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What changed in Axalta Coating Systems Ltd.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Axalta Coating Systems Ltd.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+400 added−377 removedSource: 10-K (2025-02-13) vs 10-K (2024-02-15)

Top changes in Axalta Coating Systems Ltd.'s 2024 10-K

400 paragraphs added · 377 removed · 315 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

69 edited+12 added−16 removed50 unchanged
Biggest changeIn addition, we are, or may become, subject to various climate disclosure regimes regulating the disclosure of GHG emissions and related information, such as the European Union’s (“EU”) Corporate Sustainability Reporting Directive (“CSRD”) and California’s Climate Corporate Data Accountability Act and Climate Related Financial Risk Act.
Biggest changeWe may also incur significant additional costs as a result of contamination that is discovered and/or government required remediation obligations that are imposed at these or other facilities in the future. 11 Table of Contents In addition, we are, or may become, subject to various climate disclosure regimes regulating the disclosure of GHG emissions and related information, such as the Securities and Exchange Commission’s (“SEC”) final rules under SEC Release No. 34-99678 and No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors (the “Final SEC Climate Rules”), European Union’s (“EU”) Corporate Sustainability Reporting Directive (“CSRD”) and California’s Climate Corporate Data Accountability Act and Climate Related Financial Risk Act (together, the “California Climate Laws”).
Demand in this end-market is driven by a wide variety of macroeconomic factors, such as growth in GDP, new residential and commercial construction, as well as automotive and industrial production.
Demand in this end-market is driven by a wide variety of macroeconomic factors, such as growth in GDP and new residential and commercial construction, as well as automotive and industrial production.
In the oil & gas industry, our powder and liquid products are used to protect components from corrosion and severe conditions such as extreme temperatures, pressures, and harsh chemicals.
In the oil and gas industry, our powder and liquid products are used to protect components from corrosion and severe conditions such as extreme temperatures, pressures, and harsh chemicals.
These new innovative technologies complement our existing solutions to insulate copper wire used in motors and transformers and our coatings insulate sheets forming magnetic circuits of motors and transformers, computer elements and other electrical devices to provide increased motor and power efficiency. • Transportation: Key provider of liquid and powder coatings for vehicle components, chassis, and agricultural, construction, and earth moving equipment, that protect against corrosion, provide increased durability, and deliver a superior appearance. • General Metal Finishing: Global provider of multiple technologies for a wide array of applications, including racking and shelving, metal furniture, appliances, protective coating, pipes and tubes, metal enclosures and fencing, industrial components, gutters, garage and entry doors, HVAC, metal wall panels, and power storage and electrical boxes.
These new innovative technologies complement our existing solutions to insulate copper wire used in motors and transformers and our coatings insulate sheets forming magnetic circuits of motors and transformers, computer elements and other electrical devices to provide increased motor and power efficiency. • Transportation: Key provider of liquid and powder coatings for vehicle components, chassis, and agricultural, construction, and earth moving equipment, that protect against corrosion, provide increased durability, and deliver a superior appearance. • General Metal Finishing: Global provider of multiple technologies for a wide array of applications, including racking and shelving, metal furniture, appliances, protective coating, pipes and tubes, metal enclosures and fencing, industrial components, gutters, garage and entry doors, HVAC systems, metal wall panels, and power storage and electrical boxes.
Architects and designers can benefit from the advice of color experts, superior technical service and the latest trend collections available in our dedicated color experience rooms and digital tools. • Battery Solutions: New innovative technologies in liquid and powder coatings for battery performance, insulation and conduction to enable innovation in the electrification and energy transition market.
Architects and designers can benefit from the advice of our in-house color experts, superior technical service and the latest trend collections available in our dedicated color experience rooms and digital tools. • Battery Solutions: New innovative technologies in liquid and powder coatings for battery performance, insulation and conduction to enable innovation in the electrification and energy transition market.
Particularly for HDT applications, truck owners demand a significant variety of custom colors and advanced product technologies to enable custom designs. Our strong market position and growth are driven by our ability to provide customers with our market-leading brand, Imron ® , as well as leveraging our global product lines, regional knowledge and customer service.
Particularly for HDT applications, truck owners demand a significant variety of custom colors and advanced product technologies to enable custom designs. Our strong competitive position and growth are driven by our ability to provide customers with our market-leading brand, Imron ® , as well as leveraging our global product lines, regional knowledge and customer service.
In our North America and EMEA markets, we typically see more significant accidents from the inclement weather that require more time to repair and less repair throughput for our customers. Our Mobility Coatings segment does not experience significant net sales seasonality.
In North America and EMEA, we typically see more significant accidents from the inclement weather that require more time to repair and less repair throughput for our customers. Our Mobility Coatings segment does not experience significant net sales seasonality.
Our markets are among the most demanding in the coatings industry with high levels of required product performance that continuously evolve, with increasing expectations for productivity on customer lines and environmentally responsible products.
Our end-markets are among the most demanding in the coatings industry with high levels of required product performance that continuously evolve, with increasing expectations for productivity on customer lines and environmentally responsible products.
The Compensation Committee of our Board of Directors ("Board") has oversight of the Company's human capital management efforts. The Environment, Health, Safety and Sustainability Committee of our Board has oversight of the Company's policies to protect the health and safety of our employees and contractors, and this committee regularly reviews data on our safety metrics and performance.
The Compensation Committee of our Board of Directors (“Board”) has oversight of the Company's human capital management efforts. The Environment, Health, Safety and Sustainability Committee of our Board has oversight of the Company's policies to protect the health and safety of our employees and contractors, and this committee regularly reviews data on our safety metrics and performance.
Within the industrial end-market, we focus on the following: • Building Products: Focused on the North America market, offering leading innovation for performance, style, and durability in liquid coatings serving the OEMs and aftermarket building markets, including external finishes, kitchen cabinets, flooring and furniture. • Construction: Global solutions in liquid and powder coatings for applications such as window frames, structural steel, steel roofing, and metal building materials, typically used in residential, industrial, commercial, and monumental buildings.
Within the industrial end-market, we focus on the following: • Building Products: Focused on North America, offering leading innovation for performance, style, and durability in liquid coatings serving the OEMs and aftermarket building segments, including external finishes, kitchen cabinets, flooring and furniture. • Construction: Global solutions in liquid and powder coatings for applications such as window frames, structural steel, steel roofing, and metal building materials, typically used in residential, industrial, commercial, and monumental buildings.
There has also been an increase in demand for products that enhance environmental sustainability, corrosion resistance, productivity and color aesthetics, which we provide through a combination of e-coat, waterborne, solventborne, ultraviolet ("UV") and powder technologies. Customers select industrial coatings based on protection, durability, appearance and value added through technical service and solutions, which can improve customers' application sustainability and productivity.
There has also been an increase in demand for products that enhance environmental sustainability, corrosion resistance, productivity and color aesthetics, which we provide through a combination of e-coat, waterborne, solventborne, ultraviolet (“UV”) and powder technologies. Customers select industrial coatings based on protection, durability, appearance and value added through technical service and solutions, which can improve customers' application sustainability and productivity.
Performance Coatings Customers Within our Performance Coatings segment, we sell coatings to customers in more than 140 countries. Our top ten customers accounted for approximately 20% of our Performance Coatings net sales during the year ended December 31, 2023. In our industrial and refinish end-markets we serve both large OEMs and a broad, fragmented local customer base.
Performance Coatings Customers Within our Performance Coatings segment, we sell coatings to customers in more than 140 countries. Our top ten customers accounted for approximately 20% of our Performance Coatings net sales during the year ended December 31, 2024. In our industrial and refinish end-markets we serve both large OEMs and a broad, fragmented local customer base.
Our top ten customers accounted for approximately 62% of our Mobility Coatings net sales during the year ended December 31, 2023. Mobility Coatings Competition We primarily compete against large multi-national suppliers such as AkzoNobel, BASF and PPG, as well as a few regional suppliers, in the light and commercial vehicle end-markets.
Our top ten customers accounted for approximately 62% of our Mobility Coatings net sales during the year ended December 31, 2024. Mobility Coatings Competition We primarily compete against large multi-national suppliers such as AkzoNobel, BASF and PPG, as well as a few regional suppliers, in the light and commercial vehicle end-markets.
We actively apply for and obtain U.S. and foreign patents and trademarks on new products and process innovations and as of December 31, 2023, approximately 220 patent applications were pending throughout the world. Our primary purpose in obtaining patents is to protect the results of our research for use in operations and licensing.
We actively apply for and obtain U.S. and foreign patents and trademarks on new products and process innovations and as of December 31, 2024, approximately 220 patent applications were pending throughout the world. Our primary purpose in obtaining patents is to protect the results of our research for use in operations and licensing.
Evolution within the mobility market creates tremendous opportunities for OEMs but requires them to undertake significant shifts in how they design and produce vehicles. OEMs are also increasingly looking to reduce the weight of vehicles in response to stricter vehicle emissions, fuel consumption regulations and electric vehicle range extensions.
Evolution within the mobility industry creates tremendous opportunities for OEMs but requires them to undertake significant shifts in how they design and produce vehicles. OEMs are also increasingly looking to reduce the weight of vehicles in response to stricter vehicle emissions, fuel consumption regulations and electric vehicle range extensions.
With our state-of-the-art coatings solutions and local presence in key OEM markets, we are one of the few competitors in the industry that offers global OEM manufacturers the combination of high-quality products, personalized, top-rate technical service and short lead-times for product delivery.
With our state-of-the-art coatings solutions and local presence in key OEM geographies, we are one of the few competitors in the industry that offers global OEM manufacturers the combination of high-quality products, personalized, top-rate technical service and short lead-times for product delivery.
Over the past several years, the dynamics of supply and demand had a greater impact in the cost of our raw materials than the price of the supplier feedstocks. Historically, to manage raw material volatility, we have used a combination of price increases to customers and, in certain circumstances, contractual raw material recovery mechanisms.
Over the past several years, the dynamics of supply and demand had a greater impact in the cost of our raw materials than the price of the supplier feedstocks. Historically, to manage raw material volatility, we have used a combination of price increases to customers and, in certain circumstances, contractual raw material indexing mechanisms.
Privacy Regulations We are also subject to and comply with increasingly complex privacy and data protection laws and regulations in the United States and other jurisdictions. This includes the EU's General Data Protection Regulation ("GDPR"), which enforces rules relating to the protections around the processing and transfer of personal data.
Privacy Regulations We are also subject to and comply with increasingly complex privacy and data protection laws and regulations in the United States and other jurisdictions. This includes the EU's General Data Protection Regulation (“GDPR”), which enforces rules relating to the protections around the processing and transfer of personal data.
In the powder coatings market, we believe we are one of only three truly global producers that can satisfy the needs and specifications of a customer in multiple regions of the world, while maximizing productivity from the broad scale and scope of our operations.
In the powder coatings segment, we believe we are one of only three truly global producers that can satisfy the needs and specifications of a customer in multiple regions of the world, while maximizing productivity from the broad scale and scope of our operations.
We meet the demands of commercial vehicle customers with our extensive offering of over 80,000 different colors. In the HDT market, because the metal and composite components are painted simultaneously in an automatic process, most truck OEMs use low bake coatings to ensure that the plastic composite parts on a truck's exterior do not deform during the bake process.
We meet the demands of commercial vehicle customers with our extensive offering of over 90,000 different colors. In HDT, because the metal and composite components are painted simultaneously in an automatic process, most truck OEMs use low bake coatings to ensure that the plastic composite parts on a truck's exterior do not deform during the bake process.
Commercial Vehicle Sales in the commercial vehicle end-market are generated from a variety of applications, including HDT, MDT, bus and rail, motorcycles, marine and aviation, as well as related markets such as trailers, recreational vehicles and personal sport vehicles.
Commercial Vehicle Sales in the commercial vehicle end-market are generated from a variety of applications, including HDT, MDT, bus and rail, motorcycles, marine and aviation, as well as related segments such as trailers, recreational vehicles and personal sport vehicles.
JOINT VENTURES At December 31, 2023, we were party to seven joint ventures, of which three were focused in the light vehicle end-market, two were focused in the refinish end-market and two were focused in the industrial end-market. At December 31, 2023, we were the majority shareholder, and/or exercised control, in five joint ventures, which we consolidated.
JOINT VENTURES At December 31, 2024, we were party to seven joint ventures, of which three were focused in the light vehicle end-market, two were focused in the refinish end-market and two were focused in the industrial end-market. At December 31, 2024, we were the majority shareholder, and/or exercised control, in five joint ventures, which we consolidated.
Reference to our and the SEC's websites herein do not incorporate by reference any information contained on those websites and such information should not be considered part of this Annual Report on Form 10-K. 13 Table of Contents
Reference to our and the SEC's websites herein do not incorporate by reference any information contained on those websites and such information should not be considered part of this Annual Report on Form 10-K. 12 Table of Contents
We post, and shareholders may access without charge, our recent filings and any amendments thereto of our annual reports on Form 10-K, quarterly reports on Form 10-Q and proxy statements as soon as reasonably practicable after such reports are filed with the Securities and Exchange Commission ("SEC"). We also post all financial press releases, including earnings releases, to our website.
We post, and shareholders may access without charge, our recent filings and any amendments thereto of our annual reports on Form 10-K, quarterly reports on Form 10-Q and proxy statements as soon as reasonably practicable after such reports are filed with the SEC. We also post all financial press releases, including earnings releases, to our website.
The coatings operation is a critical component of the light vehicle assembly process, requiring a high degree of precision, speed and productivity. The paint shop process typically includes a dip process, three application zones and three high-temperature ovens that cure each coating layer at temperatures ranging from 320°F to 400°F (i.e., "high bake").
The coatings operation is a critical component of the light vehicle assembly process, requiring a high degree of precision, speed and productivity. The paint shop process typically includes a dip process, three application zones and three high-temperature ovens that cure each coating layer at temperatures ranging from 320°F to 400°F (i.e., “high bake”).
We believe we are one of the few performance coatings companies that can provide the customer service, total technology solutions, color design capability and product performance necessary to deliver exceptional value to our customers. 7 Table of Contents Mobility Coatings Through our Mobility Coatings segment, we provide coatings technologies for light vehicle and commercial vehicle OEMs.
We believe we are one of the few performance coatings companies that can provide the customer service, total technology solutions, color design capability and product performance necessary to deliver exceptional value to our customers. Mobility Coatings Through our Mobility Coatings segment, we provide coatings technologies for light vehicle and commercial vehicle OEMs.
We are also a leading global developer, manufacturer and supplier of functional and decorative liquid and powder coatings for a large number of diversified applications in the industrial end-market, including building materials, cabinet, wood and luxury vinyl flooring and furniture markets in North America.
In addition, we are a leading global developer, manufacturer and supplier of functional and decorative liquid and powder coatings for a large number of diversified applications in the industrial end-market, including building materials, cabinet, wood and luxury vinyl flooring and furniture applications in North America.
Our industrial end-market comprises a wide variety of industrial manufacturers, while our refinish end-market primarily comprises approximately 90,000 body shops, including: • Independent Body Shops: Single location body shops that utilize premium, mainstream or economy brands based on the local market. • Multi-Shop Operators ("MSOs"): Body shops with more than five locations focused on providing premium paint jobs with industry leading efficiency.
Our industrial end-market comprises a wide variety of industrial manufacturers, while our refinish end-market primarily comprises approximately 93,000 body shops, including: • Independent Body Shops: Single location body shops that utilize premium, mainstream or economy brands based on the local market. • Multi-Shop Operators (“MSOs”): Body shops with more than five locations focused on providing premium paint jobs with industry leading efficiency.
In total, as of December 31, 2023, we had approximately 1,300 team members dedicated to technology development. We operate four major technology centers throughout the world where we develop and align our technology investments with regional business needs complemented by approximately 25 regional laboratories which provide local connection to our global customer base.
As of December 31, 2024, we had approximately 1,300 team members dedicated to technology development. We operate four major technology centers throughout the world where we develop and align our technology investments with regional business needs complemented by approximately 25 regional laboratories which provide local connection to our global customer base.
Environmental Protection Agency. Our Environment, Health, Safety ("EHS") and Sustainability policies and standards are a key element of the foundation upon which we develop, market, manufacture, and distribute products and services to our global customers. In 2017, we established a Board-level committee responsible for the oversight of our EHS and Sustainability policies, performance, strategy and compliance matters.
Our Environment, Health, Safety (“EHS”) and Sustainability policies and standards are a key element of the foundation upon which we develop, market, manufacture, and distribute products and services to our global customers. In 2017, we established a Board-level committee responsible for the oversight of our EHS and Sustainability policies, performance, strategy and compliance matters.
These trademarks include Abcite ® , Alesta ® , AquaEC ® , Audurra ® , Centari ® , Ceranamel ® , Challenger ® , Chemophan TM , ColorNet ® , Corlar ® , Cromax ® , Cromax Mosaic ® , Durapon 70 ® , Duxone ® , Harmonized Coating Technologies ® , Hydropon ® , Imron ® , Imron Elite TM , Imron ExcelPro TM , Lutophen TM , Nap-Gard ® , Nason ® , Raptor ® , Rival ® , Spies Hecker ® , Standox ® , Stollaquid TM , Syntopal TM , Syrox TM , U-POL ® , Vermeera TM and Voltatex ® , which are protected under applicable intellectual property laws and are the property of us and our subsidiaries.
These trademarks include Abcite ® , Alesta ® , AquaEC ® , Audurra ® , Axalta Irus Mix™ , Axalta Irus Scan™, Axalta NextJet™, Axalta Nimbus™, Centari ® , Ceranamel ® , Challenger ® , Chemophan TM , ColorNet ® , Corlar ® , Cromax ® , Cromax Mosaic ® , Durapon 70 ® , Duxone ® , Harmonized Coating Technologies ® , Hydropon ® , Imron ® , Imron Elite TM , Imron ExcelPro TM , Lutophen TM , Nap-Gard ® , Nason ® , Raptor ® , Rival ® , Spies Hecker ® , Standox ® , Stollaquid TM , Syntopal TM , Syrox TM , U-POL ® , Vermeera TM and Voltatex ® , which are protected under applicable intellectual property laws and are the property of us and our subsidiaries.
These innovations have played a fundamental role in our ability to maintain and grow our global market share as well as deliver substantial financial returns. 10 Table of Contents We believe that we are a technology leader well positioned to benefit from continued industry shifts in customer needs.
