10q10k10q10k.net

What changed in Axalta Coating Systems Ltd.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Axalta Coating Systems Ltd.'s 2022 and 2023 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 2023 report.

+317 added−321 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-16)

Top changes in Axalta Coating Systems Ltd.'s 2023 10-K

317 paragraphs added · 321 removed · 261 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

68 edited+9 added−7 removed58 unchanged
Biggest changeTotal solutions to support agriculture, construction and earth moving market for protection and appearance requirements. ◦ Oil & Gas : liquid and powder products to coat tanks, pipelines, valves and fittings protecting against chemicals, corrosion and extreme temperatures in the oil & gas industry. ◦ Coil: coatings utilized in various applications such as metal building roof and wall panels, residential and commercial steel roofing, gutters, appliances, lighting, garage and entry doors, HVAC, office furniture and truck trailers. ◦ Other : coatings for a wide and diverse array of applications, including racking and shelving, metal furniture, pipes and tubes, metal enclosures and fencing, industrial components, and power storage and electrical boxes. • Building Products: coatings utilized in OEM and aftermarket industrial construction and building markets, including external building materials, cabinets, flooring and furniture. • Energy Solutions : critical for today's automotive applications and focused on support for wind energy and new electric vehicles, liquid solutions to insulate copper wire used in motors and transformers and coatings to insulate sheets forming magnetic circuits of motors and transformers, computer elements and other electrical devices to provide increased motor and power efficiency.
Biggest changeThese 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.
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 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 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.
These trademarks include Abcite ® , Alesta ® , AquaEC ® , Audurra TM , Centari ® , Ceranamel ® , Challenger TM , Chemophan TM , ColorNet ® , Corlar ® , Cromax ® , Cromax Mosaic ® , Durapon 70 ® , Duxone TM , 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 TM , Vermeera ® 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 ® , 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.
In addition to these reduction targets, Axalta is taking steps towards our goal of a 10% reduction of volatile organic ("VOC") emissions, process waste, and water use from operations by 2030. • Business Solutions: This second pillar concentrates on how Axalta's products, services, and technology can help customers design and manufacture their finished products to help accelerate their own sustainability initiatives and achievements.
In addition to these reduction targets, Axalta is taking steps towards our goal of a 10% reduction of volatile organic compound ("VOC") emissions, process waste, and water use from operations by 2030. • Business Solutions: This second pillar concentrates on how Axalta's products, services and technology can help customers design and manufacture their finished products to help accelerate their own sustainability initiatives and achievements.
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.
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.
The coatings operation is a critical component of the 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").
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 conditions have altered, and could continue to alter, seasonal patterns.
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.
Our key products consist of the four main coatings layers: electrocoat (AquaEC™), primer (HyperDur™), basecoat (ChromaDyne™) and clearcoat (Lumeera™). The coatings process accounts for a majority of the total energy consumed during the vehicle manufacturing process.
Our key products consist of the four main coatings layers: electrocoat (AquaEC ® ), primer (HyperDur™), basecoat (ChromaDyne™) and clearcoat (Lumeera™). The coatings process accounts for a majority of the total energy consumed during the light vehicle manufacturing process.
Our markets are among the most demanding in the coatings industry with high levels of product performance that continuously evolve, with increasing expectations for productivity on customer lines and environmentally responsible products.
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.
We meet the demands of commercial vehicle customers with our extensive offering of over 75,000 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 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.
In total, as of December 31, 2022, 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.
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.
Mobility Coatings Customers We provide our products and services to light and commercial vehicle customers at over 200 assembly plants worldwide, including all the top ten global automotive manufacturers. We have a stable customer base and believe we are well positioned with the fastest growing OEMs in both the developed and emerging markets.
Mobility Coatings Customers We provide our products and services to light and commercial vehicle customers at over 220 assembly plants worldwide, including all the top ten global automotive manufacturers. We have a stable customer base and believe we are well positioned with the fastest growing OEMs in both the developed and emerging markets.
The evolution of mobility 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 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.
Mobility Coatings Sales, Marketing and Distribution We have full-time technical representatives stationed at most of our OEM customers' facilities around the world. These on-site representatives provide customer support, monitor the painting process and track paint demand at each assembly plant.
Mobility Coatings Sales, Marketing and Distribution We have full-time technical representatives stationed at most of our light vehicle OEM customers' facilities around the world. These on-site representatives provide customer support, monitor the painting process and track paint demand at each assembly plant.
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 strive to determine the causes and eliminate the potential for future similar incidents.
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.
Color matching is a critical component of coatings supplier selection, since inexact matching adversely impacts vehicle appearance, and if repainting is required due to a poor match, it can reduce the speed and volume of repairs at a given shop.
Color matching is a critical component of coatings manufacturer selection, since inexact matching adversely impacts vehicle appearance, and if repainting is required due to a poor match, it can reduce the speed and volume of repairs at a given shop.
HUMAN CAPITAL RESOURCES Our success is realized through the engagement and commitment of our people . As of December 31, 2022, we had approximately 12,000 team members with 26% of our team members based in the U.S. and 74% based in international locations.
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.
Widely recognized in the industry for our advanced and patented technologies, our products not only increase productivity and profitability for OEMs but also produce attractive and durable finishes. Our light vehicle coatings portfolio is one of the broadest in the industry.
Widely recognized in the industry for our advanced and patented technologies, we believe our products not only increase productivity and profitability for OEMs but also produce attractive and durable finishes. Our light vehicle coatings portfolio is one of the broadest in the industry.
We ship our coatings directly to commercial vehicle OEMs and provide on-site technical service representatives that play an important role by helping to optimize the painting process and by providing responsive customer support.
We ship our coatings directly to commercial vehicle OEMs and may also provide on-site technical service representatives that play an important role by helping to optimize the painting process and by providing responsive customer support.
JOINT VENTURES At December 31, 2022, 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, 2022, we were the majority shareholder, and/or exercised control, in five joint ventures, which we consolidated.
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.
Our large direct sales team in industrial serves the 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 focus global innovation projects to meet the evolving market needs.
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.
In today's existing transportation 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.
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.
We have 48 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.
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.
The Company is committing to creating a more diverse and inclusive environment that results in increasing the representation of women in management positions globally to at least 30% by 2030. Axalta 11 Table of Contents will continue to support its local communities via its Bright Futures Program, which includes STEM and vocational scholarships.
The Company is committing to creating a more diverse and inclusive environment that results in increasing the representation of women in management positions globally to at least 30% by 2030. Axalta will continue to support its local communities via its Bright Futures Program, which includes STEM and vocational scholarships.
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.
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.
Although refinish coatings typically represent only a small portion of the overall vehicle repair cost, they are critical to the vehicle owner's satisfaction given their impact on appearance. As a result, body shop operators are most focused on coatings brands with a strong track record of performance and reliability.
Although refinish coatings typically represent only a small portion of the overall vehicle repair cost, they are critical to the vehicle owner's satisfaction given their impact on appearance. As a result, body shop operators are focused on coatings manufacturers with a strong track record of performance and reliability.
Axalta is committing to deliver sustainability benefits from 80% of its new technology and innovation developments by 2030 and increasing, by at least 20%, the total percentage of net sales derived from products, services, and tools that offer sustainability benefits. • People Solutions: Building on Axalta's corporate culture, which is rooted in inclusivity, integrity, safety, and engagement, this third pillar will ensure that the Company continues operating and fostering an environment where all of our people can thrive.
Axalta is committing to deliver sustainability benefits from 80% of its new technology and innovation developments by 2030 and to increase, by at least 20%, the total percentage of net sales derived from products, services, and tools that offer sustainability benefits. 11 Table of Contents • People Solutions: Building on Axalta's corporate culture, which is rooted in inclusivity, integrity, safety, and engagement, this third pillar will ensure that the Company continues operating and fostering an environment where all of our people can thrive.
See the discussion and reconciliation of segment Adjusted EBIT 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, 2022 are highlighted below: Note: Latin America includes Mexico.
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.
Monitoring OEM line performance in real-time allows our technical support teams to help improve paint department operating efficiency and provide performance feedback to our formulating chemists and paint manufacturing teams. Many of our customer technical support representatives also help OEMs manage their physical inventory by forecasting facility coatings demand based on the customer's build schedule.
Monitoring OEM line performance in real-time is intended to allow our technical support teams to help improve paint department operating efficiency and provide performance feedback to our formulating chemists and paint manufacturing teams. Many of our customer technical support representatives also help OEMs manage their physical inventory by forecasting facility coatings demand based on the customer's build schedule.
Our top ten customers accounted for approximately 63% of our Mobility Coatings net sales during the year ended December 31, 2022. Mobility Coatings Competition We primarily compete against large multi-national suppliers such as PPG, BASF and AkzoNobel, 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, 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.
We actively apply for and obtain U.S. and foreign patents and trademarks on new products and process innovations and as of December 31, 2022, approximately 260 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, 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 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. Non-U.S.
We 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.
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, 2022. Adjusted EBIT Margin is calculated as Adjusted EBIT 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, 2023. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by net sales.
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 U.S. Securities and Exchange Commission’s Regulation Fair Disclosure (or Reg. FD). Investors should routinely monitor that site, in addition to our press releases, U.S.
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 purchase raw materials from a diverse group of suppliers, with our top ten suppliers representing approximately 34% of our 2022 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.
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.
Located in 9 countries, our manufacturing facilities provide a local presence that enables us 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.
Body shops look for suppliers and brands with productivity enhancements, regulatory compliance, consistent quality, the presence of ongoing technical support and exact color match technologies.
Body shops look for manufacturers with productivity enhancements, regulatory compliance, consistent quality, the presence of ongoing technical support and exact color match technologies.
The end-markets within this segment are refinish and industrial. Performance Coatings End-Markets Refinish Sales in the refinish end-market are driven by the number of vehicle collisions, owners' propensity to repair their vehicles, the number of miles vehicle owners drive and the size of the car parc.
Performance Coatings End-Markets Refinish Sales in the refinish end-market are driven by the number of vehicle collisions, owners' propensity to repair their vehicles, the number of miles vehicle owners drive and the size of the car parc.
