UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~March 31,~~September 30, 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~~50 Applied Bank Blvd

Suite ~~3600~~300

~~Philadelphia,~~Glen Mills, Pennsylvania ~~19103~~19342

(855) 547-1461

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

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

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

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

Common Shares, $1.00 par value

AXTA

New York Stock Exchange

(Title of class)

(Trading symbol)

(Exchange on which registered)

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

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

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

Smaller reporting company ☐ Emerging growth company ☐

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

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

As of ~~April 20,~~October 19, 2021, there were ~~232,947,186~~228,350,964 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 ~~Loss~~Income (Loss)	4
		Condensed Consolidated Balance Sheets	5
		Condensed Consolidated Statements of Changes in Shareholders' Equity	6
		Condensed Consolidated Statements of Cash Flows	78
		Notes to Condensed Consolidated Financial Statements	89
	ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2225
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3239
	ITEM 4.	Controls and Procedures	3239
PART II		Other Information
	ITEM 1.	Legal Proceedings	3340
	ITEM 1A.	Risk Factors	3340
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3340
	ITEM 3.	Defaults Upon Senior Securities	3340
	ITEM 4.	Mine Safety Disclosures	3340
	ITEM 5.	Other Information	3340
	ITEM 6.	Exhibits	3441
		Signatures	3542

Table of Contents

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

AXALTA COATING SYSTEMS LTD.

Condensed Consolidated Statements of Operations (Unaudited)

(In millions, except per share data)


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
			2021		2020				2021		2020		2021		2020
Net sales	Net sales		$	1,063.6	$	983.5		Net sales	$	1,088.6	$	1,026.9	$	3,279.0	$	2,663.1
Cost of goods sold	Cost of goods sold		684.5		646.8			Cost of goods sold	745.3		634.1		2,182.6		1,780.1
Selling, general and administrative expenses	Selling, general and administrative expenses		179.1		195.4			Selling, general and administrative expenses	181.0		166.5		544.3		516.1
Other operating charges			102.8		31.6
Other operating (benefits) charges								Other operating (benefits) charges	(7.6)		42.6		49.5		98.9
Research and development expenses	Research and development expenses		15.6		16.6			Research and development expenses	15.4		13.4		46.8		41.2
Amortization of acquired intangibles	Amortization of acquired intangibles		29.0		28.0			Amortization of acquired intangibles	29.8		28.6		88.1		84.5
Income from operations	Income from operations		52.6		65.1			Income from operations	124.7		141.7		367.7		142.3
Interest expense, net	Interest expense, net		33.5		36.5			Interest expense, net	33.8		39.8		100.7		112.4
Other (income) expense, net	Other (income) expense, net		(0.4)		0.8			Other (income) expense, net	(2.4)		2.3		(10.9)		0.9
Income before income taxes	Income before income taxes		19.5		27.8			Income before income taxes	93.3		99.6		277.9		29.0
Provision (benefit) for income taxes	Provision (benefit) for income taxes		3.8		(24.6)			Provision (benefit) for income taxes	24.4		17.1		66.9		(22.7)
Net income	Net income		15.7		52.4			Net income	68.9		82.5		211.0		51.7
Less: Net income attributable to noncontrolling interests			0.5		0.2
Less: Net (loss) income attributable to noncontrolling interests								Less: Net (loss) income attributable to noncontrolling interests	(0.2)		—		0.3		(0.2)
Net income attributable to controlling interests	Net income attributable to controlling interests		$	15.2	$	52.2		Net income attributable to controlling interests	$	69.1	$	82.5	$	210.7	$	51.9
Basic net income per share	Basic net income per share		$	0.06	$	0.22		Basic net income per share	$	0.30	$	0.35	$	0.91	$	0.22
Diluted net income per share	Diluted net income per share		$	0.06	$	0.22		Diluted net income per share	$	0.30	$	0.35	$	0.90	$	0.22

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 ~~Loss~~Income (Loss) (Unaudited)

(In millions)

Three Months Ended March 31,
2021 2020
Net income $ 15.7 $ 52.4
Other comprehensive loss, before tax:
Foreign currency translation adjustments (37.6) (86.5)
Unrealized gain (loss) on derivatives 9.2 (40.7)
Unrealized gain (loss) on pension and other benefit plan obligations 1.2 (0.2)
Other comprehensive loss, before tax (27.2) (127.4)
Income tax provision (benefit) related to items of other comprehensive loss 1.8 (5.8)
Other comprehensive loss, net of tax (29.0) (121.6)
Comprehensive loss (13.3) (69.2)
Less: Comprehensive income (loss) attributable to noncontrolling interests 0.3 (3.0)
Comprehensive loss attributable to controlling interests $ (13.6) $ (66.2)


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

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

Table of Contents

AXALTA COATING SYSTEMS LTD.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except per share data)


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,266.9	$	1,360.9	Cash and cash equivalents	$	627.7	$	1,360.9
Restricted cash	Restricted cash	2.9		3.1		Restricted cash	10.4		3.1
Accounts and notes receivable, net	Accounts and notes receivable, net	902.3		869.8		Accounts and notes receivable, net	1,050.1		869.8
Inventories	Inventories	582.2		559.9		Inventories	677.9		559.9
Prepaid expenses and other current assets	Prepaid expenses and other current assets	136.5		132.2		Prepaid expenses and other current assets	147.7		132.2

Total current assets	Total current assets	2,890.8		2,925.9		Total current assets	2,513.8		2,925.9
Property, plant and equipment, net	Property, plant and equipment, net	1,163.6		1,194.5		Property, plant and equipment, net	1,193.5		1,194.5
Goodwill	Goodwill	1,257.2		1,294.9		Goodwill	1,619.8		1,294.9
Identifiable intangibles, net	Identifiable intangibles, net	1,098.4		1,148.8		Identifiable intangibles, net	1,323.0		1,148.8
Other assets	Other assets	610.8		593.1		Other assets	582.9		593.1

Total assets	Total assets	$	7,020.8	$	7,157.2	Total assets	$	7,233.0	$	7,157.2
Liabilities, Shareholders’ Equity	Liabilities, Shareholders’ Equity					Liabilities, Shareholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	565.0	$	564.4	Accounts payable	$	622.5	$	564.4
Current portion of borrowings	Current portion of borrowings	49.9		54.2		Current portion of borrowings	43.3		54.2
Other accrued liabilities	Other accrued liabilities	575.2		562.3		Other accrued liabilities	610.8		562.3