These innovations have played a fundamental role in our ability to maintain and grow our global market share as well as deliver substantial financial returns. We believe that we are a technology leader well positioned to benefit from continued industry shifts in customer needs.
Performance Coatings Sales, Marketing and Distribution We leverage a large global refinish sales and technical support team to effectively serve our broad refinish customer base of approximately 90,000 body shops. Most of our products are supplied by our network of approximately 4,000 independent local distributors.
Performance Coatings Sales, Marketing and Distribution We leverage a large global refinish sales and technical support team to effectively serve our broad refinish customer base of approximately 93,000 body shops. Most of our products are supplied by our network of approximately 5,000 independent local distributors.
This includes our Global Innovation Center located in Philadelphia, Pennsylvania, which opened in 2018 for global research, product development and technology initiatives and now serves as our global headquarters. PATENTS, LICENSES AND TRADEMARKS As of December 31, 2023, we had a global portfolio of approximately 770 issued patents and more than 470 trademarks.
This includes our Global Innovation Center located in Philadelphia, Pennsylvania, which opened in 2018 for global research, product development and technology initiatives and now serves as our global headquarters. PATENTS, LICENSES AND TRADEMARKS As of December 31, 2024, we had a global portfolio of approximately 680 issued patents and more than 520 trademarks.
Our refinish products and systems comprise a range of coatings layers, including fillers, aerosols, and adhesives required to match the vehicle's color and appearance, producing a repair surface indistinguishable from the adjacent surface. We provide systems that enable body shops to match more than 220,000 color variations, using a database with more than four million formulations, in the global market.
Our refinish products and systems comprise a range of coatings layers, as well as fillers, aerosols, and adhesives required to match the vehicle's color and appearance, producing a repair surface indistinguishable from the adjacent surface. We provide systems that enable body shops to match more than 220,000 color variations, using a database with more than four million formulations, globally.
We are also party to a substantial number of patent licenses and other technology agreements. We have a significant number of trademarks and trademark registrations in the United States and in other countries, as described below.
We are also party to a substantial number of patent licenses and other technology licensing agreements. We have a significant number of trademarks and trademark registrations in the U.S. and in other countries, as described below.
The color matching process begins with a technician scanning a damaged vehicle with one of our advanced color matching tools, such as our Acquire Plus EFX™ hand-held spectrophotometer. The Acquire Plus EFX reads the vehicle color, evaluating both the unique flake and color characteristics of the specific vehicle.
The color matching process begins with a technician scanning a damaged vehicle with one of our advanced color matching tools, such as our Axalta Irus Scan™ hand-held spectrophotometer. The Axalta Irus Scan™ reads the vehicle color, evaluating both the unique flake and color characteristics of the specific vehicle.
These global customers are faced with evolving megatrends in electrification, sustainability, personalization and autonomous driving that require a high level of technical 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 and commercial vehicle.
These global customers are faced with evolving megatrends in electrification, sustainability, personalization and autonomous driving that require a high level of technical expertise. The OEMs require efficient, environmentally responsible coatings systems that can be applied with a high degree of precision, consistency and speed.
The Acquire Plus EFX electronically connects with our ColorNet ® database and generates for the body shop technician the precise mix of tints and colors needed to recreate that specific color for the part being repaired.
The Axalta Irus Scan™ electronically connects with our ColorNet ® database and generates for the body shop technician the precise mix of tints and colors needed to recreate that specific color for the part being repaired.
In select regions, including parts of Europe, we also sell directly to body-shop customers through our own points of distribution. Distributors maintain an inventory of our products to fill orders from body shops in their market and assume credit risk and responsibility for logistics, delivery and billing.
In select regions, including parts of Europe, we also sell directly to body-shop customers through our company owned stores. These stores maintain an inventory of our products to fill orders from body shops in their market and assume credit risk and responsibility for logistics, delivery and billing.
The proprietary nature of a coatings supplier's color systems, the substantial inventory needed to support a body shop and the body shop's familiarity with an established brand lead to high levels of customer retention. Our customer retentions have been and continue to be strong.
The proprietary nature of a coatings supplier's color systems, the substantial inventory needed to support a body shop and the body shop's familiarity with an established brand lead to high levels of customer retention.
Our solutions portfolio brings together the best of Axalta's experience and innovation into three categories: Core Mobility Solutions , Advanced Mobility Solutions and Axalta Advantage . • Core Mobility Solutions comprises Axalta's best-in-class basecoats and clearcoats for color and beautification along with primers, electrocoats and powder applications for surface protection. • Advanced Mobility Solutions encompasses products and applications for trends like sustainability, mass customization, two-tone and digital paint.
The end-markets within this segment are light vehicle and commercial vehicle. 7 Table of Contents Our portfolio brings together the best of Axalta's experience and innovation into three categories: Core Mobility Solutions , Advanced Mobility Solutions and Axalta Advantage . • Core Mobility Solutions comprises Axalta's best-in-class basecoats and clearcoats for color and beautification along with primers, electrocoats and powder applications for surface protection. • Advanced Mobility Solutions encompasses products and applications for trends like sustainability, mass customization, two-tone and digital paint.
In 2023, Axalta's injury and illness performance resulted in a 0.37 OSHA Total Recordable Incident Rate ("TRIR"), compared to the 1.9 OSHA TRIR for the Paint and Coating Manufacturing Industry as a whole (according to the US Bureau of Labor Statistics 2022 data).
In 2024, Axalta's injury and illness performance resulted in a 0.30 OSHA Total Recordable Incident Rate (“TRIR”), compared to the 2.4 OSHA TRIR for the Paint and Coating Manufacturing Industry as a whole (according to the US Bureau of Labor Statistics 2023 data).
Our fully consolidated joint venture-related net sales were $62.0 million, $78.7 million, and $80.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Our fully consolidated joint venture-related net sales were $62 million, $62 million, and $79 million for the years ended December 31, 2024, 2023 and 2022, respectively.
We currently have 49 customer training centers established globally, which helps to deepen our customer relationships. Our sales force also helps to drive shop productivity improvements and to install or upgrade body shop color matching and mixing equipment to improve shop profitability. Once a coating and color system is installed, a body shop almost exclusively uses its specific supplier's products.
Our sales force also helps to drive shop productivity improvements and to install or upgrade body shop color matching and mixing equipment to improve shop profitability. Once a coating and color system is installed, a body shop almost exclusively uses its specific supplier's products.
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, U.S.
We 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).
ITEM 1. BUSINESS Axalta Coating Systems Ltd. ("Axalta," the "Company," "we," "our" and "us"), a Bermuda exempted holding company incorporated in 2012, is a leading global manufacturer, marketer and distributor of high-performance coatings systems.
ITEM 1. BUSINESS Axalta Coating Systems Ltd. (“Axalta,” the “Company,” “we,” “our” and “us”), a Bermuda exempted holding company incorporated in 2012, is a leading global manufacturer, marketer and distributor of high-performance coatings systems and products.
Cash provided by operating activities has typically been greatest in the fourth quarter primarily driven by the timing of collections from our customers and payments to our vendors. Economic and weather conditions have altered, and could continue to alter, seasonal patterns.
Cash provided by operating activities has typically been the greatest in the fourth quarter primarily driven by the timing of collections from our customers and payments to our vendors.
We operate our business in two operating segments, Performance Coatings and Mobility Coatings, serving four end-markets globally as highlighted below. The table above reflects numbers for the year ended December 31, 2023. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by net sales.
We operate our business in two operating segments, Performance Coatings and Mobility Coatings, serving four end-markets globally as highlighted below. The table above reflects numbers for the year ended December 31, 2024. 3 Table of Contents Net sales for our four end-markets and four regions for the year ended December 31, 2024 are highlighted below: Note: Latin America includes Mexico.
Located in 9 countries, our manufacturing facilities provide a local presence intended to cultivate strong relationships, gain intimate customer knowledge, provide superior technical support to our key customers and maintain "just-in-time" product delivery capabilities critical to OEMs.
Located in 9 countries, our manufacturing facilities provide a local presence intended to cultivate strong relationships, gain intimate customer knowledge, provide superior technical support to our key customers and maintain “just-in-time” product delivery capabilities critical to OEMs. We believe our local presence also allows us to quickly react to changing local dynamics, offer high-quality products and provide excellent customer service.
In addition to the Acquire Plus EFX, we offer customers several other color matching tools, including our VINdicator ® database, which identifies vehicle color based on its vehicle identification number, and traditional color matching fan decks.
In addition to the Axalta Irus Scan™, we offer customers several other color matching tools, including our VINdicator ® database, which identifies vehicle color based on its vehicle identification number, and traditional color matching fan decks. We have launched a completely hands-free mixing machine for our automotive refinish customers, Axalta Irus Mix™.
This end-market is primarily driven by global commercial vehicle production, which is influenced by overall economic activity, government infrastructure spending, equipment replacement cycles and evolving environmental standards for sustainability. 8 Table of Contents Commercial vehicle OEMs select coatings providers on the basis of their ability to consistently deliver advanced technological solutions that improve exterior appearance, protection and durability and provide extensive color libraries and matching capabilities at the lowest total cost-in-use, while meeting stringent environmental requirements.
Commercial vehicle OEMs select coatings providers on the basis of their ability to consistently deliver advanced technological solutions that improve exterior appearance, protection and durability and provide extensive color libraries and matching capabilities at the lowest total cost-in-use, while meeting stringent environmental requirements.
In certain countries, we utilize importers that buy directly from us and actively market our products to body shops.
In certain countries, we utilize importers that buy directly from us and actively market our products to body shops. Our relationships with our top ten distributors are longstanding and continue to contribute to our success in the global refinish market.
See Part I, Item 1A, "Risk Factors—Risks Related to our Business—Risks Related to Other Aspects of our Business—Our joint ventures may not operate according to our business strategy if our joint venture partners fail to fulfill their obligations".
See Part I, Item 1A, “Risk Factors—Risks Related to our Business—Risks Related to Other Aspects of our Business—Our joint ventures may not operate according to our business strategy if our joint venture partners fail to fulfill their obligations.” 10 Table of Contents HUMAN CAPITAL RESOURCES We believe our success is realized through the engagement and commitment of our people .
Securities and Exchange Commission filings and public conference calls and webcasts, as information posted on that page could be deemed to be material information. All other reports filed or furnished to the SEC on the SEC's website, www.sec.gov, including current reports on Form 8-K, are available via direct link on our website.
All other reports filed or furnished to the SEC on the SEC's website, www.sec.gov, including current reports on Form 8-K, are available via direct link on our website.
REGULATORY COMPLIANCE Our business is subject to significant regulations in all of the markets that we operate in and we are committed to operating our business in compliance with all applicable laws and regulations. 12 Table of Contents Environmental We are subject to applicable federal, state, local and foreign laws and regulations relating to environmental protection and workers' safety, including those required by the U.S.
REGULATORY COMPLIANCE Our business is subject to significant regulations in all of the markets that we operate in and we are committed to operating our business in compliance with all applicable laws and regulations.
We believe our local presence also allows us to quickly react to changing local dynamics, offer high-quality products and provide excellent customer service. 9 Table of Contents In the commercial vehicle end-market, we employ a dedicated sales and technical service team to support our diverse customer base, including a direct sales force supporting the HDT market.
In the commercial vehicle end-market, we employ a dedicated sales and technical service team to support our diverse customer base, including a direct sales force supporting the HDT market.
Safety is ingrained in the way we do business, and our safety program is structured on the foundation that every employee is engaged and committed to improving safe operating practices and eliminating injuries. When health and safety incidents do occur, we work to determine the causes and eliminate the potential for future similar incidents.
We are committed to providing a workplace that enables team members to operate safely. Safety is ingrained in the way we do business, and our safety program is structured on the foundation that every employee is engaged and committed to improving safe operating practices and eliminating injuries.
In today's existing mobility ecosystem, coatings provide essential beauty and color to vehicle bodies while extending the useful life of the vehicle via durability related properties such as chemical resistance and chip and corrosion protection.
With that in mind, we have developed coatings technologies, including 3-Wet™, Eco-Concept™ and 2-Wet Monocoat™, that help our OEM customers lower costs by reducing energy consumption and increasing productivity. 8 Table of Contents In today's existing mobility ecosystem, coatings provide essential beauty and color to vehicle bodies while extending the useful life of the vehicle via durability-related properties such as chemical resistance and chip and corrosion protection.
Our large direct sales team in industrial serves its end customers, driving demand which is then primarily filled directly or through channels of distribution and e-commerce. We leverage this dedicated sales force and technical service team to provide regional support and identify global innovation projects to meet the evolving market needs.
Our customer retentions have been and continue to be strong. 6 Table of Contents Our large direct sales team in industrial serves its end customers, driving demand which is then primarily filled directly or through channels of distribution and e-commerce.
Our relationships with our top ten distributors are longstanding and continue to contribute to our success in the global refinish market. 6 Table of Contents Our large refinish sales force manages relationships directly with our end-customers to drive demand for our products, which in turn are purchased through customers in our distributor network.
Our large refinish sales force manages relationships directly with our end-customers to drive demand for our products, which in turn are purchased through customers in our distributor network. Due to the local nature of the refinish industry, our sales force operates on a regional/country basis to provide clients with responsive customer service and local insight.
We also aim to provide competitive compensation and benefits across all of our global locations. Safety is paramount and the well-being of our employees is our greatest responsibility. We are committed to providing a workplace that enables team members to operate safely.
Axalta strives to provide a wide variety of growth opportunities for our employees, including online trainings, on-the-job experience, education tuition assistance and financial counseling. We also aim to provide competitive compensation and benefits across all global locations. Safety is paramount and the well-being of our employees is our greatest responsibility.
As a global coatings company, we have a wide range of employees, including but not limited to management professionals, scientists, technicians, engineers, sales representatives, operators, supply chain experts, and administrative and customer service professionals. We strive to create a performance-driven culture where employees feel included and have a sense of belonging.
Axalta's ability to attract, develop and retain highly skilled talent requires us to focus on the engagement, growth and well-being of each team member. As a global coatings company, we have a diverse group of employees, including but not limited to management professionals, scientists, technicians, engineers, sales representatives, operators, supply chain experts, and administrative and customer service professionals.
During 2023, our variable cost of sales returned to within the historical range as a result of both deflation of raw material costs and continued price recapture. RESEARCH AND DEVELOPMENT Our focus on technology has allowed us to proactively provide customers with next-generation offerings that enhance product performance, improve productivity and satisfy increasingly strict environmental regulations.
RESEARCH AND DEVELOPMENT Our focus on technology has allowed us to proactively provide customers with next-generation offerings that enhance product performance, improve productivity and satisfy increasingly strict environmental regulations. Since our entry into the coatings industry over 150 years ago, we believe we have consistently been at the forefront of coatings technology innovation.
HUMAN CAPITAL RESOURCES Our success is realized through the engagement and commitment of our people . As of December 31, 2023, we had approximately 12,000 team members with 26% of our team members based in the U.S. and 74% based in international locations.
As of December 31, 2024, we had approximately 12,800 team members, inclusive of team members added from recent acquisitions, with 26% of our team members based in the U.S. and 74% based in international locations. Our workforce is distributed globally, with approximately 45% in the Americas, 37% in EMEA and 18% in Asia Pacific.
KEY RAW MATERIALS We use thousands of different raw materials, which fall into seven broad categories: liquid resins, powder resins, pigments, solvents, monomers, isocyanates and additives.
Economic and weather conditions have altered, and could continue to alter, seasonal patterns. 9 Table of Contents KEY RAW MATERIALS We use thousands of different raw materials, which fall into six broad categories: resins, pigments, solvents, monomers, isocyanates and additives. We purchase raw materials from a diverse group of global suppliers.
Due to the local nature of the refinish industry, our sales force operates on a regional/country basis to provide clients with responsive customer service and local insight. As part of their coverage efforts, salespeople introduce new products to body shops and provide technical support and ongoing training.
As part of their coverage efforts, salespeople introduce new products to body shops and provide technical support and ongoing training. We currently have 45 customer training centers established globally, which helps to deepen our customer relationships.
We purchase raw materials from a diverse group of suppliers, with our top ten suppliers representing approximately 33% of our 2023 spending on raw materials. Prices for our raw materials generally fluctuate with supplier feedstock prices as well as supply and demand dynamics of the given raw material market.
Where possible, we work to mitigate risks to our raw material supply through alternative sourcing strategies, strategic supplier relationships and maintaining strategic inventories. Raw materials represent our single largest production cost component. Prices for our raw materials generally fluctuate with supplier feedstock prices as well as supply and demand dynamics of the given raw material market.
As an example of our efforts, we conduct an all employee engagement survey that is designed to capture the voice of our employees and provide actionable insights into the specific tools, processes, and other factors that enable our employees to perform at their best. We continue to build upon and refresh our action plans each year based upon employee feedback.
As part of our efforts to drive cultural change and promote employee engagement, Axalta captures employee feedback via an annual engagement survey that is designed to provide insights into how employees can perform at their best.
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See the discussion and reconciliation of segment Adjusted EBITDA to income before income taxes in Note 20 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 3 Table of Contents Net sales for our four end-markets and four regions for the year ended December 31, 2023 are highlighted below: Note: Latin America includes Mexico.
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Axalta Irus Mix™ delivers highly accurate color and works with Axalta’s innovative packaging, designed to help refinish customers meet or exceed key business goals, including maximizing profitability and minimizing environmental impact. We have also launched a global customer experience platform for refinish customers, Axalta Nimbus™.
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With that in mind, we have developed coatings technologies, including 3-Wet™, Eco-Concept™ and 2-Wet Monocoat™, that help our OEM customers lower costs by reducing energy consumption and increasing productivity.
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This technology seamlessly connects refinish customers to Axalta’s tools and resources to improve efficiency, enhance productivity, boost performance, and maximize profitability. With Axalta Nimbus, customers have everything they need to power the refinish process in a single platform, including color retrieval, product ordering, inventory management, training resources, and support.
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Since 2001, our total raw material spend has represented between 40% and 50% of our cost of sales annually, with the exception of 2022 when our total raw material spend represented approximately 53% of our cost sales driven by continued raw material inflation experienced throughout the year.
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By working together in a single platform, comprehensive business insights provide actionable data that help owners and managers make informed decisions to increase profitability and performance. Axalta Nimbus is designed to be easy to use with an intuitive user interface for increased efficiency and customizable capabilities based on business need.
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Since 2001, our variable cost of sales has generally remained stable between approximately 35% and 45% of net sales, with an increase to 50% during 2022 driven by continued raw material inflation experienced throughout the year.