Our workforce is distributed globally, with approximately 45% in the Americas, 38% in EMEA and 17% in Asia Pacific. Axalta's ability to attract, develop and retain highly skilled talent requires us to focus on the growth and well-being of each team member.
Our workforce is distributed globally, with approximately 44% in the Americas, 37% in EMEA and 19% in Asia Pacific. Axalta's ability to attract, develop and retain highly skilled talent requires us to focus on the growth and well-being of each team member.
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 European Union's General Data Protection Regulation ("GDPR"), which enforces rules relating to the protection of processing and movement 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.
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.
This includes our Global Innovation Center located in Philadelphia, Pennsylvania, which opened in 2018 for global research, product development and technology initiatives. PATENTS, LICENSES AND TRADEMARKS As of December 31, 2022, we had a global portfolio of approximately 750 issued patents and more than 480 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, 2023, we had a global portfolio of approximately 770 issued patents and more than 470 trademarks.
Our fully consolidated joint venture-related net sales were $78.7 million, $80.7 million, and $76.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.
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.
Since 2001, our variable cost of sales has remained stable between approximately 35% and 45% of net sales; however, during 2022 our variable costs of sales were approximately 50% of net sales driven by continued raw material inflation experienced throughout the year.
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.
Over the past several years, the dynamics of supply and demand played a much more critical role in the cost of our raw materials than just 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 limited 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 recovery mechanisms.
Since 2001, on average, our total raw material spend has represented between 40% and 50% of our cost of sales; however, during 2022, our total raw material spend represented approximately 53% of our cost of sales driven by continued raw material inflation experienced throughout the year.
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.
Our top ten customers accounted for approximately 20% of our Performance Coatings net sales during the year ended December 31, 2022. In our industrial and refinish end-markets we serve both large OEMs and a broad, fragmented 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, 2023. In our industrial and refinish end-markets we serve both large OEMs and a broad, fragmented local customer base.
We believe we are one of only three truly global powder coatings 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. Performance Coatings Customers Within our Performance Coatings segment, we sell coatings to customers in more than 140 countries.
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.
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 and powder technologies. Customers select industrial coatings based on protection, durability and appearance, with a drive for improved product and application sustainability.
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.
As a global coatings manufacturer, we have a wide range of employees, including but not limited to management professionals, scientists, technicians, engineers, sales, technical, manufacturing operations, supply chain, administrative and customer service personnel. We drive to create a performance-driven culture where employees feel included and find a sense of belonging.
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.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE During January 2022, we announced a new environmental, social and governance ("ESG") framework, which is structured under three key pillars and the related goals: • Planet Solutions: Focused on ensuring a more sustainable future for the planet, this first pillar includes a series of goals aimed at improving the Company's environmental performance and reducing the impact of its global operations, including our goals to achieve an absolute reduction of 50% of Scope 1 and 2 greenhouse gas ("GHG") emissions by 2030, as well as a goal to become carbon neutral in our operations by 2040 - one decade ahead of the deadline set by the Paris Agreement on Climate Change.
Goals related to each pillar are as follows: • Planet Solutions: Focused on working towards a more sustainable future for the planet, this first pillar includes a series of goals aimed at improving the Company's environmental performance and reducing the impact of its global operations, including our goals to achieve an absolute reduction of 50% of Scope 1 and 2 greenhouse gas ("GHG") emissions by 2030, as well as a goal to become carbon neutral in our operations by 2040 - one decade ahead of the deadline set by the Paris Agreement on Climate Change.
Powder solutions provide motor and battery protection and insulation to enable engineering design. 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, new residential and commercial construction, as well as automotive and industrial production.
Performance Coatings Competition Our primary competitors in the refinish end-market include AkzoNobel, BASF, Sherwin Williams and PPG, but we also compete against local and regional players in local markets. Similarly, in the industrial end-market, we compete against multi-national suppliers, such as AkzoNobel, PPG and Sherwin-Williams, as well as a large number of local and regional players in local markets.
Similarly, in the industrial end-market, we compete against multi-national suppliers, such as AkzoNobel, PPG and Sherwin-Williams, as well as a large number of local and regional players in the markets we serve.
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.
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.
Environmental 12 Table of Contents 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. Environmental Protection Agency.
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.
We will also continue to focus on Axalta’s culture, including continuing to increase our focus on diversity and inclusion. We strive to provide a wide variety of opportunities for growth 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 of our global locations.
We also continue to focus on Axalta’s culture, including continuing to increase our efforts regarding diversity and inclusion as well as engaging senior leaders to lead through change. We strive to provide a wide variety of growth opportunities for our employees, including online trainings, on-the-job experience, education tuition assistance and financial counseling.
It is also important that we provide an environment that fosters inclusivity and embraces diversity where everyone feels they have a voice and their contributions are valued. In support of this, our first all employee engagement survey took place in 2021.
It is important that we provide an environment that fosters inclusivity and embraces diversity where everyone feels they have a voice and their contributions are valued.
In 2022, Axalta's injury and illness performance resulted in a 0.59 OSHA Total Recordable Incident Rate ("TRIR"), compared to the 3.5 OSHA TRIR for the Paint and Coating Manufacturing Industry (according to the US Bureau of Labor Statistics 2021 data). The Compensation Committee of our Board of Directors ("Board") has oversight of the Company's human capital management efforts.
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).
Our refinish products and systems comprise a range of coatings layers, including fillers, aerosols, and adhesives acquired with the 2021 acquisition of U-POL Holdings Limited ("U-POL"), required to match the vehicle's color and appearance, producing a repair surface indistinguishable from the adjacent surface.
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.
We develop, market and supply a complete portfolio of innovative coatings systems and color matching technologies to facilitate faster automotive collision repairs relative to competing technologies. Our color matching technology provides Axalta-specific formulations that enable body shops to accurately match thousands of vehicle colors, regardless of vehicle brand, color, age or supplier of the original paint during production.
Our color matching technology provides Axalta-specific formulations that enable body shops to accurately match thousands of vehicle colors, regardless of vehicle brand, color, age or supplier of the original paint during production. It would be time consuming and costly for a new entrant to create such an extensive color inventory.
EMEA represents Europe, Middle East and Africa. SEGMENT OVERVIEW Performance Coatings Through our Performance Coatings segment, we provide high-quality liquid and powder coatings solutions to both large regional and global OEMs and to a fragmented and local customer base. We are one of only a few suppliers with the technology to provide precise color matching and highly durable coatings systems.
EMEA represents Europe, Middle East and Africa. SEGMENT OVERVIEW Performance Coatings Through our Performance Coatings segment, we provide high-quality sustainable liquid and powder coating solutions to both large regional and global customers and to a fragmented and local customer base. These customers comprise, among others, independent or multi-shop operator body shops as well as a wide variety of industrial manufacturers.
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.
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.
Capturing the voice of our employees through this survey provided actionable insights into the specific tools, processes, and other factors that enable our employees to perform at their best.
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.
It would be time consuming and costly for a new entrant to create such an extensive color inventory. 4 Table of Contents Industrial The industrial end-market comprises liquid and powder coatings used in a broad array of end-business applications.
Industrial The industrial end-market comprises liquid, e-coat and powder coatings used in a broad array of end-business applications.
We are committed to providing a workplace that enables team members to operate safely, including safety protocols to ensure the health and safety of our employees during the COVID-19 pandemic.
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.
Architects and designers can benefit from the advice of color experts and the latest trend collections available in our dedicated color experience rooms and online tools. ◦ Transportation : liquid and powder coatings for vehicle components, chassis, and wheels to protect against corrosion, provide increased durability and impart appropriate aesthetics.
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.
Within the industrial end-market, we focus on the following: • General Industrial ◦ Architectural : powder and liquid coatings for applications such as window frames, curtain walls, and claddings, typically used in residential, industrial, commercial, and monumental buildings.
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.
Our employee participation in the 2022 survey increased by 20% (87% response rate) from the 2021 survey and based on the results we will continue to focus on career development and learning to ensure employees have opportunities to improve their skills and prepare for future roles at Axalta.
Over the past couple of years, we have seen improvements directly tied to the actions that have been implemented, including double-digit improvements in responses to survey questions related to training, learning and growth. We continue to focus on career development and learning to ensure employees have opportunities to improve their skills and prepare for future roles at Axalta.
Removed
With global demand for electric vehicles continuing to increase, electric vehicle ("EV") manufacturers are designing and searching for solutions to power their vehicles with innovation to extend performance and improve safety. Electric motors, batteries and EV powertrain components require protective coatings to maintain optimal temperatures, reduce the risk of fire and corrosion damage as well as to prevent electromagnetic interference.
Added
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.
Removed
By leveraging Axalta's deep expertise in energy solutions coupled with our deep knowledge of the automotive industry and the electric propulsion market, Axalta has developed coating solutions tailored to the unique needs of the evolving EV industry.
Added
Sustainability is another important component of coatings supplier selection as the current market trend is for products that are inherently more environmentally friendly and use less energy, such as our specially-formulated waterborne and our high solids solventborne products that improve productivity and performance, while reducing the impact on the environment. 4 Table of Contents We develop, market and supply a complete portfolio of innovative coatings systems and color matching technologies to facilitate faster automotive collision repairs relative to competing technologies.
Removed
We provide systems that enable body shops to match more than 200,000 color variations, using a database with more than four million formulations, in the global market.
Added
Coil coaters benefit from our performance solutions for applications serving customers producing buildings as well as appliances, lighting, garage doors, HVAC systems and trailers.
Removed
Through an acquisition completed in 2017, we have also become a leading manufacturer and supplier of coatings sold into the building materials, cabinet, wood and luxury vinyl flooring and furniture markets in North America.
Added
Performance Coatings Competition Our primary competitors in the refinish end-market include AkzoNobel, BASF, PPG and Sherwin Williams, but we also compete against local and regional players in the markets we serve.
Removed
Over time, we expect our variable costs of sales in relation to net sales to normalize to historical levels as a result of both deflation of raw material costs and continued price recapture.
Added
Since our entry into the coatings industry over 150 years ago, we believe we have consistently been at the forefront of coatings technology innovation.
Removed
The action plan we developed from the results of our 2021 survey proved to be beneficial as our engagement scores in the 2022 survey increased in each category, including double-digit improvements on questions related to training, learning and growth, and resources provided to allow employees to perform their day-to-day tasks.
Added
ENVIRONMENTAL, SOCIAL AND GOVERNANCE During January 2022, we announced a new environmental, social and governance ("ESG") framework, which is structured under three key pillars.

