UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended June 30, ~~2020~~2021



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

For the transition period from to .

Commission File Number: 001-36733

AXALTA COATING SYSTEMS LTD.

(Exact name of registrant as specified in its charter)

Bermuda

2851

98-1073028

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial
Classification Code Number)

(I.R.S. Employer

Identification No.)

Two Commerce Square

2001 Market Street

Suite 3600

Philadelphia,, Pennsylvania19103

(~~855~~) (855) 547-1461

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

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

Common Shares, $1.00 par value

AXTA

New York Stock Exchange

(Title of class)

(Trading symbol)

(Exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Non-accelerated filer ☐ Accelerated filer ☐

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

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

As of July ~~23, 2020,~~20, 2021, there were ~~235,359,947~~230,160,918 shares of the registrant’s common shares outstanding.

Table of Contents



PART I		Financial Information
	ITEM 1.	Financial Statements (Unaudited)	3
		Condensed Consolidated Statements of Operations	3
		Condensed Consolidated Statements of Comprehensive Income (Loss) ~~Income~~	4
		Condensed Consolidated Balance Sheets	5
		Condensed Consolidated Statements of Changes in Shareholders' Equity	6
		Condensed Consolidated Statements of Cash Flows	8
		Notes to Condensed Consolidated Financial Statements	9
	ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2524
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	4138
	ITEM 4.	Controls and Procedures	4138
PART II		Other Information
	ITEM 1.	Legal Proceedings	4239
	ITEM 1A.	Risk Factors	4239
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4239
	ITEM 3.	Defaults Upon Senior Securities	4239
	ITEM 4.	Mine Safety Disclosures	4239
	ITEM 5.	Other Information	4239
	ITEM 6.	Exhibits	4340
		Signatures	4441

Table of Contents

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

AXALTA COATING SYSTEMS LTD.

Condensed Consolidated Statements of Operations (Unaudited)

(In millions, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net sales	$	1,126.8	$	652.7	$	2,190.4	$	1,636.2
Cost of goods sold	752.8		499.2		1,437.3		1,146.0
Selling, general and administrative expenses	184.2		154.2		363.3		349.6
Other operating (benefits) charges	(45.7)		24.7		57.1		56.3
Research and development expenses	15.8		11.2		31.4		27.8
Amortization of acquired intangibles	29.3		27.9		58.3		55.9
Income (loss) from operations	190.4		(64.5)		243.0		0.6
Interest expense, net	33.4		36.1		66.9		72.6
Other income, net	(8.1)		(2.2)		(8.5)		(1.4)
Income (loss) before income taxes	165.1		(98.4)		184.6		(70.6)
Provision (benefit) for income taxes	38.7		(15.2)		42.5		(39.8)
Net income (loss)	126.4		(83.2)		142.1		(30.8)
Less: Net (loss) income attributable to noncontrolling interests	0		(0.4)		0.5		(0.2)
Net income (loss) attributable to controlling interests	$	126.4	$	(82.8)	$	141.6	$	(30.6)
Basic net income (loss) per share	$	0.54	$	(0.35)	$	0.61	$	(0.13)
Diluted net income (loss) per share	$	0.54	$	(0.35)	$	0.60	$	(0.13)

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019
Net sales $ 652.7
$ 1,157.5
$ 1,636.2
$ 2,276.8
Cost of goods sold 499.2
748.4
1,146.0
1,499.7
Selling, general and administrative expenses 154.2
202.4
349.6
418.0
Other operating charges 24.7
2.5
56.3
9.6
Research and development expenses 11.2
17.9
27.8
36.1
Amortization of acquired intangibles 27.9
28.4
55.9
56.9
(Loss) income from operations (64.5 ) 157.9
0.6
256.5
Interest expense, net 36.1
41.0
72.6
82.3
Other income, net (2.2 ) (0.9 ) (1.4 ) (1.9 )
(Loss) income before income taxes (98.4 ) 117.8
(70.6 ) 176.1
(Benefit) provision for income taxes (15.2 ) 17.9
(39.8 ) 32.1
Net (loss) income (83.2 ) 99.9
(30.8 ) 144.0
Less: Net (loss) income attributable to noncontrolling interests (0.4 ) 1.5
(0.2 ) 2.2
Net (loss) income attributable to controlling interests $ (82.8 ) $ 98.4
$ (30.6 ) $ 141.8
Basic net (loss) income per share $ (0.35 ) $ 0.42
$ (0.13 ) $ 0.61
Diluted net (loss) income per share $ (0.35 ) $ 0.42
$ (0.13 ) $ 0.60

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

Table of Contents

AXALTA COATING SYSTEMS LTD.

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

(In millions)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income (loss)	$	126.4	$	(83.2)	$	142.1	$	(30.8)
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	39.3		7.0		1.7		(79.5)
Unrealized gain (loss) on derivatives	6.9		(2.6)		16.1		(43.3)
Unrealized gain on pension and other benefit plan obligations	1.3		0.2		2.5		0
Other comprehensive income (loss), before tax	47.5		4.6		20.3		(122.8)
Income tax provision (benefit) related to items of other comprehensive income (loss)	1.3		(0.6)		3.1		(6.4)
Other comprehensive income (loss), net of tax	46.2		5.2		17.2		(116.4)
Comprehensive income (loss)	172.6		(78.0)		159.3		(147.2)
Less: Comprehensive income (loss) attributable to noncontrolling interests	0.6		0.5		0.9		(2.5)
Comprehensive income (loss) attributable to controlling interests	$	172.0	$	(78.5)	$	158.4	$	(144.7)

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Net (loss) income $ (83.2 ) $ 99.9
$ (30.8 ) $ 144.0
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments 7.0
(0.9 ) (79.5 ) 12.4
Unrealized loss on derivatives (2.6 ) (20.3 ) (43.3 ) (34.9 )
Unrealized gain on pension plan obligations 0.2
—
—
0.5
Other comprehensive income (loss), before tax 4.6
(21.2 ) (122.8 ) (22.0 )
Income tax benefit related to items of other comprehensive loss (0.6 ) (3.1 ) (6.4 ) (4.8 )
Other comprehensive income (loss), net of tax 5.2
(18.1 ) (116.4 ) (17.2 )
Comprehensive (loss) income (78.0 ) 81.8
(147.2 ) 126.8
Less: Comprehensive income (loss) attributable to noncontrolling interests 0.5
3.7
(2.5 ) 4.9
Comprehensive (loss) income attributable to controlling interests $ (78.5 ) $ 78.1
$ (144.7 ) $ 121.9

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

Table of Contents

AXALTA COATING SYSTEMS LTD.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except per share data)


	June 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	1,230.9	$	1,360.9
Restricted cash	10.6		3.1
Accounts and notes receivable, net	1,035.7		869.8
Inventories	614.5		559.9
Prepaid expenses and other current assets	156.5		132.2

Total current assets	3,048.2		2,925.9
Property, plant and equipment, net	1,183.3		1,194.5
Goodwill	1,294.3		1,294.9
Identifiable intangibles, net	1,096.6		1,148.8
Other assets	587.0		593.1

Total assets	$	7,209.4	$	7,157.2
Liabilities, Shareholders’ Equity
Current liabilities:
Accounts payable	$	597.5	$	564.4
Current portion of borrowings	40.5		54.2
Other accrued liabilities	578.2		562.3

Total current liabilities	1,216.2		1,180.9
Long-term borrowings	3,813.4		3,838.5
Accrued pensions	296.0		309.9
Deferred income taxes	116.6		114.0
Other liabilities	231.9		234.1

Total liabilities	5,674.1		5,677.4
Commitments and contingent liabilities (Note 5)	0		0
Shareholders’ equity:
Common shares, $1.00 par, 1,000.0 shares authorized, 251.7 and 250.9 shares issued at June 30, 2021 and December 31, 2020, respectively	251.7		250.9
Capital in excess of par	1,506.9		1,487.1
Retained earnings	704.9		563.3
Treasury shares, at cost, 20.3 and 16.1 shares at June 30, 2021 and December 31, 2020, respectively	(567.2)		(443.5)
Accumulated other comprehensive loss	(408.0)		(424.8)
Total Axalta shareholders’ equity	1,488.3		1,433.0
Noncontrolling interests	47.0		46.8
Total shareholders’ equity	1,535.3		1,479.8
Total liabilities and shareholders’ equity	$	7,209.4	$	7,157.2

June 30, 2020 December 31, 2019
Assets

Current assets:

Cash and cash equivalents $ 1,123.6
$ 1,017.5
Restricted cash 2.9
3.0
Accounts and notes receivable, net 664.0
830.1
Inventories 539.3
591.6
Prepaid expenses and other current assets 150.4
131.2
Total current assets 2,480.2
2,573.4
Property, plant and equipment, net 1,158.2
1,223.0
Goodwill 1,209.3
1,208.9
Identifiable intangibles, net 1,158.1
1,223.9
Other assets 662.8
588.8
Total assets $ 6,668.6
$ 6,818.0
Liabilities, Shareholders’ Equity

Current liabilities:

Accounts payable $ 331.9
$ 483.7
Current portion of borrowings 41.3
43.9
Other accrued liabilities 487.7
545.3
Total current liabilities 860.9
1,072.9
Long-term borrowings 3,980.0
3,790.2
Accrued pensions 278.3
285.2
Deferred income taxes 108.7
115.5
Other liabilities 182.1
144.6
Total liabilities 5,410.0
5,408.4
Commitments and contingencies (Note 5)

Shareholders’ equity:

Common shares, $1.00 par, 1,000.0 shares authorized, 250.6 and 250.1 shares issued at June 30, 2020 and December 31, 2019, respectively 250.5
249.9
Capital in excess of par 1,479.5
1,474.1
Retained earnings 411.1
443.2
Treasury shares, at cost, 15.2 shares at June 30, 2020 and December 31, 2019 (418.4 ) (417.5 )
Accumulated other comprehensive loss (509.6 ) (395.5 )
Total Axalta shareholders’ equity 1,213.1
1,354.2
Noncontrolling interests 45.5
55.4
Total shareholders’ equity 1,258.6
1,409.6
Total liabilities and shareholders’ equity $ 6,668.6
$ 6,818.0

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

Table of Contents

AXALTA COATING SYSTEMS LTD.

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

(In millions)


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

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

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

Common stock purchases	(2.3)	—		—		—		(63.7)		—		—		(63.7)
Dividends declared to noncontrolling interests	—	—		—		—		—		—		(0.7)		(0.7)
Balance at March 31, 2021	232.8	251.2		1,490.5		578.5		(507.2)		(453.6)		46.4		1,405.8
Comprehensive income:
Net income	—	—		—		126.4		—		—		0		126.4

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

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

Balance at June 30, 2021	231.4	$	251.7	$	1,506.9	$	704.9	$	(567.2)	$	(408.0)	$	47.0	$	1,535.3

Table of Contents


	Common Stock																						Common Stock
	Number of Shares	Par/Stated Value		Capital In Excess Of Par			Retained Earnings			Treasury Shares, at cost			Accumulated Other Comprehensive Loss			Non controlling Interests			Total				Number of Shares	Par/Stated Value		Capital In Excess Of Par		Retained Earnings		Treasury Shares, at cost		Accumulated Other Comprehensive Loss		Non controlling Interests		Total
Balance at December 31, 2019	234.9	$	249.9	$	1,474.1		$	443.2		$	(417.5	)	$	(395.5	)	$	55.4		$	1,409.6		Balance at December 31, 2019	234.9	$	249.9	$	1,474.1	$	443.2	$	(417.5)	$	(395.5)	$	55.4	$	1,409.6
Comprehensive income (loss):																						Comprehensive income (loss):
Net income	—	—		—			52.2			—			—			0.2			52.4			Net income	—	—		—		52.2		—		—		0.2		52.4

Net realized and unrealized loss on derivatives, net of tax benefit of $6.0 million	—	—		—			—			—			(34.7		)	—			(34.7		)	Net realized and unrealized loss on derivatives, net of tax benefit of $6.0 million	—	—		—		—		—		(34.7)		—		(34.7)
Long-term employee benefit plans, net of tax benefit of $0.2 million	—	—		—			—			—			(0.4		)	—			(0.4		)
Long-term employee benefit plans, net of tax of $0.2 million																						Long-term employee benefit plans, net of tax of $0.2 million	—	—		—		—		—		(0.4)		—		(0.4)
Foreign currency translation, net of tax of $0.0 million	—	—		—			—			—			(83.3		)	(3.2		)	(86.5		)	Foreign currency translation, net of tax of $0.0 million	—	—		—		—		—		(83.3)		(3.2)		(86.5)
Total comprehensive income (loss)	—	—		—			52.2			—			(118.4		)	(3.0		)	(69.2		)
Total comprehensive loss																						Total comprehensive loss	—	—		—		52.2		—		(118.4)		(3.0)		(69.2)
Cumulative effect of an accounting change	—	—		—			(1.5		)	—			—			—			(1.5		)	Cumulative effect of an accounting change	—	—		—		(1.5)		—		—		—		(1.5)
Recognition of stock-based compensation	—	—		5.1			—			—			—			—			5.1			Recognition of stock-based compensation	—	—		5.1		—		—		—		—		5.1
Shares issued under compensation plans	0.4	0.5		(1.6		)	—			—			—			—			(1.1		)	Shares issued under compensation plans	0.4	0.5		(1.6)		—		—		—		—		(1.1)
Ownership changes relating to noncontrolling interests	—	—		0.5			—			—			—			(2.1		)	(1.6		)	Ownership changes relating to noncontrolling interests	—	—		0.5		—		—		—		(2.1)		(1.6)

Dividends declared to noncontrolling interests	—	—		—			—			—			—			(0.5		)	(0.5		)	Dividends declared to noncontrolling interests	—	—		—		—		—		—		(0.5)		(0.5)
Balance at March 31, 2020	235.3	250.4		1,478.1			493.9			(417.5		)	(513.9		)	49.8			1,340.8			Balance at March 31, 2020	235.3	250.4		1,478.1		493.9		(417.5)		(513.9)		49.8		1,340.8
Comprehensive income (loss):																						Comprehensive income (loss):
Net loss	—	—		—			(82.8		)	—			—			(0.4		)	(83.2		)
Net income																						Net income	—	—		—		(82.8)		—		—		(0.4)		(83.2)

Net realized and unrealized loss on derivatives, net of tax benefit of $0.4 million	—	—		—			—			—			(2.2		)	—			(2.2		)	Net realized and unrealized loss on derivatives, net of tax benefit of $0.4 million	—	—		—		—		—		(2.2)		—		(2.2)
Long-term employee benefit plans, net of tax of $0.2 million	—	—		—			—			—			0.4			—			0.4
Long-term employee benefit plans, net of tax benefit of $0.2 million																						Long-term employee benefit plans, net of tax benefit of $0.2 million	—	—		—		—		—		0.4		—		0.4
Foreign currency translation, net of tax of $0.0 million	—	—		—			—			—			6.1			0.9			7.0			Foreign currency translation, net of tax of $0.0 million	—	—		—		—		—		6.1		0.9		7.0
Total comprehensive income (loss)	—	—		—			(82.8		)	—			4.3			0.5			(78.0		)	Total comprehensive income (loss)	—	—		—		(82.8)		—		4.3		0.5		(78.0)

Recognition of stock-based compensation	—	—		6.1			—			—			—			—			6.1			Recognition of stock-based compensation	—	—		6.1		—		—		—		—		6.1
Shares issued under compensation plans	0.1	0.1		1.1			—			—			—			—			1.2			Shares issued under compensation plans	0.1	0.1		1.1		—		—		—		—		1.2
Changes in redeemable noncontrolling interest	—	—		(5.8		)	—			—			—			(4.8		)	(10.6		)
Changes in redeemable noncontrolling interests																						Changes in redeemable noncontrolling interests	—	—		(5.8)		—		—		—		(4.8)		(10.6)
Common stock purchases	—	—		—			—			(0.9		)	—			—			(0.9		)	Common stock purchases	—	—		—		—		(0.9)		—		—		(0.9)

Balance at June 30, 2020	235.4	$	250.5	$	1,479.5		$	411.1		$	(418.4	)	$	(509.6	)	$	45.5		$	1,258.6		Balance at June 30, 2020	235.4	$	250.5	$	1,479.5	$	411.1	$	(418.4)	$	(509.6)	$	45.5	$	1,258.6

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

~~AXALTA COATING SYSTEMS LTD.~~

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

~~(In millions)~~

Common Stock
Number of Shares Par/Stated Value Capital In Excess Of Par Retained earnings Treasury Shares, at cost Accumulated Other Comprehensive Loss Non controlling Interests Total
Balance at December 31, 2018 235.6
$ 245.3
$ 1,409.5
$ 198.6
$ (312.2 ) $ (336.1 ) $ 105.4
$ 1,310.5
Comprehensive income:
Net income —
—
—
43.4
—
—
0.7
44.1
Net realized and unrealized loss on derivatives, net of tax benefit of $2.2 million —
—
—
—
—
(12.4 ) —
(12.4 )
Long-term employee benefit plans, net of tax of $0.5 million —
—
—
—
—
—
—
—
Foreign currency translation, net of tax of $0.0 million —
—
—
—
—
12.8
0.5
13.3
Total comprehensive income —
—
—
43.4
—
0.4
1.2
45.0
Cumulative effect of an accounting change —
—
—
(0.7 ) —
—
—
(0.7 )
Recognition of stock-based compensation —
—
6.7
—
—
—
—
6.7
Shares issued under compensation plans 1.1
1.7
9.7
—
—
—
—
11.4
Ownership changes relating to noncontrolling interests —
—
5.7
—
—
—
(32.1 ) (26.4 )
Common stock purchases (2.5 ) —
—
—
(65.8 ) —
—
(65.8 )
Dividends declared to noncontrolling interests —
—
—
—
—
—
(1.1 ) (1.1 )
Balance at March 31, 2019 234.2
247.0
1,431.6
241.3
(378.0 ) (335.7 ) 73.4
1,279.6
Comprehensive income (loss):
Net income —
—
—
98.4
—
—
1.5
99.9
Net realized and unrealized loss on derivatives, net of tax of $2.7 million —
—
—
—
—
(17.6 ) —
(17.6 )
Long-term employee benefit plans, net of tax of $0.4 million —
—
—
—
—
0.4
—
0.4
Foreign currency translation, net of tax of $0.0 million —
—
—
—
—
(3.1 ) 2.2
(0.9 )
Total comprehensive income (loss) —
—
—
98.4
—
(20.3 ) 3.7
81.8
Correction to previous cumulative effect upon adoption of ASU 2014-09 —
—
—
(3.7 ) —
—
—
(3.7 )
Recognition of stock-based compensation —
—
(1.4 ) —
—
—
—
(1.4 )
Shares issued under compensation plans 0.7
1.2
13.3
—
—
—
—
14.5
Ownership changes relating to noncontrolling interests —
—
(1.7 ) —
—
—
(22.5 ) (24.2 )
Common stock purchases (1.6 ) —
—
—
(39.5 ) —
—
(39.5 )
Balance at June 30, 2019 233.3
$ 248.2
$ 1,441.8
$ 336.0
$ (417.5 ) $ (356.0 ) $ 54.6
$ 1,307.1