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We leverage this dedicated sales force and technical service team to provide regional support and identify global innovation projects to meet the evolving market needs.
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Since our entry into the coatings industry over 150 years ago, we believe we have consistently been at the forefront of coatings technology innovation.
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This end-market is primarily driven by global commercial vehicle production, which is influenced by overall economic activity, government infrastructure spending, equipment replacement cycles and evolving environmental standards for sustainability.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE During January 2022, we announced a new environmental, social and governance ("ESG") framework, which is structured under three key pillars.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAdditionally, the ERP system is critical to our ability to provide important information to our management on a timely basis, obtain and deliver products to 25 Table of Contents our customers, provide services and customer support, send invoices and track payments, fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results, improve our data management, and otherwise operate our business.
Biggest changeWe m ay not be able to successfully implement the ERP system in any of the regions in which it has not yet been implemented without experiencing similar delays, increased costs, and other difficulties, including the diversion of management from the day-to-day operation of the business, and failure to successfully implement the ERP system could harm our business, financial condition, results of operations and cash flow. 24 Table of Contents Additionally, the ERP system is critical to our ability to provide important information to our management on a timely basis, obtain and deliver products to our customers, provide services and customer support, send invoices and track payments, fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results, improve our data management, and otherwise operate our business.
We may incur unanticipated costs or expenses, including post-closing asset impairment charges, expenses associated with eliminating redundant facilities, litigation and other liabilities. We may also face regulatory scrutiny as a result of perceived concentration in certain markets, which could cause additional delay or prevent us from completing certain acquisitions that would be beneficial to our business.
We may incur unanticipated costs or expenses, including post-closing asset impairment charges or expenses associated with eliminating redundant facilities or from litigation and other liabilities. We may also face regulatory scrutiny as a result of perceived concentration in certain markets, which could cause additional delay or prevent us from completing certain acquisitions that would be beneficial to our business.
As a result, our corporate affairs are governed by the Companies Act 1981 (the "Companies Act"), which differs in some material respects from laws typically applicable to U.S. corporations and shareholders, including the provisions relating to interested directors, amalgamations, mergers and acquisitions, takeovers, shareholder lawsuits and indemnification of directors.
As a result, our corporate affairs are governed by the Companies Act 1981, which differs in some material respects from laws typically applicable to U.S. corporations and shareholders, including the provisions relating to interested directors, amalgamations, mergers and acquisitions, takeovers, shareholder lawsuits and indemnification of directors.
Our accruals for costs and liabilities at sites where contamination is being investigated or remediated may not be adequate because the estimates on which the accruals are based depend on a number of factors, including the nature and extent of contamination, the outcome of discussions with regulatory agencies, available technology, site-specific information, remediation alternatives and, at multi-party sites, other Potentially Responsible Parties ("PRPs") and the number and financial viability of the other PRPs.
Our accruals for costs and liabilities at sites where contamination is being investigated or remediated may not be adequate because the estimates on which the accruals are based depend on a number of factors, including the nature and extent of contamination, the outcome of discussions with regulatory agencies, available technology, site-specific information, remediation alternatives and, at multi-party sites, other Potentially Responsible Parties (“PRPs”) and the number and financial viability of the other PRPs.
Any payment of distributions, loans or advances to and from our subsidiaries and joint ventures could be subject to restrictions on or taxation of, dividends or repatriation of earnings under applicable local law, monetary transfer restrictions, foreign currency exchange regulations in the jurisdictions in which our subsidiaries operate or other restrictions imposed by current or future agreements, including debt instruments, to which our non-U.S. subsidiaries may be a party.
Any payment of intercompany distributions, loans or advances to and from our subsidiaries and joint ventures could be subject to restrictions on, or taxation of, dividends or repatriation of earnings under applicable local law, monetary transfer restrictions, foreign currency exchange regulations in the jurisdictions in which our subsidiaries operate or other restrictions imposed by current or future agreements, including debt instruments, to which our non-U.S. subsidiaries may be a party.
As a multinational company with a large international footprint, we are subject to increased risk of damage or disruption to us, our employees, facilities, partners, suppliers, distributors, resellers or customers due to terrorist acts, conflicts, wars, adverse weather conditions, natural disasters, power outages, pandemics or other public health crises and environmental incidents, wherever located around the world.
As a multinational company with a large international footprint, we are subject to increased risk of damage or disruption to us, our employees and other personnel, facilities, partners, suppliers, distributors, resellers or customers due to terrorist acts, conflicts, wars, adverse weather conditions, natural disasters, power outages, pandemics or other public health crises and environmental incidents, wherever located around the world.
There is also uncertainty around the validity and enforceability, as well as the nature, of our rights in intellectual property that is created in connection with our use, development, and deployment of AI, including the potential compromise of our rights in our intellectual property that is input into AI tools, whether done intentionally or by our employees without permission to do so.
There is also uncertainty around the validity and enforceability, as well as the nature, of our rights in intellectual property that is created in connection with our use, development, and deployment of AI, including the potential compromise of our rights in our intellectual property that is input into AI tools, whether done intentionally or by our employees or agents without permission to do so.
Failure to adapt to or comply with regulatory requirements or investor, employee, customer, or other stakeholder expectations and standards, including any perceived failure, could negatively impact our reputation, ability to do business with certain customers, and our stock price and could lead to novel forms of litigation, including shareholder litigation and governmental investigations or enforcement actions related to ESG matters.
Failure to adapt to or comply with regulatory requirements or investor, employee, customer, or other stakeholder expectations, including any perceived failure, could negatively impact our reputation, ability to do business with certain customers, and our stock price and could lead to novel forms of litigation, including shareholder litigation and governmental investigations or enforcement actions related to ESG matters.
We use a significant amount of raw materials derived from crude oil and natural gas. While the majority of our raw material inputs are fourth to sixth generation derivatives of crude oil and natural gas, volatile oil and gas prices, as well as other unrelated factors, can also cause significant variations in our raw materials costs, affecting our operating results.
We use a significant amount of raw materials derived from crude oil and natural gas. While the majority of our raw material inputs are fourth to sixth generation derivatives of crude oil and natural gas, volatile oil and gas prices, as well as other unrelated factors, can cause significant variations in our raw materials costs, affecting our operating results.
For example, unusually mild weather during winter months may lead to fewer vehicle collisions, reducing market demand for our refinish coatings. Any resulting reduction in demand for our refinish coatings could have a material adverse effect on our business, financial condition, results of operations and cash flows.
For example, unusually mild weather during winter months may lead to fewer vehicle collisions, reducing demand for our refinish coatings. Any resulting reduction in demand for our refinish coatings could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The insurance we maintain may not fully cover all potential exposures. Our product liability, property, business interruption, cybersecurity and casualty insurance coverages may not cover all risks associated with the operation of our business and may not be sufficient to offset the costs of any losses, lost sales or increased costs experienced during business interruptions.
The insurance we maintain may not cover all potential exposures. Our product liability, property, business interruption, cybersecurity and casualty insurance coverages may not cover all risks associated with the operation of our business and may not be sufficient to offset the costs of any losses, lost sales or increased costs experienced during business interruptions.
We may be unable to successfully execute on our growth initiatives, business strategies or operating plans. We continue to execute, and have in the past executed, on a number of growth initiatives, strategies and operating plans designed to enhance our business, including productivity enhancements, cost reduction measures, cost savings initiatives and restructurings.
We may be unable to successfully execute on our growth initiatives or targets, business strategies or operating plans. We continue to execute, and have in the past executed, on a number of growth initiatives, strategies and operating plans designed to enhance our business, including productivity enhancements, cost reduction measures, cost savings initiatives and restructurings.
For example: • under difficult market conditions there can be no assurance that borrowings under our Revolving Credit Facility would be available or sufficient to meet our operational needs, and in such a case, we may not be able to successfully obtain additional financing on reasonable terms, or at all; • in order to respond to market conditions, we may need to seek waivers from the applicability of various provisions in the credit agreement governing our Senior Secured Credit Facilities or the indentures governing our Senior Notes, and in such case, there can be no assurance that we can obtain such waivers at a reasonable cost, if at all; • market conditions could cause the counterparties to the derivative financial instruments we may use to hedge our exposure to interest rate, commodity or currency fluctuations to experience financial difficulties and, as a result, our efforts to hedge these exposures could prove unsuccessful and, furthermore, our ability to engage in additional hedging activities may decrease or become more costly; and • market conditions could result in our key customers experiencing financial difficulties and/or electing to limit spending, which in turn could result in decreased sales and earnings for us.
For example: • under difficult market conditions there can be no assurance that borrowings under our Revolving Credit Facility would be available or sufficient to meet our operational needs, and in such a case, we may not be able to successfully obtain additional financing on reasonable terms, or at all; • in order to respond to market conditions, we may need to seek waivers from the applicability of various provisions in the credit agreement governing our Senior Secured Credit Facilities or the indentures governing our Senior Notes, and in such case, there can be no assurance that we can obtain such waivers at a reasonable cost, if at all; 21 Table of Contents • market conditions could cause the counterparties to the derivative financial instruments we may use to hedge our exposure to interest rate, commodity or currency fluctuations to experience financial difficulties and, as a result, our efforts to hedge these exposures could prove unsuccessful and, furthermore, our ability to engage in additional hedging activities may decrease or become more costly; and • market conditions could result in our key customers experiencing financial difficulties and/or electing to limit spending, which in turn could result in decreased sales and earnings for us.
In the event of such un-waived default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under our Revolving Credit Facility (as defined in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K) could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation.
In the event of such un-waived default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under our Revolving Credit Facility (as defined in Note 19 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K) could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation.
Large orders have also included and may in the future also include severe contractual liabilities if we fail to provide the quantity and quality of product at the required delivery times or fail to meet other obligations.
Large orders have also included and may in the future also include severe liabilities if we fail to provide the quantity and quality of product at the required delivery times or fail to meet other obligations.
We face risks arising from various litigation matters and other claims that have been asserted against us or that may be asserted against us in the future, including, but not limited to, claims for product liability, patent and trademark infringement, antitrust, warranty, contract and third-party property damage or personal injury, including claims arising from the matters described in Note 5 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We face risks arising from various litigation matters and other claims that have been asserted against us or that may be asserted against us in the future, including, but not limited to, claims for product liability, patent and trademark infringement, antitrust, warranty, contract and third-party property damage or personal injury, including claims arising from the matters described in Note 6 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Moreover, rising costs of freight, logistics, energy and labor, as we experienced over 2022, and which generally abated in 2023, increase our cost of sales and reduce our profitability.
Moreover, rising costs of freight, logistics, energy and labor, as we experienced over 2022, and which generally abated in 2023 and 2024, increase our cost of sales and reduce our profitability.
When the affairs of a company are being conducted in a manner that is oppressive or prejudicial to the interests of some shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company's affairs in the future or ordering the purchase of the shares of 24 Table of Contents any shareholders by other shareholders or by the company.
When the affairs of a company are being conducted in a manner that is oppressive or prejudicial to the interests of some shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company's affairs in the future or ordering the purchase of the shares of 23 Table of Contents any shareholders by other shareholders or by the company.
Our manufacturing processes consume significant amounts of raw materials, the costs of which are subject to change based on fluctuations in worldwide supply and demand as well as other factors beyond our control, including inflationary pressures like those seen from mid-2021 through 2022, and which abated for most categories during 2023.
Our manufacturing processes consume significant amounts of raw materials, the costs of which are subject to change based on fluctuations in worldwide supply and demand as well as other factors beyond our control, including inflationary pressures like those seen most recently from mid-2021 through 2022, and which abated for most categories during 2023 and 2024.
We make strategic decisions on whether to apply for intellectual property protection and what kind of protection to pursue based on a cost benefit analysis.
We make decisions on whether to apply for intellectual property protection and what kind of protection to pursue based on a cost benefit analysis.
Any disruption of operations at one of these facilities, like those that occurred in North America in the second quarter of 2023 due to production constraints following our implementation of a new enterprise resource planning system ("ERP") in the region in the quarter, have in the past and could in the future significantly affect production of our products, distribution of our products or our ability to fulfill our contractual obligations, including to our largest customers, which have in the past and could in the future damage our customer relationships and our business, financial condition, results of operations and cash flows could be adversely affected.
Any disruption of operations at one of these facilities, like those that occurred in North America in the second quarter of 2023 due to production constraints following our implementation of a new enterprise resource planning system (“ERP”) in the region in the quarter, have in the past and could in the future significantly affect our production, distribution or our ability to fulfill our contractual obligations, including to our largest customers, which have in the past and could in the future damage our customer relationships, and our business, financial condition, results of operations and cash flows could be adversely affected.
If, for any reason, the benefits we realize are less than our estimates or the implementation of these growth initiatives, strategies and operating plans adversely affect our operations or cost more or take longer to effectuate than we expect, or if our assumptions prove inaccurate, our results of operations may be materially adversely affected.
If, for any reason, the benefits we realize, or our actual results, are less than our estimates or targets, or the implementation of these growth initiatives, strategies and operating plans adversely affect our operations or cost more or take longer to effectuate than we expect, or if our assumptions prove inaccurate, our results of operations may be materially adversely affected.
In addition to the risks associated with raw materials prices, supplier capacity constraints, supplier production disruptions, including supply disruptions from our sole source or other key suppliers, supply chain and logistics congestion and disruptions, increasing costs for energy and freight, the unavailability of certain raw materials or disruptions to our key tolling arrangements could result in harm to our manufacturing capabilities or supply imbalances that may have a material adverse 15 Table of Contents effect on our business, financial condition, results of operations and cash flows.
In addition to the risks associated with raw materials prices, supplier capacity constraints, supplier production disruptions, including supply disruptions from our sole source or other key suppliers, supply chain and logistics congestion and disruptions, increasing costs for energy and freight, the unavailability of certain raw materials or disruptions to our key tolling arrangements could result in harm to our manufacturing capabilities or supply imbalances that may have a material adverse effect on our business, financial condition, results of operations and cash flows.
Based on the market price of our common shares and the composition of our income, assets and operations, we do not expect to be treated as a passive foreign investment company ("PFIC") for U.S. federal income tax purposes for the current taxable year or in the foreseeable future.
Based on the market price of our common shares and the composition of our income, assets and operations, we do not expect to be treated as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes for the current taxable year or in the foreseeable future.
If we cannot service our indebtedness, we may have to take actions such as selling assets, issuing additional equity or reducing or delaying capital expenditures, strategic acquisitions and 21 Table of Contents investments. Such actions, if necessary, may not be effected on commercially reasonable terms or at all.
If we cannot service our indebtedness, we may have to take actions 20 Table of Contents such as selling assets, issuing additional equity or reducing or delaying capital expenditures, strategic acquisitions and investments. Such actions, if necessary, may not be effected on commercially reasonable terms or at all.
Although the Acquisition closed on February 1, 2013, DuPont still has performance obligations to us, including fulfilling certain indemnification requirements. We could incur material additional costs if DuPont fails to meet its obligations or if we otherwise are unable to recover costs associated with such liabilities.
Although the Acquisition closed on February 1, 2013, EIDP still has performance obligations to us, including fulfilling certain indemnification requirements. We could incur material additional costs if EIDP fails to meet its obligations or if we otherwise are unable to recover costs associated with such liabilities.
Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company's shareholders than those who actually approved it.
Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an action requires the approval of a greater percentage of the company's shareholders than those who actually approved it.
We do not know if market conditions or the state of the overall economy will improve in the near future.
We do not know if market conditions or the state of the overall economy will improve or worsen in the near future.
We cannot provide assurance that a continuation of current economic conditions or a further economic downturn in one or more of the geographic regions in which we sell our products would not have a material adverse effect on our business, financial condition and results of operations.
We cannot provide assurance that a continuation of current economic conditions or an economic downturn in one or more of the geographic regions in which we sell our products would not have a material adverse effect on our business, financial condition and results of operations.
In addition, in connection with the Acquisition, DuPont has, subject to certain exceptions and exclusions, agreed to indemnify us for certain liabilities relating to environmental remediation obligations and certain claims relating to the exposure to hazardous substances and products manufactured prior to our separation from DuPont.
In addition, in connection with the Acquisition, EIDP has, subject to certain exceptions and exclusions, agreed to indemnify us for certain liabilities relating to environmental remediation obligations and certain claims relating to the exposure to hazardous substances and products manufactured prior to our separation from EIDP.
We may continue to seek to grow through strategic acquisitions, joint ventures or other arrangements. Our due diligence reviews in these transactions may not identify all of the material issues necessary to accurately estimate the cost or potential loss contingencies with respect to a particular transaction, including potential exposure to regulatory sanctions resulting from a counterparty's previous activities.
We expect to continue to seek to grow through acquisitions, joint ventures or other arrangements. Our due diligence reviews in these transactions may not identify all of the issues necessary to accurately estimate the cost or potential loss contingencies with respect to a particular transaction, including potential exposure to regulatory sanctions resulting from a counterparty's previous activities.
While we maintain safeguards to mitigate the effects of such incidents, we cannot be certain that such safeguards would be effective. These safeguards are reviewed periodically and modified to enable greater mitigation of such risks. See Part I, Item 1C, “Cybersecurity”. In addition, we rely extensively on information systems and technology to manage our business and summarize operating results.
While we maintain safeguards to mitigate the effects of such incidents, we cannot be certain that such safeguards would be effective. These safeguards are reviewed periodically and modified to enable greater mitigation of such risks. See Part I, Item 1C, “Cybersecurity.” In addition, we rely extensively on information systems and technology to manage our business and summarize operating results.
Vehicle manufacturers continue to develop new safety features such as collision avoidance technology and self-driving vehicles that may reduce the rate and amount of vehicle collisions, potentially negatively impacting demand for our refinish coatings. Insurance companies may influence vehicle owners to use body shops that do not use our products, which could also negatively impact demand for our refinish coatings.
Vehicle manufacturers continue to develop new safety features such as collision avoidance technology and autonomous vehicles that may reduce the rate and amount of vehicle collisions, potentially negatively impacting demand for our refinish coatings. Insurance companies may influence vehicle owners to use body shops that do not use our products, which could also negatively impact demand for our refinish coatings.
Despite our current level of indebtedness and restrictive covenants, we and our subsidiaries may incur additional indebtedness. This could further exacerbate the risks associated with our substantial financial leverage. We and our subsidiaries may incur significant additional indebtedness under the agreements governing our indebtedness.