… 4 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

77 edited+19 added−12 removed183 unchanged
Biggest changeAny disruption of operations at one of these facilities could significantly affect production of our products, distribution of our products or our ability to fulfill our contractual obligations, including to our largest customers, which could damage our customer relationships and our business, financial condition, results of operations and cash flows could be adversely affected.
Biggest changeAny 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.
We are subject to various laws and regulations around the world governing the protection of the environment and health and safety, including the discharge of pollutants into air and water and the management and disposal of hazardous substances.
We are subject to various laws and regulations around the world governing the protection of the environment and health and safety, including the discharge of pollutants into the air and water and the management and disposal of hazardous substances.
Further, given investors' increased focus related to ESG matters, such a failure could cause stockholders to reduce their ownership holdings, all of which, in turn could adversely affect our business, financial condition, results of operations and cash flows, and reduce our stock price. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 28 Table of Contents
Further, given investors' increased focus related to ESG matters, such a failure could cause stockholders to reduce their ownership holdings, all of which, in turn, could adversely affect our business, financial condition, results of operations and cash flows, and reduce our stock price. 28 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Lastly, a tightening of credit markets and increases in interest rates, like those seen in 2022, 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 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.
We cannot predict the impact that changing climate conditions or more frequent and severe weather events, if any, will have on our business, results of operations, financial condition or cash flows. Moreover, we cannot predict how legal, regulatory and social responses to concerns about global climate change, as well as other sustainability and environmental matters, will impact our business.
We cannot predict the impact that changing climate conditions or more frequent and severe weather events, if any, will have on our business, results of operations, financial condition or cash flows. Moreover, we cannot predict how legal, regulatory and social responses to concerns about climate change, as well as other sustainability and environmental matters, will impact our business.
We have in the past and may in the future be vulnerable to the effects of cybersecurity incidents that occur at third parties such as our customers, suppliers or business partners, and a failure of a third party's safeguards, policies or procedures could compromise our own data or operations.
We have in the past been, and may in the future be, vulnerable to the effects of cybersecurity incidents that occur at third parties such as our customers, suppliers or business partners, and a failure of a third party's safeguards, policies or procedures could compromise our own data or operations.
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 counter-parties 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; • 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.
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.
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 may incur unanticipated costs or expenses, including post-closing asset impairment charges, expenses associated with eliminating duplicate 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, 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.
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 conflict between Russia and Ukraine, 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, 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.
While our operations in Russia and Ukraine constituted less than 1% of our net sales during the year ended December 31, 2022, a significant escalation or expansion of economic disruption or countries subject to sanctions or the conflict's scope could have a material adverse effect on our business, financial condition, results of operations and cash flows.
While our operations in Russia and Ukraine constituted less than 1% of our net sales during the year ended December 31, 2023, a significant escalation or expansion of economic disruption or countries subject to sanctions or the conflict's scope could have a material adverse effect on our business, financial condition, results of operations and cash flows.
In the event that a customer is unwilling or unable to fulfill its obligations under these arrangements, we have incurred, including with respect to the Customer Contract Restructuring (as defined in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" below), and may in the future incur, financial losses.
In the event that a customer is unwilling or unable to fulfill its obligations under these arrangements, we have incurred, including with respect to the Customer Contract Restructuring (as defined in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" below), and may in the future incur, financial losses.
The potential for future terrorist acts, conflicts, wars, adverse weather conditions, natural disasters, power outages, pandemics or other public health crises and environmental incidents and the national and international responses to such events or perceived threats or potential conflicts relating to or arising out of such 26 Table of Contents events may create economic and political uncertainties and challenges for us, our customers, suppliers and logistic partners that could have a materially adverse effect on our business, financial condition, results of operations and cash flows.
The potential for future terrorist acts, conflicts, wars, adverse weather conditions, natural disasters, power outages, pandemics or other public health crises and environmental incidents and the national and international responses to such events or perceived threats or potential conflicts relating to or arising out of such events may create economic and political uncertainties and challenges for us, our customers, suppliers and logistic partners that could have a materially adverse effect on our business, financial condition, results of operations and cash flows.
In addition, if any of our key distributors or third-party delivery providers increase prices and we are not able to pass along these increases to customers, find comparable alternatives or adjust our delivery network, our business, financial condition, results of operations and cash flows could be adversely affected.
In addition, if any of our third-party delivery providers increase prices and we are not able to pass along these increases to customers, find comparable alternatives or adjust our delivery network, our business, financial condition, results of operations and cash flows could be 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 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 15 Table of Contents 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, cyber 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 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.
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 2022 net sales and our largest distributor accounted for approximately 3% of our 2022 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 4% of our 2023 net sales and our largest distributor accounted for approximately 3% of our 2023 net sales.
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 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 24 Table of Contents any shareholders by other shareholders or by the company.
In particular, product liability claims, regardless of their merits, could be costly, divert management's attention and adversely affect our reputation and demand for our products. 18 Table of Contents Risks Related to Human Resources If we are required to make unexpected payments to any pension plans applicable to our employees, our financial condition may be adversely affected.
In particular, product liability claims, regardless of their merits, could be costly, divert management's attention and adversely affect our reputation and demand for our products. Risks Related to Human Resources If we are required to make unexpected payments to any pension plans applicable to our employees, our financial condition may be adversely affected.
In January 2022, we announced a number of 2030 ESG targets, including our aim for a 50% absolute reduction of our Scope 1 and Scope 2 greenhouse gas emissions by 2030 and our goal to have carbon neutral operations by 2040. Achievement of these targets depends on our development and execution of various operational strategies relating to each discrete target.
In January 2022, we announced a number of 2030 ESG targets, including our aim for a 50% absolute reduction of our Scope 1 and Scope 2 GHG emissions by 2030 and our goal to have carbon neutral operations by 2040. Achievement of these targets depends on our development and execution of various operational strategies relating to each discrete target.
The circumstances in which shareholder derivative actions may be available under Bermuda law are substantially more limiting and less clear than they would be to shareholders of U.S. corporations.
The circumstances in which shareholder derivative actions may be available under Bermuda law are substantially more limited and less clear than they would be to shareholders of U.S. corporations.
Our systems are vulnerable to damage, interference, or interruption from modifications or upgrades, terrorist attacks, natural disasters or pandemics (including COVID-19), power loss, telecommunications failures, user errors, computer viruses, ransomware attacks, computer denial of service attacks, phishing schemes, or other attempts to harm or access our systems, and we have in the past, and may in the future, experience such events, though the effects have yet to have a material adverse effect on our business.
Our systems are vulnerable to damage, interference, or interruption from modifications or upgrades, terrorist attacks, natural disasters or pandemics, power loss, telecommunications failures, user errors, computer viruses, ransomware attacks, computer denial of service attacks, phishing schemes, or other attempts to harm or access our systems, and we have in the past experienced, and may in the future experience, such events, though the effects have yet to have a material adverse effect on our business.
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.
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.
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.
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.
If these differences cause the joint ventures to deviate from our business strategy, our results of operations could be materially adversely affected. 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. 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.
Generally, the duties of directors and officers of a Bermuda company are owed to the company only. Shareholders of Bermuda companies typically do not have rights to take action against directors or officers of the company and may only do so in limited circumstances. Shareholder class actions are not available 24 Table of Contents under Bermuda law.
Generally, the duties of directors and officers of a Bermuda company are owed to the company only. Shareholders of Bermuda companies typically do not have rights to take action against directors or officers of the company and may only do so in limited circumstances. Shareholder class actions are not available under Bermuda law.
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.
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 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.
While we may have contingency plans in place to mitigate the risks of such manufacturing concentration, we cannot be certain that such contingency plans would be effective. 15 Table of Contents Price increases, business and supply chain interruptions, declines in the supply of raw materials or disruptions to our major tolling arrangements could have a significant impact on our ability to grow or sustain earnings.
While we have contingency plans in place to mitigate the risks of such manufacturing concentration, we cannot be certain that such contingency plans would be effective. Price increases, business and supply chain interruptions, declines in the supply of raw materials or disruptions to our major tolling arrangements could have a significant impact on our ability to grow or sustain earnings.
Consolidation of any of our customers, including MSOs, distributors and body shops, could decrease our customer base and impact our results of operations if the resulting business seeks different sales terms or chooses to use one of our competitors for the consolidated business.
Consolidation of any of our customers, including MSOs, 14 Table of Contents distributors and body shops, could decrease our customer base and impact our results of operations if the resulting business seeks different sales terms or chooses to use one of our competitors for the consolidated business.
As of December 31, 2022, we had approximately $3.7 billion of indebtedness on a consolidated basis. As of December 31, 2022, 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, 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.
Investor advocacy groups, investment funds, and influential investors are also increasingly focused 27 Table of Contents on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights. Increased ESG-related compliance costs could result in increases to our overall operational costs.
Investor advocacy groups, investment funds, and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights. Increased ESG-related compliance costs could result in increases to our overall operational costs.
These types of attacks have occurred against our systems from time to time, with no material adverse impacts to date. We expect these attacks to continue and our protective measures may not be adequate to ensure that our operations will not be disrupted, should another such event occur in the future.
These types of attacks have occurred against our systems from time to time, and we believe there have been no material adverse impacts to date. We expect these attacks to continue and our protective measures may not be adequate to ensure that our operations will not be disrupted, should another such event occur in the future.
In particular, we are exposed to the Euro, the Brazilian Real, the Chinese Renminbi, the British Pound, the Australian Dollar, the Russian Ruble and the Turkish Lira.
In particular, we are exposed to the Euro, the Brazilian Real, the Chinese Yuan, the British Pound, the Australian Dollar, the Russian Ruble and the Turkish Lira.
Payments to us by our subsidiaries and joint ventures will be contingent upon our subsidiaries' or joint ventures' earnings and other business considerations and may be subject to statutory or contractual restrictions. In addition, there may be significant tax and other legal restrictions on the ability of foreign subsidiaries or joint ventures to remit money to us.
Payments to us by our subsidiaries and joint ventures will be contingent upon our subsidiaries' or joint ventures' earnings and other business considerations and may be subject to statutory or contractual restrictions. In addition, there may be significant tax and other legal restrictions on the ability of foreign subsidiaries or joint ventures to remit money to Axalta Coating Systems Ltd.
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.
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.
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 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 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.
As a result of changing laws and regulations, or the interpretation or enforcement of current or future laws and regulations, we may be required to make expenditures to modify operations, relocate operations, perform site cleanups or other environmental remediation, or curtail 17 Table of Contents or cease operations, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
As a result of changing laws and regulations, or the interpretation or enforcement of current or future laws and regulations, we have been and may in the future be required to make expenditures to modify operations, relocate operations, perform site cleanups or other environmental remediation, or curtail or cease operations, which could have a material adverse effect 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, 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. 21 Table of Contents To service all of our indebtedness, we will require a significant amount of cash and our ability to generate cash depends on many factors beyond our control.
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, 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.
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.
A substantial portion of our indebtedness bears, and in the case of our Revolving Credit Facility, would bear, interest at variable rates, including the Secured Overnight Financing Rate ("SOFR") and the London Inter-Bank Offered Rate ("LIBOR"), making our cost of debt subject to increase in rising interest rate environments, such as those seen during 2022, which increases could have a material adverse effect on our financial condition.
A substantial portion of our indebtedness bears, and in the case of our Revolving Credit Facility, would bear, interest at variable rates, including the Secured Overnight Financing Rate ("SOFR"), making our cost of debt subject to increase in rising interest rate environments, such as those seen during 2022 and 2023, which increases could have a material adverse effect on our financial condition.
We are subject to complex and evolving data privacy laws. Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection and other matters. We could be liable for loss or misuse of our customers' personal information and/or our employee's personally-identifiable information if we fail to prevent or mitigate such misuse or loss.
