3^			Form of Restricted Stock Unit Award Agreement 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.~~Denotes management contract or compensatory plan or arrangement

†			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:	~~April 26, 2022~~May 2, 2023	By: /s/ ~~Robert W. Bryant~~Chris Villavarayan
		~~Robert W. Bryant~~Chris Villavarayan
		Chief Executive Officer and President
		(Principal Executive Officer)

Date:	~~April 26, 2022~~May 2, 2023	By: /s/ Sean M. Lannon
		Sean M. Lannon
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

Date:	~~April 26, 2022~~May 2, 2023	By: /s/ Anthony Massey
		Anthony Massey
		Vice President and Global Controller
		(Principal Accounting Officer)

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	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


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


Restricted Stock Units	Units (millions)	Weighted-Average Fair Value
Outstanding at January 1, 2022	1.1	$	28.85
Granted	0.6	$	28.87
Vested	(0.4)	$	28.43
Forfeited (1)	—	$	28.78
Outstanding at March 31, 2022	1.3	$	29.00


	March 31, 2022		December 31, 2021
AOCI:

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


		For the Three Months Ended March 31,
		2022				2021
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 expense, net	$	—	$	—	$	—	$	0.6
Interest rate swaps	Interest expense, net	(12.4)		7.1		(1.5)		7.0
Foreign currency forward contracts (1)	Cost of goods sold	—		—		(0.1)		—
Cross-currency swaps	Interest expense, net	(5.6)		(4.8)		(29.6)		(4.8)


(in millions, except per share data)
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)
January 2022	0.3	$	28.70	0.3	$	607.4
February 2022	3.1	28.99		3.1	517.4
March 2022	3.0	25.24		3.0	442.3
Total	6.4	$	27.24	6.4	$	442.3