Despite our current level of indebtedness and restrictive covenants, we and our subsidiaries may incur additional indebtedness. This could further exacerbate the risks associated with our substantial financial leverage. We and our subsidiaries may incur significant additional indebtedness under the agreements governing our indebtedness or otherwise.
We may spend significant time and effort and incur significant litigation costs if we are required to defend ourselves against claims of intellectual property rights infringement brought against us, regardless of whether the claims have merit.
We may spend significant time and effort and incur significant litigation costs if we are required to defend ourselves against claims of intellectual property rights infringement, regardless of whether the claims have merit.
As described below in "Risks Related to Ownership of our Common Shares", our ability to generate cash is dependent on the earnings and receipt of funds from our subsidiaries and joint ventures, which businesses are subject to prevailing economic and competitive conditions and to financial, business, legislative, regulatory and other factors beyond our control.
As described below in “Risks Related to Ownership of our Common Shares,” our ability to generate cash is dependent on the earnings and receipt of funds from our subsidiaries and joint ventures, which businesses are subject to prevailing economic and competitive conditions, and to financial, business, legislative, regulatory and other factors beyond our control.
We 26 Table of Contents cannot accurately predict the effects of exchange rate fluctuations upon our future operating results because of the number of currencies involved, the variability of currency exposures and the potential volatility of currency exchange rates. Accordingly, fluctuations in foreign exchange rates may have an adverse effect on our financial condition, results of operations and cash flows.
We cannot accurately predict the effects of exchange rate fluctuations upon our future operating results because of the number of currencies involved, the variability of currency exposures and the potential volatility of currency exchange rates. Accordingly, fluctuations in foreign exchange rates may have an adverse effect on our financial condition, results of operations and cash flows.
The loss of any of our large customers or significant changes in their level of purchases, as a result of changes in business conditions, working capital levels, product requirements, consolidation or otherwise, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Further, the loss of any of our large customers or significant changes in their level of purchases, as a result of changes in business conditions, working capital levels, product requirements, consolidation, inventory destocking or otherwise, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Difficult global economic conditions, including significant volatility in the capital, credit and commodities markets, low levels of business and consumer confidence and high levels of unemployment in certain parts of the world, could have a 22 Table of Contents material adverse effect on our business, financial condition, results of operations and cash flows.
Difficult global economic conditions, including significant volatility in the capital, credit and commodities markets, low levels of business and consumer confidence and high levels of unemployment in certain parts of the world, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We could incur material additional costs if DuPont fails to meet its obligations, if the indemnification proves insufficient or if we otherwise are unable to recover costs associated with such liabilities.
We could incur material additional costs if EIDP fails to meet its obligations, if the indemnification proves insufficient or if we otherwise are unable to recover costs associated with such liabilities.
Disruptions in the U.S., Europe or other economies, or weakening of emerging markets, such as China, could adversely affect our sales, profitability and/or liquidity.
Disruptions in the U.S., Europe or other economies, or weakening of emerging markets, such as China or Latin America, could adversely affect our sales, profitability and/or liquidity.
Furthermore, many of our local businesses import or buy raw materials in a currency other than their functional currency, which can impact the operating results for these operations if we are unable to mitigate the impact of the currency exchange fluctuations.
Furthermore, many of our local businesses import or buy raw materials in a currency other than their functional currency, which can impact the operating results for these 25 Table of Contents operations if we are unable to mitigate the impact of the currency exchange fluctuations.
This volatility has had a significant impact on the market price of securities issued by many companies, including us and other 23 Table of Contents companies in our industry. The changes frequently appear to occur without regard to the operating performance of the affected companies.
This volatility has had a significant impact on the market price of securities issued by many companies, including us and other companies in our industry. The changes frequently appear to occur without regard to the operating performance of the affected companies.
Further, our continued implementation of these programs may disrupt our operations and performance. We have in the past, and may in the future, fail to realize the full extent of the anticipated benefits from such efforts and we cannot assure you that we will realize these benefits.
Further, our continued implementation of these programs may disrupt our operations and performance. We have in the past, and may in the future, fail to realize the full extent of the anticipated benefits from, or targets related to, such efforts and we cannot assure you that we will realize these benefits or targets.
As of December 31, 2023, we had approximately $3.5 billion of indebtedness on a consolidated basis. As of December 31, 2023, we were in compliance with all of the covenants under our outstanding debt instruments. We are more leveraged than some of our competitors, which could adversely affect our business plans. Our substantial indebtedness could have important consequences to you.
As of December 31, 2024, we had approximately $3.4 billion of indebtedness on a consolidated basis. As of December 31, 2024, we were in compliance with all of the covenants under our outstanding debt instruments. We are more leveraged than some of our competitors, which could adversely affect our business plans. Our substantial indebtedness could have important consequences to you.
See Part III, Item 13, "Certain Relationships and Related Transactions and Director Independence." We are a Bermuda company and it may be difficult for you to enforce judgments against us or our directors and executive officers. We are a Bermuda exempted company.
See Part III, Item 13, “Certain Relationships and Related Transactions and Director Independence.” We are a Bermuda company and it may be difficult for you to enforce judgments against us or our directors and executive officers. We are a Bermuda exempted company.
Because our financial statements are presented in U.S. dollars, we must translate our financial results as well as assets and liabilities into U.S. dollars for financial statement reporting purposes at exchange rates in effect during or at the end of each reporting period, as applicable.
Because our financial statements are presented in U.S. dollars, we must translate our financial results as well as assets and liabilities into U.S. dollars at exchange rates in effect during or at the end of each reporting period, as applicable.
Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks. Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their ESG practices and disclosure.
Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our ESG practices may impose additional costs on us or expose us to new or additional risks. Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their ESG practices and disclosure.
Several of the end-markets we serve are cyclical, and macroeconomic and other factors beyond our control could reduce demand from these end-markets for our products, including as a result of depressed demand for our customers' products or services, and materially adversely affect our business, financial condition and results of operations and cash flows.
Several of the end-markets we serve are cyclical, and macroeconomic and other factors beyond our control have in the past and could in the future reduce demand from these end-markets for our products, including as a result of depressed demand for our customers' products or services, and materially adversely affect our business, financial condition, results of operations and cash flows.
During periods of volatility in the credit markets, there is risk that any lenders, even those with strong balance sheets and sound lending practices, could fail or refuse to honor their legal commitments and obligations under existing credit commitments, including, but not limited to, extending credit up to the maximum permitted by a credit facility, allowing access to additional credit features and otherwise accessing capital and/or honoring loan commitments.
During periods of volatility in the credit markets, there is risk that any lenders, even those with strong balance sheets and sound lending practices, could fail or refuse to honor their legal commitments and obligations under existing credit commitments, including, but not limited to, extending credit up to the maximum permitted by a credit facility, or allowing access to additional credit features.
See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financial Condition." We are dependent upon our lenders for financing to execute our business strategy and meet our liquidity needs.
See Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financial Condition.” We are dependent upon our lenders for financing to execute our business strategy and meet our liquidity needs.
The market price of our common shares has in the past fluctuated, and could in the future fluctuate, significantly for various reasons, including the realization of any risks described under this "Risk Factors" section. In addition, over the past several years, the stock markets have experienced significant price and volume fluctuations.
The market price of our common shares has in the past fluctuated, and could in the future fluctuate, significantly for various reasons, including the realization of any risks described under this “Risk Factors” section. In addition, over the past several years, the stock markets have experienced significant price and volume fluctuations.
The anticipated benefits from these efforts are based on several assumptions that may prove to be inaccurate and a variety of factors could cause us to fail to realize some or all of the expected benefits, including growth, cost savings and productivity enhancements.
The anticipated benefits from these efforts are based on several assumptions that may prove to be inaccurate and a variety of factors could cause us to fail to realize some or all of the expected benefits and targets, including growth, cost savings, improved financial performance and productivity enhancements.
We have some customers that purchase a large amount of products from us and we are also reliant on distributors to assist us in selling our products. Our largest single customer accounted for approximately 4% of our 2023 net sales and our largest distributor accounted for approximately 3% of our 2023 net sales.
We have some customers that purchase a large amount of products from us and we are also reliant on distributors to assist us in selling our products. Our largest single customer accounted for approximately 5% of our 2024 net sales and our largest distributor accounted for approximately 3% of our 2024 net sales.
Acquisitions and divestitures may also require us to devote significant internal resources and could divert management's attention away from operating our business. Our joint ventures may not operate according to our business strategy if our joint venture partners fail to fulfill their obligations.
Acquisitions and divestitures may also require us to devote significant internal resources and could divert management's attention away from operating our business. 19 Table of Contents Our joint ventures may not operate according to our business strategy if our joint venture partners fail to fulfill their obligations.
Currency risk may adversely affect our financial condition, results of operations and cash flows. We derive a significant portion of our net sales from outside the United States and conduct our business and incur costs in the local currency of most countries in which we operate.
Currency risk may adversely affect our financial condition, results of operations and cash flows. We derive a significant portion of our net sales from outside the U.S. and conduct our business and incur costs in the local currency of most countries in which we operate.
This could, in turn, cause a related decline in demand for our automotive refinish coatings because, as the age of a vehicle increases, the propensity of car owners to pay for cosmetic repairs generally decreases. Also, during difficult economic times, car owners may refrain from seeking repairs for their damaged vehicles.
This has in the past and could in the future cause a related decline in demand for our automotive refinish coatings because, as the age of a vehicle increases, the propensity of car owners to pay for cosmetic repairs generally decreases. Also, during difficult economic times, car owners may refrain from seeking repairs for their damaged vehicles.
In addition, through the introduction of new technologies, new business models or new methods of travel, such as ridesharing, the number of automotive OEM new builds may decline, potentially reducing demand for our automotive OEM coatings. Furthermore, from time to time, weather conditions have an adverse effect on our sales of coatings and related products.
In addition, through the introduction of new technologies, new business models or new methods of travel, such as ridesharing, the number of automotive OEM new builds may decline, potentially reducing demand for our automotive OEM coatings. Furthermore, weather conditions have had and may in the future have an adverse effect on our sales of coatings and related products.
Our manufacturing activities and products, both inside and outside of the U.S., are subject to regulation by various federal, state, provincial and local laws, regulations and government agencies, including the U.S. Environmental Protection Agency, as well as other authorities both inside and outside of the U.S.
Our manufacturing activities and products, both inside and outside of the U.S., are subject to regulation by various federal, state, provincial and local laws, regulations and government agencies, including the EPA, as well as other authorities both inside and outside of the U.S.
Evolving environmental, safety or other regulations and laws, including with respect to disclosure of metrics related to such areas, could have a material adverse effect on our business and consolidated financial condition.
Evolving environmental, safety, product stewardship, consumer protection or other regulations and laws, including with respect to disclosure of metrics related to such areas, could have a material adverse effect on our business and consolidated financial condition.
If these differences cause the joint ventures to deviate from our business strategy, our results of operations could be materially adversely affected. 20 Table of Contents DuPont's potential breach of its obligations in connection with the Acquisition, including failure to comply with its indemnification obligations, may materially affect our business and operating results.
If these differences cause the joint ventures to deviate from our business strategy, our results of operations could be materially adversely affected. EIDP's potential breach of its obligations in connection with the Acquisition, including failure to comply with its indemnification obligations, may materially affect our business and operating results.
If we are unable to obtain capital on commercially reasonable terms, it could: • reduce funds available to us for purposes such as working capital, capital expenditures, research and development, strategic acquisitions and other general corporate purposes; • restrict our ability to introduce new products or exploit business opportunities; • increase our vulnerability to economic downturns and competitive pressures in the markets in which we operate; and • place us at a competitive disadvantage.
If we are unable to obtain capital on commercially reasonable terms, it could: • reduce funds available to us for purposes such as working capital, capital expenditures, research and development, strategic acquisitions and other general corporate purposes; • restrict our ability to introduce new products, exploit business opportunities and compete effectively; and • increase our vulnerability to economic downturns and competitive pressures in the markets in which we operate.
From time to time, we may commence operations at new manufacturing facilities, such as our recently opened Mobility Coatings manufacturing facility in Jilin City, Jilin Province, North China, and cease operations at existing manufacturing facilities, including through relocating, eliminating or utilizing alternative sources for such operations.
From time to time, we may commence operations at new manufacturing facilities, such as the Mobility Coatings manufacturing facility we opened in 2023 in Jilin City, Jilin Province, China, and cease operations at existing manufacturing facilities, including through relocating, eliminating or utilizing alternative sources for such operations.
These conditions include, but are not limited to, changes in a country's or region's social, economic or political conditions, military conflicts, including the current conflicts between Russia and Ukraine and in the Middle East, trade regulations affecting production, pricing and marketing of products, local labor conditions and regulations, reduced protection of intellectual property rights, changes in the regulatory or legal environment, restrictions on currency exchange activities, trapped cash issues, burdensome taxes and tariffs and other trade barriers, as well as the imposition of economic or other trade sanctions, each of which could impact our ability to do business in certain jurisdictions or with certain persons.
These conditions include, but are not limited to, changes in a country's or region's social, economic or political conditions, military conflicts, including the current conflicts between Russia and Ukraine and in the Middle East, geopolitical disputes, including as a result of China-Taiwan relations, trade regulations affecting production, pricing and marketing of products, local labor conditions and regulations, 15 Table of Contents semiconductor chip shortages, reduced protection of intellectual property rights, changes in the regulatory or legal environment, restrictions on currency exchange activities, trapped cash issues, burdensome taxes and tariffs and other trade barriers, as well as the imposition of economic or other trade sanctions, each of which could impact our ability to do business in certain jurisdictions or with certain persons.
While we endeavor to protect our intellectual property rights in certain jurisdictions in which our products are produced or used and in jurisdictions into which our products are imported, the decision to file for intellectual property protection is made on a case-by-case basis.
While we endeavor to protect our intellectual property rights in certain jurisdictions in which our products are produced or used and in jurisdictions into which our products are imported, the decision to file for intellectual property protection is made on a case-by-case basis and we may not accurately assess the jurisdictions where intellectual property protection is worthwhile.
In addition, as a result of our operations and/or products, including our past operations and/or products 17 Table of Contents related to our businesses prior to the acquisition of DuPont Performance Coatings ("DPC"), a business formerly owned by E.
In addition, as a result of our operations and/or products, including our past operations and/or products related to our businesses prior to the acquisition of DuPont Performance Coatings (“DPC”), a business formerly owned by E.
For example, the U.S. government has taken actions or made proposals that are intended to address trade imbalances or trade practices, specifically with China, among other countries, 16 Table of Contents which include encouraging increased production in the United States.
The U.S. government has taken actions or made proposals that are intended to address trade imbalances or trade practices, specifically with China, among other countries, which include encouraging increased production in the United States.
These factors include, among others: delays in the anticipated timing of activities related to such growth initiatives, strategies and operating plans, including those related to actions needed to satisfy legal requirements in certain jurisdictions; increased difficulty and cost in implementing these efforts; and the incurrence of other unexpected costs associated with operating the business.
These factors include, among others: delays in the anticipated timing of activities related to such growth initiatives, strategies and operating plans, including those related to actions needed to satisfy legal requirements in certain jurisdictions; increased difficulty and cost in implementing these efforts; adverse legal, reputational and financial effects on the Company resulting from such efforts; and the incurrence of other unexpected costs associated with operating the business.
We also cannot assure you that competitors will not infringe our patents, or that we will have adequate resources to enforce our patents. We also rely on unpatented proprietary technology. It is possible that others will independently develop the same or similar technology or otherwise obtain access to our unpatented technology.
We also cannot assure you that competitors will not infringe our patents, or that we will have adequate resources to enforce our patents. We also utilize and rely on a significant number of unpatented proprietary technologies. It is possible that others will independently develop the same or similar technology or otherwise obtain access to our unpatented technology.
Therefore, increases or decreases in the value of the U.S. dollar against other currencies in countries where we operate will affect our results of operations and the value of balance sheet items denominated in foreign currencies.
Therefore, increases or decreases in the value of the U.S. dollar against currencies in such countries will affect our results of operations and the value of balance sheet items denominated in foreign currencies.
If our effective tax rates were to increase, or if the ultimate determination of the taxes owed by us is for an amount in excess of amounts previously accrued, our financial condition, operating results and cash flows could be adversely affected.
There can be no assurance as to the outcome of these examinations. If our effective tax rates were to increase, or if the ultimate determination of the taxes owed by us is for an amount in excess of amounts previously accrued, our financial condition, operating results and cash flows could be adversely affected.
As described in greater detail in the "Performance Coatings Competition" section on page 7 and the "Mobility Coatings Competition" section on page 10, we face substantial competition from many international, national, regional and local competitors of various sizes in the manufacturing, distribution and sale of our coatings and related products.
As described in greater detail in the “Performance Coatings Competition” section on page 7 and the “Mobility Coatings Competition” section on page 9, we face substantial competition from many international, national, regional and local competitors of various sizes in the manufacturing, distribution and sale of our coatings and related products.
Lastly, a tightening of credit markets and increases in interest rates, like those seen in 2022 and 2023, make it more difficult for our customers to borrow to fund construction activity, manufacturing operations and other capital projects, which in turn reduces demand for our products and could have a material adverse impact on our business, financial condition, results of operations and cash flows.
Lastly, a tightening of credit markets and a high interest rate environment make it more difficult for our customers to borrow to fund construction activity, manufacturing operations and other capital projects, which in turn reduces demand for our products and could have a material adverse impact on our business, financial condition, results of operations and cash flows.
For example, it could: • limit our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions, general corporate purposes or other purposes; • require us to devote a substantial portion of our annual cash flow to the payment of interest on our indebtedness; • expose us to the risk of increased interest rates, such as the increases seen in 2022 and 2023, as, over the term of our debt, the interest cost on a significant portion of our indebtedness is subject to changes in interest rates; • limit our ability to repurchase our common shares or pay dividends; • hinder our ability to adjust rapidly to changing market conditions; • limit our flexibility in managing our business through our obligation to comply with customary financial and other covenants in the instruments governing our indebtedness, including the indentures governing our Senior Notes (as defined in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K) and the credit agreement governing our Senior Secured Credit Facilities (as defined in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K), which covenants are described in further detail in Note 18 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K; • limit our ability to secure adequate bank financing in the future with reasonable terms and conditions or at all; and • increase our vulnerability to and limit our flexibility in planning for, or reacting to, a potential downturn in general economic conditions or in one or more of our businesses.