Total current liabilities	Total current liabilities	1,190.1		1,180.9		Total current liabilities	1,276.6		1,180.9
Long-term borrowings	Long-term borrowings	3,810.1		3,838.5		Long-term borrowings	3,799.2		3,838.5
Accrued pensions	Accrued pensions	294.2		309.9		Accrued pensions	288.0		309.9
Deferred income taxes	Deferred income taxes	108.2		114.0		Deferred income taxes	177.9		114.0
Other liabilities	Other liabilities	212.4		234.1		Other liabilities	204.2		234.1

Total liabilities	Total liabilities	5,615.0		5,677.4		Total liabilities	5,745.9		5,677.4
Commitments and contingent liabilities (Note 5)		0		0
Commitments and contingent liabilities (Note 6)						Commitments and contingent liabilities (Note 6)	0		0
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Common shares, $1.00 par, 1,000.0 shares authorized, 251.2 and 250.9 shares issued at March 31, 2021 and December 31, 2020, respectively		251.2		250.9
Common shares, $1.00 par, 1,000.0 shares authorized, 251.7 and 250.9 shares issued at September 30, 2021 and December 31, 2020, respectively						Common shares, $1.00 par, 1,000.0 shares authorized, 251.7 and 250.9 shares issued at September 30, 2021 and December 31, 2020, respectively	251.7		250.9
Capital in excess of par	Capital in excess of par	1,490.5		1,487.1		Capital in excess of par	1,510.7		1,487.1
Retained earnings	Retained earnings	578.5		563.3		Retained earnings	774.0		563.3
Treasury shares, at cost, 18.4 and 16.1 shares at March 31, 2021 and December 31, 2020, respectively		(507.2)		(443.5)
Treasury shares, at cost, 23.4 and 16.1 shares at September 30, 2021 and December 31, 2020, respectively						Treasury shares, at cost, 23.4 and 16.1 shares at September 30, 2021 and December 31, 2020, respectively	(657.3)		(443.5)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(453.6)		(424.8)		Accumulated other comprehensive loss	(438.3)		(424.8)
Total Axalta shareholders’ equity	Total Axalta shareholders’ equity	1,359.4		1,433.0		Total Axalta shareholders’ equity	1,440.8		1,433.0
Noncontrolling interests	Noncontrolling interests	46.4		46.8		Noncontrolling interests	46.3		46.8
Total shareholders’ equity	Total shareholders’ equity	1,405.8		1,479.8		Total shareholders’ equity	1,487.1		1,479.8
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	7,020.8	$	7,157.2	Total liabilities and shareholders’ equity	$	7,233.0	$	7,157.2

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

Table of Contents

AXALTA COATING SYSTEMS LTD.

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

(In millions)


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

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

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

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

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

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

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

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

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

Common Stock
Number of Shares Par/Stated Value Capital In Excess Of Par Retained Earnings Treasury Shares, at cost Accumulated Other Comprehensive Loss Non controlling Interests Total
Balance at December 31, 2019 234.9 $ 249.9 $ 1,474.1 $ 443.2 $ (417.5) $ (395.5) $ 55.4 $ 1,409.6
Comprehensive loss:
Net income — — — 52.2 — — 0.2 52.4
Net realized and unrealized loss on derivatives, net of tax benefit of $6.0 million — — — — — (34.7) — (34.7)
Long-term employee benefit plans, net of tax of $0.2 million — — — — — (0.4) — (0.4)
Foreign currency translation, net of tax of $0.0 million — — — — — (83.3) (3.2) (86.5)
Total comprehensive loss — — — 52.2 — (118.4) (3.0) (69.2)
Cumulative effect of an accounting change — — — (1.5) — — — (1.5)
Recognition of stock-based compensation — — 5.1 — — — — 5.1
Shares issued under compensation plans 0.4 0.5 (1.6) — — — — (1.1)
Changes in ownership of noncontrolling interests — — 0.5 — — — (2.1) (1.6)
Dividends declared to noncontrolling interests — — — — — — (0.5) (0.5)
Balance at March 31, 2020 235.3 $ 250.4 $ 1,478.1 $ 493.9 $ (417.5) $ (513.9) $ 49.8 $ 1,340.8

Table of Contents


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

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

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

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

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

Balance at June 30, 2020	235.4	250.5		1,479.5		411.1		(418.4)		(509.6)		45.5		1,258.6
Comprehensive income (loss):
Net income	—	—		—		82.5		—		—		—		82.5
Net realized and unrealized loss on derivatives, net of tax of $1.0 million	—	—		—		—		—		6.0		—		6.0
Long-term employee benefit plans, net of tax of $0.0 million	—	—		—		—		—		(0.5)		—		(0.5)
Foreign currency translation, net of tax of $0.0 million	—	—		—		—		—		33.9		(0.5)		33.4
Total comprehensive income (loss)	—	—		—		82.5		—		39.4		(0.5)		121.4
Recognition of stock-based compensation	—	—		4.7		—		—		—		—		4.7
Shares issued under compensation plans	0.1	0.1		(0.1)		—		—		—		—		—


Balance at September 30, 2020	235.5	$	250.6	$	1,484.1	$	493.6	$	(418.4)	$	(470.2)	$	45.0	$	1,384.7

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

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AXALTA COATING SYSTEMS LTD.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	15.7	$	52.4	Net income	$	211.0	$	51.7
Adjustment to reconcile net income to cash provided by operating activities:	Adjustment to reconcile net income to cash provided by operating activities:					Adjustment to reconcile net income to cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	76.4		86.6		Depreciation and amortization	234.7		243.6
Amortization of deferred financing costs and original issue discount	Amortization of deferred financing costs and original issue discount	2.2		2.2		Amortization of deferred financing costs and original issue discount	6.7		6.8
Debt extinguishment and refinancing related costs		0		2.4

Deferred income taxes	Deferred income taxes	(18.3)		(45.7)		Deferred income taxes	9.3		(57.2)
Realized and unrealized foreign exchange losses, net	Realized and unrealized foreign exchange losses, net	8.6		3.7		Realized and unrealized foreign exchange losses, net	9.5		12.7
Stock-based compensation	Stock-based compensation	3.6		5.1		Stock-based compensation	11.7		15.9

Divestiture and impairment charges		0		0.5
Gain on sale of facility						Gain on sale of facility	(8.9)		—