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

AXALTA COATING SYSTEMS LTD.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)


	Six Months Ended June 30,							Six Months Ended June 30,
	2020			2019				2021		2020
Operating activities:							Operating activities:
Net (loss) income	$	(30.8	)	$	144.0
Adjustment to reconcile net income to cash (used for) provided by operating activities:
Net income (loss)							Net income (loss)	$	142.1	$	(30.8)
Adjustment to reconcile net income (loss) to cash provided by operating activities:							Adjustment to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization	163.2			180.3			Depreciation and amortization	155.4		163.2
Amortization of deferred financing costs and original issue discount	4.1			4.4			Amortization of deferred financing costs and original issue discount	4.2		4.1
Debt extinguishment and refinancing related costs	2.4			0.2			Debt extinguishment and refinancing related costs	0.2		2.4
Deferred income taxes	(61.2		)	(1.6		)	Deferred income taxes	5.2		(61.2)
Realized and unrealized foreign exchange losses, net	2.8			2.8			Realized and unrealized foreign exchange losses, net	9.4		2.8
Stock-based compensation	11.2			5.3			Stock-based compensation	7.8		11.2
Divestitures and impairment charges	3.2			3.9

Divestiture and impairment charges							Divestiture and impairment charges	0		3.2
Interest income on swaps designated as net investment hedges	(7.3		)	(7.2		)	Interest income on swaps designated as net investment hedges	(7.1)		(7.3)
Other non-cash, net	8.3			(0.6		)	Other non-cash, net	9.2		8.3
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Trade accounts and notes receivable	136.8			(152.9		)	Trade accounts and notes receivable	(154.2)		136.8
Inventories	32.5			(1.4		)	Inventories	(59.1)		32.5
Prepaid expenses and other assets	(60.3		)	(81.6		)	Prepaid expenses and other assets	(53.4)		(60.3)
Accounts payable	(131.0		)	20.7			Accounts payable	60.0		(131.0)
Other accrued liabilities	(87.9		)	(54.0		)	Other accrued liabilities	24.5		(87.9)
Other liabilities	11.5			6.5			Other liabilities	2.9		11.5
Cash (used for) provided by operating activities	(2.5		)	68.8
Cash provided by (used for) operating activities							Cash provided by (used for) operating activities	147.1		(2.5)
Investing activities:							Investing activities:
Acquisitions, net of cash acquired	—			(1.9		)	Acquisitions, net of cash acquired	(37.6)		0
Purchase of property, plant and equipment	(42.4		)	(47.2		)	Purchase of property, plant and equipment	(60.3)		(42.4)
Proceeds from sale of consolidated joint venture, net of cash divested	—			8.2

Interest proceeds on swaps designated as net investment hedges	7.3			7.2			Interest proceeds on swaps designated as net investment hedges	7.1		7.3

Other investing activities, net	0.8			—			Other investing activities, net	(0.5)		0.8
Cash used for investing activities	(34.3		)	(33.7		)	Cash used for investing activities	(91.3)		(34.3)
Financing activities:							Financing activities:
Proceeds from long-term borrowings	500.0			—			Proceeds from long-term borrowings	0		500.0
Payments on short-term borrowings	(18.6		)	(20.5		)	Payments on short-term borrowings	(41.1)		(18.6)
Payments on long-term borrowings	(313.1		)	(13.7		)	Payments on long-term borrowings	(14.2)		(313.1)
Financing-related costs	(6.0		)	(2.1		)	Financing-related costs	(2.5)		(6.0)
Purchases of common stock	(0.9		)	(105.3		)	Purchases of common stock	(123.7)		(0.9)
Net cash flows associated with stock-based awards	0.3			25.9			Net cash flows associated with stock-based awards	12.8		0.3

Purchase of noncontrolling interests	(1.6		)	(31.1		)	Purchase of noncontrolling interests	0		(1.6)

Other financing activities, net	(1.0		)	(1.1		)	Other financing activities, net	(1.2)		(1.0)
Cash provided by (used for) financing activities	159.1			(147.9		)
Increase (decrease) in cash	122.3			(112.8		)
Cash (used for) provided by financing activities							Cash (used for) provided by financing activities	(169.9)		159.1
(Decrease) increase in cash							(Decrease) increase in cash	(114.1)		122.3
Effect of exchange rate changes on cash	(16.3		)	1.0			Effect of exchange rate changes on cash	(8.4)		(16.3)
Cash at beginning of period	1,020.5			696.4			Cash at beginning of period	1,364.0		1,020.5
Cash at end of period	$	1,126.5		$	584.6		Cash at end of period	$	1,241.5	$	1,126.5

Cash at end of period reconciliation:							Cash at end of period reconciliation:
Cash and cash equivalents	$	1,123.6		$	577.3		Cash and cash equivalents	$	1,230.9	$	1,123.6
Restricted cash	2.9			7.3			Restricted cash	10.6		2.9

Cash at end of period	$	1,126.5		$	584.6		Cash at end of period	$	1,241.5	$	1,126.5

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

Index

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

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

The interim condensed consolidated financial statements included herein are unaudited. In the opinion of management, these statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair statement of the financial position of Axalta Coating Systems Ltd., a Bermuda exempted company limited by shares, and its consolidated subsidiaries ("Axalta," the "Company," "we," "our" and "us") at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the results of operations, comprehensive income (loss) and changes in shareholders' equity for the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, and cash flows for the six months then ended. All intercompany balances and transactions have been eliminated.

These interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

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

The results of operations for the three and six months ended June 30, ~~2020~~2021 are not necessarily indicative of the results to be expected for a full year.

Summary of Significant Accounting Policies ~~Updates~~

~~Reclassifications~~

The condensed consolidated statements of operations for the three and six months ended June 30, 2019 have been updated for comparability with the current year presentation to separately present other operating charges as detailed in our annual report on Form 10-K for the year ended December 31, 2019.

Recently Adopted Accounting Guidance

On January 1, 2020, we adopted Accounting Standards Update ("ASU") 2016-13, “Financial Instruments - Credit Losses” under a modified retrospective approach for all financial assets. ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires considerations of a broader range of reasonable and supportable information to inform credit loss estimates. The provisions of this standard primarily impact the allowance for doubtful accounts on our trade receivables, in which we have applied historical loss percentages, combined with reasonable and supportable forecasts of future losses to the respective aging categories. Adoption of ASU 2016-13 at January 1, 2020 resulted in a one-time loss to retained earnings of $1.5 million on our condensed consolidated balance sheets and statements of shareholders' equity for the six months ended June 30, 2020.

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

~~Accounting Guidance Issued But Not Yet Adopted~~

In December ~~2019, the FASB issued~~2020, we adopted ASU 2019-12, "Simplifying the Accounting for Income Taxes" ~~as part of its initiative to reduce complexity in accounting standards. The ASU~~, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic ~~740. The new standard is effective~~740 and updating provisions related to accounting for ~~fiscal years beginning after December 15, 2020,~~franchise (or similar) tax partially based on income and interim ~~periods within those fiscal years. Early~~recognition of enactment of tax law changes. The adoption ~~is permitted. We are currently evaluating the~~of this standard did not have a material impact ~~of ASU 2019-12~~ on our financial statements.

Risks and Uncertainties

In March 2020, the World Health Organization characterized the coronavirus ("COVID-19") a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The rapid spread of the pandemic and the continuously evolving responses to combat it have had ~~an increasingly~~a negative impact on the global economy. ~~In view~~The Company's results of operations, financial condition and cash flows were significantly impacted during 2020 as a result of the ~~rapidly changing~~pandemic and we continue to see impacts to our business ~~environment, unprecedented market volatility~~given the continued significant presence, and ~~heightened degree~~actual or potential spread, of ~~uncertainty resulting from COVID-19, we~~the virus globally, as well as preventative measures enacted in certain regions of the world. We are currently unable to fully determine ~~its~~the future impact of COVID-19 on our ~~business. However,~~business, though we believe the pandemic will continue to have a negative effect on our business during 2021, and potentially longer. We are monitoring the progression of the pandemic and its ongoing and potential effect on our financial position, results of operations, and cash ~~flows. The pandemic had a significant adverse impact on the Company's results of operations, financial condition and cash~~ flows, ~~during 2020 and, over time, the~~which effects could ~~have~~be materially adverse in a ~~material adverse impact.~~particular quarterly reporting period as well as on an annual basis for 2021, and potentially longer.

~~Table of Contents~~

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

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

(2) REVENUE

Consideration for products in which control has transferred to our customers that is conditional on something other than the passage of time is recorded as a contract asset within prepaid expenses and other current assets on the balance sheet. The contract asset balances at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were ~~$36.2~~$39.7 million and ~~$37.5~~$37.2 million, respectively.

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

We provide certain customers with incremental up-front consideration, subject to clawback provisions, including Business Incentive Plan assets ("BIPs"), which is capitalized as a component of other assets and amortized over the estimated life of the contractual arrangement as a reduction of net sales. At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the total carrying value of BIPs were ~~$178.8~~$156.1 million and ~~$191.2~~$165.4 million, respectively, and are presented within other assets onin the condensed consolidated balance sheets. For the three and six months ended June 30, 2021 and 2020, ~~and 2019,~~$13.7 million, $29.0 million, $16.4 million and $33.3 million, ~~$16.0 million and $33.1 million,~~ respectively, ~~were~~was amortized and reflected as reductions of net sales in the condensed consolidated statements of operations. The total carrying value of BIPs exclude other upfront incentives made in conjunction with long-term customer commitments of ~~$92.3~~$76.9 million and ~~$79.0~~$79.8 million at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, which will be repaid in future periods.

See Note 16 for disaggregated net sales by end-market.

(3) GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

During the three and six months ended June 30, 2021, we acquired a producer of wire enamels used in a range of consumer electronics, electric vehicle and industrial applications, based in China. The acquisition was accounted for as a business combination within our industrial end-market and Performance Coatings segment. The overall impacts to our condensed consolidated financial statements were not considered material as of and for the three and six months ended June 30, 2021. As of June 30, 2021, we have not yet finalized the purchase accounting related to the acquisition and the amounts recorded represent preliminary values. We expect to finalize our purchase accounting during the measurement period which will be no later than one year following the acquisition date.

Goodwill

The following table shows changes in the carrying amount of goodwill from December 31, ~~2019~~2020 to June 30, ~~2020~~2021 by reportable segment:

Performance
Coatings

Transportation
Coatings
Total
Balance at December 31, 2019 $ 1,130.9
$ 78.0
$ 1,208.9
Foreign currency translation 0.2
0.2
0.4
Balance at June 30, 2020 $ 1,131.1
$ 78.2
$ 1,209.3


	Performance Coatings		Mobility Coatings		Total
Balance at December 31, 2020	$	1,211.3	$	83.6	$	1,294.9
Goodwill from acquisitions	23.1		0		23.1
Foreign currency translation	(22.1)		(1.6)		(23.7)
Balance at June 30, 2021	$	1,212.3	$	82.0	$	1,294.3

Identifiable Intangible Assets

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


June 30, 2021	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted average amortization periods (years)
Technology	$	561.5	$	(404.3)	$	157.2	10.4
Trademarks—indefinite-lived	276.8		—		276.8		Indefinite
Trademarks—definite-lived	103.1		(40.3)		62.8		15.8
Customer relationships	949.2		(352.0)		597.2		19.0
Other	15.0		(12.4)		2.6		5.0
Total	$	1,905.6	$	(809.0)	$	1,096.6


June 30, 2020	Gross Carrying Amount		Accumulated Amortization			Net Book Value		Weighted Average Amortization Periods (years)
December 31, 2020									December 31, 2020	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted average amortization periods (years)
Technology	$	541.0	$	(338.0	)	$	203.0	10.4	Technology	$	564.8	$	(383.6)	$	181.2	10.4
Trademarks - indefinite-lived	265.9		—			265.9		Indefinite
Trademarks - definite-lived	98.9		(32.8		)	66.1		15.8
Trademarks—indefinite-lived									Trademarks—indefinite-lived	282.9		—		282.9		Indefinite
Trademarks—definite-lived									Trademarks—definite-lived	103.6		(37.5)		66.1		16.0
Customer relationships	908.1		(290.7		)	617.4		19.0	Customer relationships	943.6		(329.3)		614.3		19.0
Other	15.2		(9.5		)	5.7		5.0	Other	15.3		(11.0)		4.3		5.0
Total	$	1,829.1	$	(671.0	)	$	1,158.1		Total	$	1,910.2	$	(761.4)	$	1,148.8

December 31, 2019
Gross Carrying
Amount

Accumulated
Amortization

Net Book
Value

Weighted Average
Amortization Periods (years)
Technology $ 540.2
$ (310.6 ) $ 229.6
10.4
Trademarks—indefinite-lived 264.9
—
264.9
Indefinite
Trademarks—definite-lived 99.7
(30.1 ) 69.6
15.8
Customer relationships 923.8
(271.3 ) 652.5
19.1
Other 15.2
(7.9 ) 7.3
5.0
Total $ 1,843.8
$ (619.9 ) $ 1,223.9

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

The estimated amortization expense related to the fair value of acquired intangible assets for the remainder of ~~2020~~2021 and each of the succeeding five years is:

Remainder of 2020 $ 57.5
2021 111.7
2022 109.6
2023 70.2
2024 65.4
2025 64.7


Remainder of 2021	$	58.5
2022	114.6
2023	73.7
2024	68.7
2025	68.0
2026	67.5

(4) RESTRUCTURING

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

~~We have incurred costs in connection with involuntary termination benefits associated with our corporate-related initiatives and cost-saving opportunities associated with our Axalta Way initiatives.~~ During the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, we incurred ~~restructuring~~ costs ~~net~~for termination benefits of ~~changes to estimates, of~~$22.5 million, $27.0 million, $13.7 million and $32.2 million, ~~$2.9 million~~respectively. Pretax charges during the three and ~~$4.2 million, respectively. These amounts~~six months ended June 30, 2021 primarily relate to additional employee severance charges within Europe that were excluded from the previously announced global restructuring during July 2020 as we resolved the open aspects related to works council consultations and local legal requirements during the quarter. The majority of our termination benefits are recorded within other operating (benefits) charges in the condensed consolidated statements of operations. The remaining payments associated with these actions are expected to be substantially completed within 1824 months.

The following table summarizes the ~~activities~~activity related to ~~the restructuring~~termination benefit reserves and expenses from December 31, ~~2019~~2020 to June 30, ~~2020:~~

2020 Activity
Balance at December 31, 2019 $ 78.0
Expenses, net of changes to estimates 32.2
Payments made (37.9 )
Foreign currency translation 0.1
Balance at June 30, 2020 $ 72.4

2021:

We recognized impairments of $2.7 million and $3.2 million during the three and six months ended June 30, 2020, respectively, primarily attributable to impairments and associated write-downs resulting from our recent decision to exit the Performance Coatings segment business in Argentina. The impairments are included in the condensed consolidated statements of operations within other operating charges.


	2021 Activity
Balance at December 31, 2020	$	55.8
Expenses, net of changes to estimates	27.0
Payments made	(24.7)
Foreign currency translation	(1.2)
Balance at June 30, 2021	$	56.9

The impacts to pre-tax earnings from incremental accelerated depreciation resulting from the previously announced closure of our manufacturing facility in Mechelen, Belgium for the three and six months ended June 30, 2020 and 2019 were $0.4 million, $8.5 million, $6.7 million and $12.8 million, respectively, which were recorded to cost of goods sold on the condensed consolidated statements of operations.

(5) COMMITMENTS AND CONTINGENCIES

Guarantees

We guarantee certain of our customers’ obligations to third parties, whereby any default by our customers on their obligations could force us to make payments to the applicable creditors. At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had outstanding bank guarantees of ~~$10.9~~$6.6 million and ~~$11.6~~$8.5 million, respectively. ~~Most~~A portion of our bank guarantees expire between ~~2020~~2021 and 2026, while others do not have specified expiration dates. We monitor the customer obligations and bank guarantees to evaluate whether we have a liability at the balance sheet date. AtDuring the six months ended June 30, 2020, we ~~recorded~~incurred a ~~liability~~$1.0 million charge related to our outstanding bank ~~guarantees of $1.0 million.~~guarantees. We did 0t have any liabilities related to our outstanding bank guarantees recorded at June 30, 2021 and December 31, ~~2019.~~2020.

Operational Matter

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

When we filed, and as disclosed in, our Annual Report on Form 10-K for the year ended December 31, 2020, we estimated that it was reasonably possible that losses associated with the matter could have been up to $250 million. Subsequent to the filing of our Annual Report on Form 10-K and through the filing of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, there were further developments which led us to conclude that losses from this matter were probable and, therefore, recorded a charge of $94.4 million for such probable estimated losses during the three months ended March 31, 2021. We also disclosed that, at the time, based on the information then currently available surrounding the full scope and

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

associated responsibilities among relevant parties, we believed that it was reasonably possible that we could incur losses, in addition to the recorded probable losses, of up to $65 million.

Given further developments during the three months ended June 30, 2021, we have reduced our previously recorded estimated charge by $71.8 million which has resulted in a benefit for the three months ended June 30, 2021. This reflects an estimated $29.4 million for insurance receivables recorded within Accounts and notes receivable, net in the condensed consolidated balance sheets at June 30, 2021, as we have obtained confirmation from our insurance carriers that the relevant policies provide coverage for certain losses arising under this matter. The updated amount of the charge also reflects a net decrease of approximately $42.4 million, as we have learned more about the matter, including actual costs to repair the impacted products and the number of impacted products. Liabilities of $50.1 million are recorded as Other accrued liabilities in the condensed consolidated balance sheets at June 30, 2021 and we do 0t believe at this time that there are any incremental reasonably possible losses. The recorded probable losses remain an estimate and actual costs arising from this matter could be materially lower or higher depending on the actual costs incurred to repair the impacted products as well as the availability of additional insurance coverage.