We are subject to complex and evolving data privacy laws. Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection and other matters, including GDPR. We could be liable for loss or misuse of our customers' and/or our employees' personally-identifiable information if we fail to prevent or mitigate such misuse or loss.
From time to time, we may commence operations at new manufacturing facilities, such as our soon-to-be operational 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 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.
Our effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in available tax credits or tax deductions and changes in tax and other non-tax laws or their interpretation, such as interpretations as to the legality of tax advantages granted under the European Union ("EU") state aid rules and the impacts of the EU's Anti-Tax Avoidance Directive.
Our effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in available tax credits or tax deductions and changes in tax and other non-tax laws or their interpretation, such as interpretations as to the legality of tax advantages granted under the EU state aid rules, impacts of the EU's Anti-Tax Avoidance Directive and local exit tax rules with respect to business restructurings.
Our global business is adversely affected by decreases in the general level of economic activity, such as decreases in business and consumer spending, construction activity and industrial manufacturing, which effects are exacerbated in a rising interest rate environment.
Our global business is adversely affected by decreases in the general level of economic activity, such as decreases in business and consumer spending, construction activity and industrial manufacturing, which effects are exacerbated in a rising interest rate environment, like that seen in 2022 and 2023.
Although we have developed systems and processes that are designed to protect customer and employee information and prevent misuse of such information and other security breaches, failure to prevent or mitigate such misuse or breaches may affect our reputation and operating results negatively and may require significant management time and attention.
Although we have developed systems and processes that are designed to protect customer and employee information and prevent misuse of such information and other security breaches, failure to prevent or mitigate such misuse or breaches may affect our reputation and operating results negatively and may require significant management time and attention and could result in significant regulatory fines and/or other penalties.
While we maintain 25 Table of Contents 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. 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.
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.
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.
Changes in local and regional economic or political conditions could affect product demand in our non-U.S. operations. Specifically, our financial results could be affected by changes in trade, monetary and fiscal policies, laws and regulations, or other activities of U.S. and non-U.S. governments, agencies and similar organizations.
Specifically, our financial results could be affected by changes in trade, monetary and fiscal policies, laws and regulations, or other activities of U.S. and non-U.S. governments, agencies and similar organizations.
Our joint ventures may not operate according to our business strategy if our joint venture partners fail to fulfill their obligations. As part of our business, we have entered into certain, and may in the future enter into additional, joint venture arrangements. The nature of a joint venture requires us to share control over significant decisions with unaffiliated third parties.
As part of our business, we have entered into certain, and may in the future enter into additional, joint venture arrangements. The nature of a joint venture requires us to share control over significant decisions with unaffiliated third parties.
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 since mid-2021 and that worsened over much of 2022.
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.
New government regulations could also result in new or more stringent forms of ESG oversight, including increased greenhouse gas limitations, and the expansion of mandatory and voluntary reporting, diligence, and disclosure regarding ESG matters.
New government regulations could also result in new or more stringent forms of ESG oversight, including increased limitation on, or required reduction of, GHG emissions, and the expansion of mandatory and voluntary reporting, diligence, and disclosure regarding ESG matters.
We may not be able to successfully implement the ERP system without experiencing 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.
We 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.
Laws and regulations, and the interpretation and enforcement thereof, may change as a result of a variety of factors, including political, economic, regulatory or social events or in response to climate change.
In addition, legal and regulatory systems in emerging and developing markets may be less developed and less consistent. Laws and regulations, and the interpretation and enforcement thereof, may change as a result of a variety of factors, including political, economic, regulatory or social events or in response to climate change.
In addition, over the past several years, the stock markets have experienced significant price and volume fluctuations. 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.
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.
Third parties have in the past and in the future may oppose our trademark applications, or otherwise challenge our use of the trademarks.
We cannot assure you that our trademark applications will be approved. Third parties have in the past and in the future may oppose our trademark applications, or otherwise challenge our use of the trademarks.
Lastly, if we do not effectively implement the ERP system as planned or the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be negatively affected. Increased competition may adversely affect our business, financial condition, results of operations and cash flows.
Lastly, if we do not effectively implement the ERP system as planned or the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be negatively affected.
Our financial condition, results of operations and cash flows may be adversely affected to the extent that we are required to make any additional payments to any relevant defined benefit pension plans in excess of the amounts assumed in our current projections and assumptions or report higher pension plan expenses under relevant accounting rules.
Our financial condition, results of operations and cash flows may be adversely affected to the extent that we are required to make any additional payments to any relevant defined benefit pension plans in excess of the amounts assumed in our current projections and assumptions or report higher pension plan expenses under relevant accounting rules. 18 Table of Contents We are subject to work stoppages, union negotiations, labor disputes and other matters associated with our labor force, which may adversely impact our operations and cause us to incur incremental costs.
It is possible 19 Table of Contents that only a limited number of the pending patent applications will result in issued patents, which may have a materially adverse effect on our business and results of operations.
We also cannot assure you that the patents issued as a result of our foreign patent applications will have the same scope of coverage as our U.S. patents. It is possible that only a limited number of the pending patent applications will result in issued patents, which may have a materially adverse effect on our business and results of operations.
We may also issue additional common shares or convertible debt securities. As of February 9, 2023, we had 1,000,000,000 common shares authorized and 221,052,018 common shares outstanding.
We may also issue additional common shares or convertible debt securities. As of February 8, 2024, we had 1,000,000,000 common shares authorized and 220,140,111 common shares outstanding.
In addition, new disclosure requirements related to GHG emissions and climate change, including any final rules approved by the SEC, may negatively impact our business by diverting resources and harming our reputation.
In addition, new disclosure requirements related to GHG emissions and climate change, including any final rules approved by the SEC, California or other U.S. states, the EU's recently adopted CSRD, and other requirements adopted by national and sub-national jurisdictions from time to time, may negatively impact our business by diverting resources and harming our reputation.
We are in the process of a multi-year implementation of a new enterprise resource planning ("ERP") system, which will replace much of our existing core financial systems.
We are in the process of a multi-year implementation of a new ERP system, which will replace much of our existing core financial systems. In 2023, we experienced temporary operational disruptions in North America from our ERP system implementation in the region.
Moreover, rising costs of freight, logistics, energy and labor, as we experienced over 2022, increase our cost of sales and reduce our profitability. Failure to develop and market new products and manage product life cycles could impact our competitive position and have a material adverse effect on our business, financial condition, results of operations and cash flows.
Failure to develop and market new products and manage product life cycles could impact our competitive position and have a material adverse effect on our business, financial condition, results of operations and cash flows.
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.
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.
Although we believe our cash and cash equivalents, together with cash we expect to generate from operations and unused capacity available under our Revolving Credit Facility, provide adequate resources to fund ongoing operating requirements, we may need to seek additional financing to compete effectively. 22 Table of Contents 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 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.
These risks include, among others: delays in the anticipated timing of activities related to such growth initiatives, strategies and operating plans; increased difficulty and cost in implementing these efforts; and the incurrence of other unexpected costs associated with operating the business. Further, our continued implementation of these programs may disrupt our operations and performance.
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.
We may be unable to successfully execute on our growth initiatives, business strategies or operating plans. We continue to execute on a number of growth initiatives, strategies and operating plans designed to enhance our business, including productivity enhancements and cost reduction. The anticipated benefits from these efforts are based on several assumptions that may prove to be inaccurate.
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.
Evolving environmental, safety or other regulations and laws could have a material adverse effect on our business and consolidated financial condition. 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.
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.
We also cannot assure you that we will successfully respond to changing employee preferences spurred by the COVID-19 pandemic. Failures in these areas could adversely affect our business, financial condition, results of operations and cash flows. Risks Related to Intellectual Property Our inability to protect and enforce our intellectual property rights could adversely affect our financial results.
Failures in these areas could adversely affect our business, financial condition, results of operations and cash flows. Risks Related to Intellectual Property Our inability to protect and enforce our intellectual property rights could adversely affect our financial results.
Volatility in the market price of our common shares may prevent you from being able to sell your common shares at or above the price you paid for your common shares. The market price of our common shares could fluctuate significantly for various reasons, including the realization of any risks described under this "Risk Factors" section.
The price of our common shares has and may in the future fluctuate significantly, and you could lose all or part of your investment. Volatility in the market price of our common shares may prevent you from being able to sell your common shares at or above the price you paid for your common shares.
We may not be able to successfully commence such new operations or cease such existing operations and our failure to successfully do so could have a material adverse impact on our business results. 16 Table of Contents Risks Related to our Global Operations As a global business, we are subject to risks associated with our non-U.S. operations that are not present in the United States.
We may not be able to successfully commence such new operations or cease such existing operations and our failure to successfully do so could have a material adverse impact on our business results.
A variety of risks could cause us to fail to realize some or all of the expected benefits, including growth and cost savings.
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.
As of December 31, 2022, substantially all of our U.S. workforce was not unionized and approximately half of our workforce outside the U.S. was unionized or otherwise covered by labor agreements. Consequently, we have been and may in the future be subject to union campaigns, work stoppages, union negotiations and other labor disputes.
Many of our employees globally are in unions or otherwise covered by labor agreements, including works councils. As of December 31, 2023, substantially all of our U.S. workforce was not unionized and approximately half of our workforce outside the U.S. was unionized or otherwise covered by labor agreements.
We conduct our business on a global basis, with approximately 63% of our 2022 net sales occurring outside the United States. We anticipate that international sales will continue to represent a substantial portion of our net sales and that our strategy for continued growth and profitability will entail further international expansion, particularly in emerging markets.
We anticipate that international sales will continue to represent a substantial portion of our net sales and that our strategy for continued growth and profitability may entail further international expansion, particularly in emerging markets. Changes in local and regional economic or political conditions could affect product demand in our non-U.S. operations.
In 2021, more than 140 countries tentatively signed on to the Organization for Economic Cooperation and Development ("OECD") Pillar Two framework that imposes a minimum tax rate of 15% among other provisions.
The Organization for Economic Cooperation and Development (“OECD”) has reached agreement among various member countries to implement the OECD’s Pillar Two framework that imposes a minimum tax rate of 15% among other provisions. Many countries continue to announce changes in their tax laws 27 Table of Contents and regulations to adopt Pillar Two proposals or implement a domestic minimum tax.
These arrangements could result in financial obligations imposed upon us and could affect our future financial condition, results of operations and cash flows. 20 Table of Contents Acquisitions and divestitures may also require us to devote significant internal resources and could divert management's attention away from operating our business.
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.
In particular, our 23 Table of Contents operations in Brazil, China and India where we maintain local currency cash balances are subject to import authorization or pricing controls. The price of our common shares has and may in the future fluctuate significantly, and you could lose all or part of your investment.
In particular, our operations in Brazil, China and India where we maintain local currency cash balances are subject to import authorization or pricing controls. From time to time, we may engage in internal reorganizations to manage such restrictions and other limitations. However, any such reorganizations may, among other things, adversely affect our operating results and cash flows.
Other countries including the United Kingdom and Switzerland are also actively considering changes to their tax laws to adopt certain parts of the OECD's proposals. Additionally, we and our subsidiaries are engaged in a number of intercompany transactions across multiple tax jurisdictions.
Some of these legislative changes could negatively impact our effective tax rate and tax liabilities. We continue to evaluate the impact of these proposed and enacted legislative changes on our financial statements as new guidance becomes available. Additionally, we and our subsidiaries are engaged in a number of intercompany transactions across multiple tax jurisdictions.
Removed
Our business, results of operations, financial condition, cash flows and stock price have been, and may in the future be, adversely affected by the COVID-19 pandemic. COVID-19 has had and may continue to have an adverse impact on demand for our products and, thus, our income from operations.
Added
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.
Removed
While we have seen a return to more stable demand for our products and services during 2021 and 2022 after experiencing significant impacts to our results of operations, financial condition and cash flows in 2020 from the COVID-19 pandemic, we continue to see impacts to our business given the continued significant presence, and actual or potential spread, of the virus globally, as well as preventative measures enacted in certain regions of the world.