Interest income on swaps designated as net investment hedges	Interest income on swaps designated as net investment hedges	(3.5)		(3.7)		Interest income on swaps designated as net investment hedges	(14.3)		(11.0)
Other non-cash, net	Other non-cash, net	1.4		(1.9)		Other non-cash, net	11.3		8.6
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Trade accounts and notes receivable	Trade accounts and notes receivable	(52.6)		5.4		Trade accounts and notes receivable	(168.5)		(14.0)
Inventories	Inventories	(36.2)		(27.1)		Inventories	(107.8)		43.2
Prepaid expenses and other assets	Prepaid expenses and other assets	(18.0)		(38.2)		Prepaid expenses and other assets	(64.3)		(60.8)
Accounts payable	Accounts payable	33.4		29.0		Accounts payable	88.3		15.2
Other accrued liabilities	Other accrued liabilities	30.7		(73.3)		Other accrued liabilities	61.3		(40.9)
Other liabilities	Other liabilities	(3.8)		1.8		Other liabilities	10.0		17.1
Cash provided by (used for) operating activities		39.6		(0.8)
Cash provided by operating activities						Cash provided by operating activities	290.0		230.9
Investing activities:	Investing activities:					Investing activities:

Acquisitions, net of cash acquired						Acquisitions, net of cash acquired	(647.3)		—
Purchase of property, plant and equipment	Purchase of property, plant and equipment	(31.8)		(22.7)		Purchase of property, plant and equipment	(98.7)		(56.2)

Interest proceeds on swaps designated as net investment hedges	Interest proceeds on swaps designated as net investment hedges	3.5		3.7		Interest proceeds on swaps designated as net investment hedges	14.3		11.0

Other investing activities, net	Other investing activities, net	0.5		0.4		Other investing activities, net	11.8		5.9
Cash used for investing activities	Cash used for investing activities	(27.8)		(18.6)		Cash used for investing activities	(719.9)		(39.3)
Financing activities:	Financing activities:					Financing activities:

Proceeds from long-term borrowings						Proceeds from long-term borrowings	—		500.0
Payments on short-term borrowings	Payments on short-term borrowings	(20.0)		(10.6)		Payments on short-term borrowings	(54.5)		(23.2)
Payments on long-term borrowings	Payments on long-term borrowings	(6.7)		(307.2)		Payments on long-term borrowings	(20.1)		(325.3)
Financing-related costs	Financing-related costs	(1.5)		0		Financing-related costs	(2.6)		(8.4)
Purchases of common stock	Purchases of common stock	(63.7)		0		Purchases of common stock	(213.8)		(0.9)
Net cash flows associated with stock-based awards	Net cash flows associated with stock-based awards	0.1		(1.1)		Net cash flows associated with stock-based awards	12.7		0.3

Purchase of noncontrolling interests	Purchase of noncontrolling interests	0		(1.6)		Purchase of noncontrolling interests	—		(5.8)

Other financing activities, net	Other financing activities, net	(0.7)		(0.8)		Other financing activities, net	(1.2)		0.1
Cash used for financing activities		(92.5)		(321.3)
Decrease in cash		(80.7)		(340.7)
Cash (used for) provided by financing activities						Cash (used for) provided by financing activities	(279.5)		136.8
(Decrease) increase in cash						(Decrease) increase in cash	(709.4)		328.4
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(13.5)		(19.8)		Effect of exchange rate changes on cash	(16.5)		(4.7)
Cash at beginning of period	Cash at beginning of period	1,364.0		1,020.5		Cash at beginning of period	1,364.0		1,020.5
Cash at end of period	Cash at end of period	$	1,269.8	$	660.0	Cash at end of period	$	638.1	$	1,344.2

Cash at end of period reconciliation:	Cash at end of period reconciliation:					Cash at end of period reconciliation:
Cash and cash equivalents	Cash and cash equivalents	$	1,266.9	$	657.2	Cash and cash equivalents	$	627.7	$	1,341.3
Restricted cash	Restricted cash	2.9		2.8		Restricted cash	10.4		2.9

Cash at end of period	Cash at end of period	$	1,269.8	$	660.0	Cash at end of period	$	638.1	$	1,344.2

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

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

Index


Note						Page
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES						910
(2) REVENUE						910
(3) ~~GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS~~						10
~~(4) RESTRUCTURING~~ACQUISITIONS						11
~~(5) COMMITMENTS~~(4 ) GOODWILL AND ~~CONTINGENCIES~~						11
~~(6) LONG-TERM EMPLOYEE BENEFITS~~IDENTIFIABLE INTANGIBLE ASSETS						12
~~(7) STOCK-BASED COMPENSATION~~(5 ) RESTRUCTURING						1213
~~(8) OTHER (INCOME) EXPENSE, NET~~(6 ) COMMITMENTS AND CONTINGENCIES						13
(7 ) LONG-TERM EMPLOYEE BENEFITS						14
~~(9) INCOME TAXES~~(						148
~~(10) NET INCOME PER COMMON SHARE~~) STOCK-BASED COMPENSATION						15
~~(11) ACCOUNTS AND NOTES RECEIVABLE, NET~~						15
~~(12) INVENTORIES~~						15
~~(13) PROPERTY, PLANT AND EQUIPMENT,~~(9) OTHER (INCOME) EXPENSE, NET						16
~~(14) BORROWINGS~~(10 ) INCOME TAXES						16
~~(15)~~(1 1 ) NET INCOME (LOSS) PER COMMON SHARE						17
(1 2 ) ACCOUNTS AND NOTES RECEIVABLE, NET						17
(1 3 ) INVENTORIES						18
(1 4 ) PROPERTY, PLANT AND EQUIPMENT, NET						18
(1 5 ) BORROWINGS						18
(1 6 ) FINANCIAL INSTRUMENTS, HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENTS						1619
~~(16)~~(1 7 ) SEGMENTS						18
~~(17) ACCUMULATED OTHER COMPREHENSIVE LOSS~~						21
~~(18) SUBSEQUENT EVENTS~~(1 8 ) ACCUMULATED OTHER COMPREHENSIVE LOSS						2124

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

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

The interim condensed consolidated financial statements included herein are unaudited. In the opinion of management, these statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair statement of the financial position and shareholders' equity of Axalta Coating Systems Ltd., a Bermuda exempted company limited by shares, and its consolidated subsidiaries ("Axalta," the "Company," "we," "our" and "us") at ~~March 31,~~September 30, 2021, ~~and December 31, 2020,~~ the results of operations, comprehensive ~~loss,~~income (loss) and changes in shareholders' equity for the three and nine months ended September 30, 2021 and 2020, and cash flows for the ~~three~~nine months ~~ended March 31, 2021 and 2020.~~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, 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 nine months ended ~~March 31,~~September 30, 2021 are not necessarily indicative of the results to be expected for a full year.