Other

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

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

(6) LONG-TERM EMPLOYEE BENEFITS

Components of Net Periodic Benefit Cost

The following table sets forth the components of net periodic benefit ~~cost~~costs for the three and six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Components of net periodic benefit cost:
Net periodic benefit cost:
Service cost $ 1.9
$ 1.7
$ 3.7
$ 3.6
Interest cost 2.3
3.4
4.6
6.6
Expected return on plan assets (3.1 ) (3.5 ) (6.3 ) (7.0 )
Amortization of actuarial loss, net 0.8
0.4
1.8
0.9
Plan curtailments (0.6 ) —
(1.8 ) —
Net periodic benefit cost $ 1.3
$ 2.0
$ 2.0
$ 4.1


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Components of net periodic benefit cost:
Net periodic benefit cost:
Service cost	$	2.0	$	1.9	$	3.8	$	3.7
Interest cost	1.9		2.3		3.9		4.6
Expected return on plan assets	(3.5)		(3.1)		(6.9)		(6.3)
Amortization of actuarial loss, net	1.3		0.8		2.5		1.8

Plan curtailments	0		(0.6)		0		(1.8)
Net periodic benefit cost	$	1.7	$	1.3	$	3.3	$	2.0

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

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

(7) STOCK-BASED COMPENSATION

During the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, we recognized expenses of $4.2 million, $7.8 million,$6.1 million and$11.2 million, ~~income of~~ ~~$1.4 million~~ ~~and expense of $5.3 million,~~ respectively, ~~for~~in stock-based compensation, which was allocated between costs of goods sold and selling, general and administrative expenses on the condensed consolidated statements of operations. ~~The income recognized during the three months ended June 30, 2019 resulted primarily from forfeitures.~~ We recognized tax benefits on stock-based compensation of $0.9 million, $1.2 million, $1.3 million, ~~$1.5 million, tax expense of $0.2 million~~ and ~~tax benefits of $1.1~~$1.5 million for the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

~~Table of Contents~~

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

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

~~2020~~2021 Activity

In February 2020, we granted restricted stock units and performance share units to certain employees and directors. All awards were granted under the Company's Amended and Restated 2014 Incentive Award Plan. During 2020, the Company withheld shares and used cash to settle the employees' tax portion of vesting awards in the amount of $0.5 million.

A summary of award activity by type for the six months ended June 30, ~~2020~~2021 is presented below.

Stock Options
Awards
(in millions)

Weighted-
Average
Exercise
Price

Aggregate
Intrinsic
Value
(in millions)

Weighted
Average
Remaining
Contractual
Life (years)
Outstanding at January 1, 2020 3.0
$ 25.92

Granted —
$ —

Exercised ⁽¹⁾
—
$ 14.61

Forfeited ⁽¹⁾
—
$ 28.24

Outstanding at June 30, 2020 3.0
$ 26.27

Vested and expected to vest at June 30, 2020 3.0
$ 26.27
$ 5.4
5.24
Exercisable at June 30, 2020 2.4
$ 25.94
$ 5.4
4.49


Stock Options	Awards (in millions)	Weighted- Average Exercise Price		Aggregate Intrinsic Value (in millions)		Weighted Average Remaining Contractual Life (years)
Outstanding at January 1, 2021	2.5	$	27.34
Granted	0	$	0
Exercised	(0.5)	$	28.26
Forfeited / Expired	(0.4)	$	32.00
Outstanding at June 30, 2021	1.6	$	25.77
Vested and expected to vest at June 30, 2021	1.6	$	25.77	$	7.8	5.27
Exercisable at June 30, 2021	1.4	$	25.64	$	7.2	4.98


~~(1)~~	~~Activity during the six months ended June 30, 2020 rounds to zero.~~

Cash received by the Company upon exercise of options for the six months ended June 30, ~~2020~~2021 was ~~$0.8~~$14.1 million. ~~Excess tax benefits~~Tax shortfall expenses on these exercises were ~~$0.1~~$0.5 million.

At June 30, ~~2020,~~2021, there ~~is $1.6~~was $0.3 million of unrecognized expense relating to unvested stock options that is expected to be amortized over athe weighted average period of ~~1.2 years.~~0.7 year.


Restricted Stock Awards and Restricted Stock Units	Awards/Units (millions)		Weighted-Average Fair Value
Outstanding at January 1, 2020	1.2		$	28.45
Restricted Stock Awards and Restricted Stock Units (1)					Restricted Stock Awards and Restricted Stock Units (1)	Awards/Units (millions)	Weighted-Average Fair Value
Outstanding at January 1, 2021					Outstanding at January 1, 2021	1.0	$	28.84
Granted	0.4		$	29.73	Granted	0.6	$	28.75
Vested	(0.4	)	$	28.35	Vested	(0.4)	$	29.06
Forfeited	(0.1	)	$	28.13	Forfeited	(0.1)	$	29.05
Outstanding at June 30, 2020	1.1		$	29.03
Outstanding at June 30, 2021					Outstanding at June 30, 2021	1.1	$	28.69

(1) As of June 30, 2021, there are 0 restricted stock awards outstanding and only restricted stock units remain.

Tax shortfall expenses on the vesting of restricted stock awards and restricted stock units during the six months ended June 30, ~~2020~~2021 was ~~$0.3~~$0.1 million.

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

At June 30, ~~2020,~~2021, there ~~is $16.2~~was $19.1 million of unamortized expense relating to unvested ~~restricted stock and~~ restricted stock units that is expected to be amortized over a weighted average period of ~~1.5~~1.7 years.


Performance Stock Awards and Performance Share Units (1)	Awards/Units (millions)	Weighted-Average Fair Value
Outstanding at January 1, 2021	0.5	$	31.07
Granted	0.4	$	29.53
Vested	0	$	0
Forfeited	(0.2)	$	31.85
Outstanding at June 30, 2021	0.7	$	30.11

(1) As of June 30, 2021, there are 0 performance stock awards outstanding and only performance share units remain

Performance Stock Awards and Performance Share Units
Awards/Units
(millions)

Weighted-Average
Fair Value
Outstanding at January 1, 2020 0.5
$ 32.11
Granted 0.4
$ 31.88
Vested (0.1 ) $ 38.11
Forfeited (0.1 ) $ 32.95
Outstanding at June 30, 2020 0.7
$ 31.14

Our performance stock awards and performance share units allow for participants to vest in more or less than the targeted number of shares granted. ~~Some~~All of our performance awards are currently performing ~~at better or worse than targets, and we~~below the applicable targets. We currently expect a total of ~~0.6~~0.5 million shares with a weighted average fair value per share of ~~$30.46~~$29.89 to ~~vest.~~vest at the respective vesting dates for such awards. At June 30, ~~2020,~~2021, there is ~~$13.2~~$12.4 million of unamortized expense relating to unvested ~~performance stock awards and~~ performance share units that is expected to be amortized over a weighted average period of ~~2.2~~2.4 years. The forfeitures include performance stock awards and performance share units that vested below ~~target.~~threshold payout.

~~Table of Contents~~

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

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

(8) OTHER INCOME, NET

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Foreign exchange (gains) losses, net $ (0.3 ) $ 2.2
$ 2.0
$ 4.6
Debt extinguishment and refinancing related costs —
0.2
2.4
0.2
Other miscellaneous income, net (1.9 ) (3.3 ) (5.8 ) (6.7 )
Total $ (2.2 ) $ (0.9 ) $ (1.4 ) $ (1.9 )


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Foreign exchange losses (gains), net	$	1.8	$	(0.3)	$	3.6	$	2.0

Debt extinguishment and refinancing related costs	0.2		0		0.2		2.4
Other miscellaneous income, net (1)	(10.1)		(1.9)		(12.3)		(5.8)

Total	$	(8.1)	$	(2.2)	$	(8.5)	$	(1.4)

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

(9) INCOME TAXES

Our effective income tax rates for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 are as follows:

Six Months Ended June 30,
2020 2019
Effective Tax Rate 56.4 % 18.2 %


	Six Months Ended June 30,
	2021		2020
Effective Tax Rate	23.0	%	56.4	%

The Company's effective tax rate for the periods reflected in the condensed consolidated financial statements are not directly comparable primarily due to the intra-entity asset transfers of certain of its intellectual property and the impacts of certain ongoing tax audits, which occurred during the six months ended June 30, 2020 and are discussed ~~in further detail~~ below.

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

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

In connection with the income tax audit in Germany for the tax period 2010-2013, the Germany Tax Authority (“GTA”) indicated that it believed that certain positions taken on the 2010-2013 corporate income tax returns were not in compliance with German tax law. While the Company ~~believes our filings were accurate~~disagrees with the conclusions of the GTA based on the technical merits of our positions, after extensive discussions with the GTA and to avoid a potentially long and costly litigation process, in March 2020 the Company expressed a willingness to settle with the GTA on certain ~~matters and expects to reach~~matters. The Company has reached a formal agreement with the GTA and is expecting to settle the final assessment in the coming months. ~~As a result of these changes, the~~The Company recorded a charge to income tax expense of $14.3 million during the six months ended June 30, 2020. The Company is also currently under audit in Germany for tax years 2014-2017 and is prepared to vigorously defend itself on these matters.

The Company anticipates that it is reasonably possible it will settle up to $11.9 million, exclusive of interest and penalties, of its current unrecognized tax benefits within 2021 due to the conclusion of the 2010-2013 German income tax audit.

~~Table of Contents~~

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

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

(10) NET INCOME (LOSS) ~~INCOME~~ PER COMMON SHARE

Basic ~~earnings~~net income (loss) per common share excludes the dilutive impact of potentially dilutive securities and is computed by dividing net ~~(loss)~~ income by the weighted average number of common shares outstanding for the period. ~~For periods in which we recognize~~Diluted net income ~~diluted earnings~~(loss) per common share includes the effect of potential dilution from the hypothetical exercise of outstanding stock options and vesting of restricted shares and performance shares. ~~For periods in which we recognize net loss, such impacts are excluded from the calculation of earnings per share as its inclusion would have an anti-dilutive effect.~~ A reconciliation of our basic and diluted ~~earnings~~net income (loss) per common share is as follows:

Three Months Ended June 30, Six Months Ended June 30,
(In millions, except per share data) 2020 2019 2020 2019
Net (loss) income to common shareholders $ (82.8 ) $ 98.4
$ (30.6 ) $ 141.8
Basic weighted average shares outstanding 235.2
233.3
235.1
233.7
Diluted weighted average shares outstanding 235.2
235.4
235.1
236.0
Net income (loss) per common share:
Basic net (loss) income per share $ (0.35 ) $ 0.42
$ (0.13 ) $ 0.61
Diluted net (loss) income per share $ (0.35 ) $ 0.42
$ (0.13 ) $ 0.60


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions, except per share data)	2021		2020		2021		2020
Net income (loss) to common shareholders	$	126.4	$	(82.8)	$	141.6	$	(30.6)
Basic weighted average shares outstanding	232.5		235.2		233.2		235.1
Diluted weighted average shares outstanding	233.5		235.2		234.1		235.1
Net income (loss) per common share:
Basic net income (loss) per share	$	0.54	$	(0.35)	$	0.61	$	(0.13)
Diluted net income (loss) per share	$	0.54	$	(0.35)	$	0.60	$	(0.13)

~~Significant Transactions~~

During January 2020, we voluntarily prepaid $300.0 million of the outstanding principal on the 2024 Dollar Term Loans. As a result of the prepayment, we recorded a loss on extinguishment of debt of $2.7 million consisting of the write off of unamortized deferred financing costs and original issue discounts of $1.5 million and $1.2 million, respectively.17

~~Issuance of 2027 Senior Notes~~

During June 2020, Axalta Coating Systems, LLC and Axalta Coating Systems Dutch Holding B B.V. (collectively, the "Issuers"), each an indirect, wholly owned subsidiary of the Company, issued $500.0 million in aggregate principal amount of 4.750% Senior Notes due 2027 (the “2027 Senior Notes”).

~~The 2027 Senior Notes are fully and unconditionally guaranteed by the Company and each of the Company's existing restricted subsidiaries, subject to certain exceptions.~~

The indenture governing the 2027 Senior Notes contains covenants that limit the Company’s (and its subsidiaries’) ability to, among other things: (i) incur additional debt or issue certain preferred stock; (ii) pay dividends, redeem stock or make other distributions; (iii) make other restricted payments or investments; (iv) create liens on assets; (v) transfer or sell assets; (vi) create restrictions on payment of dividends or other amounts by the Company to the Company’s restricted subsidiaries; (vii) engage in mergers or consolidations; (viii) engage in certain transactions with affiliates; and (ix) designate the Company’s subsidiaries as unrestricted subsidiaries.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

The 2027 Senior Notes were issued at par and are due June 15, 2027. We will defer debt issuance costs of $8.3 million, which are recorded as reductions to long-term borrowings in the condensed consolidated balance sheets and amortized over the life of the issuance. The 2027 Senior Notes bear interest at 4.750% which is payable semi-annually on June 15^th ~~and December 15~~^th. We have the option to redeem all or part of the 2027 Senior Notes at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest, if any, on or after June 15^th ~~of the years indicated:~~

Period 2027 Senior Notes Percentage
2023 102.375 %
2024 101.188 %
2025 and thereafter 100.000 %

Notwithstanding the foregoing, at any time and from time to time prior to June 15, 2023, we may at our option redeem in the aggregate up to 40% of the original aggregate principal amount of the 2027 Senior Notes with the net cash proceeds of one or more Equity Offerings (as defined in the indenture governing the 2027 Senior Notes) at a redemption price of 104.75% plus accrued and unpaid interest, if any, to the redemption date. At least 50% of the original aggregate principal of the notes must remain outstanding after each such redemption.

Upon the occurrence of certain events constituting a change of control, holders of the 2027 Senior Notes have the right to require us to repurchase all or any part of the 2027 Senior Notes at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest, if any, to the repurchase date.

The indebtedness under the 2027 Senior Notes is senior unsecured indebtedness of the Issuers, is senior in right of payment to all future subordinated indebtedness of the Issuers and guarantors, and is equal in right of payment to all existing and future senior indebtedness of the Issuers and guarantors. The 2027 Senior Notes are effectively subordinated to any secured indebtedness of the Issuers and guarantors (including indebtedness outstanding under the Senior Secured Credit Facilities) to the extent of the value of the assets securing such indebtedness.

Future repayments

Below is a schedule of required future repayments of all borrowings outstanding at June 30, ~~2020.~~2021.

Remainder of 2020 $ 23.5
2021 30.4
2022 54.2
2023 27.1
2024 2,870.3
Thereafter 1,058.9
Total borrowings 4,064.4
Unamortized original issue discount (8.3 )
Unamortized deferred financing costs (34.8 )
Total borrowings, net $ 4,021.3


Remainder of 2021	$	26.1
2022	54.4
2023	27.3
2024	1,993.3
2025	539.1
Thereafter	1,249.6
Total borrowings	3,889.8
Unamortized original issue discount	(5.5)
Unamortized deferred financing costs	(30.4)
Total borrowings, net	$	3,853.9

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

Fair value of financial instruments

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

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

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

Fair value of contingent consideration

The fair value of contingent consideration associated with an acquisition completed in the current year is valued at each balance sheet date, until amounts become payable, with adjustments recorded within other operating (benefits) charges in the condensed consolidated statements of operations. During the six months ended June 30, 2021, in conjunction with the acquisition described in Note 3, we recorded fair value of contingent consideration of $7.3 million. The contingent consideration was valued using a probability-weighted expected payment method. The analysis considered the timing of expected future cash flows and the probability of key elements of the approval process are completed. Due to the significant unobservable inputs used in the valuations, these liabilities are categorized within Level 3 of the fair value hierarchy.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

The table below presents the fair values of our financial instruments measured on a recurring basis by level within the fair value hierarchy at June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.


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

Cross-currency swaps (2)	$	0	$	17.1	$	0	$	17.1	$	0	$	16.7	$	0	$	16.7

Other assets:



Investments in equity securities	0.7		0		0		0.7		0.8		0		0		0.8
Liabilities:
Other accrued liabilities:
Interest rate caps (1)	0		1.0		0		1.0		0		2.0		0		2.0
Interest rate swaps (1)	0		29.2		0		29.2		0		28.9		0		28.9

Contingent consideration	0		0		4.4		4.4		0		0		0		0
Other liabilities:

Interest rate swaps (1)	0		16.0		0		16.0		0		31.1		0		31.1
Cross-currency swaps (2)	0		31.9		0		31.9		0		52.0		0		52.0
Contingent consideration	0		0		2.9		2.9		0		0		0		0
Long-term borrowings:
2024 Dollar Term Loans	0		2,045.0		0		2,045.0		0		2,043.0		0		2,043.0
2025 Euro Senior Notes	0		546.2		0		546.2		0		564.3		0		564.3
2027 Dollar Senior Notes	0		524.6		0		524.6		0		533.1		0		533.1
2029 Dollar Senior Notes	0		685.0		0		685.0		0		704.6		0		704.6

June 30, 2020 December 31, 2019
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets:
Prepaid expenses and other current assets:
Cross-currency swaps ⁽²⁾
$ —
$ 14.5
$ —
$ 14.5
$ —
$ 14.4
$ —
$ 14.4
Foreign currency forward contracts ^{(1) (3)}
—
—
—
—
—
—
—
—
Other assets:

Cross-currency swaps ⁽²⁾
—
19.9
—
19.9
—
8.0
—
8.0
Investments in equity securities 0.7
—
—
0.7
0.6
—
—
0.6
Liabilities:
Other accrued liabilities:
Interest rate caps ⁽¹⁾
—
2.0
—
2.0
—
1.3
—
1.3
Interest rate swaps ⁽¹⁾
—
28.0
—
28.0
—
8.9
—
8.9
Other liabilities:
Interest rate caps ⁽¹⁾
—
1.0
—
1.0
—
1.2
—
1.2
Interest rate swaps ⁽¹⁾
—
44.5
—
44.5
—
20.5
—
20.5
Long-term borrowings:
2024 Dollar Term Loans —
2,007.4
—
2,007.4
—
2,396.5
—
2,396.5
2024 Dollar Senior Notes —
507.0
—
507.0
—
520.2
—
520.2
2024 Euro Senior Notes —
375.6
—
375.6
—
388.2
—
388.2
2025 Euro Senior Notes —
501.7
—
501.7
—
520.7
—
520.7
2027 Dollar Senior Notes —
503.6
—
503.6
—
—
—
—
(1) Cash flow hedge

(2) Net investment hedge

The table below presents a roll forward of activity for the Level 3 liabilities for the three and six months ended June 30, 2021.