… 28 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

5 edited+1 added−0 removed0 unchanged
Biggest changeType of Facility/Country Location Segment Manufacturing Facilities North America Canada Cornwall Performance United States of America Fridley, MN Performance Front Royal, VA (2) Performance; Mobility Ft. Madison, IA Performance; Mobility High Point, NC Performance Hilliard, OH Performance; Mobility Houston, TX Performance Jacksonville, TX Performance Madison, AL Performance Mt.
Biggest changeThe 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.
Clemens, MI (2) Performance; Mobility Orrville, OH Performance Riverside, CA Performance Sacramento, CA 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 Tewkesbury Performance Darlington Performance Farnham Performance Huthwaite Performance Wellingborough Performance United Arab Emirates Ras Al Khaimah Performance Asia Pacific China Changchun (1) Performance; Mobility Jiading Performance; Mobility Qingpu Performance Ma'anshan Performance 29 Table of Contents Type of Facility/Country Location Segment India Savli Performance; Mobility 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 Russia Moscow Mobility Technology Centers China Shanghai Performance; Mobility Germany Wuppertal Performance; Mobility United States of America Mt.
Clemens, 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.
We own 24 of our manufacturing facilities, two of our technology centers, and 10 of our customer training centers, while the rest of the facilities and centers are leased. We believe that our properties as currently constituted are suitable, adequate and provide sufficient productive capacity for our current operations.
We own 28 of our manufacturing facilities, two of our technology centers, and 12 of our customer training centers, while the rest of the facilities and centers are leased. We believe that our properties as currently constituted are suitable, adequate and provide sufficient productive capacity for our current 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 14 Asia Pacific 20 (1) Manufacturing and distribution operations at this facility is in process of being relocated to other Axalta facilities. (2) 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 12 Latin America 2 EMEA 17 Asia Pacific 18 (1) Subject to a mortgage under our Senior Secured Credit Facilities.
ITEM 2. PROPERTIES Our corporate headquarters is located in Glen Mills, PA. Our extensive geographic footprint comprises 45 manufacturing facilities (including three manufacturing sites operated by our joint ventures), four major technology centers and 48 customer training centers supporting our global operations. The table below presents summary information regarding our facilities as of December 31, 2022.
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.
Added
Madison, IA Performance; Mobility High Point, NC Performance Hilliard, OH Performance Houston, TX Performance Jacksonville, TX Performance Madison, AL Performance Mt.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+1 added−0 removed1 unchanged
Biggest changeThe SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Company reasonably believes will exceed a specified threshold. Pursuant to recent SEC amendments to this requirement, the Company will be using a threshold of $1 million for such proceedings.
Biggest changeSEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Company reasonably believes will exceed a specified threshold. Pursuant to recent SEC amendments to this requirement, the Company will be using a threshold of $1 million for such proceedings.
We 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.
We 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.
Added
The Company is not aware of any matters that exceed this threshold and that meet the other conditions for disclosure.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

12 edited+6 added−6 removed5 unchanged
Biggest changeBerube 60 Senior Vice President, General Counsel and Corporate Secretary Troy D. Weaver 51 Senior Vice President, Global Refinish Hadi H. Awada 44 Senior Vice President, Global Mobility Coatings Shelley J. Bausch 57 Senior Vice President, Global Industrial Coatings Jacqueline Scanlan 50 Senior Vice President and Chief Human Resources Officer *As of February 16, 2023 Chris Villavarayan Mr.
Biggest changeWeaver 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.
Mr. Weaver also led Axalta's initiative to secure and grow market share with multiple location collision shop operators, mega-dealers, and nationally recognized collision shop networks. Mr. Weaver began his career at DuPont Performance Coatings in 1992 where he held various Sales and Marketing leadership roles.
Weaver also led Axalta's initiative to secure and grow market share with multiple location collision shop operators, mega-dealers, and nationally recognized collision shop networks. Mr. Weaver began his career at DuPont Performance Coatings in 1992 where he held various Sales and Marketing leadership roles.
Awada ran a multibillion-dollar business and led efforts to develop and deploy an operational turnaround and transform the product line to focus on new technologies for customers seeking sustainability and innovation. Previously at Faurecia, he worked in Europe where he led sales and programs for many international customers.
In those roles, Mr. Awada ran a multibillion-dollar business and led efforts to develop and deploy an operational turnaround and transform the product line to focus on new technologies for customers seeking sustainability and innovation. Previously at Faurecia, he worked in Europe where he led sales and programs for many international customers.
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 served on the board of directors of the Kraton Corporation from 2017 to 2022.
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.
He is also a two-time recipient of DuPont's Prestigious Marketing Excellence Award, first in 2007 and again in 2010. Mr. Weaver is active in the industry and has served as Chairman of the Board of CIECA (Collision Industry Electronic Commerce Association). 31 Hadi H. Awada Mr. Awada has served as our Senior Vice President, Global Mobility Coatings since October 2020.
He is also a two-time recipient of DuPont's Prestigious Marketing Excellence Award, first in 2007 and again in 2010. Mr. Weaver is active in the industry and has served as Chairman of the Board of CIECA (Collision Industry Electronic Commerce Association). Hadi H. Awada Mr. Awada has served as our President, Global Mobility Coatings since January 2024.
Weaver has served as our Senior Vice President, Global Refinish since October 2020. Prior to that, Mr. Weaver served 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.
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.
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 Senior Vice President, Global Industrial Coatings since January 2021. Previously, 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. Shelley J. Bausch Ms. Bausch has served as our President, Global Industrial Coatings since January 2024. Prior to that, Ms.
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. Jacqueline Scanlan Ms. Scanlan has served as our Senior Vice President and Chief Human Resources Officer since June 2021. From 2017 to 2021, Ms.
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.
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.
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.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 30 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 52 Chief Executive Officer and President Sean M. Lannon 44 Senior Vice President and Chief Financial Officer Brian A.
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.
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. In those roles, Mr.
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.
Villavarayan earned his bachelor’s degree in civil engineering from McMaster University and completed the Wharton Executive Education Advanced Finance Program. Sean M. Lannon Mr. Lannon has served as our Senior Vice President and Chief Financial Officer since October 12, 2018. Prior to that, Mr.
Villavarayan 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.
Removed
Lannon served as Vice President, Corporate Finance and Global Controller of Axalta since 2016, and was Vice President and Global Controller from 2013 until that promotion. Previously, Mr. Lannon served as the Vice President, Global Controller of Trinseo. Prior to joining Trinseo in 2011, he was the Senior Manager, Financial Reporting at Endo Pharmaceuticals. Mr.
Added
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.
Removed
Lannon began his career at PricewaterhouseCoopers where he spent more than nine years within the organization's Assurance Practice. Mr. Lannon graduated summa cum laude with a B.A. in Accounting from Philadelphia University. Brian A. Berube Mr. Berube has served as our Senior Vice President, General Counsel and Corporate Secretary since June 2019. Previously, Mr.
Added
Throughout his 16-year tenure with Meritor, Mr. Anderson also served as Group Vice President, Finance; Treasurer; Assistant Treasurer; and Director, International Capital Markets, Risk Management and Corporate Insurance. Earlier, he held treasury and financial planning roles at General Motors Acceptance Corporation after beginning his career with First Chicago Corporation. Mr.
Removed
Berube was Senior Vice President and General Counsel of Cabot Corporation, a position he held from March 2003 until June 2019. Prior to this appointment, Mr. Berube held various roles at Cabot, which he joined in 1994. Prior to joining Cabot, Mr.
Added
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.
Removed
Berube was a corporate attorney at Choate, Hall & Stewart, a Boston law firm, and a law clerk with the New Hampshire Supreme Court. He earned his B.A. in Political Science from the College of the Holy Cross and a J.D. from Boston College Law School. Troy D. Weaver Mr.
Added
Tufano has been with Axalta since 2021, joining the company as Vice President of Human Resources ("HR") for the global Operations and Technology organizations. Previously, Ms. Tufano served in HR leadership roles at Campbell Soup Company and Northrop Grumman. She earned an M.B.A. from Loyola Marymount University and a B.A. in Business Administration from Flagler College. Alex Tablin-Wolf Mr.
Removed
Scanlan served as Senior Vice President, Human Resources at Haemonetics Corporation, a global medical technology company. Before Haemonetics, from 2014 to 2016, she served as Corporate Vice President, Human Resources, North America at Novo Nordisk, a global healthcare company. Prior to Novo Nordisk, she held leadership positions at Campbell Soup Company, Bristol-Myers Squibb, DuPont Pharmaceuticals Company and Accenture.
Added
Tablin-Wolf has served as our Senior Vice President, General Counsel & Corporate Secretary since January 2024. Mr. Tablin-Wolf joined Axalta in January 2017, and, prior to his current appointment, served in a number of roles of increasing responsibility. Prior to joining Axalta, Mr.
Removed
She received a B.A. in Political Science from St. Joseph's University and a M.S. in Organizational Dynamics from the University of Pennsylvania. 32 Table of Contents PART II
Added
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