Summary of Significant Accounting Policies

Recently Adopted Accounting Guidance

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

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

Risks and Uncertainties

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

(2) REVENUE

Consideration for products in which control has transferred to our customers that is conditional on something other than the passage of time is recorded as a contract asset within prepaid expenses and other current assets on the balance sheet. The contract asset balances at ~~March 31,~~September 30, 2021 and December 31, 2020 were ~~$38.1~~$39.6 million and $37.2 million, respectively.

910

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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 ~~March 31,~~September 30, 2021 and December 31, 2020, the total carrying value of BIPs were ~~$161.0~~$155.8 million and $165.4 million, respectively, and are presented within other assets onin the condensed consolidated balance sheets. For the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, ~~$15.3~~$17.1 million, $46.1 million, $16.6 million and ~~$16.9~~$49.9 million, respectively, was amortized and reflected as reductions of net sales in the condensed consolidated statements of operations. The total carrying value of BIPs exclude other upfront incentives made in conjunction with long-term customer commitments of ~~$74.2~~$77.0 million and $79.8 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, which ~~will~~we expect to be repaid in future periods.

See Note 1617 for disaggregated net sales by end-market.

(3) ACQUISITIONS

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

Acquisition of U-POL Holdings Limited

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

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


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

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

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

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

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

Other Acquisitions

During April 2021, we acquired a producer of wire enamels used in a range of consumer electronics, electric vehicle and industrial applications, based in China. The acquisition was accounted for as a business combination within our industrial end-market and Performance Coatings segment. The overall impacts to our condensed consolidated financial statements were not considered material as of and for the three and nine months ended September 30, 2021. As of September 30, 2021, 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.

(4) GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

Goodwill

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


		Performance Coatings		Mobility Coatings		Total			Performance Coatings		Mobility Coatings		Total
Balance at December 31, 2020	Balance at December 31, 2020	$	1,211.3	$	83.6	$	1,294.9	Balance at December 31, 2020	$	1,211.3	$	83.6	$	1,294.9

Goodwill from acquisitions								Goodwill from acquisitions	372.8		—		372.8
Foreign currency translation	Foreign currency translation	(35.2)		(2.5)		(37.7)		Foreign currency translation	(45.2)		(2.7)		(47.9)
Balance at March 31, 2021		$	1,176.1	$	81.1	$	1,257.2
Balance at September 30, 2021								Balance at September 30, 2021	$	1,538.9	$	80.9	$	1,619.8

Identifiable Intangible Assets

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


March 31, 2021		Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted average amortization periods (years)
September 30, 2021									September 30, 2021	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted average amortization periods (years)
Technology	Technology	$	552.5	$	(387.5)	$	165.0	10.4	Technology	$	592.8	$	(413.5)	$	179.3	10.2
Trademarks—indefinite-lived	Trademarks—indefinite-lived	274.1		—		274.1		Indefinite	Trademarks—indefinite-lived	272.8		—		272.8		Indefinite
Trademarks—definite-lived	Trademarks—definite-lived	101.6		(38.3)		63.3		16.0	Trademarks—definite-lived	136.1		(41.8)		94.3		14.4
Customer relationships	Customer relationships	928.3		(335.8)		592.5		19.0	Customer relationships	1,130.3		(355.7)		774.6		19.2
Other	Other	15.3		(11.8)		3.5		5.0	Other	15.1		(13.1)		2.0		5.0
Total	Total	$	1,871.8	$	(773.4)	$	1,098.4		Total	$	2,147.1	$	(824.1)	$	1,323.0


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

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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 2021 and each of the succeeding five years is:


Remainder of 2021	Remainder of 2021	$	85.6	Remainder of 2021	$	33.6
2022	2022	112.1		2022	132.1
2023	2023	71.8		2023	91.5
2024	2024	66.8		2024	86.7
2025	2025	66.2		2025	86.0
2026	2026	65.6		2026	85.4

~~(4)~~(5) RESTRUCTURING

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

During the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, we incurred costs for termination benefits of ~~$4.5~~$9.5 million, $36.5 million, $35.2 million and ~~$18.5~~$67.4 million, respectively. ~~These amounts~~Pretax charges during the nine months ended September 30, 2021 primarily relate to additional employee severance charges within Europe that were not included in the previously announced global restructuring made in July 2020 as the required works council consultations and other local legal requirements were completed during the quarter. The majority of our termination benefits are recorded within other operating (benefits) charges in the condensed consolidated statements of operations. The remaining payments associated with these actions are expected to be substantially completed within 24 months.

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


	2021 Activity
Balance at December 31, 2020	$	55.8
Expenses, net of changes to estimates	~~4.5~~36.5
Payments made	~~(19.2)~~(27.3)
Foreign currency translation	~~(1.5)~~(2.2)
Balance at ~~March 31,~~September 30, 2021	$	~~39.6~~62.8

During September 2021, we completed the sale of our manufacturing facility in Mechelen, Belgium, which stopped operations during 2020 as a result of actions taken to reduce operational costs via a manufacturing footprint rationalization announced in 2018. During the three and nine months ended September 30, 2021, the sale resulted in a gain of $8.9 million, of which $1.0 million is included in cost of goods sold and $7.9 million is included in other operating (benefits) charges in the condensed consolidated statements of operations.