~~(1)~~			~~Cash flow hedge~~			Fair Value Using Significant Unobservable Inputs (Level 3)

Beginning balance January 1, 2021		$	0
Activity		0

~~(2)~~	~~Net investment hedge~~


~~(3)~~	~~Balance~~

Ending balance at March 31, 2021		0
Business acquisition		7.3




Ending balance at June 30, ~~2020 rounds to zero.~~2021		$	7.3

Derivative Financial Instruments

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

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

~~Interest Rate Swaps Designated as Cash Flow Hedges~~19

During the three months ended March 31, 2020, we entered into 2 interest rate swaps with aggregate notional amounts totaling $400.0 million to hedge interest rate exposures associated with the 2024 Dollar Term Loans. Under the terms of the interest rate swap agreements, the Company is required to pay the counterparties a stream of fixed interest payments at rates of 1.61% and 1.18% on $200.0 million of notional value for each instrument, and in-turn, receives variable interest payments based on 3-month LIBOR from the counter-parties. The interest rate swaps are designated as cash flow hedges and expire on December 31, 2022. These interest rate swaps are marked to market at each reporting date and any unrealized gains or losses are included in accumulated other comprehensive loss ("AOCI") and reclassified to interest expense in the same period or periods during which the hedged transactions affect earnings.

~~Foreign Currency Forward Contracts Designated as Cash Flow Hedges~~

During the three months ended March 31, 2020, we designated foreign currency forward contracts with a notional value of $5.0 million as cash flow hedges of the Company’s exposure to variability in exchange rates on forecasted purchases of inventory denominated in foreign currencies. These forward currency contracts are marked to market at each reporting date and any unrealized gains or losses are included in AOCI and reclassified to cost of goods sold in the same period or periods during which the hedged transactions affect earnings.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

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


	June 30, 2020			December 31, 2019				June 30, 2021		December 31, 2020
AOCI:							AOCI:
Interest rate caps (cash flow hedges)	$	3.7		$	3.5		Interest rate caps (cash flow hedges)	$	1.4	$	2.6
Interest rate swaps (cash flow hedges)	72.5			29.4			Interest rate swaps (cash flow hedges)	45.2		60.0
Foreign currency forward contracts (cash flow hedges) ⁽¹⁾	—			—
Foreign currency forward contracts (cash flow hedges)							Foreign currency forward contracts (cash flow hedges)	0.2		0.3
Cross-currency swaps (net investment hedges)	(34.4		)	(22.4		)	Cross-currency swaps (net investment hedges)	14.8		35.2
Total AOCI	$	41.8		$	10.5		Total AOCI	$	61.6	$	98.1


~~(1)~~	~~Balance at June 30, 2020 rounds to zero.~~

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

The following tables set forth the locations and amounts recognized during the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 for these cash flow and net investment hedges.

For the Three Months Ended June 30,
2020 2019
Derivatives in Cash Flow and Net Investment Hedges Location of Loss Recognized in Income on Derivatives Net Amount of Loss Recognized in OCI on Derivatives Amount of Loss (Gain) Recognized in Income Net Amount of Loss (Gain) Recognized in OCI on Derivatives Amount of (Gain) Loss Recognized in Income
Interest rate caps Interest expense, net $ —
$ 0.6
$ 3.4
$ (0.5 )
Interest rate swaps Interest expense, net 6.1
2.9
16.6
0.2
Foreign currency forward contracts ⁽¹⁾
Cost of goods sold —
—
—
—
Cross-currency swaps Interest expense, net 3.1
(3.7 ) (1.6 ) (3.6 )


~~(1)~~	~~Activity during the three months ended June 30, 2020 rounds to zero.~~


		For the Three Months Ended June 30,
		2021				2020
Derivatives in Cash Flow and Net Investment Hedges	Location of Loss (Gain) Recognized in Income on Derivatives	Net Amount of Loss (Gain) Recognized in OCI on Derivatives		Amount of Loss (Gain) Recognized in Income		Net Amount of Loss (Gain) Recognized in OCI on Derivatives		Amount of Loss (Gain) Recognized in Income
Interest rate caps	Interest expense, net	$	0	$	0.6	$	0	$	0.6
Interest rate swaps	Interest expense, net	0.9		7.2		6.1		2.9
Foreign currency forward contracts (1)	Cost of goods sold	0.1		0.1		0		0
Cross-currency swaps	Interest expense, net	(0.3)		(4.7)		3.1		(3.7)

For the Six Months Ended June 30,
2020 2019
Derivatives in Cash Flow and Net Investment Hedges Location of Loss (Gain) Recognized in Income on Derivatives Net Amount of Loss (Gain) Recognized in OCI on Derivatives Amount of Loss (Gain) Recognized in Income Net Amount of Loss (Gain) Recognized in OCI on Derivatives Amount of (Gain) Loss Recognized in Income
Interest rate caps Interest expense, net $ 1.1
$ 0.9
$ 5.9
$ (1.6 )
Interest rate swaps Interest expense, net 47.6
4.5
27.6
0.1
Foreign currency forward contracts ⁽¹⁾
Cost of goods sold —
—
—
—
Cross-currency swaps Interest expense, net (19.4 ) (7.4 ) (14.9 ) (7.2 )
(1) Activity during the three months ended June 30, 2020 rounds to zero


~~(1)~~	~~Activity during the six months ended June 30, 2020 rounds to zero.~~


		For the Six Months Ended June 30,
		2021				2020
Derivatives in Cash Flow and Net Investment Hedges	Location of Loss (Gain) Recognized in Income on Derivatives	Net Amount of (Gain) Recognized in OCI on Derivatives		Amount of Loss (Gain) Recognized in Income		Net Amount of Loss (Gain) Recognized in OCI on Derivatives		Amount of Loss (Gain) Recognized in Income
Interest rate caps	Interest expense, net	$	0	$	1.2	$	1.1	$	0.9
Interest rate swaps	Interest expense, net	(0.6)		14.2		47.6		4.5
Foreign currency forward contracts (1)	Cost of goods sold	0		0.1		0		0
Cross-currency swaps	Interest expense, net	(29.9)		(9.5)		(19.4)		(7.4)

(1) Activity during the six months ended June 30, 2020 rounds to zero

Over the next 12 months, we expect losses of ~~$31.8~~$30.7 million pertaining to cash flow hedges to be reclassified from AOCI into earnings, related to our interest rate caps, interest rate swaps, and foreign currency forward contracts.

Derivative Instruments Not Designated as Cash Flow Hedges

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

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

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

Derivatives Not Designated as Hedging
Instruments under ASC 815

Location of Loss (Gain) Recognized in
Income on Derivatives
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Foreign currency forward contracts Other income, net $ 0.8
$ 0.3
$ (0.9 ) $ 1.8


Derivatives Not Designated as Hedging Instruments under ASC 815	Location of Gain (Loss) Recognized in Income (Loss) on Derivatives	Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020

Foreign currency forward contracts	Other income, net	$	0.9	$	0.8	$	(5.9)	$	(0.9)

(16) SEGMENTS

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

We have 2 operating segments, which are also our reportable segments: Performance Coatings and Mobility Coatings. Previously named Transportation ~~Coatings.~~Coatings, our Mobility Coatings segment was renamed during the six months ended June 30, 2021 with no changes to the underlying business or segment structure. The CODM reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment. Our CODM is identified as the Chief Executive Officer because he has final authority over performance assessment and resource allocation decisions. Our segments are based on the type and concentration of customers served, service requirements, methods of distribution and major product lines.

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

Through our ~~Transportation~~Mobility Coatings segment, we provide advanced coating technologies to OEMs of light and commercial vehicles. These increasingly global customers require a high level of technical support coupled with cost-effective, 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.

~~Table of Contents~~

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

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

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net sales (1):
Refinish	$	463.1	$	261.9	$	862.1	$	629.7
Industrial	342.7		220.2		651.0		500.1
Total Net sales Performance Coatings	805.8		482.1		1,513.1		1,129.8
Light Vehicle	243.9		126.3		522.8		386.4
Commercial Vehicle	77.1		44.3		154.5		120.0
Total Net sales Mobility Coatings	321.0		170.6		677.3		506.4
Total Net sales	$	1,126.8	$	652.7	$	2,190.4	$	1,636.2

(1)The Company has 0 intercompany sales between segments.

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Net sales ⁽¹⁾:

Refinish $ 261.9
$ 447.3
$ 629.7
$ 852.8
Industrial 220.2
309.4
500.1
617.2
Total Net sales Performance Coatings 482.1
756.7
1,129.8
1,470.0
Light Vehicle 126.3
306.1
386.4
622.0
Commercial Vehicle 44.3
94.7
120.0
184.8
Total Net sales Transportation Coatings 170.6
400.8
506.4
806.8
Total Net sales $ 652.7
$ 1,157.5
$ 1,636.2
$ 2,276.8
Equity in earnings in unconsolidated affiliates:
Performance Coatings $ —
$ 0.1
$ —
$ 0.2
Transportation Coatings (0.2 ) 0.4
(0.1 ) —
Total $ (0.2 ) $ 0.5
$ (0.1 ) $ 0.2

June 30, 2020 December 31, 2019
Investment in unconsolidated affiliates:
Performance Coatings $ 2.0
$ 2.4
Transportation Coatings 12.6
12.7
Total $ 14.6
$ 15.1


~~(1)~~	~~The Company has 0 intercompany sales between segments.~~

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Segment Adjusted EBIT (1):
Performance Coatings	$	139.7	$	1.5	$	256.9	$	80.9
Mobility Coatings	5.7		(39.3)		44.9		(13.5)
Total (2)	145.4		(37.8)		301.8		67.4
Interest expense, net	33.4		36.1		66.9		72.6
Debt extinguishment and refinancing related costs (a)	0.2		0		0.2		2.4
Termination benefits and other employee related costs (b)	22.7		15.2		25.5		34.7
Strategic review and retention costs (c)	2.2		6.7		7.6		18.2
Offering and transactional costs (d)	1.4		0.1		1.6		0.2
Impairment charges(e)	0		2.7		0		3.2
Pension special events (f)	0		(0.6)		0		(1.8)
Accelerated depreciation (g)	0.6		0.4		1.2		8.5
Indemnity income (h)	(0.1)		0		(0.1)		0

Operational matter (i)	(71.8)		0		22.6		0
Brazil indirect tax (j)	(8.3)		0		(8.3)		0
Income (loss) before income taxes	$	165.1	$	(98.4)	$	184.6	$	(70.6)

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Segment Adjusted EBIT ⁽¹⁾:

Performance Coatings $ 1.5
$ 127.6
$ 80.9
$ 206.2
Transportation Coatings (39.3 ) 40.4
(13.5 ) 74.6
Total ⁽²⁾
(37.8 ) 168.0
67.4
280.8
Interest expense, net 36.1
41.0
72.6
82.3
Debt extinguishment and refinancing related costs ^(a)
—
0.2
2.4
0.2
Termination benefits and other employee related costs ^(b)
15.2
2.8
34.7
4.1
Strategic review and retention costs ^(c)
6.7
0.8
18.2
0.8
Offering and transactional costs ^(d)
0.1
0.2
0.2
0.8
Loss (gain) on divestiture and impairments ^(e)
2.7
(1.3 ) 3.2
3.9
Pension special event ^(f)
(0.6 ) —
(1.8 ) —
Accelerated depreciation ^(g)
0.4
6.7
8.5
12.8
Indemnity income ^(h)
—
(0.2 ) —
(0.2 )
(Loss) income before income taxes $ (98.4 ) $ 117.8
$ (70.6 ) $ 176.1



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

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

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

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

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

(d)			Represents acquisition and divestiture-related expenses, all of which are not considered indicative of our ongoing operating performance.

(e)			Represents ~~expenses and associated changes to estimates related to the sale of our interest in a joint venture business and other impairments,~~impairment charges, which are not considered indicative of our ongoing ~~operating~~ performance.

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

(g)			Represents incremental depreciation expense resulting from truncated useful lives of the assets impacted by our manufacturing footprint assessments, which we do not consider indicative of our ongoing operating performance.

(h)			Represents indemnity income associated with ~~the acquisition by Axalta of the DuPont Performance Coatings business,~~acquisitions, which we do not consider indicative of our ongoing operating performance.

(i)			Represents expenses, changes in estimates and insurance recoveries for probable liabilities related to an operational matter in the Mobility Coatings segment discussed further in Note 5, which is not indicative of our ongoing operating performance.

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

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

(17) ACCUMULATED OTHER COMPREHENSIVE LOSS

Unrealized
Currency
Translation
Adjustments

Pension
Adjustments

Unrealized
(Loss) Gain on
Derivatives

Accumulated
Other
Comprehensive
(Loss) Income
Balance at December 31, 2019 $ (297.0 ) $ (69.9 ) $ (28.6 ) $ (395.5 )
Current year deferrals to AOCI (83.3 ) —
(36.3 ) (119.6 )
Reclassifications from AOCI to Net income —
(0.4 ) 1.6
1.2
Net Change (83.3 ) (0.4 ) (34.7 ) (118.4 )
Balance at March 31, 2020 (380.3 ) (70.3 ) (63.3 ) (513.9 )
Current year deferrals to AOCI 6.1
—
(5.2 ) 0.9
Reclassifications from AOCI to Net income —
0.4
3.0
3.4
Net Change 6.1
0.4
(2.2 ) 4.3
Balance at June 30, 2020 $ (374.2 ) $ (69.9 ) $ (65.5 ) $ (509.6 )


	Unrealized Currency Translation Adjustments		Pension Adjustments		Unrealized (Loss) Gain on Derivatives		Accumulated Other Comprehensive (Loss) Income
Balance at December 31, 2020	$	(282.0)	$	(88.7)	$	(54.1)	$	(424.8)
Current year deferrals to AOCI	(37.4)		0		1.3		(36.1)
Reclassifications from AOCI to Net income	0		0.7		6.6		7.3
Net Change	(37.4)		0.7		7.9		(28.8)
Balance at March 31, 2021	(319.4)		(88.0)		(46.2)		(453.6)
Current year deferrals to AOCI	38.7		0		(0.8)		37.9
Reclassifications from AOCI to Net income	0		1.0		6.7		7.7
Net Change	38.7		1.0		5.9		45.6
Balance at June 30, 2021	$	(280.7)	$	(87.0)	$	(40.3)	$	(408.0)

The cumulative income tax benefit related to the adjustments for pension benefits at June 30, 2021 was $32.7 million. The cumulative income tax benefit related to the adjustments for unrealized loss on derivatives at June 30, 2021 was $6.5 million.


	Unrealized Currency Translation Adjustments		Pension Adjustments		Unrealized Gain (Loss) on Derivatives		Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2019	$	(297.0)	$	(69.9)	$	(28.6)	$	(395.5)
Current year deferrals to AOCI	(83.3)		0		(36.3)		(119.6)
Reclassifications from AOCI to Net loss	0		(0.4)		1.6		1.2
Net Change	(83.3)		(0.4)		(34.7)		(118.4)
Balance at March 31, 2020	(380.3)		(70.3)		(63.3)		(513.9)
Current year deferrals to AOCI	6.1		0		(5.2)		0.9
Reclassifications from AOCI to Net loss	0		0.4		3.0		3.4
Net Change	6.1		0.4		(2.2)		4.3
Balance at June 30, 2020	$	(374.2)	$	(69.9)	$	(65.5)	$	(509.6)

Included within ~~reclassifications~~the reclassification from AOCI to Net ~~income~~Income for the three and six months ended June 30, 2020 were curtailment gains of $0.6 million and $1.8 million, respectively. The cumulative income tax benefit related to the adjustments for pension benefits at June 30, 2020 was $27.0 million. The cumulative income tax benefit related to the adjustments for unrealized loss on derivatives at June 30, 2020 was $10.7 million.

Unrealized
Currency
Translation
Adjustments

Pension
Adjustments

Unrealized
Gain (Loss) on
Derivatives
Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2018 $ (299.4 ) $ (36.4 ) $ (0.3 ) $ (336.1 )
Current year deferrals to AOCI 12.8
—
(11.4 ) 1.4
Reclassifications from AOCI to Net income —
—
(1.0 ) (1.0 )
Net Change 12.8
—
(12.4 ) 0.4
Balance at March 31, 2019 (286.6 ) (36.4 ) (12.7 ) (335.7 )
Current year deferrals to AOCI (5.7 ) (0.1 ) (17.3 ) (23.1 )
Reclassifications from AOCI to Net income 2.6
0.5
(0.3 ) 2.8
Net Change (3.1 ) 0.4
(17.6 ) (20.3 )
Balance at June 30, 2019 $ (289.7 ) $ (36.0 ) $ (30.3 ) $ (356.0 )

The cumulative income tax benefit related to the adjustments for pension benefits at June 30, 2019 was $14.3 million. The cumulative income tax benefit related to the adjustments for unrealized loss on derivatives at June 30, 2019 was $4.4 million.

(18) SUBSEQUENT EVENTS

OnAcquisition

As disclosed in our Current Report on Form 8-K filed on July ~~29, 2020,~~7, 2021, on July 6, 2021, we ~~announced~~entered into definitive agreements, whereby we agreed to acquire one hundred percent (100%) of the share capital of U-POL Holdings Limited (“U-POL”), a ~~global restructuring~~leading manufacturer of ~~our business given~~repair and refinish products used primarily for automotive refinish and aftermarket protective applications, for £428 million in cash, subject to limited adjustments as described in the ~~significant customer demand headwinds we are facing due to COVID-19 and to better position~~agreement. Closing of the ~~Company for sustained growth. The restructuring, which~~acquisition is subject to ~~works council consultations and local legal~~satisfaction of certain regulatory requirements ~~is expected to result in a pretax charge of approximately $40-45 million, of which approximately $30-35 million relates primarily to employee severance~~ and other ~~cash costs. The remaining approximately $10 million relates to the accelerated depreciation~~customary closing conditions.