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed2 unchanged
Biggest changeITEM 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 9, 2023, there were five registered holders of record of Axalta's common shares as shown on the records of the Company's transfer agent.
Biggest changeITEM 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.
This graph assumes an investment of $100 in our common shares and each index (with all dividends reinvested) on December 31, 2017. ITEM 6. RESERVED 33 Table of Contents
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

Item 7. Management's Discussion & Analysis

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

86 edited+20 added−34 removed63 unchanged
Biggest changeDollar Partially offset by: n Higher average selling prices and product mix contributed to by both end-markets and all regions, in excess of variable input cost inflation n Contributions from companies acquired in 2021 In addition to the factors noted above, Adjusted EBIT margin decreased due to the following: n Decrease in net sales of $20.3 million due to the Customer Contract Restructuring 43 Table of Contents Mobility Coatings Segment Year Ended December 31, 2022 vs 2021 2022 2021 $ Change % Change Net sales $ 1,557.7 $ 1,319.9 $ 237.8 18.0 % Volume effect 13.6 % Price/Mix effect 8.1 % Exchange rate effect (3.7) % Adjusted EBIT $ 24.0 $ 38.7 $ (14.7) (38.0) % Adjusted EBIT Margin 1.5 % 2.9 % Net sales increased primarily due to the following: n Higher sales volumes across both end-markets and all regions, despite impacts from the Russia-Ukraine conflict and the China COVID-19 lockdowns n Higher average selling prices and product mix across both end-markets and all regions, primarily as a result of pricing actions taken to offset input price inflation Partially offset by: n Unfavorable impacts of currency translation due primarily to the weakening of the Euro, Turkish Lira and Chinese Renminbi compared to the U.S.
Biggest changePerformance Coatings Segment Year Ended December 31, 2023 vs 2022 2023 2022 $ Change % Change Net sales $ 3,407.7 $ 3,326.7 $ 81.0 2.4 % Price/Mix effect 7.0 % Impact of one-time events 0.6 % Exchange rate effect 0.6 % Volume effect (5.8) % Adjusted EBITDA $ 741.9 $ 700.0 $ 41.9 6.0 % Adjusted EBITDA Margin 21.8 % 21.0 % Net sales increased primarily due to the following: n Higher average selling prices and product mix across both end-markets and all regions primarily as a result of pricing actions taken to offset cumulative input cost inflation n The absence of a $20.3 million reduction in the prior year from the Customer Contract Restructuring, creating a 0.6% benefit in the current year Partially offset by: n Lower sales volumes across both end-markets, primarily driven by impacts 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 Adjusted EBITDA and Adjusted EBITDA margin increased primarily due to the following: n Higher average selling prices and product mix across both end-markets and all regions primarily as a result of pricing actions taken to offset cumulative input cost inflation n Decreased variable input costs primarily within industrial as a result of deflationary benefits and savings driven by the productivity programs launched during 2023 Partially offset by: n Higher operating expenses due primarily to increased labor costs n Lower sales volumes across both end-markets, primarily driven by impacts 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 n Less effective coverage of fixed costs as a result of lower sales volumes n Higher costs of $27.0 million associated with our multi-year ERP system implementation and fees for third-party consultants focused on productivity programs n Increase of $14.7 million in inventory charges from obsolescence, quality and yield loss from manufacturing compared to the prior year In addition to the factors noted above, the current year period Adjusted EBITDA margin was negatively impacted by: n The absence of a $20.3 million reduction to net sales in the prior year from the Customer Contract Restructuring 44 Table of Contents Mobility Coatings Segment Year Ended December 31, 2023 vs 2022 2023 2022 $ Change % Change Net sales $ 1,776.4 $ 1,557.7 $ 218.7 14.0 % Volume effect 10.6 % Price/Mix effect 2.9 % Exchange rate effect 0.5 % Adjusted EBITDA $ 209.5 $ 110.8 $ 98.7 89.1 % Adjusted EBITDA Margin 11.8 % 7.1 % Net sales increased primarily due to the following: n Higher sales volumes across both end-markets and all regions n Higher average selling prices and product mix across both end-markets primarily as a result of pricing actions taken to offset cumulative input cost inflation Adjusted EBITDA and Adjusted EBITDA margin increased primarily due to the following: n Decreased variable input costs across both end-markets and all regions due to deflationary benefits and savings driven by the productivity programs launched during 2023 n Higher sales volumes across both end-markets and all regions n Higher average selling prices and product mix across both end-markets primarily as a result of pricing actions taken to offset cumulative input cost inflation Partially offset by: n Higher operating expenses due primarily to increased labor costs n Higher costs of $14.0 million associated with our multi-year ERP system implementation and fees for third-party consultants focused on productivity programs n Increase of $6.8 million in inventory charges from obsolescence, quality and yield loss from manufacturing compared to the prior year LIQUIDITY AND CAPITAL RESOURCES Our primary sources of liquidity are cash on hand, net cash provided by operating activities and available borrowing capacity under our Senior Secured Credit Facilities.
Our highly leveraged nature may limit our ability to procure additional financing in the future and elevated interest rates, as experienced during 2022, 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 rates, as experienced during 2022 and 2023, may increase our interest expense and weaken our financial condition.
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.
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.
Our remaining available borrowing capacity under other lines of credit in certain non-U.S. jurisdictions totaled $46.4 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 $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.
The primary uses were for purchases of our common stock totaling $200.1 million, payments, net of refinancing proceeds, of $153.0 million on borrowings, which includes $64.6 million for our China supplier financing program, and outflows of $15.1 million for fees associated with refinancing our 2024 Dollar Term Loans.
The primary uses were for the purchase of common stock totaling $200.1 million, payments, net of refinancing proceeds, of $153.0 million on borrowings, which includes $64.6 million for our China supplier financing program, and outflows of $15.1 million for fees associated with refinancing our 2024 Dollar Term Loans.
Costs related to the operational matter described in Note 6 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K are accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated.
Costs related to the operational matter described in Note 5 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K are accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated.
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. 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 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.
Research and development expenses Research and development expenses represent costs incurred to develop new products, services, processes and technologies or to generate improvements to existing products, services or processes.
Research and development expenses Research and development expenses represent costs incurred to develop new products, services, processes and technologies or to generate significant improvements to existing products, services or processes.
See Note 9 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 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 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.
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.
The most important contingencies impacting our financial statements are those related to environmental remediation, operational matters, 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 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.
Contractual Obligations See Note 7 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 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.
The related expense is recognized as compensation expense over the service period utilizing the graded vesting attribution method. 49 Table of Contents Compensation expense related to performance share units, which are determined to have a market condition, is determined at the grant-date of the awards using a valuation methodology (Monte Carlo simulation model) to account for the market conditions linked to these awards and are recognized as compensation expense over the service period utilizing the graded vesting attribution method.
Compensation expense related to performance share units, which are determined to have a market condition, is determined at the grant-date of the awards using a valuation methodology (Monte Carlo simulation model) to account for the market conditions linked to these awards and is recognized over the service period utilizing the graded vesting attribution method.
This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for 2022 and 2021. For the comparison of 2021 and 2020, see Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2021 Annual Report on Form 10-K, filed with the SEC on February 18, 2022.
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.
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; 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; • 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.
While our operations in Russia and Ukraine constituted less than 1.5% of our net sales during the years ended December 31, 2022 and 2021, a significant escalation or expansion of economic disruption or countries subject to sanctions or the conflict's scope could have a material adverse effect on our results of operations, financial condition and cash flows.
While we ceased commercial operations in Russia during 2023 and our operations in Russia and Ukraine constituted less than 1% of our net sales during the years ended December 31, 2023 and 2022, a significant escalation or expansion of economic disruption, countries subject to sanctions or the conflict's scope could have a material adverse effect on our results of operations, financial condition and cash flows.
The estimated impact of either a 100 basis point increase or decrease of the discount rate to the net periodic benefit cost for 2023 would result in a decrease of approximately $0.5 million or an increase of approximately $0.4 million, respectively.
The estimated impact of either a 100 basis point increase or decrease of the discount rate to the net periodic benefit cost for 2024 would result in a decrease of approximately $0.3 million or an increase of approximately $0.5 million, respectively.
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. 51 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 5 and Note 10 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 53 Table of Contents
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 2023 would result in a decrease or increase of approximately $1.4 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 2024 would result in a decrease or increase of approximately $1.9 million, respectively.
At December 31, 2022 and 2021, the Company had gross unrecognized tax benefits, excluding interest and penalties, for both domestic and foreign operations of $98.2 million and $91.4 million, respectively. See Note 11 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail on our accounting for income taxes.
At December 31, 2023 and 2022, the Company had gross unrecognized tax benefits, excluding interest and penalties, for both domestic and foreign operations of $95.6 million and $98.2 million, respectively. See Note 10 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail on our accounting for income taxes.
These outflows were primarily driven by increased sales volumes and price-mix, increased inventory on hand caused by supply chain disruptions combined with inflation of raw material, freight, logistics and energy costs and payments of Business Incentive Plan assets.
These outflows were primarily driven by increased sales volumes and price-mix, increased inventory on hand caused by supply chain disruptions combined with inflation of raw material, freight, logistics and energy costs and payments of BIPS.
Federal income tax rate 21.0 % 21.0 % Effective tax rate 25.3 % 22.4 % Effective tax rate vs. statutory U.S. Federal income tax rate 4.3 % 1.4 % (Favorable) Unfavorable Impact Items impacting the effective tax rate vs. statutory U.S. federal income tax rate 2022 2021 Earnings generated in jurisdictions where the statutory rate is lower than the U.S.
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.
After giving effect to our cross-currency and interest rate hedges, borrowings denominated in Euros as of December 31, 2022 and 2021 were $1,319.6 million and $1,380.1 million, respectively, with weighted average interest rates of 2.5% and 2.5%, respectively.
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.
The following trends have impacted our segment net sales performance: • Performance Coatings: Net sales increased 7.4% for the year ended December 31, 2022 compared with the year ended December 31, 2021.
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.
Federal rate (1) $ (22.4) $ (16.9) Changes in valuation allowance 1.6 18.1 Foreign exchange (loss) gain, net (5.4) 2.2 Tax credits (8.7) (6.7) Non-deductible expenses and interest 5.7 5.7 Change in unrecognized tax benefits 6.2 (4.9) State taxes 4.8 5.0 Foreign taxes 6.9 8.7 Other - net (2) 22.3 (6.4) (1) Primarily related to earnings in Bermuda, Germany, Luxembourg and Switzerland.
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.
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; 36 Table of Contents • changes in buying habits of our customers (including our distributors); and • fluctuations in foreign exchange rates.
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.
The following table details our borrowings outstanding at the dates indicated: December 31, (In millions) 2022 2021 2024 Dollar Term Loans $ — $ 2,038.9 2029 Dollar Term Loans 2,000.0 — 2025 Euro Senior Notes 479.1 508.8 2027 Dollar Senior Notes 500.0 500.0 2029 Dollar Senior Notes 700.0 700.0 Short-term and other borrowings 74.5 113.8 Unamortized original issue discount (22.4) (4.6) Unamortized deferred financing costs (26.9) (27.3) Total borrowings, net 3,704.3 3,829.6 Less: Short-term borrowings 16.0 55.4 Current portion of long-term borrowings 15.0 24.3 Long-term debt $ 3,673.3 $ 3,749.9 Our indebtedness, including the Senior Secured Credit Facilities, Senior Notes and short-term borrowings, is more fully described in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
The following table details our borrowings outstanding at the dates indicated: December 31, (In millions) 2023 2022 2029 Dollar Term Loans $ 1,785.8 $ 2,000.0 2025 Euro Senior Notes — 479.1 2027 Dollar Senior Notes 500.0 500.0 2029 Dollar Senior Notes 700.0 700.0 2031 Dollar Senior Notes 500.0 — Short-term and other borrowings 61.8 74.5 Unamortized original issue discount (16.5) (22.4) Unamortized deferred financing costs (26.9) (26.9) Total borrowings, net 3,504.2 3,704.3 Less: Short-term borrowings 7.2 16.0 Current portion of long-term borrowings 18.5 15.0 Long-term debt $ 3,478.5 $ 3,673.3 Our indebtedness, including the Senior Secured Credit Facilities, Senior Notes and short-term borrowings, is more fully described in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
In 2021, the Company recorded a tax benefit of $2.9 million in the Netherlands, which is fully offset by a tax expense of $2.9 million for an increase to the valuation allowance. 42 Table of Contents SEGMENT RESULTS The Company's products and operations are managed and reported in two operating segments: Performance Coatings and Mobility Coatings.
(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.
Our supplier financing facility in China is more fully described in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 44 Table of Contents Cash Flows Years ended December 31, 2022 and 2021 Years Ended December 31, (In millions) 2022 2021 Net cash provided by (used for): Operating activities: Net income $ 192.2 $ 264.4 Depreciation and amortization 303.1 316.5 Amortization of deferred financing costs and original issue discount 9.6 8.9 Debt extinguishment and refinancing-related costs 14.7 0.2 Deferred income taxes (3.4) 15.0 Realized and unrealized foreign exchange losses, net 15.5 10.1 Stock-based compensation 22.2 14.9 Gain on sales of facilities (1.5) (19.7) Interest income on swaps designated as net investment hedges (19.9) (18.0) Commercial agreement restructuring charge 25.0 — Other non-cash, net 7.7 11.7 Net income adjusted for non-cash items 565.2 604.0 Changes in operating assets and liabilities (271.4) (45.4) Operating activities 293.8 558.6 Investing activities (106.4) (716.0) Financing activities (368.9) (334.5) Effect of exchange rate changes on cash (14.8) (20.9) Net (decrease) increase in cash $ (196.3) $ (512.8) 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.
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.
At December 31, 2022, availability under the Revolving Credit Facility was $529.3 million, net of $20.7 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, 2022, we had $13.5 million of outstanding borrowings under other lines of credit.
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.
Through our Mobility Coatings segment, we provide coatings technologies for light vehicle and commercial vehicle OEMs. 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.
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.
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, 2022 and 2021, respectively: Years Ended December 31, 2022 2021 (In millions) Principal Average Effective Interest Rate Interest Expense Principal Average Effective Interest Rate Interest Expense Term Loans $ 2,000.0 3.9% $ 70.5 $ 2,038.9 2.2% $ 62.2 Revolving Credit Facility — N/A 2.7 — N/A 1.5 Senior Notes 1,679.1 4.1% 63.8 1,708.8 4.1% 65.9 Short-term and other borrowings 74.5 Various 2.8 113.8 Various 4.6 Total $ 3,753.6 $ 139.8 $ 3,861.5 $ 134.2 47 Table of Contents 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, 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.
Derivative Instruments 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.
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.
Financial Condition We had cash and cash equivalents at December 31, 2022 and 2021 of $645.2 million and $840.6 million, respectively. Of these balances, $433.6 million and $471.9 million were maintained in non-U.S. jurisdictions as of December 31, 2022 and 2021, respectively, with $12.9 million and $11.3 million, respectively, within Russia.