For example, it could: • limit our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions, general corporate purposes or other purposes; • require us to devote a substantial portion of our annual cash flow to the payment of interest on our indebtedness; • expose us to the risk of high interest rates, as, over the term of our debt, the interest cost on a significant portion of our indebtedness is subject to changes in interest rates; • limit our ability to repurchase our common shares or pay dividends; • limit our flexibility in managing our business through our obligation to comply with customary financial and other covenants in the instruments governing our indebtedness, including the indentures governing our Senior Notes (as defined in Note 19 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K) and the credit agreement governing our Senior Secured Credit Facilities (as defined in Note 19 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K), which covenants are described in further detail in Note 19 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K; and • increase our vulnerability to and limit our flexibility in planning for, or reacting to, downturns in general economic conditions or in one or more of our businesses.
Foreign Corrupt Practices Act (the "FCPA"), the United Kingdom Bribery Act 2010 (the "Bribery Act") as well as anti-corruption laws of the various jurisdictions in which we operate.
Foreign Corrupt Practices Act (the “FCPA”) and the United Kingdom Bribery Act 2010 (the “Bribery Act”), as well as anti-corruption laws of the various jurisdictions in which we operate.
In addition, increasing legislative, regulatory and judicial scrutiny, or limitations, on employee non-compete and similar agreements and restrictions may make it easier for former employees to work for our competitors or to otherwise compete with our business. We also cannot assure you that we will successfully respond to changing employee preferences spurred by the COVID-19 pandemic.
In addition, increasing legislative, regulatory and judicial scrutiny, or limitations, on employee non-compete and similar agreements and restrictions may make it easier for former employees to work for our competitors or to otherwise compete with our business. We also cannot assure you that we will successfully respond to changing employee preferences in the past few years, including flexible working arrangements.
I. du Pont de Nemours and Company ("DuPont"), including certain assets of DPC and all of the capital stock and other equity interests of certain entities engaged in the DPC business (the "Acquisition"), we could incur substantial costs, including costs relating to remediation and restoration activities and third-party claims for property damage or personal injury.
I. du Pont de Nemours and Company (now known as EIDP, Inc., a subsidiary of Corteva, Inc.) (“EIDP”), including certain assets of DPC and all of the capital stock and other equity interests of certain entities engaged in the DPC business (the “Acquisition”), we could incur substantial costs, including costs relating to remediation and restoration activities and third-party claims for property damage or personal injury.
If we are unable to maintain the proprietary nature of our technologies, we could be materially adversely affected. 19 Table of Contents We rely on our trademarks, trade names and brand names to distinguish our products from the products of our competitors and have registered or applied to register many of these trademarks.
If we are unable to maintain the proprietary nature of our technologies, we could be materially adversely affected. We rely on our trademarks, trade names and brand names to distinguish our products from the products of our competitors and have registered or applied to register many of these trademarks. We cannot assure you that our trademark applications will be approved.
Furthermore, we may make strategic divestitures from time to time. These divestitures may result in continued financial involvement in the divested businesses, such as through indemnities, guarantees or other financial arrangements. These arrangements could result in financial obligations imposed upon us and could affect our future financial condition, results of operations and cash flows.
These divestitures may result in continued financial involvement in the divested businesses, such as through indemnities, guarantees or other financial arrangements. These arrangements could result in financial obligations imposed upon us, reduce our net sales and profitability and could affect our future financial condition, results of operations and cash flows.
In rising raw material price environments, we may be unable to pass along these increased costs to our customers. In declining raw material price environments, customers may seek price concessions from us greater than any raw material cost savings we realize.
As a result, in rising raw material price environments, we may be unable to pass along these increased costs to our customers. Additionally, in declining raw material price environments, we may not realize raw material cost savings because of such lags, or customers may seek price concessions from us greater than any raw material cost savings we realize.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company’s Chief Information and Digital Officer (the “CIDO”), who reports directly to the Senior Vice President, Chief Financial Officer, is the member of the Company’s management that is principally responsible for overseeing the Company’s cybersecurity risk management programs, in partnership with business and functional leaders across the Company.
Biggest changeRelevant matters are also reviewed with the full Board on at least an annual basis. The Company’s Global Director of Information Security & Compliance (the “GDISC”) is the member of the Company’s management that is principally responsible for overseeing the Company’s cybersecurity risk management programs, in partnership with business and functional leaders across the Company.
For additional information regarding how cybersecurity threats have affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition, see Part I, Item 1A, “Risk Factors—General Risk Factors—Interruption, interference with, or failure of our information technology and communications systems could hurt our ability to effectively provide our products and services, which could harm our reputation, financial condition, operating results and cash flows”. 29 Table of Contents
For additional information regarding how cybersecurity threats have affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition, see Part I, Item 1A, “Risk Factors—General Risk Factors—Interruption, interference with, or failure of our information technology and communications systems could hurt our ability to effectively provide our products and services, which could harm our reputation, financial condition, operating results and cash flows.” 28 Table of Contents
The CIDO has 23 years of experience in the information technology and cybersecurity field, including previous roles in security architecture, audit, compliance, and governance. Under the oversight of the CIDO, members of the Company’s Information Technology and Compliance departments administer the Company's cybersecurity response policies, including assessing cybersecurity incidents as they occur and determining the severity of any cybersecurity incidents.
The CIO has 24 years of experience in the information technology and cybersecurity field, including previous roles in security architecture, audit, compliance, and governance. Under the oversight of the GDISC, members of the Company’s Information Technology and Compliance departments administer the Company's cybersecurity response policies, including assessing cybersecurity incidents as they occur and determining the severity of any cybersecurity incidents.
Removed
Relevant matters are also reviewed with the full Board on at least an annual basis.
Added
The GDISC has 22 years of experience in the information technology and cybersecurity field, including previous roles in cybersecurity leadership, governance, and technology architecture and engineering. The GDISC reports to the Company’s Chief Information Officer (the “CIO”), who reports directly to the Senior Vice President, Chief Financial Officer.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeClemens, MI (1) Performance; Mobility Orrville, OH Performance Riverside, CA Performance Sacramento, CA (1) Performance Latin America Brazil Guarulhos Performance; Mobility Colombia Cartagena de Indias Performance Guatemala Amatitlan Performance Mexico Apodaca Performance Ocoyoacac Performance Tlalnepantla Performance; Mobility EMEA Austria Guntramsdorf Performance; Mobility France Montbrison Performance Germany Landshut Performance Wuppertal Performance; Mobility Netherlands Zuidland Performance Sweden Västervik Performance Switzerland Bulle Performance Turkey Gebze Performance; Mobility Çerkezköy Performance United Kingdom Darlington Performance Farnham Performance Huthwaite Performance Wellingborough Performance United Arab Emirates Ras Al Khaimah Performance Asia Pacific China Jilin Performance; Mobility Jiading Performance; Mobility Qingpu Performance Ma'anshan Performance India Savli Performance; Mobility 30 Table of Contents Type of Facility/Country Location Segment Malaysia Shah Alam Performance Shah Alam Performance Thailand Bangplee Performance; Mobility Joint Venture Manufacturing Facilities Indonesia Cikarang Performance Joint Venture Partner Manufacturing Facilities South Africa Port Elizabeth Mobility Technology Centers China Shanghai Performance; Mobility Germany Wuppertal Performance; Mobility United States of America Mt.
Biggest changeClemens, MI (1) Performance; Mobility Orrville, OH Performance Riverside, CA Performance Sacramento, CA (1) Performance Latin America Brazil Guarulhos Performance; Mobility Colombia Cartagena de Indias Performance Guatemala Amatitlan Performance Mexico Apodaca Performance Ocoyoacac Performance Tlalnepantla Performance; Mobility EMEA Austria Guntramsdorf Performance; Mobility France Montbrison Performance Germany Landshut Performance Wuppertal Performance; Mobility Netherlands Zuidland Performance Sweden Västervik Performance Switzerland Bulle Performance Turkey Gebze Performance; Mobility Çerkezköy Performance United Kingdom Darlington Performance Farnham Performance Huthwaite Performance Wellingborough Performance United Arab Emirates Ras Al Khaimah Performance Asia Pacific China Jilin Performance; Mobility Jiading Performance; Mobility Qingpu Performance Ma'anshan Performance India Savli Performance; Mobility Malaysia Shah Alam Performance Shah Alam Performance Thailand Bangplee Performance; Mobility 29 Table of Contents Type of Facility/Country Location Segment Joint Venture Manufacturing Facilities Indonesia Cikarang Performance Joint Venture Partner Manufacturing Facilities South Africa Port Elizabeth Mobility Technology Centers China Shanghai Performance; Mobility Germany Wuppertal Performance; Mobility United States of America Mt.
ITEM 2. PROPERTIES In February 2024, we moved our corporate headquarters from Glen Mills, PA to Philadelphia, PA. Our extensive geographic footprint comprises 43 manufacturing facilities (including two manufacturing sites operated by our joint ventures), four major technology centers and 49 customer training centers supporting our global operations.
ITEM 2. PROPERTIES In February 2024, we moved our corporate headquarters from Glen Mills, PA to Philadelphia, PA. Our extensive geographic footprint comprises 44 manufacturing facilities (including two manufacturing sites operated by our joint ventures), four major technology centers and 45 customer training centers supporting our global operations.
Clemens, MI Performance; Mobility Philadelphia, PA Performance; Mobility Customer Training Centers Location by Region Number of Facilities North America 12 Latin America 2 EMEA 17 Asia Pacific 18 (1) Subject to a mortgage under our Senior Secured Credit Facilities.
Clemens, MI Performance; Mobility Philadelphia, PA Performance; Mobility Customer Training Centers Location by Region Number of Facilities North America 11 Latin America 2 EMEA 15 Asia Pacific 17 (1) Subject to a mortgage under our Senior Secured Credit Facilities.
The table below presents summary information regarding our facilities as of December 31, 2023. Type of Facility/Country Location Segment Manufacturing Facilities North America Canada Cornwall, ON Performance United States of America Fridley, MN Performance Front Royal, VA (1) Performance; Mobility Ft.
The table below presents summary information regarding our facilities as of December 31, 2024. Type of Facility/Country Location Segment Manufacturing Facilities North America Canada Cornwall, ON Performance Milton, ON Performance United States of America Brighton, MI Performance Fridley, MN Performance Front Royal, VA (1) Performance; Mobility Ft.
Madison, IA Performance; Mobility High Point, NC Performance Hilliard, OH Performance Houston, TX Performance Jacksonville, TX Performance Madison, AL Performance Mt.
Madison, IA Performance; Mobility High Point, NC Performance Houston, TX Performance Jacksonville, TX Performance Madison, AL Performance Mt.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe do not expect that any currently pending lawsuits will have a material adverse effect on us as discussed in Note 5 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Biggest changeWe do not expect that any currently pending lawsuits will have a material adverse effect on us as discussed in Note 6 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeVillavarayan earned his bachelor’s degree in civil engineering from McMaster University and completed the Wharton Executive Education Advanced Finance Program. Carl D. Anderson II Mr. Anderson has served as Senior Vice President and Chief Financial Officer at Axalta since August 14, 2023.
Biggest changeVillavarayan currently serves as a Director on the Board of Franklin Electric and Focus: HOPE, a Detroit-based non-profit organization. Mr. Villavarayan earned his B.S. in civil engineering from McMaster University and completed the Wharton Executive Education Advanced Finance Program. Carl D. Anderson II Mr.
Villavarayan joined the Company from Meritor, Inc., a global supplier of a broad range of integrated systems, modules and components to OEMs and the aftermarket for the commercial vehicle, transportation and industrial sectors, where he held a number of positions of increasing responsibility over the course of 22 years, most recently serving, from 2021 until October 2022, as CEO and President.
Villavarayan joined the Company from Meritor, Inc., a global supplier of a broad range of integrated systems, modules and components to OEMs and the aftermarket for the commercial vehicle, transportation and industrial sectors (“Meritor”), where he held a number of positions of increasing responsibility over the course of 22 years, most recently serving, from 2021 until October 2022, as CEO and President.
Tablin-Wolf was a corporate attorney at Blank Rome LLP and Fox Rothschild LLP, where he concentrated his practice on mergers and acquisitions, venture capital and general corporate counseling. Mr. Tablin-Wolf earned a B.S. in Psychology from Santa Clara University and a J.D., cum laude, from the Temple University Beasley School of Law. 33 Table of Contents PART II
Tablin-Wolf was a corporate attorney at Blank Rome LLP and Fox Rothschild LLP, where he concentrated his practice on mergers and acquisitions, venture capital and general corporate counseling. Mr. Tablin-Wolf earned a B.S. in Psychology from Santa Clara University and a J.D., cum laude, from the Temple University Beasley School of Law. 32 Table of Contents PART II
Prior to that, Mr. Awada was our Senior Vice President, Global Mobility Coatings from October 2020 until January 2024. Previously, Mr. Awada was President, Faurecia Clean Mobility – North America, where he also served as a member of Faurecia's North American Board of Management and President, Faurecia Clean Mobility – Asia Pacific, serving on multiple boards with joint venture partners.
Prior to that, Mr. Awada was our Senior Vice President, Global Mobility Coatings from October 2020 until January 2024. Previously, Mr. Awada was President, Forvia Mobility – North America, where he also served as a member of Forvia North American Board of Management and President, Faurecia Clean Mobility – Asia Pacific, serving on multiple boards with joint venture partners.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. INFORMATION ABOUT OUR EXECUTIVE OFFICERS The executive officers of the Company are appointed by the Board. The following table provides information regarding our executive officers: Name Age* Position Chris Villavarayan 53 Chief Executive Officer and President Carl D. Anderson II 54 Senior Vice President and Chief Financial Officer Troy D.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. INFORMATION ABOUT OUR EXECUTIVE OFFICERS The executive officers of the Company are appointed by the Board. The following table provides information regarding our executive officers: Name Age* Position Chris Villavarayan 54 Chief Executive Officer and President Carl D. Anderson II 55 Senior Vice President and Chief Financial Officer Troy D.
Weaver served as our Senior Vice President, Global Refinish from October 2020 until January 2024, as our Vice President, Global Refinish from August 2019 until October 2020 and as our Vice President, North America Refinish from January 2017 until August 2019 where he was responsible for Axalta's high performing Refinish business in the USA and Canada. Mr.
Weaver served as our Senior Vice President, Global Refinish from October 2020 until January 2024, as our Vice President, Global Refinish from August 2019 until October 2020 and as our Vice President, North America Refinish from January 2017 until August 2019 where he was responsible for Axalta's high performing Refinish business in the U.S. and Canada. Mr.
Awada started his career after earning his B.A. from the University of Toledo, serving the Ford Motor Company in various roles within the Ford customer service division. Shelley J. Bausch Ms. Bausch has served as our President, Global Industrial Coatings since January 2024. Prior to that, Ms.
Awada started his career after earning his B.A. from the University of Toledo, serving the Ford Motor Company in various roles within the Ford customer service division. Tim Bowes Mr. Bowes has served as our President, Global Industrial Coatings since January 2025. Prior to that, Mr.
Anderson earned a master’s degree in business administration from Wayne State University and a bachelor’s degree in Economics from Michigan State University. Troy D. Weaver Mr. Weaver has served as our President, Global Refinish since January 2024. Prior to that, Mr.
Anderson earned an M.B.A. from Wayne State University and a B.A. in Economics from Michigan State University. Troy D. Weaver Mr. Weaver has served as our President, Global Refinish since January 2024. Prior to that, Mr.
Previously, he served as the Chief Financial Officer for XPO, Inc., a leading provider of freight transportation services, from November 2022 to August 2023. Prior to XPO, Mr. Anderson was Senior Vice President and CFO at Meritor, Inc., a leading supplier of OEM and aftermarket parts for commercial vehicle and industrial markets, from March 2019 to October 2022.
Anderson has served as Senior Vice President and Chief Financial Officer at Axalta since August 14, 2023. Previously, he served as the Chief Financial Officer for XPO, Inc., a leading provider of freight transportation services, from November 2022 to August 2023. Prior to XPO, Mr. Anderson was Senior Vice President and CFO at Meritor from March 2019 to October 2022.
Weaver 52 President, Global Refinish Hadi H. Awada 45 President, Global Mobility Coatings Shelley J. Bausch 58 President, Global Industrial Coatings Amy Tufano 43 Senior Vice President and Chief Human Resources Officer Alex Tablin-Wolf 40 Senior Vice President, General Counsel & Corporate Secretary *As of February 15, 2024 31 Chris Villavarayan Mr.
Weaver 53 President, Global Refinish Hadi H. Awada 46 President, Global Mobility Coatings Tim Bowes 61 President, Global Industrial Coatings Amy Tufano 44 Senior Vice President and Chief Human Resources Officer Alex Tablin-Wolf 41 Senior Vice President, General Counsel & Corporate Secretary *As of February 13, 2025 30 Table of Contents Chris Villavarayan Mr.
She earned a B.S. in Business Administration, summa cum laude, from Alma College and a M.B.A. from the University of Michigan – Flint. 32 Amy Tufano Ms. Tufano has served as our Senior Vice President and Chief Human Resources Officer since September 2023. Ms.
Bowes has lived and worked in Asia and Europe and holds an M.B.A. from Wayne State University in Detroit, Michigan and a B.S. from Lawrence Technological University in Southfield, Michigan. 31 Table of Contents Amy Tufano Ms. Tufano has served as our Senior Vice President and Chief Human Resources Officer since September 2023. Ms.
Removed
Bausch was our Senior Vice President, Global Industrial Coatings from January 2021 until January 2024. Previously, Ms. Bausch led the Asia Pacific region and the Fluid Technologies business unit for the Carlisle Companies Inc., a manufacturer of engineered products used in roofing, architectural metal, aerospace, medical technologies, industrial, transportation, refinish, and agriculture, mining and construction equipment markets.
Added
Bowes served as Axalta’s Senior Vice President and Chief Transformation Officer from March 2023 until his appointment as President, Global Industrial Coatings. Prior to joining Axalta, he served as Senior Vice President and President of Electrification, Industrial, Aftermarket, Purchasing & Supply Chain for Meritor. Mr.
Removed
Before Carlisle, she led the Industrial Coatings business for PPG from 2014 to 2017 and, before that, spent 25 years at Dow Corning Corporation in a variety of senior management and commercial roles. Ms. Bausch currently serves on the board of directors of GATX Corporation and served on the board of directors of the Kraton Corporation from 2017 to 2022.