Table of assets and other non-cash costs. Capital expenditures associated with these restructuring actions are anticipated in the range of $10-15 million. Substantially all of the restructuring actions are expected to be completed over the next 24 months and result in a net reduction to our workforce of approximately 550 employees globally, with the potential for additional reductions from Europe.Contents

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the interim unaudited condensed consolidated financial statements and the condensed notes thereto included elsewhere in this Quarterly Report on Form 10-Q, as well as the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

FORWARD-LOOKING STATEMENTS

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

~~adverse developments in economic conditions as a result of global coronavirus pandemic ("COVID-19") or otherwise;~~

the duration and spread of COVID-19 outbreak; its severity; actions taken to contain the virus, including government actions to mitigate the economic impact of the outbreak; how quickly and to what extent normal economic and operating conditions can resume; how quickly and to what extent our customers and counterparties can recover from the negative impacts of the outbreak; and the effects, and unpredictability resulting from, recurring containment and mitigation actions;

~~volatility in the capital, credit and commodities markets;~~

~~our inability to successfully execute on our growth strategy and our cost savings initiatives, including restructurings;~~

~~increased competition;~~

~~reduced demand for some of our products as a result of improved safety features on vehicles, insurance company influence, new business models or new methods of travel~~

~~risks of the loss or change in purchasing levels of any of our significant customers or the consolidation of MSOs, distributors and/or body shops;~~

~~our reliance on our distributor network and third-party delivery services for the distribution and export of certain of our products;~~

~~credit risk exposure from our customers;~~

~~price increases or business interruptions in our supply of raw materials;~~

~~failure to develop and market new products and manage product life cycles;~~

~~business disruptions, security threats and security breaches, including security risks to our information technology systems;~~

~~risks associated with our outsourcing strategies;~~

~~risks associated with our non-U.S. operations;~~

~~currency-related risks;~~

~~terrorist acts, conflicts, wars, natural disasters, pandemics, and other health crises that may materially adversely affect our business, financial condition and results of operations;~~

~~risks associated with the United Kingdom’s withdrawal from the European Union;~~

~~failure to comply with the anti-corruption laws of the United States and various international jurisdictions;~~

~~failure to comply with anti-terrorism laws and regulations and applicable trade embargoes;~~

~~risks associated with protecting data privacy;~~

significant environmental liabilities and costs as a result of our current and past operations or products, including operations or products related to our business prior to our acquisition of DuPont Performance Coatings;

~~transporting certain materials that are inherently hazardous due to their toxic nature;~~

~~litigation and other commitments and contingencies;~~

~~ability to recruit and retain the experienced and skilled personnel we need to compete;~~

~~unexpected liabilities under any pension plans applicable to our employees;~~

~~work stoppages, union negotiations, labor disputes and other matters associated with our labor force;~~

~~our ability to protect and enforce intellectual property rights;~~

~~intellectual property infringement suits against us by third parties;~~

~~our ability to realize the anticipated benefits of any acquisitions and divestitures;~~

~~our joint ventures’ ability to operate according to our business strategy should our joint venture partners fail to fulfill their obligations;~~

~~risk that the insurance we maintain may not fully cover all potential exposures;~~

risks associated with changes in tax rates, laws or regulations, or the interpretation or application of tax laws and regulations, including unexpected impacts of the new U.S. TCJA legislation, which may differ with further regulatory guidance and changes in our current interpretations and assumptions;

~~our substantial indebtedness;~~

~~our ability to obtain additional capital on commercially reasonable terms may be limited;~~

~~any statements of belief and any statements of assumptions underlying any of the foregoing;~~

other factors disclosed in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2019 and our other filings with the Securities and Exchange Commission; and

~~other factors beyond our control.~~

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

OVERVIEW

We are a leading global manufacturer, marketer and distributor of high performance coatings ~~systems.~~systems and products. We have over a 150-year heritage in the coatings industry and are known for manufacturing high-quality products with well-recognized brands supported by market-leading technology and customer service. Our diverse global footprint of 47 manufacturing facilities, four technology centers, 5350 customer training centers and approximately 13,000 people allows us to meet the needs of customers in over 130 countries. We serve our customer base through an extensive sales force and technical support organization, as well as through approximately 4,000 independent, locally based distributors.

We operate our business in two operating segments, Performance Coatings and Mobility Coatings. Previously named Transportation ~~Coatings.~~Coatings, our Mobility Coatings segment was renamed during the six months ended June 30, 2021 with no changes to the underlying business or segment structure. Our segments are based on the type and concentration of customers served, service requirements, methods of distribution and major product lines.

Through our ~~Transportation~~Mobility Coatings segment, we provide advanced coating technologies to ~~OEMs~~original equipment manufacturers ("OEMs") of light and commercial vehicles. These increasingly global customers require a high level of technical support coupled with cost-effective, 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.

Table of Contents

BUSINESS HIGHLIGHTS

General Business Highlights

Our net sales ~~decreased 28.1%~~increased 33.9%, including a 4.1% benefit from foreign currency translation, for the six months ended June 30, ~~2020~~2021 compared with the six months ended June 30, ~~2019,~~2020. The increased sales were primarily driven by ~~a decrease in~~higher volumes of ~~26.3%~~25.9% as a result of ~~decreased~~ demand ~~largely due to COVID-19 impacts. The decrease in net sales is inclusive of negative~~recovery from the impacts of ~~portfolio changes of 1.3% associated with the prior year sale of a consolidated joint venture,~~COVID-19 as well as ~~impacts of unfavorable currency translation of 2.4%. Partially offsetting these declines was a 0.6% increase from~~slightly higher average selling price and product mix ~~driven by the Transportation Coatings segment, with contributions from both end-markets and all regions.~~of 3.9%. The following trends have impacted our segment and end-market net sales performance:

•

~~Performance Coatings:~~Net sales decreased 23.1% driven primarily by a decrease in volumes of 20.8% as a result of decreased demand largely due to COVID-19 across both end-markets, inclusive of the negative net impacts of portfolio changes of 1.9% associated with the 2019 sale of our consolidated powder joint venture in China. Furthering the decrease during the period were the impacts of unfavorable foreign currency translation of 2.2%, as well as a 0.1% decrease from lower average selling prices and product mix resulting primarily from a change in product mix in the refinish end-market.

•Performance Coatings:Net sales increased 33.9%, including a 4.7% benefit from foreign currency translation, for the six months ended June 30, 2021 compared with the six months ended June 30, 2020. The increased sales were primarily driven by higher volumes of 23.9% as a result of demand recovery from the impacts of COVID-19 and higher average selling prices and product mix of 5.3%. The favorable foreign currency translation is driven primarily by fluctuations of the Euro and Chinese Renminbi compared to the U.S. Dollar.

•Mobility Coatings: Net sales increased 33.7%, including a 2.5% benefit from foreign currency translation, for the six months ended June 30, 2021 compared with the six months ended June 30, 2020. The increased sales were primarily due to higher volumes of 30.5% as a result of demand recovery from the impacts of COVID-19. The favorable foreign currency translation is driven primarily by fluctuations of the Euro and Chinese Renminbi compared to the U.S. Dollar.

•

~~Transportation Coatings:~~ Net sales decreased 37.2% driven primarily by a decrease in volumes of 36.1% as a result of customer shutdowns caused by COVID-19, as well as the impacts of unfavorable foreign currency translation of 3.1%. Partially offsetting the decline in volumes during the period was an increase of 2.0% from increased average selling prices and product mix across both end-markets and all regions.

Our business serves four end-markets globally with net sales for the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, as follows:


(In millions)	Three Months Ended June 30,				2020 vs 2019		Six Months Ended June 30,				2020 vs 2019		(In millions)	Three Months Ended June 30,				2021 vs 2020		Six Months Ended June 30,				2021 vs 2020
	2020		2019		% change		2020		2019		% change			2021		2020		% change		2021		2020		% change
Performance Coatings													Performance Coatings
Refinish	$	261.9	$	447.3	(41.4	)%	$	629.7	$	852.8	(26.2	)%	Refinish	$	463.1	$	261.9	76.8	%	$	862.1	$	629.7	36.9	%
Industrial	220.2		309.4		(28.8	)%	500.1		617.2		(19.0	)%	Industrial	342.7		220.2		55.6	%	651.0		500.1		30.2	%
Total Net sales Performance Coatings	482.1		756.7		(36.3	)%	1,129.8		1,470.0		(23.1	)%	Total Net sales Performance Coatings	805.8		482.1		67.1	%	1,513.1		1,129.8		33.9	%
Transportation Coatings
Mobility Coatings													Mobility Coatings
Light Vehicle	126.3		306.1		(58.7	)%	386.4		622.0		(37.9	)%	Light Vehicle	243.9		126.3		93.1	%	522.8		386.4		35.3	%
Commercial Vehicle	44.3		94.7		(53.2	)%	120.0		184.8		(35.1	)%	Commercial Vehicle	77.1		44.3		74.0	%	154.5		120.0		28.8	%
Total Net sales Transportation Coatings	170.6		400.8		(57.4	)%	506.4		806.8		(37.2	)%
Total Net sales Mobility Coatings													Total Net sales Mobility Coatings	321.0		170.6		88.2	%	677.3		506.4		33.7	%
Total Net sales	$	652.7	$	1,157.5	(43.6	)%	$	1,636.2	$	2,276.8	(28.1	)%	Total Net sales	$	1,126.8	$	652.7	72.6	%	$	2,190.4	$	1,636.2	33.9	%

Coronavirus (COVID-19) Pandemic

During the six months ended June 30, 2021, the Company continued its recovery, which began in the second half of 2020, from the ~~COVID-19 pandemic had a~~ significant adverse impact on the demand for our products and, thus, our income from ~~operations. These impacts have been felt globally; however,~~operations, caused by the COVID-19 pandemic during the first half of 2020. While we have ~~seen improvements as countries are reopening. We have taken action~~continued to both plan for and address the near-term impact commensurate with the decline in demand in certain areas of our business. The focus is on dynamically adjusting our cost structure as needed and has already included actions related to reducing discretionary spend across the organization which is aided by our highly variable cost structure. We sawsee sequential improvements ~~month-to-month during~~quarter over quarter, we remain cognizant of the ~~second quarter along with the economic reopening; however, if the global pandemic continues to grow and evolve into an even more prolonged health crisis or there are~~potential impacts of new variants, shutdowns or restrictions put in place ~~the effects could have a material adverse impact~~ on our future results of operations, financial condition and cash flows.

~~Consistent with the actions taken or recommended by governmental authorities, in March 2020~~We continue to actively monitor and the following months, we elected to shut down certain manufacturing operations in regions around the world for periods of time during the six months ended June 30, 2020. Currently, all of our manufacturing sites are open, and the timing of re-opening has been phased and in-line with the return of customer demand. At each of our sites, we have taken steps to enhance safety standards in place to protect workers. The reduced production levels during the three months ended June 30, 2020 had a significant adverse impact on our results of operations. A continued disruption to our production levels will have a substantial adverse effect on our financial condition, liquidity, and results of operations.

~~We are actively monitoring and managing~~manage supply chain challenges, including logistics, but, thus far, there have been no significant ~~disruptions.~~disruptions caused by COVID-19. Our supply chain team is coordinating with our suppliers to identify and mitigate potential areas of risk and manage inventories. Further, we are actively monitoring our customers credit worthiness, and while there has been an increase in credit risk levels, at this point we are not aware of any material changes to our customers' ability to settle outstanding receivables.

~~A significant portion of our non-operations focused workforce~~Our business continues to ~~work remotely while~~be impacted in certain regions and end-markets as a result of government restrictions which were in place for parts of the quarter ended June 30, 2021 and we will continue to monitor ~~COVID-19~~impacts.

Supply-chain shortages, semiconductor shortages and ~~adhere to government guidelines for safe operation; however, plans have been formulated for~~raw material inflation

During the six months ended June 30, 2021, the Company was impacted by supply chain shortages as a ~~gradual return to on-site work, where appropriate, during~~result of severe weather in the ~~third quarter.~~U.S., semiconductor chip shortages impacting Light Vehicle production globally and inflation of raw material costs. We ~~expect~~anticipate these conditions to continue to ~~be able~~impact our results through the second half of 2021. We will continue to ~~meet our customers' needs while ensuring the safety~~monitor these situations and mitigate potential areas of ~~our employees, customers~~risk and ~~communities.~~

While we remain committed to our Axalta Way cost savings initiative and expect to meet our full year 2020 savings goals, the timing of achieving our established savings goals during the year has changed as our focus shifted to maximizing short-term liquidity amid the COVID-19 downturn. During the quarter, we were able to reduce operating costs by approximately $75 million and achieve incremental cash flows of approximately $70 million from COVID-19 related cost and cash flow actions. In addition, we announced a global restructuring initiative in July which is expected to achieve approximately $50 million of annual savings, with the majority realized by the end of 2021.

From a liquidity standpoint, we have $1,123.6 million of cash and cash equivalents and $361.0 million of available borrowing capacity under our Senior Secured Credit Facilities. We have no outstanding borrowing on the Revolving Credit Facility and, therefore, are not currently subject to any financial covenants under the Senior Secured Credit Facility.manage inventories.

Capital and Liquidity Highlights

During ~~January 2020,~~the six months ended June 30, 2021, we ~~voluntarily prepaid $300.0~~paid cash consideration of $37.6 million for acquisitions, net of cash acquired. During July 2021, we announced another acquisition, which is discussed further in Note 18 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Table of Contents

During the six months ended June 30, 2021, we repurchased 4.2 million shares for total consideration of $123.6 million as we continue to execute against our previously approved share repurchase program. In April 2021, our Board of Directors authorized an increase in our common share repurchase program of $625.0 million, bringing the size of the ~~outstanding principal on the 2024 Dollar Term Loans.~~program, initially announced in March 2017, to a total of $1.3 billion, of which we have already repurchased $562.5 million through June 30, 2021.

During the six months ended June ~~2020, we issued $500.0 million~~30, 2021, in ~~aggregate principal amount of 4.750% Senior Notes due 2027,~~connection with the ~~proceeds~~Tenth Amendment to ~~be used for general corporate purposes and to pay related transaction costs and expenses.~~

~~See~~the Credit Agreement (the "Tenth Amendment") discussed within Note 14 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, ~~for additional information.~~we increased the borrowing capacity under our revolving credit facility from $400.0 million to $550.0 million and extended the maturity of the revolving credit facility from 2024 to 2026, provided that such date will be accelerated in certain circumstances as set forth in the Tenth Amendment.

~~Strategic Review~~

On March 31, 2020, we announced that our Board of Directors concluded that the previously announced review of strategic alternatives was complete and that the ongoing execution of our strategic plan is the best alternative to maximize value for Axalta’s shareholders.

FACTORS AFFECTING OUR OPERATING RESULTS

~~Except as described in "Risk Factors" below, there~~There have been no changes in the factors affecting our operating results previously reported in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2019 other than the impact of COVID-19 as discussed herein.~~2020.

RESULTS OF OPERATIONS

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

Net sales


	Three Months Ended June 30,				2020 vs 2019					Six Months Ended June 30,				2020 vs 2019						Three Months Ended June 30,				2021 vs 2020				Six Months Ended June 30,				2021 vs 2020
	2020		2019		$ Change			% Change		2020		2019		$ Change			% Change			2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Net sales	$	652.7	$	1,157.5	$	(504.8	)	(43.6	)%	$	1,636.2	$	2,276.8	$	(640.6	)	(28.1	)%	Net sales	$	1,126.8	$	652.7	$	474.1	72.6	%	$	2,190.4	$	1,636.2	$	554.2	33.9	%
Volume effect								(39.2	)%								(25.0	)%	Volume effect							56.4	%							25.3	%
Impact of portfolio changes								(1.1	)%								(1.3	)%
Price/product mix effect								(0.5	)%								0.6	%
Impact of acquisitions																			Impact of acquisitions							1.6	%							0.6	%
Price/Mix effect																			Price/Mix effect							9.3	%							3.9	%
Exchange rate effect								(2.8	)%								(2.4	)%	Exchange rate effect							5.3	%							4.1	%

Three months ended June 30, ~~2020~~2021 compared to the three months ended June 30, ~~2019~~

2020



Net sales ~~decreased~~increased due to the following:
ⁿ~~Lower~~Higher sales volumes across both segments ~~and all regions driven by significantly reduced global automotive production, lower vehicle miles driven and accelerated industrial slowdown primarily~~ as a result of ~~COVID-19~~demand recovery from the impacts ~~as well as previously anticipated muted industrial trends and declines in light and commercial vehicle builds~~of COVID-19
ⁿ~~Unfavorable~~Higher average selling price driven by Performance Coatings as a result of pricing actions in both end-markets and improved product mix in Refinish
n Favorable impacts of currency translation, due primarily to the ~~weakening~~fluctuations of the ~~Brazilian Real,~~ Euro ~~Mexican Peso~~and Chinese Renminbi compared to the U.S. dollar

Six months ended June 30, 2021 compared to the six months ended June 30, 2020


Net sales increased due to the following:
n Higher sales volumes across both segments as a result of demand recovery from the impacts of COVID-19
n Favorable impacts of currency translation, due primarily to the fluctuations of the Euro and Chinese Renminbi compared to the U.S. dollar
ⁿ~~Negative impacts~~Higher average selling price driven by Performance Coatings as a result of ~~portfolio changes resulting from the sale of our consolidated joint venture interests within our Performance Coatings segment during the second quarter of 2019~~
ⁿ~~Lower average selling prices~~pricing actions in both end-markets and ~~product mix resulting primarily from a change in~~improved product mix in ~~refinish, substantially offset by increases across both end-markets and all regions within the Transportation Coatings segment.~~Refinish

~~Six~~

Table of Contents

Cost of sales


	Three Months Ended June 30,						2021 vs 2020				Six Months Ended June 30,						2021 vs 2020
	2021			2020			$ Change		% Change		2021			2020			$ Change		% Change

Cost of sales	$	752.8		$	499.2		$	253.6	50.8	%	$	1,437.3		$	1,146.0		$	291.3	25.4	%





% of net sales	66.8		%	76.5		%					65.6		%	70.0		%

Three months ended June 30, ~~2020~~2021 compared to the ~~six~~three months ended June 30, ~~2019~~

2020



~~Net~~Cost of sales ~~decreased~~increased due to the following:
ⁿ~~Lower~~Higher sales volumes across both segments ~~and all regions driven by significantly reduced global automotive production, lower vehicle miles driven and accelerated industrial slowdown primarily~~ as a result of ~~COVID-19~~demand recovery from the impacts ~~as well as previously anticipated muted industrial trends and declines in light and commercial vehicle builds~~of COVID-19
ⁿHigher variable input costs due to raw material inflation
n Increased compensation related expenses compared to prior year which were lower due to COVID-19 related cost reduction actions
n Unfavorable impacts of currency translation, due primarily to the ~~weakening~~fluctuations of the Euro ~~Brazilian Real, Mexican Peso~~ and Chinese Renminbi compared to the U.S. dollar
ⁿ~~Negative impacts as a result of portfolio changes resulting from the sale of our consolidated joint venture interests within our Performance Coatings segment during the second quarter of 2019~~
Partially offset by:
ⁿ~~Higher average selling prices across both end-markets and all regions within the Transportation Coatings segment~~

~~Cost of sales~~

Three Months Ended June 30, 2020 vs 2019 Six Months Ended June 30, 2020 vs 2019
2020 2019 $ Change % Change 2020 2019 $ Change % Change
Cost of sales $ 499.2
$ 748.4
$ (249.2 ) (33.3 )% $ 1,146.0
$ 1,499.7
$ (353.7 ) (23.6 )%
% of net sales 76.5 % 64.7 % 70.0 % 65.9 %