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.
Net income before deducting depreciation, amortization and other non-cash items generated cash of $565.2 million. 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.
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.
Such impairment assessments involve comparing the carrying amount of the asset group, determined at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets, to the forecasted undiscounted future cash flows generated by that asset group (i.e., a recoverability test).
Such impairment assessments involve comparing the carrying amount of the asset group, as defined within ASC 360, Property, Plant and Equipment, as the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets, to the forecasted undiscounted future cash flows generated by that asset group (i.e., a recoverability test).
Our net deferred tax asset balance as of December 31, 2022 is $3.1 million, net of valuation allowances of $194.0 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, 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.
Dollars as of December 31, 2022 and 2021 were $2,434.0 million and $2,481.4 million, respectively, with weighted average interest rates of 5.4% and 3.4%, respectively.
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.
The forward-looking statements and projections are subject to and involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, including the effects of COVID-19, that may cause our business, industry, strategy, financing activities or actual results to differ materially.
The forward-looking statements and projections are subject to and involve risks and uncertainties, including, but not limited to, economic, competitive, governmental, geopolitical and technological factors outside of our control, as well as impacts from operational disruptions related to our ERP system implementation, that may cause our business, industry, strategy, financing activities or actual results to differ materially.
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.
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).
The inputs utilized in a quantitative analysis are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement." The process of evaluating the potential impairment of goodwill and indefinite-lived intangible assets is subjective because it requires the use of estimates and assumptions as to our future cash flows, discount rates commensurate with the risks involved in the assets, future economic and market conditions, as well as other key assumptions.
The process of evaluating the potential impairment of goodwill and indefinite-lived intangible assets is subjective because it requires the use of estimates and assumptions as to our future cash flows, discount rates commensurate with the risks involved in the assets, future economic and market conditions, as well as other key assumptions.
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.
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.
The increased net sales were primarily driven by higher average selling price and product mix of 10.1%, higher volumes of 3.7% and a 1.7% contribution from acquisitions, net of the impact from the restructuring of a Performance Coatings commercial agreement ("Customer Contract Restructuring"), which is discussed in more detail in Note 2 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
The increased net sales were driven by higher average selling price and product mix of 5.8%, and the absence of a $20.3 million reduction to net sales from the restructuring of a Performance Coatings commercial agreement in 2022, which is discussed in more detail in Note 2 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K ("Customer Contract Restructuring") creating a 0.4% benefit, partially offset by lower volumes of 0.6%.
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.
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.
We are actively monitoring the broader economic impact on commodities and currency exchange rates from the current conflict, especially on the price and supply of raw materials. We recorded expenses of $5.0 million related to incremental reserves for accounts receivable, inventory and other assets as a result of sanctions imposed on Russia during the year ended December 31, 2022.
We are actively monitoring the broader economic impact on commodities and currency exchange rates from the current conflict, especially on the price and supply of raw materials. We recorded benefits of $1.5 million related to changes in estimates of reserves for accounts receivable and inventory during the year ended December 31, 2023.
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.
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.
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.
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.
Availability under the Revolving Credit Facility was $529.3 million and $527.9 million at December 31, 2022 and December 31, 2021, 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.
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.
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.
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.
Key assumptions in the valuation of noncontrolling interest included a discount rate, a terminal value based on a range of long-term sustainable growth rates and adjustments because of the lack of control that market participants would consider when measuring the fair value of the noncontrolling interests. 48 Table of Contents The fair value of contingent consideration liabilities is estimated by applying an income approach using the Black-Scholes option pricing model.
Key assumptions in the valuation of noncontrolling interest include a discount rate, a terminal value based on a range of long-term sustainable growth rates and adjustments because of the lack of control that market participants would consider when measuring the fair value of the noncontrolling interests.
Other Impacts on Cash Currency exchange impacts on cash for the year ended December 31, 2021 were unfavorable by $20.9 million, which was driven primarily by fluctuations in the Euro compared to the U.S. Dollar partially offset by fluctuations in the Chinese Renminbi 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 $6.4 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.
The fair value of noncontrolling interests, when applicable, are estimated by applying an income approach and is based on significant inputs that are not observable in the market and thus represents a fair value measurement categorized within Level 3 of the fair value hierarchy.
In contemplation of the in-use premise and the nature of the assets, the fair value is developed primarily using a cost approach. The fair value of noncontrolling interests, when applicable, are estimated by applying an income approach and is based on significant inputs that are not observable in the market.
Dollar partially offset by the strengthening of the Mexican Peso. Year Ended December 31, 2021 Net Cash Provided by Operating Activities Net cash provided by operating activities for the year ended December 31, 2021 was $558.6 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $604.0 million.
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.
Through our Performance Coatings segment, we provide high-quality liquid and powder coatings solutions to both large regional and global OEMs and to a fragmented and local customer base. 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.
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 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 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.
Property, plant and equipment are stated at cost and depreciated or amortized on a straight-line basis over their estimated useful lives. Property, plant and equipment acquired through the Acquisition were recorded at their estimated fair value on the acquisition date resulting in a new cost basis for accounting purposes. • Other .
Property, plant and equipment are stated at cost and depreciated or amortized on a straight-line basis over their estimated useful lives. • Other .
Such cash generation is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, including the effects of COVID-19, inflationary pressures and Russia's conflict with Ukraine. 46 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.
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.
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 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.
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 $2.5 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.
Expenses relating to administrative personnel generally do not increase or decrease directly with changes in sales volume; and • depreciation, advertising and other selling expenses, such as expenses incurred in connection with travel and communications. 37 Table of Contents 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.
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.
While the extent of our future tax liability is uncertain, changes to the debt and equity capitalization of our subsidiaries, the realignment of the functions performed, and risks assumed by the various subsidiaries are among the factors that will determine the future book and taxable income of the Company and its subsidiaries. 38 Table of Contents RESULTS OF OPERATIONS The following discussion should be read in conjunction with the information contained in the accompanying financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
While the extent of our future tax liability is uncertain, changes to the debt and equity capitalization of our subsidiaries, the realignment of the functions performed, and risks assumed by the various subsidiaries are among the factors that will determine the future book and taxable income of the Company and its subsidiaries.
This was offset by net uses of working capital of $45.4 million, for which the most significant drivers were increases in inventory, accounts and notes receivable, prepaid expenses and other assets of $111.6 million, $80.5 million and $45.3 million, respectively.
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”).
OVERVIEW We are a leading global manufacturer, marketer and distributor of high-performance coatings systems and products. We have over a 150-year heritage in the coatings industry and are known for manufacturing high-quality products with well-recognized brands supported by market-leading technology and customer service.
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.
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.
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.
Our China supplier financing program and our 2024 Dollar Term Loan refinancing are discussed further in Note 18 to the condensed consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 45 Table of Contents Other Impacts on Cash Currency exchange impacts on cash for the year ended December 31, 2022 were unfavorable by $14.8 million, which was driven primarily by weakening in the British Pound, Argentine Peso and Chinese Renminbi compared to the U.S.
Other Impacts on Cash Currency exchange impacts on cash for the year ended December 31, 2022 were unfavorable by $14.8 million, which was driven primarily by weakening in the British Pound, Argentine Peso and Chinese Yuan compared to the U.S. Dollar partially offset by the strengthening of the Mexican Peso.
Performance Coatings Segment Year Ended December 31, 2022 vs 2021 2022 2021 $ Change % Change Net sales $ 3,326.7 $ 3,096.3 $ 230.4 7.4 % Price/Mix effect 10.9 % Impact of acquisitions and Customer Contract Restructuring 2.4 % Volume effect (0.4) % Exchange rate effect (5.5) % Adjusted EBIT $ 448.3 $ 479.4 $ (31.1) (6.5) % Adjusted EBIT Margin 13.5 % 15.5 % Net sales increased primarily due to the following: n Higher average selling prices and product mix across both end-markets and all regions, primarily as a result of pricing actions taken to offset input price inflation within both end-markets n Sales from companies acquired in 2021 Partially offset by: n Unfavorable impacts of currency translation due primarily to the weakening of the Euro compared to the U.S.
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.
A 10% decrease in the total number of products repaired would result in an approximately $5.7 million reduction in the estimated liability. Insurance recoveries related to the operational matter 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.
Capital and Liquidity Highlights During the year ended December 31, 2022, we repurchased 7.4 million shares of our common stock for total consideration of $200.1 million as we continued to execute against our previously-approved share repurchase program.
During the year ended December 31, 2023, we repurchased 1.8 million shares of our common stock for total consideration of $50.0 million as we continued to execute against our previously-approved share repurchase program. 36 Table of Contents ERP system implementation We are in the midst of a multi-year project to upgrade our ERP system through a phased implementation approach.
Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan, strategies and capital structure. These statements often include words such as "anticipate," "assumed," "expect," "believe," "intended," "estimates," "goal," "projections," "plans," "can," "could," "should," "would," "may," "will," "forecasts" and the negative of these words or other comparable or similar terminology.
These statements often include words such as "anticipated," "expect," "believe," "intend," "estimates, " "projections," "could," "should," "would," "may," "will," "future," "goals," "committing," "aim," "plans," "can," "predict," "assumptions," "future," "targets," "potential" an d "forecasts" and the negative of these words or other comparable or similar terminology.
By the end of the year, each of these conditions had begun to normalize, but we will continue to monitor each condition and take appropriate actions that we believe will help mitigate costs and other operational impacts. 35 Table of Contents Russia conflict with Ukraine Russia's conflict with Ukraine and the sanctions and other measures imposed by various governments in response to this conflict have increased the level of economic and political uncertainty globally.
Russia conflict with Ukraine Russia's conflict with Ukraine and the sanctions and other measures imposed by various governments in response to this conflict have increased the level of economic and political uncertainty globally.
The end-markets within this segment are light vehicle and commercial vehicle. 34 Table of Contents BUSINESS HIGHLIGHTS General Business Highlights Our net sales increased 10.6%, including a 4.9% headwind from foreign currency translation, for the year ended December 31, 2022 compared with the year ended December 31, 2021.
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.
During the year ended December 31, 2022, we entered into the Eleventh Amendment (as defined in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K).
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.
The risks and uncertainties related to the COVID-19 pandemic are discussed in further detail within Note 1 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.
See Note 20 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
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.
At December 31, 2022 and 2021, deferred income taxes of approximately $10.8 million and $10.6 million, respectively, have been provided on such subsidiary earnings.
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.
Our historical results of operations summarized and analyzed below may not necessarily reflect what will occur in the future.
RESULTS OF OPERATIONS The following discussion should be read in conjunction with the information contained in the accompanying financial statements and related notes included elsewhere in this Annual Report on Form 10-K. Our historical results of operations summarized and analyzed below may not necessarily reflect what will occur in the future.
At December 31, 2022, and 2021, we have not recorded a deferred tax liability related to withholding taxes of approximately $177.5 million and $124.7 million, respectively, on unremitted earnings of subsidiaries that are permanently invested. 50 Table of Contents 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 will ultimately pay factoring in various uncertainties.
The primary uses were for the purchase of common stock totaling $243.8 million and payments of $100.9 million on borrowings, which includes $63.8 million for our China supplier financing program discussed further in Note 18 to the condensed consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
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.
The increased net sales were primarily driven by higher average selling price and product mix of 10.9% and contributions from acquisitions, net of the impact from the Customer Contract Restructuring, of 2.4%, partially offset by a 5.5% headwind from unfavorable foreign currency translation driven primarily by the weakening of the Euro compared to the U.S.
The increased net sales were driven by higher sales volumes of 10.6% and higher average selling price and product mix of 2.9%.
Our business serves four end-markets globally with net sales for the years ended December 31, 2022 and 2021 as follows: (In millions) Year Ended December 31, 2022 vs 2021 2022 2021 % change Performance Coatings Refinish $ 1,943.4 $ 1,776.4 9.4 % Industrial 1,383.3 1,319.9 4.8 % Total Net sales Performance Coatings 3,326.7 3,096.3 7.4 % Mobility Coatings Light Vehicle 1,181.1 1,013.1 16.6 % Commercial Vehicle 376.6 306.8 22.8 % Total Net sales Mobility Coatings 1,557.7 1,319.9 18.0 % Total Net sales $ 4,884.4 $ 4,416.2 10.6 % CEO transition On July 26, 2022, we announced that Robert Bryant would step down as President and Chief Executive Officer and as a member of Axalta's Board, effective August 31, 2022.
Our business serves four end-markets globally with net sales for the years ended December 31, 2023 and 2022 as follows: (In millions) Year Ended December 31, 2023 vs 2022 2023 2022 % change Performance Coatings Refinish $ 2,084.3 $ 1,943.4 7.3 % Industrial 1,323.4 1,383.3 (4.3) % Total Net sales Performance Coatings 3,407.7 3,326.7 2.4 % Mobility Coatings Light Vehicle 1,340.4 1,181.1 13.5 % Commercial Vehicle 436.0 376.6 15.8 % Total Net sales Mobility Coatings 1,776.4 1,557.7 14.0 % Total Net sales $ 5,184.1 $ 4,884.4 6.1 % Capital and Liquidity Highlights During August 2023, we entered into the Thirteenth Amendment to the Credit Agreement (as defined in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K) to lower the interest rate spread applicable to the 2029 Dollar Term Loans (as defined in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K) from 3.00% to 2.50% when bearing interest at a rate based on the Secured Overnight Finance Rate ("SOFR").