Added
Bowes has also served as Senior Vice President and President of the Casting business unit for American Axle & Manufacturing and CEO and President of Transtar Industries, an Industrial and Automotive Aftermarket company. He also held executive leadership roles at ITT Automotive and Intermet. Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed0 unchanged
Biggest changeRecent Sales of Unregistered Securities None. Stock Performance The line graph below compares the cumulative total shareholder value return of our common shares with the cumulative total returns of an overall stock market index, the Standard & Poor's Composite 500 Index ("S&P 500"), and our peer group index, Standard & Poor's 400 Materials Index ("S&P 400 Materials").
Biggest changeRecent Sales of Unregistered Securities None. Stock Performance The line graph below compares the cumulative total shareholder value return of our common shares with the cumulative total returns of an overall stock market index, the Standard & Poor's Composite 500 Index (“S&P 500”), and our peer group index, Standard & Poor's 400 Materials Index (“S&P 400 Materials”).
A substantially greater number of holders of Axalta common shares are "street name" or beneficial holders, whose shares of record are held by banks, brokers and other financial institutions. Since our incorporation in August 2012, we have not paid dividends on our common shares, and we do not currently intend to pay dividends in the foreseeable future.
A substantially greater number of holders of Axalta common shares are “street name” or beneficial holders, whose shares of record are held by banks, brokers and other financial institutions. Since our incorporation in August 2012, we have not paid dividends on our common shares, and we do not currently intend to pay dividends in the foreseeable future.
This graph assumes an investment of $100 in our common shares and each index (with all dividends reinvested) on December 31, 2018. ITEM 6. RESERVED 34 Table of Contents
This graph assumes an investment of $100 in our common shares and each index (with all dividends reinvested) on December 31, 2019. ITEM 6. RESERVED 33 Table of Contents
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Share Information Our common shares are traded on the New York Stock Exchange under the symbol "AXTA." As of February 8, 2024, there were three registered holders of record of Axalta's common shares as shown on the records of the Company's transfer agent.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Share Information Our common shares are traded on the New York Stock Exchange under the symbol “AXTA.” As of February 6, 2025, there were three registered holders of record of Axalta's common shares as shown on the records of the Company's transfer agent.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

87 edited+33 added−25 removed57 unchanged
Biggest changeDollar n The absence of a $20.3 million reduction in the prior year from the Customer Contract Restructuring Partially offset by: n Lower sales volumes primarily as a result of temporary operational delays in North America from our multi-year ERP system implementation, a deprioritization of certain low-margin refinish products, a weaker industrial market environment, and the strategic decision to exit certain industrial customers, partially offset by higher sales volumes within Mobility Coatings 39 Table of Contents Cost of sales Year Ended December 31, 2023 vs 2022 2023 2022 $ Change % Change Cost of sales $ 3,565.6 $ 3,465.6 $ 100.0 2.9 % % of net sales 68.8 % 71.0 % Cost of sales increased primarily due to the following: n Higher operating expenses due primarily to increased labor costs n Higher costs of $41.0 million associated with our multi-year ERP system implementation and fees for third-party consultants focused on productivity programs n Increase of $21.5 million in inventory charges from obsolescence, quality and yield loss from manufacturing compared to the prior year n Impairment charge of $8.2 million due to the decision to demolish assets at a previously closed manufacturing site Partially offset by: n Lower variable input costs as a result of deflationary benefits and savings driven by the productivity programs launched during 2023 n Unfavorable currency translation impacts of approximately 0.5% due primarily to the strengthening of the Mexican Peso, Euro and Brazilian Real, partially offset by the weakening of the Chinese Yuan and South African Rand n Decreased costs associated with lower sales volumes in Performance Coatings Cost of sales as a percentage of net sales decreased primarily due to the following: n Higher average selling prices in both segments and all regions n Lower variable input costs as a result of deflationary benefits and savings driven by the productivity programs launched during 2023 n The absence of a $20.3 million reduction to net sales in the prior year from the Customer Contract Restructuring which had no corresponding impact on cost of sales Partially offset by: n Higher operating expenses due primarily to increased labor costs n Higher costs of $41.0 million associated with our multi-year ERP system implementation and fees for third-party consultants focused on productivity programs n Increase of $21.5 million in inventory charges from obsolescence, quality and yield loss from manufacturing compared to the prior year n Impairment charge of $8.2 million due to the decision to demolish assets at a previously closed manufacturing site 40 Table of Contents Selling, general and administrative expenses Year Ended December 31, 2023 vs 2022 2023 2022 $ Change % Change Selling, general and administrative expenses $ 840.1 $ 772.4 $ 67.7 8.8 % Selling, general and administrative expenses increased primarily due to the following: n Higher operating expenses due primarily to increased variable labor costs n Increased commissions resulting from increased sales n Increase of $5.3 million in bad debt expense n Unfavorable currency translation impacts of approximately 0.6% due primarily to the strengthening of the Euro and Mexican Peso, partially offset by the weakening of the Chinese Yuan Other operating charges Year Ended December 31, 2023 vs 2022 2023 2022 $ Change % Change Other operating charges $ 28.4 $ 31.5 $ (3.1) (9.8) % Other operating charges decreased primarily due to the following: n Decrease of $19.5 million in termination benefits and other employee-related costs associated with our cost saving initiatives n Decrease of $5.1 million from expenses of $3.5 million in the prior year to benefits of $1.6 million in the current period as a result of changes in estimates of reserves for accounts receivable related to Russia's conflict with Ukraine Partially offset by: n Third-party consultant costs of $12.1 million related to productivity programs recorded during the current period of which there was no comparable activity in the prior year n Impairment charges increased $7.5 million primarily related to the exit of a non-core business category in Mobility Coatings n Contingent consideration adjustments associated with acquisitions of $1.0 million, of which there was no comparable activity in the prior year n Increase of $0.7 million in accelerated depreciation and site closure expenses Research and development expenses Year Ended December 31, 2023 vs 2022 2023 2022 $ Change % Change Research and development expenses $ 74.0 $ 66.4 $ 7.6 11.4 % Research and development expenses increased primarily due to the following: n Increased labor costs n Impacts of currency translation were immaterial when compared to the prior year Amortization of acquired intangibles Year Ended December 31, 2023 vs 2022 2023 2022 $ Change % Change Amortization of acquired intangibles $ 88.5 $ 125.3 $ (36.8) (29.4) % Amortization of acquired intangibles decreased primarily due to the following: n Reduced amortization from intangibles relating to the DPC acquisition reaching the end of their useful lives n Impacts of currency translation were immaterial when compared to the prior year 41 Table of Contents Interest expense, net Year Ended December 31, 2023 vs 2022 2023 2022 $ Change % Change Interest expense, net $ 213.3 $ 139.8 $ 73.5 52.6 % Interest expense, net increased primarily due to the following: • Unfavorable impact of approximately $82.3 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 (as defined in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K), partially offset by a lower interest rate from a repricing in August 2023 • Unfavorable impact of approximately $2.3 million due to the interest rate on the 2031 Dollar Senior Notes, which were issued in November 2023 to replace the 2025 Euro Senior Notes (as defined in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K) Partially offset by: n Favorable impact of a lower principal balance of the 2029 Dollar Term Loans during the current year period, primarily as a result of $200.0 million of voluntary payments during the current year n Impacts of currency translation were immaterial when compared to the prior year Other expense, net Year Ended December 31, 2023 vs 2022 2023 2022 $ Change % Change Other expense, net $ 19.5 $ 26.1 $ (6.6) 25.3 % Other expense, net changed primarily due to the following: n Decreased debt extinguishment and refinancing related costs of $4.8 million as the impact of refinancing the 2024 Dollar Term Loan in December 2022 exceeded the costs incurred during 2023 to reprice the 2029 Dollar Term Loans in August 2023, issue the 2031 Dollar Senior Notes in November 2023 and the write-offs related to $200.0 million of voluntary prepayments on the 2029 Dollar Term Loans n The absence of a $4.7 million charge recorded in 2022 for the Customer Contract Restructuring n Increased miscellaneous income, net of $5.7 million Partially offset by: n Unfavorable impact of foreign exchange losses of $7.5 million when compared with the prior year, including a devaluation of net monetary assets denominated in the Turkish Lira and Argentinian Peso due to hyperinflationary conditions n Increase of $1.1 million in expense from pension special events from a benefit of $0.8 million in the prior year to an expense of $0.3 million in the current year 42 Table of Contents Provision for income taxes Year Ended December 31, 2023 2022 Income before income taxes $ 354.7 $ 257.3 Provision for income taxes 86.2 65.1 Statutory U.S.
Biggest changeDollar Other operating charges Year Ended December 31, 2024 vs 2023 2024 2023 $ Change % Change Other operating charges $ 79 $ 28 $ 51 182.1 % Other operating charges increased primarily due to the following: n Increase of $61 million in termination benefits and other employee-related costs primarily associated with our 2024 Transformation Initiative n Increase of $6 million in acquisition-related costs n Increase of $4 million in environmental remediation costs Partially offset by: n $12 million of third-party consultant costs in the prior year related to productivity programs n $7 million of impairment charges recognized in the prior year related to the exit of a non-core business category in the Mobility Coatings segment 39 Table of Contents Research and development expenses Year Ended December 31, 2024 vs 2023 2024 2023 $ Change % Change Research and development expenses $ 74 $ 74 $ — — % Research and development expenses remained generally consistent: n Impacts of currency translation were immaterial when compared to the prior year Amortization of acquired intangibles Year Ended December 31, 2024 vs 2023 2024 2023 $ Change % Change Amortization of acquired intangibles $ 92 $ 88 $ 4 4.5 % Amortization of acquired intangibles increased primarily due to the following: n Increased amortization of $8 million associated with assets acquired during 2024 and the fourth quarter of 2023 Partially offset by: n Reduced amortization of $5 million from certain intangible assets reaching the end of their useful lives during 2023 and 2024, primarily relating to intangibles from the 2013 DuPont Performance Coatings acquisition n Impacts of currency translation were immaterial when compared to the prior year Interest expense, net Year Ended December 31, 2024 vs 2023 2024 2023 $ Change % Change Interest expense, net $ 205 $ 213 $ (8) (3.8) % Interest expense, net decreased primarily due to the following: n Favorable impact of $24 million attributable to lower interest rates and lower principal on our 2029 Dollar Term Loans, primarily as a result of $125 million of prepayments during 2024 and the fourth quarter of 2023 n Favorable impact of $17 million attributable to the redemption in November 2023 of our Euro-denominated Senior Notes due in 2025 n Favorable impact of $3 million attributable to our derivative instruments used to hedge the variable interest rate exposure on certain debt arrangements Partially offset by: n Unfavorable impact of $32 million attributable to our 2031 Dollar Senior Notes which were issued in November 2023 n Unfavorable impact of $2 million attributable to the borrowings against our Revolving Credit Facility during 2024 Other expense, net Year Ended December 31, 2024 vs 2023 2024 2023 $ Change % Change Other expense, net $ 5 $ 20 $ (15) (75.0) % Other expense, net decreased primarily due to the following: n Favorable impact of foreign exchange gains and losses of $12 million when compared with the prior year, including expenses from the remeasurement of net monetary assets denominated in the Argentinian Peso and Turkish Lira due to a significant devaluation in the prior year n Decreased debt extinguishment and refinancing related costs of $5 million driven by $5 million in expenses for the prepayments and repricings of our 2029 Dollar Term Loans in the current year compared to the $10 million in expenses for prepayments, repricing of the 2029 Dollar Term Loans and issuance of the 2031 Dollar Senior Notes in the prior year n $2 million benefit from pension settlements and curtailments Partially offset by: n Increased miscellaneous expense, net of $4 million 40 Table of Contents Provision for income taxes Year Ended December 31, 2024 2023 Income before income taxes $ 496 $ 355 Provision for income taxes 105 86 Statutory U.S.
Key assumptions in the valuation of contingent consideration liabilities include discount rates, expected terms, volatility rates and operating results as applicable based on the targets identified in the respective acquisition agreements. See Notes 1 and 3 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
Key assumptions in the valuation of contingent consideration liabilities include discount rates, expected terms, volatility rates and operating results as applicable based on the targets identified in the respective acquisition agreements. See Notes 1, 3 and 4 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
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.
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 other 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.
A 10% decrease in the total number of products repaired would result in an approximately $2.5 million reduction in the estimated liability. Environmental remediation costs are accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated.
A 10% decrease in the total number of products repaired would result in an approximately $2 million reduction in the estimated liability. Environmental remediation costs are accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated.
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).
We 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).
Compensation expense related to restricted stock units is equal to the grant-date fair value of the awards determined by the closing share price on the date of the grant. The related expense is recognized as compensation expense over the service period utilizing the graded vesting attribution method.
Stock-Based Compensation Compensation expense related to restricted stock units is equal to the grant-date fair value of the awards determined by the closing share price on the date of the grant. The related expense is recognized as compensation expense over the service period utilizing the graded vesting attribution method.
The main factors that influence our cost of sales as a percentage of net sales include: • changes in the price of raw materials; • changes in the costs of labor, logistics and energy; • production volumes; • the implementation of cost control measures aimed at improving productivity, including reduction of fixed production costs, refinements in inventory management and the coordination of purchasing within each subsidiary and at the business level; • changes in sales volumes, average selling prices and product mix; • inventory obsolescence, quality and yield loss from manufacturing; and • fluctuations in foreign exchange rates.
The main factors that influence our cost of sales as a percentage of net sales include: • changes in the price of raw materials, including as a result of tariffs; • changes in the costs of labor, logistics and energy; • production volumes; • the implementation of cost control measures aimed at improving productivity, including reduction of fixed production costs, refinements in inventory management and the coordination of purchasing within each subsidiary and at the business level; • changes in sales volumes, average selling prices and product mix; • inventory obsolescence, quality and yield loss from manufacturing; and • fluctuations in foreign exchange rates.
Inherent in these valuations are assumptions including expected return on plan assets, discount rates at which liabilities could have been settled, rate of increase in future compensations levels, and mortality rates. These assumptions are updated annually and are disclosed in Note 7 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. In accordance with U.S.
Inherent in these valuations are assumptions including expected return on plan assets, discount rates at which liabilities could have been settled, rate of increase in future compensations levels, and mortality rates. These assumptions are updated annually and are disclosed in Note 8 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. In accordance with U.S.
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.
We serve our customer base through an extensive sales force and technical support organization, as well as through approximately 5,000 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.
Based on the results of our 2023 qualitative evaluation, we do not believe the meaningful estimates and assumptions supporting the goodwill and indefinite-lived intangible assets balances have changed materially from our most recent quantitative evaluation in 2022, which rendered fair values substantially in excess of carrying values for all reporting units.
Based on the results of our 2024 qualitative evaluation, we do not believe the meaningful estimates and assumptions supporting the goodwill and indefinite-lived intangible assets balances have changed materially from our most recent quantitative evaluation in 2022, which rendered fair values substantially in excess of carrying values for all reporting units.
Any such purchases of our common stock or Senior Notes may be made through the open market or privately negotiated transactions with third parties or pursuant to one or more redemption, tender or exchange offers or otherwise, upon such terms and at such prices, as well as with such consideration, as we, or any of our affiliates, may determine.
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 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 are one of only a few suppliers with the technology to provide precise color matching and highly durable coatings systems. The end-markets within this segment are refinish and industrial. 35 Through our Mobility Coatings segment, we provide coatings technologies for light vehicle and commercial vehicle OEMs.
We are one of only a few suppliers with the technology to provide precise color matching and highly durable coatings systems. The end-markets within this segment are refinish and industrial. 34 Through our Mobility Coatings segment, we provide coatings technologies for light vehicle and commercial vehicle OEMs.
In 2023, we performed a qualitative evaluation for impairment over our reporting units and indefinite-lived intangible assets and concluded that it was not more likely than not that the fair values are less than the respective carrying amounts.
In 2024, we performed a qualitative evaluation for impairment over our reporting units and indefinite-lived intangible assets and concluded that it was not more likely than not that the fair values are less than the respective carrying amounts.
See Note 2 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail on our revenue. 52 Table of Contents Contingencies Contingencies, by their nature, relate to uncertainties that require management to exercise judgment both in assessing the likelihood that a liability has been incurred as well as in estimating the amount of potential loss.
See Note 2 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail on our revenue. Contingencies Contingencies, by their nature, relate to uncertainties that require management to exercise judgment both in assessing the likelihood that a liability has been incurred as well as in estimating the amount of potential loss.
Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors, including, but not limited to, those described in "Risk Factors," could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections.
Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors, including, but not limited to, those described in “Risk Factors,” could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections.
The fair values of real properties acquired are based on the consideration of their highest and best use in the market. The fair values of property, plant and equipment, other than real properties, are based on the consideration that unless otherwise identified, they will continue to be used "as is" and as part of the ongoing business.
The fair values of real properties acquired are based on the consideration of their highest and best use in the market. The fair values of property, plant and equipment, other than real properties, are based on the consideration that unless otherwise identified, they will continue to be used “as is” and as part of the ongoing business.
The breadth of our operations and the global complexity of tax regulations require us to make assessments in estimating taxes we will ultimately pay factoring in various uncertainties.
The breadth of our operations and the global complexity of tax regulations require us to make assessments in estimating taxes we may ultimately pay factoring in various uncertainties.
The inputs utilized in a quantitative analysis are classified as Level 3 inputs within the fair value hierarchy as defined in Accounting Standards Codification ("ASC") 820, Fair Value Measurement .
The inputs utilized in a quantitative analysis are classified as Level 3 inputs within the fair value hierarchy as defined in Accounting Standards Codification (“ASC”) 820, Fair Value Measurement .
Other Impacts on Cash Currency exchange impacts on cash for the year ended December 31, 2023 were unfavorable by $6.4 million, which was driven primarily by the fluctuations of the Euro, Argentinian Peso and Turkish Lira, partially offset by the Mexican Peso and British Pound compared to the U.S. Dollar.
Other Impacts on Cash Currency exchange impacts on cash for the year ended December 31, 2023 were unfavorable by $6 million, which was driven primarily by the fluctuations of the Euro, Argentinian Peso and Turkish Lira, partially offset by the Mexican Peso and British Pound, in each case compared to the U.S. Dollar.
This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for 2023 and 2022. For the comparison of 2022 and 2021, see Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2022 Annual Report on Form 10-K, filed with the SEC on February 16, 2023.
This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for 2024 and 2023. For the comparison of 2023 and 2022, see Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2023 Annual Report on Form 10-K, filed with the SEC on February 15, 2024.