~~Three months ended June 30, 2020 compared to the three months ended June 30, 2019~~



~~Cost of sales decreased due to the following:~~
ⁿ~~Lower sales volumes across both segments and all regions~~
ⁿ~~Lower costs as a result of portfolio changes resulting from the sale of our consolidated joint venture interests within our Performance Coatings segment during the second quarter of 2019~~
ⁿ~~Favorable impacts of currency translation of 2.1%, due primarily to the weakening of the Brazilian Real, Euro, Mexican Peso and Chinese Renminbi compared to the U.S. dollar~~
ⁿ~~Decline in depreciation expense for operating equipment~~
ⁿ~~Decreased variable input costs~~
ⁿReduction in costs due to operational efficiencies associated with our cost savings initiatives ~~as well as decreased compensation related expenses, associated with COVID-19 related cost reduction actions~~
~~Partially offset by:~~ n Decreased expenses of $31.1 million associated with improved utilization at manufacturing sites in the current year as manufacturing utilization was negatively impacted in the 2020 period due to COVID-19
ⁿ~~Increased~~Lower expenses ~~associated with reduced utilization at certain manufacturing sites and increased~~in 2021 compared to 2020 of $5.2 million resulting from fewer inventory ~~reserves~~write-offs
Cost of sales as a percentage of net sales ~~increased~~decreased due to the following:
ⁿ~~Decreased net sales from price and product mix, primarily resulting from impacts of product mix sold in refinish~~
ⁿ~~Lower~~Higher sales volume covering fixed costs ~~including impacts of reduced utilization at certain manufacturing sites and increased inventory reserves~~
~~Partially offset by:~~
ⁿDecreases ~~associated with variable cost savings and~~in costs due to operational efficiencies associated with cost savings initiatives ~~as well as decreased compensation related expenses, associated with COVID-19 related cost reduction actions~~
Partially offset by:
n Higher variable input costs due to raw material inflation

Table of Contents

Six months ended June 30, ~~2020~~2021 compared to the six months ended June 30, ~~2019~~

2020



Cost of sales ~~decreased~~increased due to the following:
ⁿ~~Lower~~Higher sales volumes across both segments ~~and all regions~~as a result of demand recovery from the impacts of COVID-19
ⁿ~~Lower~~Higher variable input costs ~~as a result of portfolio changes resulting from the sale of our consolidated joint venture interests within our Performance Coatings segment during the second quarter of 2019~~due to raw material inflation
ⁿ~~Favorable~~Increased compensation related expenses compared to prior year which were lower due to COVID-19 related cost reduction actions
n Unfavorable impacts of currency translation, ~~of 1.8%,~~ due primarily to the ~~weakening~~fluctuations of the Euro ~~Brazilian Real, Mexican Peso~~ and Chinese Renminbi compared to the U.S. dollar
ⁿ~~Decline in depreciation expense for operating equipment~~ Partially offset by:
ⁿ~~Decreased variable input costs across both segments and all regions~~
ⁿReduction in costs due to operational efficiencies associated with our cost savings initiatives ~~as well as decreased compensation related expenses, associated with COVID-19 related cost reduction actions~~
~~Partially offset by:~~ n Decreased expenses of $35.2 million associated with improved utilization at manufacturing sites in the current year as manufacturing utilization was negatively impacted in the 2020 period due to COVID-19
ⁿ~~Increased~~Lower expenses ~~associated with reduced utilization at certain manufacturing sites and increased~~in 2021 compared to 2020 of $7.3 million resulting from fewer inventory ~~reserves~~write-offs
Cost of sales as a percentage of net sales decreased due to the following:
n Higher sales volume covering fixed costs
n Decreases in costs due to operational efficiencies associated with cost savings initiatives
Partially offset by:
n Higher variable input costs due to raw material inflation

Selling, general and administrative expenses


	Three Months Ended June 30,				2021 vs 2020				Six Months Ended June 30,				2021 vs 2020
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change

SG&A	$	184.2	$	154.2	$	30.0	19.5	%	$	363.3	$	349.6	$	13.7	3.9	%

Three months ended June 30, 2021 compared to the three months ended June 30, 2020


Selling, general and administrative expenses increased due to the following:
ⁿ~~Lower~~Increase in commissions and sales ~~volume covering fixed costs, including~~incentive compensation driven by increased sales
n Increased expenses as a result of acquisitions
n Increased compensation related expenses compared to prior year which were lower due to COVID-19 related cost reduction actions
n Unfavorable impacts of ~~reduced utilization at certain manufacturing sites~~currency translation, due primarily to the fluctuations of the Euro and ~~increased inventory reserves~~Chinese Renminbi compared to the U.S. dollar
Partially offset by:
ⁿ~~Decreases associated with variable cost savings~~Lower expenses in 2021 compared to 2020 of $6.8 million resulting from fewer inventory write-offs

Table of Contents

Six months ended June 30, 2021 compared to the six months ended June 30, 2020


Selling, general and ~~operational efficiencies associated with cost savings initiatives,~~administrative expenses increased due to the following:
n Increase in commissions and sales incentive compensation driven by increased sales
n Increased expenses as ~~well as decreased~~a result of acquisitions
n Increased compensation related expenses ~~associated with~~compared to prior year which were lower due to COVID-19 related cost reduction actions
ⁿ~~Price~~Unfavorable impacts of currency translation, due primarily to the fluctuations of the Euro and ~~product mix increase~~Chinese Renminbi compared to ~~net sales, primarily resulting from higher average selling prices across both end-markets and all regions within~~ the ~~Transportation Coatings segment, partially offset by lower average selling prices and product mix in refinish~~U.S. dollar

~~Selling, general and administrative expenses~~

Three Months Ended June 30, 2020 vs 2019 Six Months Ended June 30, 2020 vs 2019
2020 2019 $ Change % Change 2020 2019 $ Change % Change
SG&A $ 154.2
$ 202.4
$ (48.2 ) (23.8 )% $ 349.6
$ 418.0
$ (68.4 ) (16.4 )%

~~Three months ended June 30, 2020 compared to the three months ended June 30, 2019~~



~~Selling, general and administrative expenses decreased due to the following:~~Partially offset by:
ⁿReduction in costs due to operational efficiencies associated with our cost savings initiatives ~~as well as decreased compensation-related expenses, associated with COVID-19 related cost reduction actions~~
ⁿ~~Decline in commissions and sales incentive compensation driven by decrease in net sales~~
ⁿLower ~~costs as a result~~expenses in 2021 compared to 2020 of ~~portfolio changes~~$9.5 million resulting from ~~the sale of our consolidated joint venture interests within our Performance Coatings segment during the second quarter of 2019~~
ⁿ~~Favorable impacts of currency translation of 4.6%, due primarily to the weakening of the Euro, Chinese Renminbi, Mexican Peso and Brazilian Real compared to the U.S. dollar~~
~~Partially offset by:~~
ⁿ~~Increased stock-based compensation expenses of $6.9 million, primarily due to forfeitures in the prior year~~
ⁿ~~Increased reserves for trade receivables of $5.6 million to $7.0 million from $1.4 million in the prior year~~fewer inventory write-offs

~~Six~~Other operating (benefits) charges


	Three Months Ended June 30,				2021 vs 2020				Six Months Ended June 30,				2021 vs 2020
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Other operating (benefits) charges	$	(45.7)	$	24.7	$	(70.4)	(285.0)	%	$	57.1	$	56.3	$	0.8	1.4	%

Three months ended June 30, 2021 compared to the three months ended June 30, 2020 ~~compared to the six months ended June 30, 2019~~



~~Selling, general and administrative expenses~~Other operating (benefits) charges decreased due to the following:
ⁿReduction in costs due to operational efficiencies associated with our cost savings initiatives, as well as decreased compensation-related expenses associated, with COVID-19 related cost reduction actions
ⁿ~~Decline in commissions and sales incentive compensation driven by decrease in net sales~~
ⁿ~~Lower costs as a result~~Benefits of ~~portfolio changes resulting from the sale of our consolidated joint venture interests within our Performance Coatings segment during the second quarter of 2019~~
ⁿ~~Favorable impacts of currency translation of 3.8%, due primarily to the weakening of the Euro, Chinese Renminbi, and Brazilian Real compared to the U.S. dollar~~
~~Partially offset by:~~
ⁿ~~Increased reserves for trade receivables of $7.9 million to $10.4 million from $2.5 million in the prior year~~
ⁿ~~Increased stock-based compensation expenses of $6.0 million, primarily due to forfeitures in the prior year~~

~~Other operating charges~~

Three Months Ended June 30, 2020 vs 2019 Six Months Ended June 30, 2020 vs 2019
2020 2019 $ Change % Change 2020 2019 $ Change % Change
Other operating charges $ 24.7
$ 2.5
$ 22.2
888.0 % $ 56.3
$ 9.6
$ 46.7
486.5 %

~~Three months ended June 30, 2020 compared to the three months ended June 30, 2019~~



~~Other operating charges increased due to the following:~~
ⁿ~~Increase in termination benefits and other employee related costs associated with our cost savings initiatives of $12.4 million from $2.8 million in the prior year to $15.2~~$71.8 million in the current year related to insurance recoveries and changes to our estimates for probable liabilities in for an operational matter in our Mobility Coatings segment discussed further in Note 5 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q
ⁿ~~Increased expenses~~Expenses of ~~$5.9~~$4.5 million associated with the review of strategic alternatives that was concluded in March 2020, ~~as discussed above within "Business Highlights - Strategic Review" and retention costs from $0.8~~with no such expenses in 2021
n Impairment charges of $2.7 million in the prior year ~~to $6.7 million in the current year~~
ⁿ~~Increase in divestiture and impairment charges of $4.0 million from a gain of $1.3 million in the prior year to expenses of $2.7 million in the current year, which are~~ primarily ~~attributable~~related to impairments and associated write-downs resulting from our ~~recent~~ decision to exit the Performance Coatings segment business in Argentina, compared with no such expenses in 2021

~~Six months ended June 30, 2020 compared to the six months ended June 30, 2019~~



~~Other operating charges increased due to the following:~~Partially offset by:
ⁿIncrease of $7.5 million in termination benefits and other employee related costs associated with our cost saving initiatives ~~of $30.6 million~~ from ~~$4.1~~$15.2 million in the prior year to ~~$34.7~~$22.7 million in the current year

Six months ended June 30, 2021 compared to the six months ended June 30, 2020


Other operating (benefits) charges increased due to the following:
ⁿ~~Increased expenses~~Expenses of ~~$17.4~~$22.6 million in the current year as a result of a charge recorded in relation to probable liabilities for an operational matter in our Mobility Coatings segment discussed further in Note 5 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q
Partially offset by:
n Expenses of $10.6 million associated with the review of strategic alternatives that was concluded in March 2020, ~~as discussed above within "Business Highlights - Strategic Review"~~with no such expenses in 2021
n Decrease of $9.2 million in termination benefits and ~~retention~~other employee related costs associated with our cost saving initiatives from ~~$0.8~~$34.7 million in the prior year to ~~$18.2~~$25.5 million in the current year
n Impairment charges of $3.2 million in the prior year primarily related to impairments and associated write-downs resulting from our decision to exit the Performance Coatings segment business in Argentina, compared with no such expenses in 2021

Research and development expenses

Three Months Ended June 30, 2020 vs 2019 Six Months Ended June 30, 2020 vs 2019
2020 2019 $ Change % Change 2020 2019 $ Change % Change
Research and development expenses $ 11.2
$ 17.9
$ (6.7 ) (37.4 )% $ 27.8
$ 36.1
$ (8.3 ) (23.0 )%


	Three Months Ended June 30,				2021 vs 2020				Six Months Ended June 30,				2021 vs 2020
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Research and development expenses	$	15.8	$	11.2	$	4.6	41.1	%	$	31.4	$	27.8	$	3.6	12.9	%

Three months ended June 30, ~~2020~~2021 compared to the three months ended June 30, ~~2019~~

2020



Research and development expenses ~~decreased~~increased due to the following:
ⁿ ~~Decrease~~Increase in ~~operating~~compensation related expenses and other spending as a result of ~~operational efficiencies associated with~~temporary cost savings initiatives ~~as well as decreased compensation-related expenses, associated with COVID-19 related cost reduction actions~~during 2020

Table of Contents

Six months ended June 30, 2021 compared to the six months ended June 30, 2020


Research and development expenses increased due to the following:
ⁿ Increase in compensation related expenses and other spending as a result of temporary cost savings initiatives during 2020

Amortization of acquired intangibles


	Three Months Ended June 30,				2021 vs 2020				Six Months Ended June 30,				2021 vs 2020
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Amortization of acquired intangibles	$	29.3	$	27.9	$	1.4	5.0	%	$	58.3	$	55.9	$	2.4	4.3	%

Three months ended June 30, 2021 compared to the three months ended June 30, 2020


Amortization of acquired intangibles increased due to the following:
n ~~Favorable~~Unfavorable impacts of foreign currency translation, ~~which reduced expenses by 0.9%, due~~ primarily related to ~~the weakening~~fluctuations of the Euro compared to the U.S. dollar

Six months ended June 30, ~~2020~~2021 compared to the six months ended June 30, ~~2019~~

2020



~~Research and development expenses decreased~~Amortization of acquired intangibles increased due to the following:
ⁿ Decrease in operating expenses as a result of operational efficiencies associated with cost savings initiatives, as well as decreased compensation-related expenses, associated with COVID-19 related cost reduction actions
ⁿ~~Favorable~~Unfavorable impacts of foreign currency translation, ~~which reduced expenses by 0.8%, due~~ primarily related to ~~the weakening~~fluctuations of the Euro compared to the U.S. dollar

~~Amortization of acquired intangibles~~Interest expense, net

Three Months Ended June 30, 2020 vs 2019 Six Months Ended June 30, 2020 vs 2019
2020 2019 $ Change % Change 2020 2019 $ Change % Change
Amortization of acquired intangibles $ 27.9
$ 28.4
$ (0.5 ) (1.8 )% $ 55.9
$ 56.9
$ (1.0 ) (1.8 )%


	Three Months Ended June 30,				2021 vs 2020				Six Months Ended June 30,				2021 vs 2020
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Interest expense, net	$	33.4	$	36.1	$	(2.7)	(7.5)	%	$	66.9	$	72.6	$	(5.7)	(7.9)	%

Three months ended June 30, ~~2020~~2021 compared to the three months ended June 30, ~~2019~~

2020

~~Amortization of acquired intangibles decreased due to the following:~~

ⁿ~~Favorable impacts of foreign currency translation of 1.4%, primarily related to the weakening of the Euro compared to the U.S. dollar~~

~~Six months ended June 30, 2020 compared to the six months ended June 30, 2019~~

~~Amortization of acquired intangibles decreased due to the following:~~

ⁿ~~Favorable impacts of foreign currency translation of 1.1%, primarily related to the weakening of the Euro compared to the U.S. dollar~~

~~Interest expense, net~~

Three Months Ended June 30, 2020 vs 2019 Six Months Ended June 30, 2020 vs 2019
2020 2019 $ Change % Change 2020 2019 $ Change % Change
Interest expense, net $ 36.1
$ 41.0
$ (4.9 ) (12.0 )% $ 72.6
$ 82.3
$ (9.7 ) (11.8 )%

~~Three months ended June 30, 2020 compared to the three months ended June 30, 2019~~



Interest expense, net decreased primarily due to the following:
ⁿ Decrease in ~~principal base due to the voluntary prepayment of $300.0 million on our 2024 Dollar Term Loans in January 2020~~
ⁿ ~~Decrease in average~~ interest rates due to LIBOR decreases on our variable rate debt over the comparable period
ⁿ~~Weakening of the Euro compared to the U.S. Dollar of 2.1%~~
Partially offset by:
ⁿ~~Increase from a partial period of expense associated with the issuance of $500.0 million aggregate principal amount of 2027 Senior Notes~~
ⁿUnfavorable impacts of our derivative instruments used to hedge the variable interest rate exposure on certain debt arrangements

Six months ended June 30, ~~2020~~2021 compared to the six months ended June 30, ~~2019~~

2020



Interest expense, net decreased primarily due to the following:
ⁿ Decrease in ~~principal base due to the voluntary prepayment of $300.0 million on our 2024 Dollar Term Loans in January 2020~~
ⁿ ~~Decrease in average~~ interest rates due to LIBOR decreases on our variable rate debt over the comparable period
ⁿ~~Weakening of the Euro compared to the U.S. Dollar of 2.5%~~
Partially offset by:
ⁿ~~Increase from a partial period of expense associated with the issuance of $500.0 million aggregate principal amount of 2027 Senior Notes~~
ⁿUnfavorable impacts of our derivative instruments used to hedge the variable interest rate exposure on certain debt arrangements

Other income, net

Three Months Ended June 30, 2020 vs 2019 Six Months Ended June 30, 2020 vs 2019
2020 2019 $ Change % Change 2020 2019 $ Change % Change
Other income, net $ (2.2 ) $ (0.9 ) $ (1.3 ) 144.4 % $ (1.4 ) $ (1.9 ) $ 0.5
(26.3 )%


	Three Months Ended June 30,				2021 vs 2020				Six Months Ended June 30,				2021 vs 2020
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Other income, net	$	(8.1)	$	(2.2)	$	(5.9)	268.2	%	$	(8.5)	$	(1.4)	$	(7.1)	507.1	%

Three months ended June 30, ~~2020~~2021 compared to the three months ended June 30, ~~2019~~

2020



Other income, net increased due to the following:
ⁿ~~Increased~~Income of $8.3 million recorded in 2021 related to a law change with respect to certain Brazilian indirect taxes
Partially offset by:
n Unfavorable impact ~~from~~of foreign exchange ~~of $2.5 million from~~ losses of ~~$2.2~~$2.1 million ~~during~~when compared with the prior year period

Table of Contents

Six months ended June 30, 2021 compared to the six months ended June 30, 2020


Other income, net changed due to ~~gains $0.3~~the following:
n Income of $8.3 million ~~during the current period~~recorded in 2021 related to a law change with respect to certain Brazilian indirect taxes
ⁿ~~Pension curtailment benefits released from accumulated other comprehensive loss for $0.6~~Reduction in debt extinguishment and refinancing related costs of $2.2 million
Partially offset by:
ⁿ~~Decrease in miscellaneous income~~Unfavorable impact of foreign exchange losses of $1.6 million when compared with the prior year period

~~Six months ended June 30, 2020 compared to the~~ ~~six months ended June 30, 2019~~