… 60 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+0 added−1 removed12 unchanged
Biggest changeWe use these intercompany loans to offset the exposure to profitability and cash flows created by external loans denominated in currencies that are different from the functional currency of the issuing entities, including our 2025 Euro Senior Notes (as defined in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K), which are denominated in Euros. 52 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.
Biggest changeWhere 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.
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 $2.4 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 $2.2 million o n c ash interest expense considering the impact of our hedging positions currently in place.
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. 53 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. 55 Table of Contents
When the fair value of a derivative contract is positive, the counterparty owes us, thus creating a receivable risk for us. We are exposed to counterparty credit risk in the event of non-performance by counter-parties to our derivative agreements. We minimize counterparty credit (or repayment) risk by entering into transactions with major financial institutions of investment grade credit rating.
When the fair value of a derivative contract is positive, the counterparty owes us, thus creating a receivable risk for us. We are exposed to counterparty credit risk in the event of non-performance by counterparties to our derivative agreements. We minimize counterparty credit (or repayment) risk by entering into transactions with major financial institutions of investment grade credit rating.
We earn significant revenues and incur significant costs in foreign currencies including the Euro, Mexican Peso, Brazilian Real, Chinese Renminbi, British Pound and the Turkish Lira. 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 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.
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 $245.1 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 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.
During 2022, a significant portion of the raw material inflation was passed through to our customers through a series of price increases.
During 2022 and 2023, a significant portion of the raw material inflation was passed through to our customers through a series of price increases.
The majority of our net sales for the years ended December 31, 2022, 2021 and 2020 were from operations outside the United States. At December 31, 2022 and 2021, the accumulated other comprehensive loss account in the consolidated balance sheets included a cumulative translation loss of $433.5 million and $331.3 million, respectively.
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.
Since 2001, on average, our total raw material spend has represented between 40% and 50% of our cost of sales; however, during 2022, our total raw material spend represented approximately 53% of our cost of sales driven by continued raw material inflation experienced throughout the year.
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.
Removed
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.

Other AXTA 10-K year-over-year comparisons