~~(5)~~

(6) COMMITMENTS AND CONTINGENCIES

Guarantees

We guarantee certain of our customers’ obligations to third parties, whereby any default by our customers on their obligations could force us to make payments to the applicable creditors. At ~~March 31,~~September 30, 2021 and December 31, 2020, we had outstanding bank guarantees of ~~$8.2~~$6.2 million and $8.5 million, respectively. A portion of our bank guarantees expire between 2021 and ~~2026,~~2036, while others do not have specified expiration dates. We monitor the customer obligations and bank guarantees to evaluate whether we have a liability at the balance sheet date. During the ~~three~~nine months ended ~~March 31,~~September 30, 2020, we incurred a $1.0 million charge related to our outstanding bank guarantees. We did 0tnot have any liabilities related to our outstanding bank guarantees recorded at ~~March 31,~~September 30, 2021 and December 31, 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. ~~Based on further developments since~~Subsequent to the

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

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

For the three and nine months ended September 30, 2021, we recorded a ~~charge~~benefit of ~~$94.4~~$18.7 million ~~for such probable losses during~~and expense of $3.9 million, respectively, within other operating (benefits) charges in the condensed consolidated statement of operations. The benefit in the three months ended ~~March 31, 2021.~~September 30, 2021, primarily resulted from incremental anticipated insurance recoveries as a result of clarification of coverages under our policies. At September 30, 2021, we have recorded an estimated $48.7 million for insurance receivables within accounts and notes receivable, net in the condensed consolidated balance sheets. Liabilities of $48.0 million are recorded as other accrued liabilities in the condensed consolidated balance sheets at September 30, 2021. The recorded probable losses ~~are~~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.~~

~~Based on~~products as well as the information currently available surrounding the full scope and associated responsibilities among relevant parties, we believe it is reasonably possible that we could incur losses in addition to the recorded probable lossesavailability of ~~up to $65 million. We maintain~~additional insurance ~~with significant policy limits, that could provide coverage for the liabilities or other~~

coverage.

~~Table of Contents~~

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

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

~~losses that may arise from this matter. We have submitted an insurance claim, and discussions with our insurers are ongoing. No agreement or resolution has been reached.~~

Other

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

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

~~(6)~~(7) LONG-TERM EMPLOYEE BENEFITS

Components of Net Periodic Benefit Cost

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


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
			2021		2020				2021		2020		2021		2020
Components of net periodic benefit cost:	Components of net periodic benefit cost:							Components of net periodic benefit cost:
Net periodic benefit cost:	Net periodic benefit cost:							Net periodic benefit cost:
Service cost	Service cost		$	1.8	$	1.8		Service cost	$	2.0	$	1.8	$	5.8	$	5.5
Interest cost	Interest cost		2.0		2.3			Interest cost	1.9		2.6		5.8		7.2
Expected return on plan assets	Expected return on plan assets		(3.4)		(3.2)			Expected return on plan assets	(3.4)		(3.2)		(10.3)		(9.5)
Amortization of actuarial loss, net	Amortization of actuarial loss, net		1.2		1.0			Amortization of actuarial loss, net	1.3		0.7		3.8		2.5

Amortization of prior service cost, net								Amortization of prior service cost, net	(0.1)		—		(0.1)		—
Plan curtailments	Plan curtailments		0		(1.2)			Plan curtailments	—		(0.7)		—		(2.5)
Net periodic benefit cost	Net periodic benefit cost		$	1.6	$	0.7		Net periodic benefit cost	$	1.7	$	1.2	$	5.0	$	3.2

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

~~(7)~~14

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

(8) STOCK-BASED COMPENSATION

During the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, we recognized expenses of ~~$3.6~~$3.9 million, $11.7 million, $4.7 million and ~~$5.1~~$15.9 million, respectively, in stock-based compensation, which was allocated between costs of goods sold and selling, general and administrative expenses on the condensed consolidated statements of operations. We recognized tax benefits on stock-based compensation of ~~$0.3~~$0.5 million, $1.2 million, $0.1 million, and ~~$0.2~~$1.6 million for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively.

2021 Activity

A summary of award activity by type for the nine months ended September 30, 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, 2021	2.5	$	27.34
Granted	—	$	—
Exercised	(0.5)	$	28.26
Forfeited / Expired	(0.4)	$	31.92
Outstanding at September 30, 2021	1.6	$	25.65
Vested and expected to vest at September 30, 2021	1.6	$	25.65	$	6.4	5.14
Exercisable at September 30, 2021	1.4	$	25.50	$	6.0	4.86

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

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


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

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

Tax shortfall expenses on the vesting of restricted stock awards and restricted stock units during the nine months ended September 30, 2021 was $0.1 million.

1215

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

~~2021 Activity~~

~~A summary of award activity by type for the three months ended March 31, 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, 2021 2.5 $ 27.34
Granted 0 $ 0
Exercised (0.1) $ 22.76
Forfeited / Expired (1)
0 $ 29.88
Outstanding at March 31, 2021 2.4 $ 27.40
Vested and expected to vest at March 31, 2021 2.4 $ 27.40 $ 7.1 4.17
Exercisable at March 31, 2021 2.2 $ 27.46 $ 6.5 3.80

~~(1) Activity during the three months ended March 31, 2021 rounds to zero.~~

Cash received by the Company upon exercise of options for the three months ended March 31, 2021 was $1.3 million. NaN excess tax benefits or shortfall expenses were recorded related to these exercises.

At ~~March 31,~~September 30, 2021, there was ~~$0.4 million of unrecognized expense relating to unvested stock options that is expected to be amortized over the weighted average period of 0.9 year.~~

Restricted Stock Awards and Restricted Stock Units (1)
Awards/Units
(millions) Weighted-Average
Fair Value
Outstanding at January 1, 2021 1.0 $ 28.84
Granted 0.5 $ 28.54
Vested (0.4) $ 28.84
Forfeited (2)
0 $ 29.35
Outstanding at March 31, 2021 1.1 $ 28.69

~~(1) As of March 31, 2021, there are 0 restricted stock awards outstanding and only restricted stock units remain.~~

~~(2) Activity during the three months ended March 31, 2021 rounds to zero.~~

~~Tax shortfall expenses on the vesting of restricted stock awards and restricted stock units during the three months ended March 31, 2021 was $0.1 million.~~

~~At March 31, 2021, there was $22.2~~$16.2 million of unamortized expense relating to unvested restricted stock units that is expected to be amortized over a weighted average period of ~~1.8~~1.6 years.


Performance Stock Awards and Performance Share Units (1)	Performance Stock Awards and Performance Share Units (1)	Awards/Units (millions)	Weighted-Average Fair Value		Performance Stock Awards and Performance Share Units (1)	Awards/Units (millions)	Weighted-Average Fair Value
Outstanding at January 1, 2021	Outstanding at January 1, 2021	0.5	$	31.07	Outstanding at January 1, 2021	0.5	$	31.07
Granted	Granted	0.4	$	29.53	Granted	0.4	$	29.53
Vested	Vested	0	$	0	Vested	—	$	—
Forfeited	Forfeited	(0.1)	$	32.93	Forfeited	(0.2)	$	31.84
Outstanding at March 31, 2021		0.8	$	30.21
Outstanding at September 30, 2021					Outstanding at September 30, 2021	0.7	$	30.11

(1) As of ~~March 31,~~September 30, 2021, there are 0no performance stock awards outstanding and only performance share units remain.