~~Other income, net decreased due to the following:~~

ⁿDebt extinguishment and refinancing related costs of $2.4 million, driven primarily by the write off of unamortized deferred financing costs and original issue discounts in relation with the voluntary prepayment of $300.0 million of outstanding principal on our 2024 Dollar Term Loans in January 2020

ⁿ~~Decrease in miscellaneous income~~

~~Partially offset by:~~

ⁿDecreased impact from foreign exchange of $2.6 million from losses of $4.6 million during the prior year to losses of $2.0 million during the current year, as well as increases from pension curtailment benefits released from accumulated other comprehensive loss for $1.8 million

~~(Benefit) provision~~Provision (benefit) for income taxes


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Income (loss) before income taxes	$	165.1		$	(98.4)		$	184.6		$	(70.6)
Provision (benefit) for income taxes	38.7			(15.2)			42.5			(39.8)
Statutory U.S. Federal income tax rate	21.0		%	21.0		%	21.0		%	21.0		%
Effective tax rate	23.4		%	15.4		%	23.0		%	56.4		%
Effective tax rate vs. statutory U.S. Federal income tax rate	2.4		%	(5.6)		%	2.0		%	35.4		%

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(Loss) income before income taxes $ (98.4 ) $ 117.8
$ (70.6 ) $ 176.1
(Benefit) provision for income taxes (15.2 ) 17.9
(39.8 ) 32.1
Statutory U.S. Federal income tax rate 21.0 % 21.0 % 21.0 % 21.0 %
Effective tax rate 15.4 % 15.2 % 56.4 % 18.2 %
Effective tax rate vs. statutory U.S. Federal income tax rate (5.6 )% (5.8 )% 35.4 % (2.8 )%


	(Favorable) Unfavorable Impact													(Favorable) Unfavorable Impact
	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
Items impacting the effective tax rate vs. statutory U.S. federal income tax rate	2020			2019			2020			2019			Items impacting the effective tax rate vs. statutory U.S. federal income tax rate	2021		2020		2021		2020
Earnings generated in jurisdictions where the statutory rate is different from the U.S. Federal rate ⁽¹⁾	$	(1.6	)	$	(8.3	)	$	(5.9	)	$	(10.9	)	Earnings generated in jurisdictions where the statutory rate is different from the U.S. Federal rate (1)	$	(2.3)	$	(1.6)	$	(7.0)	$	(5.9)
Changes in valuation allowance	1.8			(21.8		)	7.4			(19.2		)	Changes in valuation allowance	5.4		2.1		12.4		(2.4)
Foreign exchange gain (loss), net	0.3			1.5			(1.3		)	0.9			Foreign exchange gain (loss), net	1.0		—		(0.6)		8.5
Stock-based compensation excess tax benefits, net	—			(3.2		)	—			(6.8		)
Non-deductible expenses and interest	1.7			0.6			3.1			2.2			Non-deductible expenses and interest	1.3		1.8		2.1		3.1
Increase in unrecognized tax benefits⁽²⁾	1.4			6.4			19.3			7.2			Increase in unrecognized tax benefits(2)	1.4		1.4		3.7		19.3
Intra-entity asset transfer ⁽³⁾	—			—			(50.5		)	—			Intra-entity asset transfer (3)	—		—		—		(50.5)
Foreign taxes ⁽⁴⁾	1.9			16.8			3.5			18.4
Foreign taxes													Foreign taxes	1.9		1.9		3.3		3.5

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

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

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

(4) For the three and six months ended June 30, 2019, the unfavorable impact is primarily related to an adjustment for certain tax attributes for which the Company determined are no longer realizable. This was mostly offset by a tax benefit for the decrease to the valuation allowance on the tax attributes previously recorded as a result

Table of ~~changes under U.S. tax reform.~~Contents

SEGMENT RESULTS

The Company's products and operations are managed and reported in two operating segments: Performance Coatings and ~~Transportation~~Mobility Coatings. See Note 16 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

Performance Coatings Segment


	Three Months Ended June 30,						2020 vs 2019					Six Months Ended June 30,						2020 vs 2019						Three Months Ended June 30,						2021 vs 2020				Six Months Ended June 30,						2021 vs 2020
	2020			2019			$ Change			% Change		2020			2019			$ Change			% Change			2021			2020			$ Change		% Change		2021			2020			$ Change		% Change
Net sales	$	482.1		$	756.7		$	(274.6	)	(36.3	)%	$	1,129.8		$	1,470.0		$	(340.2	)	(23.1	)%	Net sales	$	805.8		$	482.1		$	323.7	67.1	%	$	1,513.1		$	1,129.8		$	383.3	33.9	%
Volume effect										(29.7	)%										(18.9	)%	Volume effect									45.5	%									23.0	%
Impact of portfolio changes										(1.6	)%										(1.9	)%
Price/product mix effect										(2.6	)%										(0.1	)%
Impact of acquisitions																							Impact of acquisitions									2.1	%									0.9	%
Price/Mix effect																							Price/Mix effect									14.0	%									5.3	%
Exchange rate effect										(2.4	)%										(2.2	)%	Exchange rate effect									5.5	%									4.7	%

Adjusted EBIT	$	1.5		$	127.6		$	(126.1	)	(98.8	)%	$	80.9		$	206.2		$	(125.3	)	(60.8	)%	Adjusted EBIT	$	139.7		$	1.5		$	138.2	9,213.3	%	$	256.9		$	80.9		$	176.0	217.6	%
Adjusted EBIT Margin	0.3		%	16.9		%						7.2		%	14.0		%						Adjusted EBIT Margin	17.3		%	0.3		%					17.0		%	7.2		%

Three months ended June 30, ~~2020~~2021 compared to the three months ended June 30, ~~2019~~

2020



Net sales ~~decreased~~increased due to the following:
ⁿ~~Lower organic~~Higher volumes across both end-markets and all regions ~~due to decreased demand primarily~~ as a result of demand recovery from the impacts of COVID-19
ⁿ~~Lower~~Higher average selling prices and product mix across both end-markets, ~~primarily~~ driven by ~~a change in product mix sold in refinish, partially offset by stable average~~ price actions within both end-markets and improved product mix in ~~our other regions and the industrial end-market~~Refinish North America
ⁿ~~Unfavorable~~Favorable impacts of currency translation, due primarily to the ~~weakening~~fluctuations of the Euro and Chinese Renminbi ~~and Brazilian Real~~ compared to the U.S. dollar
ⁿ~~Negative impacts as a result of portfolio changes within our industrial end-market, which included the sale of our consolidated joint venture interests during the second quarter of 2019~~



Adjusted EBIT ~~decreased~~increased due to the following:
ⁿ~~Lower organic~~Higher volumes across both end-markets and all regions ~~due to decreased demand primarily~~ as a result of demand recovery from the impacts of COVID-19
ⁿ Lower manufacturing expenses compared to the prior year as a result of underutilized manufacturing assets in the prior year quarter due to COVID-19 demand impacts
n ~~Lower~~Higher average selling prices and product mix across both end-markets ~~primarily driven by a change in product mix sold in refinish, partially~~and most regions

Partially offset ~~by stable average price~~by:
n Higher variable input costs across both end-markets and ~~product mix in our other~~all regions ~~and across our industrial end-market~~due to raw material inflation
ⁿ~~Unfavorable~~Higher operating expenses across both end-markets driven by EMEA and North America as a result of temporary cost savings initiatives during 2020
Adjusted EBIT margins increased during the three months ended June 30, 2021 due to the following:
n Higher volumes across both end-markets and all regions as a result of demand recovery from the impacts of COVID-19
n Lower manufacturing expenses compared to the prior year as a result of underutilized manufacturing assets in the prior year quarter due to COVID-19 demand impacts
n Higher average selling prices and product mix across both end-markets and most regions
Partially offset by:
n Higher variable input costs across both end-markets and all regions due to raw material inflation

Table of Contents

Six months ended June 30, 2021 compared to the six months ended June 30, 2020


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


Adjusted EBIT increased due to the following:
ⁿ~~Lower sales volume covering fixed costs, including~~Higher volumes across both end-markets and all regions as a result of demand recovery from the impacts of ~~reduced utilization at certain manufacturing sites and increased inventory reserves~~COVID-19
~~Partially offset by:~~ n Lower manufacturing expenses compared to the prior year as a result of underutilized manufacturing assets in the prior year quarter due to COVID-19 demand impacts
ⁿHigher average selling prices and product mix across both end-markets and most regions
n Lower operating expenses across ~~both end-markets~~most regions resulting from operational efficiencies associated with our cost savings initiatives ~~as well as overall lower compensation expense associated with COVID-19 related cost reduction actions and costs to support net sales~~
ⁿ~~Lower variable input costs across both end-markets~~

~~Six months ended June 30, 2020 compared to the six months ended June 30, 2019~~



~~Net sales decreased due to the following:~~Partially offset by:
ⁿ~~Lower organic volumes~~Higher variable input costs across both end-markets and all regions due to ~~decreased demand primarily~~raw material inflation
Adjusted EBIT margins increased during the six months ended June 30, 2021 due to the following:
n Higher volumes across both end-markets and all regions as a result of demand recovery from the impacts of COVID-19
ⁿ~~Unfavorable impacts of currency translation, due primarily to the weakening of the Euro, Chinese Renminbi, and Brazilian Real~~ Lower manufacturing expenses compared to the ~~U.S. dollar~~prior year as a result of underutilized manufacturing assets in the prior year quarter due to COVID-19 demand impacts
ⁿ~~Negative impacts as a result of portfolio changes within our industrial end-market, which included the sale of our consolidated joint venture interests during the second quarter of 2019~~
ⁿ~~Lower~~Higher average selling prices and product mix across both end-markets ~~primarily driven by a change in product mix sold in refinish, offset by increases in EMEA refinish~~ and ~~stable average price and product mix in our industrial end-market~~most regions



~~Adjusted EBIT decreased due to the following:~~Partially offset by:
ⁿ~~Lower organic volumes~~Higher variable input costs across both end-markets and all regions due to ~~decreased demand primarily~~raw material inflation

Mobility Coatings Segment


	Three Months Ended June 30,						2021 vs 2020				Six Months Ended June 30,						2021 vs 2020
	2021			2020			$ Change		% Change		2021			2020			$ Change		% Change
Net sales	$	321.0		$	170.6		$	150.4	88.2	%	$	677.3		$	506.4		$	170.9	33.7	%
Volume effect									87.4	%									30.5	%

Price/Mix effect									(4.1)	%									0.7	%
Exchange rate effect									4.9	%									2.5	%

Adjusted EBIT	$	5.7		$	(39.3)		$	45.0	114.5	%	$	44.9		$	(13.5)		$	58.4	432.6	%
Adjusted EBIT Margin	1.8		%	(23.0)		%					6.6		%	(2.7)		%

Three months ended June 30, 2021 compared to the three months ended June 30, 2020


Net sales increased due to the following:
n Higher volumes across both end-markets and all regions as a result of demand recovery from the impacts of COVID-19
ⁿLower average selling prices and product mix across both end-markets, primarily driven by a change in product mix sold in refinish, offset by increases in refinish and stable average price and product mix in our industrial end-market
ⁿ~~Unfavorable~~Favorable impacts of currency translation, due primarily to the ~~weakening~~fluctuations of the ~~Euro, Chinese Renminbi, and Brazilian Real compared to the U.S. dollar~~
ⁿ~~Lower sales volume covering fixed costs, including impacts of reduced utilization at certain manufacturing sites and increased inventory reserves~~
~~Partially offset by:~~
ⁿLower operating expenses across both end-markets and all regions except Latin America, resulting from operational efficiencies associated with our cost savings initiatives as well as overall lower compensation expense associated with COVID-19 related cost reduction actions and costs to support net sales
ⁿ~~Lower variable input costs across both end-markets and all regions~~

~~Transportation Coatings Segment~~

Three Months Ended June 30, 2020 vs 2019 Six Months Ended June 30, 2020 vs 2019
2020 2019 $ Change % Change 2020 2019 $ Change % Change
Net sales $ 170.6
$ 400.8
$ (230.2 ) (57.4 )% $ 506.4
$ 806.8
$ (300.4 ) (37.2 )%
Volume effect (57.2 )% (36.1 )%
Price/product mix effect 3.5 % 2.0 %
Exchange rate effect (3.7 )% (3.1 )%

Adjusted EBIT $ (39.3 ) $ 40.4
$ (79.7 ) (197.3 )% $ (13.5 ) $ 74.6
$ (88.1 ) (118.1 )%
Adjusted EBIT Margin (23.0 )% 10.1 % (2.7 )% 9.2 %

~~Three months ended June 30, 2020 compared to the three months ended June 30, 2019~~



~~Net sales decreased due to the following:~~
ⁿ~~Lower organic volumes across both end-markets and all regions due to decreased demand primarily as a result of COVID-19 as well as a previously anticipated decrease in vehicle builds~~
ⁿ~~Unfavorable impacts of currency translation, due primarily to the weakening of the Brazilian Real,~~ Euro and Chinese Renminbi compared to the U.S. dollar
Partially offset by:
ⁿ~~Higher~~Lower average selling prices ~~across both end-markets~~ and ~~all~~product mix driven by Light Vehicle in our Latin America and Asia Pacific regions

Table of Contents



Adjusted EBIT ~~decreased~~increased due to the following:
ⁿ~~Lower organic~~Higher volumes across both end-markets ~~and~~across all regions ~~due to decreased demand primarily~~ as a result of demand recovery from the impacts of COVID-19 ~~as well as a previously anticipated decrease in vehicle builds~~
ⁿ~~Unfavorable impacts of currency translation, due primarily to the weakening of the Brazilian Real, Euro and Chinese Renminbi~~ Lower manufacturing expenses compared to the ~~U.S. dollar~~prior year as a result of underutilized manufacturing assets in the prior year quarter due to COVID-19 demand impacts
ⁿ~~Lower sales volume covering fixed costs, including impacts of reduced utilization at certain manufacturing sites and increased inventory reserves~~
~~Partially offset by:~~
ⁿLower operating expenses across ~~both end-markets and all~~most regions ~~primarily in light vehicle~~ resulting from operational efficiencies associated with our cost savings initiatives ~~as well as lower compensation expense associated with COVID-19 related cost reduction actions and costs to support net sales~~
ⁿ~~Higher average selling prices across both end-markets and all regions~~

~~Six months ended June 30, 2020 compared to the six months ended June 30, 2019~~



~~Net sales decreased due to the following:~~
ⁿ~~Lower organic volumes across both end-markets and all regions due to decreased demand primarily as a result of COVID-19 as well as a previously anticipated decrease in vehicle builds~~
ⁿ~~Unfavorable impacts of currency translation, due primarily to the weakening of the Brazilian Real, Euro and Chinese Renminbi compared to the U.S. dollar~~
Partially offset by:
ⁿHigher variable input costs due to raw material inflation
n Lower average selling prices ~~across both end-markets~~ and ~~all~~product mix driven by Light Vehicle in our Latin America and Asia Pacific regions



Adjusted EBIT ~~decreased~~margins increased during the three months ended June 30, 2021 due to the following:
ⁿ~~Lower organic~~Higher volumes across both end-markets and all regions ~~due to decreased demand primarily~~ as a result of demand recovery from the impacts of COVID-19 ~~as well as a previously anticipated decrease in vehicle builds~~
ⁿ~~Unfavorable impacts of currency translation, due primarily to the weakening of the Brazilian Real, Euro and Chinese Renminbi~~ Lower manufacturing expenses compared to the ~~U.S. dollar~~prior year as a result of underutilized manufacturing assets in the prior year quarter due to COVID-19 demand impacts
ⁿ~~Lower sales volume covering fixed costs, including impacts of reduced utilization at certain manufacturing sites and increased inventory reserves~~
~~Partially offset by:~~
ⁿLower operating expenses across ~~both end-markets and all~~most regions ~~primarily in light vehicle~~ resulting from operational efficiencies associated with our cost savings initiatives ~~as well as lower compensation expense associated with COVID-19 related cost reduction actions and costs to support net sales~~
Partially offset by:
ⁿHigher ~~average selling prices~~variable input costs due to raw material inflation

Six months ended June 30, 2021 compared to the six months ended June 30, 2020


Net sales increased due to the following:
n Higher volumes across both end-markets and all regions as a result of demand recovery from the impacts of COVID-19
ⁿ~~Lower variable input costs~~Favorable impacts of currency translation, due primarily to the fluctuations of the Euro and Chinese Renminbi, partially offset by the weakening of the Brazilian Real, compared to the U.S. dollar


Adjusted EBIT increased due to the following:
n Higher volumes across both end-markets and all regions as a result of demand recovery from the impacts of COVID-19

n Lower manufacturing expenses compared to the prior year as a result of underutilized manufacturing assets in the prior year quarter due to COVID-19 demand impacts
n Lower operating expenses across all regions resulting from operational efficiencies associated with our cost savings initiatives
Partially offset by:

n Higher variable input costs due to raw material inflation
Adjusted EBIT margins increased during the six months ended June 30, 2021 due to the following:
n Higher volumes across both end-markets and all regions as a result of demand recovery from the impacts of COVID-19
n Lower manufacturing expenses compared to the prior year as a result of underutilized manufacturing assets in the prior year quarter due to COVID-19 demand impacts

n Lower operating expenses across all regions resulting from operational efficiencies associated with our cost savings initiatives
Partially offset by:
n Higher variable input costs due to raw material inflation

LIQUIDITY AND CAPITAL RESOURCES

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

At June 30, ~~2020,~~2021, availability under the Revolving Credit Facility was ~~$361.0~~$516.0 million, net of ~~$39.0~~$34.0 million of letters of credit outstanding. All such availability may be utilized without violating any covenants under the credit agreement governing such facility or the indentures governing the Senior Notes. At June 30, ~~2020,~~2021, we had ~~$10.2~~$12.6 million of outstanding borrowings under other lines of credit. Our remaining available borrowing capacity under other lines of credit in certain non-U.S. jurisdictions totaled ~~$8.4~~$8.9 million.