Selling, general and administrative expenses ("SG&A") Our SG&A expense consists of all expenditures incurred in connection with the sales and marketing of our products, as well as technical support for our customers and administrative overhead costs, including: • compensation and benefit costs for management, sales personnel and administrative staff, including share-based compensation expense.
Selling, general and administrative expenses (“SG&A”) Our SG&A expenses consist of all expenditures incurred in connection with the sales and marketing of our products, as well as technical support for our customers and administrative overhead costs, including: • compensation and benefit costs for management, sales personnel and administrative staff, including share-based compensation expense.
Partially offsetting the outflows were proceeds of $8.8 million from a short-term borrowing and $7.5 million net cash received primarily from stock option exercises. Our China supplier financing program and our 2024 Dollar Term Loan refinancing are discussed further in Note 17 and Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Partially offsetting the outflows were proceeds of $9 million from a short-term borrowing and $8 million net cash received primarily from stock option exercises. Our China supplier financing program and our 2024 Dollar Term Loan refinancing are discussed further in Note 18 and Note 19, respectively, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
These outflows were partially offset by decreases in inventories of $103.1 million as a result of management of inventory levels and increases in other accrued liabilities of $29.3 million. Net Cash Used for Investing Activities Net cash used for investing activities for the year ended December 31, 2023 was $205.7 million.
These outflows were partially offset by decreases in inventories of $103 million as a result of management of inventory levels and increases in other accrued liabilities of $29 million. Net Cash Used for Investing Activities Net cash used for investing activities for the year ended December 31, 2023 was $206 million.
The required reserves may change in the future due to new developments in each matter. For more information on these matters, see Note 5 and Note 10 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 53 Table of Contents
The required reserves may change in the future due to new developments in each matter. For more information on these matters, see Note 6 and Note 11 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 50 Table of Contents
More information on potential factors that could affect our financial results is available in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as "Risk Factors" in this Annual Report on Form 10-K and in other documents that we have filed with, or furnished to, the SEC, and you should not place undue reliance on these forward-looking statements or projections.
More information on potential factors that could affect our financial results is available in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as “Risk Factors” in this Annual Report on Form 10-K and in other documents that we have filed with, or furnished to, the SEC, and you should not place undue reliance on these forward-looking statements or projections.
Our remaining available borrowing capacity under other lines of credit in certain non-U.S. jurisdictions totaled $55.4 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.
Our remaining available borrowing capacity under other lines of credit in certain non-U.S. jurisdictions totaled $102 million at December 31, 2024. 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.
For more information about risks relating to our business, see Part I, Item 1A, "Risk Factors—Risks Related to our Business." Cost of goods sold ("cost of sales") Our cost of sales consists principally of the following: • Production materials costs . These include costs of the materials needed to manufacture products for distribution.
For more information about risks relating to our business, see Part I, Item 1A, “Risk Factors—Risks Related to our Business.” Cost of goods sold (“cost of sales”) Our cost of sales consists principally of the following: • Production materials costs . These include costs of the materials needed to manufacture products for distribution.
These risk factors are discussed in Part I, Item 1A, "Risk Factors," included elsewhere in this Annual Report on Form 10-K. Goodwill and indefinite-lived intangible assets The Company tests indefinite-lived intangible assets and goodwill for impairment annually by either performing a qualitative evaluation or a quantitative test.
These risk factors are discussed in Part I, Item 1A, “Risk Factors,” included elsewhere in this Annual Report on Form 10-K. 47 Table of Contents Goodwill and indefinite-lived intangible assets The Company tests indefinite-lived intangible assets and goodwill for impairment annually by either performing a qualitative evaluation or a quantitative test.
Contractual Obligations See Note 6 and Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for disclosure of our material contractual obligations.
Contractual Obligations See Note 7 and Note 19 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for disclosure of our material contractual obligations.
Federal income tax rate 21.0 % 21.0 % Effective tax rate 24.3 % 25.3 % Effective tax rate vs. statutory U.S. Federal income tax rate 3.3 % 4.3 % (Favorable) Unfavorable Impact 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 lower than the U.S.
Federal income tax rate 21.0 % 21.0 % Effective tax rate 21.1 % 24.3 % Effective tax rate vs. statutory U.S. Federal income tax rate 0.1 % 3.3 % (Favorable) Unfavorable Impact Items impacting the effective tax rate vs. statutory U.S. federal income tax rate 2024 2023 Earnings generated in jurisdictions where the statutory rate is lower than the U.S.
Property, plant and equipment are stated at cost and depreciated or amortized on a straight-line basis over their estimated useful lives. • Other .
Property, plant and equipment are stated at cost and depreciated or amortized on a straight-line basis over their estimated useful lives. 36 Table of Contents • Other .
The following trends have impacted our segment net sales performance: • Performance Coatings: Net sales increased 2.4% for the year ended December 31, 2023 compared with the year ended December 31, 2022.
The following trends have impacted our segment net sales performance: • Performance Coatings: Net sales increased 1.4% for the year ended December 31, 2024 compared with the year ended December 31, 2023.
Our recorded deferred tax asset balance as of December 31, 2023 is $8.2 million, which is net of valuation allowances of $233.5 million. The Company records a valuation allowance if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
Our recorded deferred tax asset balance as of December 31, 2024 is $13 million, which is net of valuation allowances of $250 million. The Company records a valuation allowance if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
At December 31, 2023, availability under the Revolving Credit Facility was $527.7 million, net of $22.3 million of letters of credit outstanding. All such availability may be utilized without violating any covenants under the Credit Agreement or the indentures governing the Senior Notes. At December 31, 2023, we had $3.8 million of outstanding borrowings under other lines of credit.
At December 31, 2024, availability under the Revolving Credit Facility was $778 million, net of $22 million of letters of credit outstanding. All such availability may be utilized without violating any covenants under the Credit Agreement or the indentures governing the Senior Notes. At December 31, 2024, we had no outstanding borrowings under other lines of credit.
After giving effect to our cross-currency and interest rate hedges, borrowings denominated in Euros as of December 31, 2023 and 2022 were $1,015.5 million and $1,319.6 million, respectively, with weighted average interest rates of 4.3% and 2.5%, respectively.
After giving effect to our cross-currency and interest rate hedges, borrowings denominated in Euros as of December 31, 2024 and 2023 were $1,016 million with weighted average interest rates of 4.2% and 4.3%, respectively.
The estimated impact of a 100 basis point increase or decrease of the expected return on assets assumption on the net periodic benefit cost for 2024 would result in a decrease or increase of approximately $1.9 million, respectively.
The estimated impact of a 100 basis point increase or decrease of the expected return on assets assumption on the net periodic benefit cost for 2025 would result in a increase or decrease of approximately $2 million.
Derivative Instruments As dictated by ASC 820, Fair Value Measurement , the fair market value recognized in the audited financial statements related to derivative instruments is determined by using valuation models whose inputs are derived using market observable inputs, including interest rate yield curves, as well as foreign exchange and commodity spot and forward rates, and reflects the asset or liability position as of the end of each reporting period. 51 Table of Contents Income taxes The provision for income taxes was determined using the asset and liability approach of accounting for income taxes.
Derivative Instruments As dictated by ASC 820, Fair Value Measurement , the fair market value recognized in the consolidated financial statements related to derivative instruments is determined by using valuation models whose inputs are derived using market observable inputs, including interest rate yield curves, as well as foreign exchange and commodity spot and forward rates, and reflects the asset or liability position as of the end of each reporting period.
Off Balance Sheet Arrangements See Note 5 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for disclosure of our guarantees of certain customers' obligations to third parties. Recent Accounting Guidance See Note 1 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a summary of recent accounting guidance.
Off Balance Sheet Arrangements See Note 6 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for disclosure of our guarantees of certain customers' obligations to third parties.
Variable consideration in the form of price, less discounts and rebates, are estimated and recorded, as a reduction to net sales, upon the sale of our products based on our ability to make a reasonable estimate of the amounts expected to be received.
Control transfers and revenue is recognized when our products are delivered to our distribution customers. Variable consideration in the form of price, less discounts and rebates, is estimated and recorded, as a reduction to net sales, upon the sale of our products based on our ability to make a reasonable estimate of the amounts expected to be received.
Federal rate (1) $ (29.1) $ (22.4) Changes in valuation allowance 37.9 1.6 Foreign exchange gains and losses 0.6 (5.4) Tax credits (8.8) (8.7) Non-deductible expenses and interest 6.6 5.7 Change in unrecognized tax benefits (6.0) 6.2 State taxes 5.4 4.8 Foreign taxes 9.0 6.9 Other - net (2) (3.9) 22.3 (1) Primarily related to earnings in Bermuda, Germany, Luxembourg and Switzerland.
Federal rate (1) $ (25) $ (29) Changes in valuation allowance (2) 14 38 Foreign exchange gains and losses (14) 1 Tax credits (7) (9) Non-deductible expenses and interest 7 7 Change in unrecognized tax benefits 13 (6) State taxes 6 5 Foreign taxes 8 9 Bermuda CITA (3) (27) — Other - net (4) 26 (4) (1) Primarily related to earnings in Bermuda, Germany and Switzerland.
Our overall net sales are generally impacted by the following factors: • fluctuations in overall economic activity within the geographic markets in which we operate; • underlying growth (or lack thereof) in one or more of our end-markets, either worldwide or in particular geographies in which we operate; • the type of products used within existing customer applications, or the development of new applications requiring products similar to ours; • changes in product sales prices (including volume discounts and cash discounts for prompt payment); • changes in the level of competition faced by our products, including price competition, quality competition and the launch of new products by competitors; • our ability to successfully develop and launch new products and applications; • changes in buying habits of our customers (including our distributors); and • fluctuations in foreign exchange rates. 37 Table of Contents While the factors described above impact net sales in each of our operating segments, the impact of these factors on our operating segments can differ, as described below.
Our overall net sales are generally impacted by the following factors: • fluctuations in overall economic activity within the geographic markets in which we operate; • underlying growth (or lack thereof) in one or more of our end-markets, either worldwide or in particular geographies in which we operate; • the type of products used within existing customer applications, or the development of new applications requiring products similar to ours; • changes in product sales prices (including volume discounts, cash discounts for prompt payment and impacts from raw material indexing); • changes in the level of competition faced by our products, including price competition, quality competition and the launch of new products by competitors; • our ability to successfully develop and launch new products and applications; • changes in buying habits of our customers (including our distributors); and • fluctuations in foreign exchange rates.
This was partially offset by net uses of working capital of $53.5 million, for which the most significant drivers were increases in accounts and notes receivable and prepaid expenses and other assets of $119.0 million and $70.7 million, respectively, driven primarily by increased price-mix, the timing of collections and payments of Business Incentive Plan assets (“BIPs”).
This was partially offset by net uses of working capital of $55 million, for which the most significant drivers were increases in accounts and notes receivable and prepaid expenses and other assets of $119 million and $71 million, respectively, driven primarily by increased price-mix, the timing of collections and payments of BIPs.
BUSINESS HIGHLIGHTS General Business Highlights Our net sales increased 6.1%, including a 0.5% benefit from foreign currency translation, for the year ended December 31, 2023 compared with the year ended December 31, 2022.
BUSINESS HIGHLIGHTS General Business Highlights Our net sales increased 1.8%, including a 0.4% headwind from foreign currency translation, for the year ended December 31, 2024 compared with the year ended December 31, 2023.
See Note 8 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail on stock-based compensation. Retirement Benefits The amounts recognized in the audited financial statements related to pension benefits are determined from actuarial valuations.
See Notes 1 and 9 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail on stock-based compensation. 48 Table of Contents Retirement Benefits The amounts recognized in the consolidated financial statements related to pension benefits are determined from actuarial valuations.
At December 31, 2023 and 2022, deferred income taxes of approximately $12.9 million and $10.8 million, respectively, have been provided on such subsidiary earnings. At December 31, 2023, and 2022, we have not recorded a deferred tax liability related to withholding taxes of approximately $38.1 million and $177.5 million, respectively, on unremitted earnings of subsidiaries that are permanently invested.
At December 31, 2024 and 2023, deferred income taxes of approximately $14 million and $13 million, respectively, have been provided on such subsidiary earnings. At December 31, 2024 and 2023, we have not recorded a deferred tax liability related to withholding taxes of approximately $95 million and $38 million, respectively, on unremitted earnings of subsidiaries that are permanently invested.
Year Ended December 31, 2022 Net Cash Provided by Operating Activities Net cash provided by operating activities for the year ended December 31, 2022 was $293.8 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $565.2 million.
Dollar. Year Ended December 31, 2023 Net Cash Provided by Operating Activities Net cash provided by operating activities for the year ended December 31, 2023 was $575 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $630 million.
Our highly leveraged nature may limit our ability to procure additional financing in the future and elevated interest rates, as experienced during 2022 and 2023, may increase our interest expense and weaken our financial condition.
Our highly leveraged nature may limit our ability to procure additional financing in the future and elevated interest rate environments may increase our interest expense and weaken our financial condition.
Net Cash Used for Financing Activities Net cash used for financing activities for the year ended December 31, 2022 was $368.9 million.
Net Cash Used for Financing Activities Net cash used for financing activities for the year ended December 31, 2024 was $201 million.
The primary uses were for purchases of property, plant and equipment of $137.9 million and for business acquisitions of $106.3 million discussed further in Note 3 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, partially offset by proceeds of $39.0 million from settlements and interest proceeds from swaps designated as net investment hedges, which are discussed further in Note 19 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 46 Table of Contents Net Cash Used for Financing Activities Net cash used for financing activities for the year ended December 31, 2023 was $315.0 million.
The primary uses were for purchases of property, plant and equipment of $138 million, and for business acquisitions of $106 million discussed further in Note 3 to the consolidated financial statements included in the 2023 Annual Report on Form 10-K, partially offset by proceeds of $39 million from settlements and interest proceeds from swaps designated as net investment hedges, which are discussed further in Note 20 to the consolidated financial statements included elsewhere in the 2023 Annual Report on Form 10-K.
Accounting for Business Combinations Determining the fair value of assets acquired and liabilities assumed in business combinations requires management's judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, royalty rates, customer attrition rates, technology migration rates, asset lives and market multiples, among other items. 49 Table of Contents The fair values of intangible assets are estimated using an income approach, either the excess earnings method (customer relationships) or the relief from royalty method (technology and trademarks).
Accounting for Business Combinations Determining the fair value of assets acquired and liabilities assumed in business combinations requires management's judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, royalty rates, customer attrition rates, technology migration rates, asset lives and market multiples, among other items.
We believe that the amounts recorded in the financial statements related to goodwill and indefinite-lived intangible assets are based on the best estimates and judgments of the appropriate Axalta management, although actual outcomes could differ from our estimates.
We believe that the amounts recorded in the financial statements related to goodwill and indefinite-lived intangible assets are based on the best estimates and judgments of the appropriate Axalta management, although actual outcomes could differ from our estimates. See Note 1 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of results of operations and financial condition are based upon our consolidated financial statements. These financial statements have been prepared in accordance with U.S. GAAP unless otherwise noted. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts reported in the financial statements.
These financial statements have been prepared in accordance with U.S. GAAP unless otherwise noted. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts reported in the financial statements.
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.
Such cash generation is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. 45 Table of Contents 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.
See Note 1 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information. 50 Table of Contents Long-Lived Assets Long-lived assets, which includes property, plant and equipment, and definite-lived intangible assets, such as technology, trademarks, customer relationships and non-compete agreements, are continually assessed for impairment at the asset group level whenever events or changes in circumstances indicate the carrying amount of the asset group may not be recoverable.
Long-Lived Assets Long-lived assets, which includes property, plant and equipment, and definite-lived intangible assets, such as technology, trademarks, customer relationships and non-compete agreements, are continually assessed for impairment at the asset group level whenever events or changes in circumstances indicate the carrying amount of the asset group may not be recoverable.
Other expense (income), net Other expense (income), net represents costs incurred on various non-operational items including costs incurred in conjunction with our debt refinancing and extinguishment transactions, interest income, as well as foreign exchange gains and losses and non-operational impairment losses unrelated to our core business.
Interest expense, net also includes the amortization of debt issuance costs and debt discounts associated with our Senior Secured Credit Facilities, Senior Notes and other indebtedness. 37 Table of Contents Other expense, net Other expense, net represents costs incurred on various non-operational items including costs incurred in conjunction with our debt refinancing and extinguishment transactions, interest income, as well as foreign exchange gains and losses and non-operational impairment losses unrelated to our core business.
Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the period.
Income taxes The provision for income taxes was determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid.
During the year ended December 31, 2023, we voluntarily prepaid $200.0 million of the outstanding principal amount of the 2029 Dollar Term Loans. See Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
Capital and Liquidity Highlights During the year ended December 31, 2024, we prepaid $75 million of the outstanding principal amount of the 2029 Dollar Term Loans (as defined in Note 19 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K).
We believe at this time our organizational structure allows us the necessary flexibility to move funds throughout our subsidiaries to meet our operational working capital needs. 47 Table of Contents Our business may not generate sufficient cash flow from operations and future borrowings may not be available under our Senior Secured Credit Facilities in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs, including planned capital expenditures.
Our business may not generate sufficient cash flow from operations and future borrowings may not be available under our Senior Secured Credit Facilities in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs, including planned capital expenditures.
The primary uses were voluntary prepayments of $200.0 million of the outstanding principal amount of the 2029 Dollar Term Loans, contractual repayments of $56.7 million on borrowings, which includes $41.9 million for our China supplier financing program, purchases of our common stock totaling $50.0 million, payments of $16.6 million for fees associated with refinancing our 2024 Dollar Term Loans, repricing our 2029 Dollar Term Loans and the issuance of the 2031 Dollar Senior Notes and payments totaling $7.7 million for deferred acquisition-related consideration.
The primary uses were prepayments of $200 million of the outstanding principal amount of the 2029 Dollar Term Loans, contractual repayments of $57 million on borrowings, which includes $42 million for our China supplier financing program, purchases of our common stock totaling $50 million, payments of $17 million for fees associated with refinancing our 2024 Dollar Term Loans (as defined in Note 19 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K), repricing our 2029 Dollar Term Loans and the issuance of the 2031 Dollar Senior Notes and payments totaling $8 million for deferred acquisition-related consideration.