Our performance stock awards and performance share units allow for participants to vest in more or less than the targeted number of shares granted. All of our performance awards are currently performing below the applicable targets. We currently expect a total of ~~0.6~~0.4 million shares with a weighted average fair value per share of ~~$29.91~~$29.74 to ~~vest.~~vest at the respective vesting dates for such awards. At ~~March 31,~~September 30, 2021, there is ~~$13.5~~$8.9 million of unamortized expense relating to unvested performance share units that is expected to be amortized over a weighted average period of ~~2.6~~2.3 years. The forfeitures include performance stock awards and performance share units that vested below threshold payout.

~~Table of Contents~~

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

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

~~(8)~~(9) OTHER (INCOME) EXPENSE, NET


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
			2021		2020				2021		2020		2021		2020
Foreign exchange losses, net			$	1.8	$	2.3
Foreign exchange (gain) losses, net								Foreign exchange (gain) losses, net	$	(0.7)	$	5.5	$	2.9	$	7.5

Debt extinguishment and refinancing related costs	Debt extinguishment and refinancing related costs		0		2.4			Debt extinguishment and refinancing related costs	—		—		0.2		2.4
Other miscellaneous income, net(1)	Other miscellaneous income, net(1)		(2.2)		(3.9)			Other miscellaneous income, net(1)	(1.7)		(3.2)		(14.0)		(9.0)

Total	Total		$	(0.4)	$	0.8		Total	$	(2.4)	$	2.3	$	(10.9)	$	0.9

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

~~(9)~~(10) INCOME TAXES

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

Three Months Ended March 31,
2021 2020
Effective Tax Rate 19.5 % (88.5) %


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

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 ~~three~~nine months ended ~~March 31,~~September 30, 2020 and are discussed 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 ~~three~~nine months ended ~~March 31,~~September 30, 2020. The Company expects to be able to realize the deferred tax assets resulting from these intra-entity asset transfers.

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

In connection with the income 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 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 ~~three~~nine months ended ~~March 31,~~September 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 ~~$11.8~~$24.0 million, exclusive of interest and penalties, of its current unrecognized tax benefits within ~~2021~~the next 12 months due to the expected conclusion of ~~the 2010-2013 German income~~ongoing tax ~~audit.~~

audits.

~~Table of Contents~~

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

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

~~(10)~~(11) NET INCOME PER COMMON SHARE

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


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	(In millions, except per share data)		2021		2020			(In millions, except per share data)	2021		2020		2021		2020
Net income to common shareholders	Net income to common shareholders		$	15.2	$	52.2		Net income to common shareholders	$	69.1	$	82.5	$	210.7	$	51.9
Basic weighted average shares outstanding	Basic weighted average shares outstanding		233.9		234.9			Basic weighted average shares outstanding	229.9		235.3		232.1		235.1
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding		234.7		235.9			Diluted weighted average shares outstanding	230.7		236.0		233.0		235.9
Net income per common share:	Net income per common share:							Net income per common share:
Basic net income per share	Basic net income per share		$	0.06	$	0.22		Basic net income per share	$	0.30	$	0.35	$	0.91	$	0.22
Diluted net income per share	Diluted net income per share		$	0.06	$	0.22		Diluted net income per share	$	0.30	$	0.35	$	0.90	$	0.22

The number of anti-dilutive shares that have been excluded in the computation of diluted net income per share for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 were ~~1.5~~0.3 million, 0.8 million, 2.8 million and ~~2.6~~2.9 million, respectively.

~~(11)~~(12) ACCOUNTS AND NOTES RECEIVABLE, NET

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


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Accounts receivable - trade, net (1)	Accounts receivable - trade, net (1)	$	778.4	$	738.3	Accounts receivable - trade, net (1)	$	859.2	$	738.3
Notes receivable	Notes receivable	22.1		30.3		Notes receivable	23.2		30.3
Other(2)	Other(2)	101.8		101.2		Other(2)	167.7		101.2
Total	Total	$	902.3	$	869.8	Total	$	1,050.1	$	869.8

(1) Allowance for doubtful accounts was ~~$25.2~~$24.5 million and $26.5 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

(2) Includes $48.7 million at September 30, 2021 of insurance recoveries related to the operational matter as discussed further in Note 6.

Bad debt expense of ~~$0.7~~$0.4 million, $1.3 million, $2.4 million and ~~$3.4~~$12.8 million was included within selling, general and administrative expenses for the three and nine months ended ~~March 31,~~September 30, 2021 and ~~2020, respectively.~~

~~(12) INVENTORIES~~

March 31, 2021 December 31, 2020
Finished products $ 324.5 $ 319.3
Semi-finished products 97.1 92.2
Raw materials 138.6 127.2
Stores and supplies 22.0 21.2
Total $ 582.2 $ 559.9

~~Inventory reserves were $14.9 million and $17.0 million at March 31, 2021 and December 31,~~ 2020, respectively.

1517

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

(13) INVENTORIES


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

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

(14) PROPERTY, PLANT AND EQUIPMENT, NET


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Property, plant and equipment	Property, plant and equipment	$	2,290.0	$	2,317.9	Property, plant and equipment	$	2,293.8	$	2,317.9
Accumulated depreciation	Accumulated depreciation	(1,126.4)		(1,123.4)		Accumulated depreciation	(1,100.3)		(1,123.4)
Property, plant, and equipment, net	Property, plant, and equipment, net	$	1,163.6	$	1,194.5	Property, plant, and equipment, net	$	1,193.5	$	1,194.5

Depreciation expense amounted to ~~$31.9~~$31.5 million, $96.3 million, $31.1 million and ~~$41.6~~$104.4 million for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively.