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

Table of Contents

Cash Flows


	Six Months Ended June 30,
(In millions)	2021		2020
Net cash provided by (used for):
Operating activities:
Net income (loss)	$	142.1	$	(30.8)
Depreciation and amortization	155.4		163.2
Amortization of deferred financing costs and original issue discount	4.2		4.1
Debt extinguishment and refinancing related costs	0.2		2.4
Deferred income taxes	5.2		(61.2)
Realized and unrealized foreign exchange losses, net	9.4		2.8
Stock-based compensation	7.8		11.2
Divestiture and impairment charges	—		3.2
Interest income on swaps designated as net investment hedges	(7.1)		(7.3)
Other non-cash, net	9.2		8.3
Net income adjusted for non-cash items	326.4		95.9
Changes in operating assets and liabilities	(179.3)		(98.4)
Operating activities	147.1		(2.5)
Investing activities	(91.3)		(34.3)
Financing activities	(169.9)		159.1
Effect of exchange rate changes on cash	(8.4)		(16.3)

Net (decrease) increase in cash, cash equivalents and restricted cash	$	(122.5)	$	106.0

Six months ended June 30, 2021

Net Cash Provided by Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2021 was $147.1 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $326.4 million. This was offset by net uses of working capital of $179.3 million, for which the most significant drivers were increases in accounts and notes receivable, inventory, and prepaid expenses and other assets of $154.2 million, $59.1 million, and $53.4 million, respectively. These outflows were primarily driven by timing of collections, inflation of raw material costs and building inventory to pre-COVID-19 levels to align with returning demand. The outflows were partially offset by increases in accounts payable of $60.0 million due to increased production and inflation of raw material costs and other accruals of $24.5 million primarily due to accruals related to the operational matter within the Mobility Coatings segment, which is discussed further in Note 5 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Net Cash Used for Investing Activities

Net cash used for investing activities for the six months ended June 30, 2021 was $91.3 million. The primary uses were for purchases of property, plant and equipment of $60.3 million and $37.6 million for a business acquisition during April 2021, which is discussed further in Note 3 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Net Cash Used for Financing Activities

Net cash used for financing activities for the six months ended June 30, 2021 was $169.9 million. The primary uses were for the purchase of common stock totaling $123.7 million and payments of $55.3 million on borrowings.

Other Impacts on Cash

Currency exchange impacts on cash for the six months ended June 30, 2021 were unfavorable by $8.4 million, which was driven primarily by fluctuations in the Euro compared to the U.S. Dollar.

Six Months Ended June 30,
(In millions) 2020 2019
Net cash provided by (used for):
Operating activities:
Net (loss) income $ (30.8 ) $ 144.0
Depreciation and amortization 163.2
180.3
Amortization of deferred financing costs and original issue discount 4.1
4.4
Debt extinguishment and refinancing related costs 2.4
0.2
Deferred income taxes (61.2 ) (1.6 )
Realized and unrealized foreign exchange losses, net 2.8
2.8
Stock-based compensation 11.2
5.3
Divestitures and impairment charges 3.2
3.9
Interest income on swaps designated as net investment hedges (7.3 ) (7.2 )
Other non-cash, net 8.3
(0.6 )
Net income adjusted for non-cash items 95.9
331.5
Changes in operating assets and liabilities (98.4 ) (262.7 )
Operating activities (2.5 ) 68.8
Investing activities (34.3 ) (33.7 )
Financing activities 159.1
(147.9 )
Effect of exchange rate changes on cash (16.3 ) 1.0
Net increase (decrease) in cash, cash equivalents and restricted cash $ 106.0
$ (111.8 )

Table of Contents

Six months ended June 30, 2020

Net Cash Used for Operating Activities

Net cash used for operating activities for the six months ended June 30, 2020 was $2.5 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $95.9 million. This was offset by net uses of working capital of $98.4 million, for which the most significant drivers were decreases in accounts payable of $131.0 million, other accrued liabilities of $87.9 million and increases in prepaid expenses and other assets of $60.3 million during the six months ended June 30, 2020. These outflows were primarily related to the timing of cash payments for employee related benefits, customer incentive payments, payments ofrelated to normal seasonal operating activities and decreased business activity associated with the COVID-19 downturn. Partially offsetting these outflows were decreases in receivables of $136.8 million and inventory of $32.5 million.

Net Cash Used for Investing Activities

Net cash used for investing activities for the six months ended June 30, 2020 was $34.3 million. The primary use was for purchases of property, plant and equipment of $42.4 million partially offset by interest proceeds on swaps designated as net investment hedges of $7.3 million.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2020 was $159.1 million. This change was driven primarily by cash proceeds of $500.0 million from the issuance of our 2027 Senior Notes, partially offset by the voluntary prepayment of $300.0 million of the outstanding principal on the 2024 Dollar Term Loans. Offsetting the inflows were routine repayments of $31.7 million on short-term and long-term borrowings, payments ~~for financing-related~~of financing related costs of $6.0 million and purchases of noncontrolling interests of $1.6 million.

Other Impacts on Cash

Currency exchange impacts on cash for the six months ended June 30, 2020 were unfavorable by $16.3 million, which was driven primarily by weakening of the British Pound, Mexican Peso, South African Rand, Brazilian Real and Russian Ruble compared to the U.S. Dollar.

~~Six months ended June 30, 2019~~

~~Net Cash Provided by Operating Activities~~

Net cash provided by operating activities for the six months ended June 30, 2019 was $68.8 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $331.5 million. This was partially offset by net uses of working capital of $262.7 million. The most significant drivers of the uses of working capital were increases in accounts receivable of $152.9 million, prepaid expenses and other assets of $81.6 million and inventories of $1.4 million during the six months ended June 30, 2019, as well as a decrease in other accrued liabilities of $54.0 million. These outflows were primarily driven by customer incentive payments and payments of normal seasonal operating activities, including interest payments on our long-term indebtedness and timing of cash payments for annual employee performance related benefits. Partially offsetting these outflows were increases in accounts payable of $20.7 million and other liabilities of $6.5 million.

~~Net Cash Used for Investing Activities~~

Net cash used for investing activities for the six months ended June 30, 2019 was $33.7 million. The primary uses were for purchases of property, plant and equipment of $47.2 million, business acquisitions of $1.9 million, partially offset by proceeds from the sale of our noncontrolling interest subsidiary of $8.2 million and interest proceeds on swaps designated as net investment hedges of $7.2 million.

~~Net Cash Used for Financing Activities~~

Net cash used for financing activities for the six months ended June 30, 2019 was $147.9 million. This change was driven by purchases of treasury stock totaling $105.3 million, payments of $34.2 million on short-term and long-term borrowings, investments in noncontrolling interests of $31.1 million and dividends to noncontrolling interests of $1.1 million. These payments were partially offset by cash received from stock option exercises of $25.9 million.

~~Other Impacts on Cash~~

~~Currency exchange impacts on cash for the six months ended June 30, 2019 were favorable by $1.0 million, which was driven primarily by the Chinese Renminbi.~~

Financial Condition

We had cash and cash equivalents at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 of ~~$1,123.6~~$1,230.9 million and ~~$1,017.5~~$1,360.9 million, respectively. Of these balances, ~~$528.1~~$624.3 million and ~~$540.0~~$761.7 million were maintained in non-U.S. jurisdictions as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. We believe our organizational structure allows us the necessary flexibility to move funds throughout our subsidiaries to meet our operational working capital needs.

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

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

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

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


(In millions)	June 30, 2020			December 31, 2019			(In millions)	June 30, 2021		December 31, 2020
2024 Dollar Term Loans	$	2,075.3		$	2,387.5		2024 Dollar Term Loans	$	2,051.0	$	2,063.2
2024 Dollar Senior Notes	500.0			500.0
2024 Euro Senior Notes	377.0			375.2

2025 Euro Senior Notes	506.5			504.0			2025 Euro Senior Notes	535.8		552.1
2027 Dollar Senior Notes	500.0			—			2027 Dollar Senior Notes	500.0		500.0
2029 Dollar Senior Notes							2029 Dollar Senior Notes	700.0		700.0
Short-term and other borrowings	105.6			109.0			Short-term and other borrowings	103.0		118.0
Unamortized original issue discount	(8.3		)	(10.5		)	Unamortized original issue discount	(5.5)		(6.3)
Unamortized deferred financing costs	(34.8		)	(31.1		)	Unamortized deferred financing costs	(30.4)		(34.3)
Total borrowings, net	4,021.3			3,834.1			Total borrowings, net	3,853.9		3,892.7
Less:							Less:
Short-term borrowings	17.0			19.6			Short-term borrowings	16.2		29.9
Current portion of long-term borrowings	24.3			24.3			Current portion of long-term borrowings	24.3		24.3
Long-term debt	$	3,980.0		$	3,790.2		Long-term debt	$	3,813.4	$	3,838.5

Our indebtedness, including the Senior Secured Credit Facilities and Senior Notes, is more fully described in ~~Note 14 to unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and~~ Note 18 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

We believe that we continue to maintain sufficient liquidity to meet our requirements, including our leverage and associated interest as well as our working capital needs. ~~Availability~~During the six months ended June 30, 2021, we entered into the Tenth Amendment to the Credit Agreement in order to, among other things, increase the commitments available pursuant to the Revolving Credit Facility from $400.0 million to $550.0 million and extend the maturity from 2024 to 2026, provided that such date will be accelerated in certain circumstances as set forth in the Tenth Amendment. As a result, availability under the Revolving Credit Facility was ~~$361.0~~$516.0 million and ~~$361.2~~$366.0 million at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, 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.

Contractual Obligations

Information related to our contractual obligations can be found in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. There have been no material changes in the Company's contractual obligations since December 31, ~~2019.~~2020.

Off-Balance Sheet Arrangements

See Note 5 "Commitments and Contingencies" to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for disclosure of our guarantees of certain customers’ obligations to third parties.

Recent Accounting Guidance

See Note 1 "Basis of Presentation and Summary of Significant Accounting Policies" to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a summary of recent accounting guidance.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical accounting policies are those accounting policies that can have a significant impact on the presentation of our financial condition and results of operations, and that require the use of complex and subjective estimates based upon past experience and management’s judgment. Because of the uncertainty inherent in such estimates, actual results may differ materially from these estimates. The policies applied in preparing our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q are those that management believes are the most dependent on estimates and assumptions. There have been no material changes to our critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. For a description of our critical accounting policies and estimates as well as a listing of our significant accounting policies, see “Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” and “Note 1 - Basis of Presentation and Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the market risks previously disclosed in our financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As required by Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), the Company carried out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, ~~2020.~~2021.

Changes in internal control over financial reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the three months ended June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are from time to time party to legal proceedings that arise in the ordinary course of business. We are not involved in any litigation other than that which has arisen in the ordinary course of business. We do not expect that any currently pending lawsuits will have a material adverse effect upon our results of operations, financial condition or cash flows on ~~us.~~a consolidated annual basis.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from the risks previously reported in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2019, other than as set forth below.~~2020.

Our business, results of operations, financial condition, cash flows and stock price can be adversely affected by pandemics, epidemics or other public health emergencies, such as the recent outbreak of COVID-19.

The impact of the coronavirus (COVID-19) has created significant volatility in the global economy and led to declining near-term, and uncertain longer-term, economic activity and conditions. There have been extraordinary actions taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world, including travel bans, quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

Although we have continued to operate our facilities to date consistent with applicable governmental orders, the outbreak of COVID-19 and any preventive, protective or other actions taken by governmental authorities may have a material adverse effect on our operations, supply chain, customers and logistics networks, including business shutdowns and other disruptions. The extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, depending upon the severity and duration of the outbreak and the effectiveness of actions taken globally to contain or mitigate its effects, including any ongoing actions in response to changing health conditions over time. Any resulting financial impact cannot be estimated reasonably at this time, but may materially adversely affect our business, results of operations, financial condition and cash flows. Even after the COVID-19 pandemic has subsided, we may experience materially adverse impacts to our business due to any resulting economic recession or depression. Additionally, concerns over the economic impact of COVID-19 have caused extreme volatility in financial and other capital markets which has and may continue to adversely impact our stock price and our ability to access capital markets. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in our Annual Report on Form 10-K for the year ended December 31, 2019, such as those relating to our products and financial performance.

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

~~None.~~Issuer Purchases of Equity Securities

The following table summarizes the Company's share repurchase activity through its share repurchase program for the three months ended June 30, 2021:


(in millions, except per share data)
Month	Total Number of Shares Purchased(1)	Average Price Paid per Share(1)		Total Number of Shares Purchased as Part of Publicly Announced Programs(1)	Approximate Dollar Value of Shares That May Yet Be Purchased Under Our Share Repurchase Program(1)(2)
April 2021	—	$	—	—	$	797.5
May 2021	0.5	32.32		0.5	782.5
June 2021	1.4	31.54		1.4	737.5
Total	1.9	$	31.73	1.9	$	737.5

(1) All shares were repurchased through the $675.0 million share repurchase program announced in March 2017 (the "Program"). Under the Program, we repurchased $60.0 million of our common shares during the three months ended June 30, 2021 and $502.5 million in prior periods. At June 30, 2021, the Company had remaining authorization to repurchase $737.5 million of shares. There is no expiration date on the Program.

(2) In April 2021, our Board of Directors authorized an increase in the Program by $625.0 million, bringing the total size of the Program to $1.3 billion, of which we have already purchased $562.5 million.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS



EXHIBIT NO.			DESCRIPTION OF EXHIBITS

4.110.4			~~Indenture,~~Tenth Amendment to Credit Agreement, dated as of ~~June 15, 2020,~~May 11, 2021, among Axalta Coating Systems Ltd., Axalta Coating Systems Dutch Holding B B.V., Axalta Coating Systems U.S. Holdings, Inc., Axalta Coating Systems U.S., Inc., certain lenders party thereto and Barclays Bank PLC, as administrative agent and collateral agent (incorporated by ~~and among~~reference to Exhibit 10.1 to the ~~Issuers,~~Registrant’s Current Report on Form 8-K (File No. 001-36733) filed with the ~~guarantors named therein and Wilmington Trust, National Association, as trustee (including the form of Note)~~SEC on May 12, 2021)

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

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

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

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

101			INS - Inline XBRL Instance Document. The document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document

101			SCH - Inline XBRL Taxonomy Extension Schema Document

101			CAL - Inline XBRL Taxonomy Extension Calculation Linkbase Document

101			DEF - Inline XBRL Taxonomy Extension Definition Linkbase Document

101			LAB - Inline XBRL Taxonomy Extension Label Linkbase Document

101			PRE - Inline XBRL Taxonomy Extension Presentation Linkbase Document

104			Cover Page Interactive Data File (embedded within the Inline XBRL document)

*			Previously filed.

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

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SIGNATURES

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



				AXALTA COATING SYSTEMS LTD.


Date:	July 26, 2021		~~AXALTA COATING SYSTEMS LTD.~~

~~Date:~~	~~July 29, 2020~~	By: /s/ Robert W. Bryant
				Robert W. Bryant
				Chief Executive Officer and President
				(Principal Executive Officer)

Date:		July ~~29, 2020~~26, 2021		By: /s/ Sean M. Lannon
				Sean M. Lannon
				Senior Vice President and Chief Financial Officer
				(Principal Financial Officer)

Date:		July ~~29, 2020~~26, 2021		By: /s/ Anthony Massey
				Anthony Massey
				Vice President and Global Controller
				(Principal Accounting Officer)

4441



	June 30, 2020		December 31, 2019
Finished products	$	294.8	$	327.4
Semi-finished products	93.4		109.9
Raw materials	131.1		133.7
Stores and supplies	20.0		20.6
Total	$	539.3	$	591.6


	June 30, 2021		December 31, 2020
Finished products	$	324.1	$	319.3
Semi-finished products	106.2		92.2
Raw materials	161.0		127.2
Stores and supplies	23.2		21.2
Total	$	614.5	$	559.9



	June 30, 2020			December 31, 2019
Property, plant and equipment	$	2,198.2		$	2,231.9
Accumulated depreciation	(1,040.0		)	(1,008.9		)
Property, plant, and equipment, net	$	1,158.2		$	1,223.0


	June 30, 2021		December 31, 2020
Property, plant and equipment	$	2,350.3	$	2,317.9
Accumulated depreciation	(1,167.0)		(1,123.4)
Property, plant, and equipment, net	$	1,183.3	$	1,194.5



Note						Page
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES						10
(2) REVENUE						1110
(3) GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS						11
(4) RESTRUCTURING						12
(5) COMMITMENTS AND CONTINGENCIES						12
(6) LONG-TERM EMPLOYEE BENEFITS						13
(7) STOCK-BASED COMPENSATION						1314
(8) OTHER INCOME, NET						15
(9) INCOME TAXES						15
(10) NET INCOME (LOSS) ~~INCOME~~ PER COMMON SHARE						16
(11) ACCOUNTS AND NOTES RECEIVABLE, NET						16
(12) INVENTORIES						1617
(13) PROPERTY, PLANT AND EQUIPMENT, NET						17
(14) BORROWINGS						17
(15) FINANCIAL INSTRUMENTS, HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENTS						18
(16) SEGMENTS						21
(17) ACCUMULATED OTHER COMPREHENSIVE LOSS						2423
(18) SUBSEQUENT EVENTS						2423



	Performance Coatings		Transportation Coatings		Total
Balance at December 31, 2019	$	1,130.9	$	78.0	$	1,208.9
Foreign currency translation	0.2		0.2		0.4
Balance at June 30, 2020	$	1,131.1	$	78.2	$	1,209.3



Remainder of 2020	$	57.5
2021	111.7
2022	109.6
2023	70.2
2024	65.4
2025	64.7



	2020 Activity
Balance at December 31, 2019	$	78.0
Expenses, net of changes to estimates	32.2
Payments made	(37.9		)
Foreign currency translation	0.1
Balance at June 30, 2020	$	72.4


	June 30, 2021		December 31, 2020
Accounts receivable - trade, net (1)	$	864.4	$	738.3
Notes receivable	26.4		30.3
Other (2)	144.9		101.2
Total	$	1,035.7	$	869.8



	June 30, 2020		December 31, 2019
Accounts receivable - trade, net ⁽¹⁾	$	548.7	$	718.4
Notes receivable	25.0		24.7
Other	90.3		87.0
Total	$	664.0	$	830.1


~~(1)~~	~~Allowance for doubtful accounts was $25.4 million and $16.0 million at June 30, 2020 and December 31, 2019, respectively.~~



Period	2027 Senior Notes Percentage
2023	102.375	%
2024	101.188	%
2025 and thereafter	100.000	%



Remainder of 2020	$	23.5
2021	30.4
2022	54.2
2023	27.1
2024	2,870.3
Thereafter	1,058.9
Total borrowings	4,064.4
Unamortized original issue discount	(8.3		)
Unamortized deferred financing costs	(34.8		)
Total borrowings, net	$	4,021.3



Derivatives Not Designated as Hedging Instruments under ASC 815	Location of Loss (Gain) Recognized in Income on Derivatives	Three Months Ended June 30,				Six Months Ended June 30,
	Location of Loss (Gain) Recognized in Income on Derivatives	2020		2019		2020			2019
Foreign currency forward contracts	Other income, net	$	0.8	$	0.3	$	(0.9	)	$	1.8