Changes in SG&A expense as a percentage of net sales have historically been impacted by a number of factors, including: • changes in the costs of labor, including inflationary pressures; • changes in sales volume, as higher volumes enable us to spread the fixed portion of our administrative expense over higher sales; • changes in our customer base, as new customers may require different levels of sales and marketing attention; • new product launches in existing and new markets, as these launches typically involve a more intense sales activity and technical support before they are integrated into customer applications; • customer credit issues requiring increases to the allowance for doubtful accounts; and • fluctuations in foreign exchange rates. 38 Table of Contents Other operating charges Our other operating charges include termination benefits and other employee-related costs, strategic review and retention costs, acquisition and divestiture-related costs, impairment charges, an operational matter, which is discussed further in Note 5 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, and gains of sales of facilities, details of which are included in our reconciliations of segment operating performance to income before income taxes.
Changes in SG&A expenses as a percentage of net sales have historically been impacted by a number of factors, including: • changes in the costs of labor, including inflationary pressures; • changes in sales volume, as higher volumes enable us to spread the fixed portion of our administrative expense over higher sales; • changes in our customer base, as new customers may require different levels of sales and marketing attention; • new product launches in existing and new markets, as these launches typically involve a more intense sales activity and technical support before they are integrated into customer applications; • customer credit issues requiring increases to the allowance for doubtful accounts; and • fluctuations in foreign exchange rates.
Our supplier financing facility in China is more fully described in Note 17 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 45 Table of Contents Cash Flows Years ended December 31, 2023 and 2022 Years Ended December 31, (In millions) 2023 2022 Net cash provided by (used for): Operating activities: Net income $ 268.5 $ 192.2 Depreciation and amortization 275.6 303.1 Amortization of deferred financing costs and original issue discount 8.5 9.6 Debt extinguishment and refinancing-related costs 9.9 14.7 Deferred income taxes (8.4) (3.4) Realized and unrealized foreign exchange losses, net 21.4 15.5 Stock-based compensation 26.2 22.2 Impairment charges 15.3 0.7 Gains on sales of facilities (0.3) (1.5) Interest income on swaps designated as net investment hedges (9.6) (19.9) Commercial agreement restructuring charge — 25.0 Other non-cash, net 21.7 7.0 Net income adjusted for non-cash items 628.8 565.2 Changes in operating assets and liabilities (53.5) (271.4) Operating activities 575.3 293.8 Investing activities (205.7) (106.4) Financing activities (315.0) (368.9) Effect of exchange rate changes on cash (6.4) (14.8) Net (decrease) increase in cash $ 48.2 $ (196.3) Year Ended December 31, 2023 Net Cash Provided by Operating Activities Net cash provided by operating activities for the year ended December 31, 2023 was $575.3 million.
See Note 5 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information. 43 Table of Contents Cash Flows Years ended December 31, 2024 and 2023 Years Ended December 31, (In millions) 2024 2023 Net cash provided by (used for): Operating activities: Net income $ 391 $ 269 Depreciation and amortization 280 276 Amortization of deferred financing costs and original issue discount 7 9 Debt extinguishment and refinancing-related costs 5 10 Deferred income taxes (17) (8) Realized and unrealized foreign exchange losses, net 11 21 Stock-based compensation 28 26 Impairment charges — 15 Interest income on swaps designated as net investment hedges (15) (10) Other non-cash, net 9 22 Net income adjusted for non-cash items 699 630 Changes in operating assets and liabilities (123) (55) Operating activities 576 575 Investing activities (440) (206) Financing activities (201) (315) Effect of exchange rate changes on cash (42) (6) Net (decrease) increase in cash $ (107) $ 48 Year Ended December 31, 2024 Net Cash Provided by Operating Activities Net cash provided by operating activities for the year ended December 31, 2024 was $576 million.
The primary use was for purchases of property, plant and equipment of $150.9 million, partially offset by proceeds of $44.9 million from settlements and interest from swaps designated as net investment hedges, which are discussed further in Note 19 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
The primary uses were $301 million for the acquisitions discussed in Note 3 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K net of cash acquired, $140 million for purchases of property, plant and equipment and $22 million for the disbursements to customers for loans which primarily have a repayment period of five years, partially offset by proceeds of $15 million from settlements and interest proceeds from swaps designated as net investment hedges, which are discussed further in Note 20 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Financial Condition We had cash and cash equivalents at December 31, 2023 and 2022 of $699.8 million and $645.2 million, respectively. Of these balances, $462.4 million and $433.6 million were maintained in non-U.S. jurisdictions as of December 31, 2023 and 2022, respectively, with $4.9 million and $12.9 million, respectively, within Russia.
Financial Condition We had cash and cash equivalents at December 31, 2024 and 2023 of $593 million and $700 million, respectively. Of these balances, $497 million and $462 million were maintained in non-U.S. jurisdictions as of December 31, 2024 and 2023, respectively.
Interest expense is inclusive of the amortization of debt issuance costs, debt discounts and the impact of derivative instruments for the years ended December 31, 2023 and 2022, respectively: Years Ended December 31, 2023 2022 (In millions) Principal Average Effective Interest Rate Interest Expense Principal Average Effective Interest Rate Interest Expense Term Loans $ 1,785.8 8.2% $ 144.1 $ 2,000.0 3.9% $ 70.5 Revolving Credit Facility — N/A 2.6 — N/A 2.7 Senior Notes 1,700.0 4.2% 67.5 1,679.1 4.1% 63.8 Short-term and other borrowings 61.8 Various 4.7 74.5 Various 5.6 Capitalized interest N/A N/A (5.6) N/A N/A (2.8) Total $ 3,547.6 $ 213.3 $ 3,753.6 $ 139.8 After giving effect to our cross-currency and interest rate hedges, our borrowings denominated in U.S.
Interest expense is inclusive of the amortization of debt issuance costs, debt discounts and the impact of derivative instruments for the years ended December 31, 2024 and 2023, respectively: Years Ended December 31, 2024 2023 (In millions) Principal Average Effective Interest Rate Interest Expense Principal Average Effective Interest Rate Interest Expense Term Loans $ 1,702 7.6% $ 118 $ 1,786 8.2% $ 144 Revolving Credit Facility (1) — 7.3% 5 — N/A 3 Senior Notes 1,700 5.1% 82 1,700 4.2% 67 Short-term and other borrowings 54 Various 4 62 Various 5 Capitalized interest N/A N/A (4) N/A N/A (6) Total $ 3,456 $ 205 $ 3,548 $ 213 (1) The computation for Average Effective Interest Rate excludes undrawn revolver fees.
The effect on deferred tax assets and liabilities of a change in tax law is recognized in income in the period that includes the enactment date.
Deferred tax assets and liabilities are measured using enacted tax rates applicable in the years in which they are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax law is recognized in income in the period that includes the enactment date.
The most important contingencies impacting our financial statements are those related to environmental remediation, an operational matter, pending or threatened litigation against the Company and the resolution of matters related to open tax years.
The most important contingencies impacting our financial statements at this time are those related to the operational matter, as described in Note 6 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K (the “Operational Matter”), environmental remediation, pending or threatened litigation against the Company and the resolution of matters related to open tax years as discussed in Note 11 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Our China supplier financing program and our 2024 Dollar Term Loan refinancing are discussed further in Note 17 and Note 18, respectively, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Our supplier financing programs are more fully described in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
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 43 manufacturing facilities, four technology centers, 49 customer training centers and approximately 12,000 team members allows us to meet the needs of customers in over 140 countries.
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.
Interest expense, net Interest expense, net consists primarily of interest expense on institutional borrowings and other financing obligations and changes in fair value of interest rate derivative instruments, net of capitalized interest expense. Interest expense, net also includes the amortization of debt issuance costs and debt discounts associated with our Senior Secured Credit Facilities, Senior Notes and other indebtedness.
Interest expense, net Interest expense, net consists primarily of interest expense on institutional borrowings and other financing obligations and changes in fair value of interest rate derivative instruments, net of capitalized interest expense.
Insurance recoveries are recorded when probable to the extent they cover incurred or probable liabilities, while recoveries in excess of incurred or probable liabilities are recorded when collection is realizable.
Insurance recoveries are recorded when probable to the extent they cover incurred or probable liabilities, while recoveries in excess of incurred or probable liabilities are recorded when collection is realizable. Costs related to the Operational Matter are accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated.
Availability under the Revolving Credit Facility was $527.7 million and $529.3 million at December 31, 2023 and December 31, 2022, respectively, all of which may be borrowed by us without violating any covenants under the credit agreement governing such facility or the indentures governing the Senior Notes. 48 Table of Contents The following table details our borrowings outstanding, average effective interest rates and the associated interest expense for the years ended December 31, 2023 and 2022.
Availability under the Revolving Credit Facility was $778 million and $528 million at December 31, 2024 and December 31, 2023, respectively, all of which may be borrowed by us without violating any covenants under the Credit Agreement or the indentures governing the Senior Notes.
As you read and consider this Annual Report on Form 10-K, you should understand that these statements are not guarantees of performance or results.
As you read and consider this Annual Report on Form 10-K, 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 and uncertainties, including, but not limited to, economic, competitive, governmental, including the tariffs recently imposed by the U.S.
Deferred taxes result from differences between the financial and tax basis of our assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Deferred tax assets and liabilities are measured using enacted tax rates applicable in the years in which they are expected to be recovered or settled.
The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the period. Deferred taxes result from differences between the financial and tax basis of our assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted.
The increased net sales were driven by higher average selling price and product mix of 7.0% and the absence of the Customer Contract Restructuring, which created a 0.6% benefit, partially offset by lower sales volumes of 5.8%. • Mobility Coatings: Net sales increased 14.0% for the year ended December 31, 2023 compared with the year ended December 31, 2022.
The increased net sales were driven by contributions of 1.1% from the CoverFlexx acquisition and higher average selling price and product mix of 0.6%, partially offset by lower sales volumes of 0.2%, including contributions from the André Koch acquisition completed in October 2023, and impacts from foreign currency fluctuations. • Mobility Coatings: Net sales increased 2.5% for the year ended December 31, 2024 compared with the year ended December 31, 2023.
(2) In 2022, the Company recorded a tax expense of $23.0 million in the Netherlands, which was fully offset by a tax benefit of $23.0 million for an increase to the valuation allowance. 43 Table of Contents SEGMENT RESULTS The Company's products and operations are managed and reported in two operating segments: Performance Coatings and Mobility Coatings.
(4) In 2024, the Company recorded tax expense of $26 million in the Netherlands related to the write off of an expired net operating loss carryforward. 41 Table of Contents SEGMENT RESULTS The Company's products and operations are managed and reported in two operating segments: Performance Coatings and Mobility Coatings.
This was offset by net uses of working capital of $271.4 million, for which the most significant drivers were increases in inventories, accounts and notes receivable, prepaid expenses and other assets of $195.4 million, $171.0 million and $80.5 million, respectively.
Net income before deducting depreciation, amortization and other non-cash items generated cash of $699 million. This was partially offset by net uses of working capital of $123 million, for which the most significant drivers were increases in prepaid expenses and other assets of $130 million and decreases in accounts payable of $49 million.
Dollars as of December 31, 2023 and 2022 were $2,532.1 million and $2,434.0 million, respectively, with weighted average interest rates of 6.5% and 5.4%, respectively.
After giving effect to our cross-currency and interest rate hedges, our borrowings denominated in U.S. Dollars as of December 31, 2024 and 2023 were $2,440 million and $2,532 million, respectively, with weighted average interest rates of 5.5% and 6.5%, respectively.
GAAP, actual results that differed from the assumptions are accumulated and amortized over future periods and therefore affect expense recognized in future periods.
GAAP, actual results that differed from the assumptions are accumulated and amortized over future periods and therefore affect expense recognized in future periods. The estimated impact of either a 100 basis point increase or decrease of the discount rate to the net periodic benefit cost for 2025 would be immaterial.
Net sales Year Ended December 31, 2023 vs 2022 2023 2022 $ Change % Change Net sales $ 5,184.1 $ 4,884.4 $ 299.7 6.1 % Price/Mix effect 5.8 % Exchange rate effect 0.5 % Impact of one-time events 0.4 % Volume effect (0.6) % Net sales increased primarily due to the following: n Higher average selling prices and product mix in both segments and all regions, primarily as a result of pricing actions taken to offset cumulative input cost inflation n Favorable impacts of currency translation due primarily to fluctuations of the Mexican Peso, Euro and Brazilian Real, partially offset by the Chinese Yuan, South African Rand and Swedish Krona, compared to the U.S.
Net sales Year Ended December 31, 2024 vs 2023 2024 2023 $ Change % Change Net sales $ 5,276 $ 5,184 $ 92 1.8 % Volume effect 1.1 % Impact of CoverFlexx 0.7 % Price/Mix effect 0.4 % Exchange rate effect (0.4) % Net sales increased primarily due to the following: n Higher sales volumes including the contribution from the André Koch acquisition, growth in our light vehicle end-market and impacts from lower volumes in the prior year in connection with production constraints associated with our multi-year ERP system implementation in North America n Contributions from the CoverFlexx acquisition n Higher average selling prices and product mix in Performance Coatings Partially offset by: n Unfavorable impacts of currency translation primarily due to the weakening of the Brazilian Real, Mexican Peso and Chinese Yuan, partially offset by the fluctuations of the British Pound, in each case compared to the U.S.
During 2023, we replaced Adjusted EBIT with Adjusted EBITDA as the primary measure to evaluate financial performance of our operating segments and allocate resources. For more information, see Note 20 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
See Note 3 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe try to manage these risks by ensuring we have strategic contracts in place on critical materials along with a balance of pricing mechanisms across categories, competitive sourcing options including low cost country sources, and utilizing our supplier relationship management program. In addition, we attempt to mitigate raw material inflation by passing along price increases to our customers.
Biggest changeWe try to manage these risks by ensuring we have strategic contracts in place on critical materials along with a balance of pricing mechanisms across categories, competitive sourcing options including low cost country sources, and utilizing our supplier relationship management program.
A one-eighth percent change in the applicable interest rate for borrowings under the Senior Secured Credit Facilities (assuming the Revolving Credit Facility is undrawn ) would have an annual impact of approxim ately $2.2 million o n c ash interest expense considering the impact of our hedging positions currently in place.
A one-eighth percent change in the applicable interest rate for borrowings under the Senior Secured Credit Facilities (assuming the Revolving Credit Facility is undrawn ) would have an annual impact of approxim ately $2 million o n c ash interest expense considering the impact of our hedging positions currently in place.
We earn significant revenues and incur significant costs in foreign currencies including the Euro, Mexican Peso, Brazilian Real, Chinese Yuan, British Pound, Turkish Lira and the Argentinian Peso. As a result, movements in exchange rates could cause our revenues and expenses to materially fluctuate, impacting our future profitability and cash flows.
We earn significant revenues and incur significant costs in foreign currencies including the Euro, Mexican Peso, Brazilian Real, Chinese Yuan, British Pound, Turkish Lira, Argentinian Peso and the British Pound. As a result, movements in exchange rates could cause our revenues and expenses to materially fluctuate, impacting our future profitability and cash flows.
Where intercompany loans are not a component of permanently invested capital of the affected subsidiaries, increases or decreases in the value of the subsidiaries' functional currency against other currencies will affect our results of operations. 54 Table of Contents Commodity price risk While our raw material pricing fluctuates based on underlying feedstocks movements, we are also subject to supply and demand dynamics, or other macro-level factors, and also to changes in our cost of sales caused by movements in underlying commodity prices, such as oil and natural gas, among others, for energy spend and certain purchased raw materials, including monomers, resins and solvents.
Where intercompany loans are not a component of permanently invested capital of the affected subsidiaries, increases or decreases in the value of the subsidiaries' functional currency against other currencies will affect our results of operations. 51 Table of Contents Commodity price risk While our raw material pricing fluctuates based on underlying feedstocks movements, we are also subject to supply and demand dynamics, or other macro-level factors, and also to changes in our cost of sales caused by movements in underlying commodity prices, such as oil and natural gas, among others, for energy spend and certain purchased raw materials, including monomers, resins and solvents.
For further detail on our use of derivative instruments, see Note 19 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Foreign exchange rates risk We are exposed to foreign currency exchange risk by virtue of the translation of our international operations from local currencies into the U.S. Dollar.
For further detail on our use of derivative instruments, see Note 20 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Foreign exchange rates risk We are exposed to foreign currency exchange risk by virtue of the translation of our international operations from local currencies into the U.S. Dollar.
Treasury policy Our treasury policy seeks to ensure that adequate financial resources are available for the development of our businesses while managing our currency and interest rate risks. Our policy is to not engage in speculative transactions. Our policies with respect to the major areas of our treasury activity are set forth above. 55 Table of Contents
Treasury policy Our treasury policy seeks to ensure that adequate financial resources are available for the development of our businesses while managing our currency and interest rate risks. Our policy is to not engage in speculative transactions. Our policies with respect to the major areas of our treasury activity are set forth above. 52 Table of Contents
A hypothetical 10% increase in the value of the U.S. Dollar relative to all foreign currencies would have increased the cumulative translation loss by $290.3 million. This sensitivity analysis is inherently limited as it assumes that rates of multiple foreign currencies are moving in the same direction relative to the value of the U.S. Dollar.
A hypothetical 10% increase in the value of the U.S. Dollar relative to all foreign currencies would have increased the cumulative translation loss in the current year by $312 million. This sensitivity analysis is inherently limited as it assumes that rates of multiple foreign currencies are moving in the same direction relative to the value of the U.S. Dollar.
The majority of our net sales for the years ended December 31, 2023, 2022 and 2021 were from operations outside the United States. At December 31, 2023 and 2022, the accumulated other comprehensive loss account in the consolidated balance sheets included a cumulative translation loss of $374.2 million and $433.5 million, respectively.
The majority of our net sales for the years ended December 31, 2024, 2023 and 2022 were from operations outside the United States. At December 31, 2024 and 2023, the accumulated other comprehensive loss account in the consolidated balance sheets included a cumulative translation loss of $517 million and $374 million, respectively.
Removed
During 2022 and 2023, a significant portion of the raw material inflation was passed through to our customers through a series of price increases.
Added
While we attempt to limit the impact of fluctuations in the prices of raw materials by implementing raw material price adjustment mechanisms based on index pricing, such mechanisms may be ineffective and often lag market price changes. In addition, we attempt to mitigate raw material inflation by passing along price increases to our customers.
Removed
Since 2001, our total raw material spend has represented between 40% and 50% of our cost of sales annually, with the exception of 2022 when our total raw material spend represented approximately 53% of our cost sales driven by continued raw material inflation experienced throughout the year.

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