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

~~(14)~~

(15) BORROWINGS

Borrowings are summarized as follows:


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
2024 Dollar Term Loans	2024 Dollar Term Loans	$	2,057.1	$	2,063.2	2024 Dollar Term Loans	$	2,045.0	$	2,063.2

2025 Euro Senior Notes	2025 Euro Senior Notes	528.6		552.1		2025 Euro Senior Notes	525.2		552.1
2027 Dollar Senior Notes	2027 Dollar Senior Notes	500.0		500.0		2027 Dollar Senior Notes	500.0		500.0
2029 Dollar Senior Notes	2029 Dollar Senior Notes	700.0		700.0		2029 Dollar Senior Notes	700.0		700.0
Short-term and other borrowings	Short-term and other borrowings	112.9		118.0		Short-term and other borrowings	106.4		118.0
Unamortized original issue discount	Unamortized original issue discount	(6.0)		(6.3)		Unamortized original issue discount	(5.1)		(6.3)
Unamortized deferred financing costs	Unamortized deferred financing costs	(32.6)		(34.3)		Unamortized deferred financing costs	(29.0)		(34.3)
Total borrowings, net	Total borrowings, net	3,860.0		3,892.7		Total borrowings, net	3,842.5		3,892.7
Less:	Less:					Less:
Short-term borrowings	Short-term borrowings	25.6		29.9		Short-term borrowings	19.0		29.9
Current portion of long-term borrowings	Current portion of long-term borrowings	24.3		24.3		Current portion of long-term borrowings	24.3		24.3
Long-term debt	Long-term debt	$	3,810.1	$	3,838.5	Long-term debt	$	3,799.2	$	3,838.5

Revolving Credit Facility

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

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

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

Future repayments

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


Remainder of 2021	Remainder of 2021	$	42.4	Remainder of 2021	$	21.6
2022	2022	54.4		2022	54.4
2023	2023	27.3		2023	27.3
2024	2024	1,993.3		2024	1,993.3
2025	2025	531.9		2025	528.5
Thereafter	Thereafter	1,249.3		Thereafter	1,251.5
Total borrowings	Total borrowings	3,898.6		Total borrowings	3,876.6
Unamortized original issue discount	Unamortized original issue discount	(6.0)		Unamortized original issue discount	(5.1)
Unamortized deferred financing costs	Unamortized deferred financing costs	(32.6)		Unamortized deferred financing costs	(29.0)
Total borrowings, net	Total borrowings, net	$	3,860.0	Total borrowings, net	$	3,842.5

~~(15)~~(16) FINANCIAL INSTRUMENTS, HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENTS

Fair value of financial instruments

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

~~Table of Contents~~

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

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

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 nine months ended September 30, 2021, in conjunction with the acquisition in China described in Note 3, we recorded fair value of contingent consideration of $7.3 million, which remained unchanged as of September 30, 2021. The contingent consideration was valued using a probability-weighted expected payment method. The analysis considered the timing of expected future cash flows and the probability of whether key elements of the contingent event are completed. Due to the significant unobservable inputs used in the valuations, these liabilities are categorized within Level 3 of the fair value hierarchy.

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

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


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

Cross-currency swaps (2)	Cross-currency swaps (2)	$	0	$	18.5	$	0	$	18.5	$	0	$	16.7	$	0	$	16.7	Cross-currency swaps (2)	$	—	$	18.6	$	—	$	18.6	$	—	$	16.7	$	—	$	16.7

Foreign currency forward contracts (1)																		Foreign currency forward contracts (1)	—		0.1		—		0.1		—		—		—		—
Other assets:	Other assets:																	Other assets:

Investments in equity securities	Investments in equity securities	0.7		0		0		0.7		0.8		0		0		0.8		Investments in equity securities	0.7		—		—		0.7		0.8		—		—		0.8
Liabilities:	Liabilities:																	Liabilities:
Other accrued liabilities:	Other accrued liabilities:																	Other accrued liabilities:
Interest rate caps (1)	Interest rate caps (1)	0		1.5		0		1.5		0		2.0		0		2.0		Interest rate caps (1)	—		0.5		—		0.5		—		2.0		—		2.0
Interest rate swaps (1)	Interest rate swaps (1)	0		28.7		0		28.7		0		28.9		0		28.9		Interest rate swaps (1)	—		29.3		—		29.3		—		28.9		—		28.9
Foreign currency forward contracts (1)		0		0.1		0		0.1		0		0		0		0

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

Interest rate swaps (1)	Interest rate swaps (1)	0		22.8		0		22.8		0		31.1		0		31.1		Interest rate swaps (1)	—		9.3		—		9.3		—		31.1		—		31.1
Cross-currency swaps (2)	Cross-currency swaps (2)	0		28.9		0		28.9		0		52.0		0		52.0		Cross-currency swaps (2)	—		17.8		—		17.8		—		52.0		—		52.0

Long-term borrowings:	Long-term borrowings:																	Long-term borrowings:
2024 Dollar Term Loans	2024 Dollar Term Loans	0		2,057.0		0		2,057.0		0		2,043.0		0		2,043.0		2024 Dollar Term Loans	—		2,039.6		—		2,039.6		—		2,043.0		—		2,043.0
2025 Euro Senior Notes	2025 Euro Senior Notes	0		539.3		0		539.3		0		564.3		0		564.3		2025 Euro Senior Notes	—		534.8		—		534.8		—		564.3		—		564.3
2027 Dollar Senior Notes	2027 Dollar Senior Notes	0		519.2		0		519.2		0		533.1		0		533.1		2027 Dollar Senior Notes	—		521.6		—		521.6		—		533.1		—		533.1
2029 Dollar Senior Notes	2029 Dollar Senior Notes	0		681.7		0		681.7		0		704.6		0		704.6		2029 Dollar Senior Notes	—		684.6		—		684.6		—		704.6		—		704.6

(1) Cash flow hedge

(2) Net investment hedge

The table below presents a roll forward of activity for the Level 3 liabilities for the nine months ended September 30, 2021.


	Fair Value Using Significant Unobservable Inputs (Level 3)
Beginning balance January 1, 2021	$	—






Business acquisition	7.3










Ending balance at September 30, 2021	$	7.3

Derivative Financial Instruments

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

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


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
AOCI:	AOCI:					AOCI:
Interest rate caps (cash flow hedges)	Interest rate caps (cash flow hedges)	$	2.0	$	2.6	Interest rate caps (cash flow hedges)	$	0.7	$	2.6
Interest rate swaps (cash flow hedges)	Interest rate swaps (cash flow hedges)	51.5		60.0		Interest rate swaps (cash flow hedges)	38.6		60.0
Foreign currency forward contracts (cash flow hedges)	Foreign currency forward contracts (cash flow hedges)	0.2		0.3		Foreign currency forward contracts (cash flow hedges)	0.1		0.3
Cross-currency swaps (net investment hedges)	Cross-currency swaps (net investment hedges)	10.4		35.2		Cross-currency swaps (net investment hedges)	(0.8)		35.2
Total AOCI	Total AOCI	$	64.1	$	98.1	Total AOCI	$	38.6	$	98.1

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

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.

~~Table of Contents~~

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

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

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


			For the Three Months Ended March 31,										For the Three Months Ended September 30,
			2021				2020						2021				2020
Derivatives in Cash Flow and Net Investment Hedges	Derivatives in Cash Flow and Net Investment Hedges	Location of Loss (Gain) Recognized in Income on Derivatives	Net Amount of 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		Derivatives in Cash Flow and Net Investment Hedges	Location of Loss (Gain) Recognized in Income on Derivatives	Net Amount of Loss (Gain) Recognized in OCI on Derivatives		Amount of Loss (Gain) Recognized in Income		Net Amount of Loss Recognized in OCI on Derivatives		Amount of Loss (Gain) Recognized in Income
Interest rate caps	Interest rate caps	Interest expense, net	$	0	$	0.6	$	1.1	$	0.3	Interest rate caps	Interest expense, net	$	—	$	0.7	$	0.1	$	0.6
Interest rate swaps	Interest rate swaps	Interest expense, net	(1.5)		7.0		41.5		1.6		Interest rate swaps	Interest expense, net	0.9		7.5		0.4		7.0
Foreign currency forward contracts	Foreign currency forward contracts	Cost of goods sold	(0.1)		0		0		0		Foreign currency forward contracts	Cost of goods sold	—		0.1		0.1		—
Cross-currency swaps	Cross-currency swaps	Interest expense, net	(29.6)		(4.8)		(22.5)		(3.7)		Cross-currency swaps	Interest expense, net	(20.4)		(4.8)		16.9		(3.6)


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

Over the next 12 months, we expect losses of ~~$31.0~~$30.1 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 statements of operations.

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

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


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

Foreign currency forward contracts	Foreign currency forward contracts	Other (income) expense, net		$	(6.8)		$	(1.7)		Foreign currency forward contracts		Other (income) expense, net		$	(0.9)		$	(4.4)		$	(6.8)		$	(5.3)

~~(16)~~(17) SEGMENTS

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

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

We have 2 operating segments, which are also our reportable segments: Performance Coatings and Mobility Coatings. Previously named Transportation Coatings, our Mobility Coatings segment was renamed ~~during the three months ended March 31,~~earlier in 2021 with no changes to the underlying business or segment structure. The CODM reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment. Our CODM is identified as the Chief Executive Officer because he has final authority over performance assessment and resource allocation decisions. Our segments are based on the type and concentration of customers served, service requirements, methods of distribution and major product lines.

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

Through our Mobility Coatings segment, we provide advanced coating 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 March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
			2021		2020				2021		2020		2021		2020
Net sales (1):	Net sales (1):							Net sales (1):
Refinish	Refinish		$	399.0	$	367.8		Refinish	$	443.4	$	401.7	$	1,305.5	$	1,031.4
Industrial	Industrial		308.3		279.9			Industrial	335.8		281.0		986.8		781.1
Total Net sales Performance Coatings	Total Net sales Performance Coatings		707.3		647.7			Total Net sales Performance Coatings	779.2		682.7		2,292.3		1,812.5
Light Vehicle	Light Vehicle		278.9		260.1			Light Vehicle	235.4		276.3		758.2		662.7
Commercial Vehicle	Commercial Vehicle		77.4		75.7			Commercial Vehicle	74.0		67.9		228.5		187.9
Total Net sales Mobility Coatings	Total Net sales Mobility Coatings		356.3		335.8			Total Net sales Mobility Coatings	309.4		344.2		986.7		850.6
Total Net sales	Total Net sales		$	1,063.6	$	983.5		Total Net sales	$	1,088.6	$	1,026.9	$	3,279.0	$	2,663.1
Depreciation and amortization expense (2):								Depreciation and amortization expense (2):
Performance Coatings								Performance Coatings	$	57.0	$	57.4	$	167.4	$	175.3
Mobility Coatings								Mobility Coatings	22.3		23.0		67.3		68.3
Total Depreciation and amortization expense								Total Depreciation and amortization expense	$	79.3	$	80.4	$	234.7	$	243.6

			March 31, 2021		December 31, 2020
Investment in unconsolidated affiliates:
Performance Coatings			$	2.0	$	2.0
Mobility Coatings			8.3		8.7
Total			$	10.3	$	10.7

(1)The Company has 0no intercompany sales between segments.

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

1922

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

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


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
			2021		2020				2021		2020		2021		2020
Segment Adjusted EBIT (1):	Segment Adjusted EBIT (1):							Segment Adjusted EBIT (1):
Performance Coatings	Performance Coatings		$	117.2	$	79.4		Performance Coatings	$	122.8	$	133.9	$	379.7	$	214.8
Mobility Coatings	Mobility Coatings		39.2		25.8			Mobility Coatings	(2.7)		48.5		42.2		35.0
Total (2)	Total (2)		156.4		105.2			Total (2)	120.1		182.4		421.9		249.8
Interest expense, net	Interest expense, net		33.5		36.5			Interest expense, net	33.8		39.8		100.7		112.4
Debt extinguishment and refinancing related costs (a)	Debt extinguishment and refinancing related costs (a)		0		2.4			Debt extinguishment and refinancing related costs (a)	—		—		0.2		2.4
Termination benefits and other employee related costs (b)	Termination benefits and other employee related costs (b)		2.8		19.5			Termination benefits and other employee related costs (b)	9.6		35.7		35.1		70.4
Strategic review and retention costs (c)	Strategic review and retention costs (c)		5.4		11.5			Strategic review and retention costs (c)	2.1		6.9		9.7		25.1
Offering and transactional costs (d)			0.2		0.1
Impairment charges(e)			0		0.5
Acquisition and divestiture-related costs (d)								Acquisition and divestiture-related costs (d)	9.2		0.1		10.8		0.3
Impairment (benefits) charges(e)								Impairment (benefits) charges(e)	(0.8)		0.3		(0.8)		3.5
Pension special events (f)	Pension special events (f)		0		(1.2)			Pension special events (f)	—		(0.7)		—		(2.5)
Accelerated depreciation (g)	Accelerated depreciation (g)		0.6		8.1			Accelerated depreciation (g)	0.6		0.4		1.8		8.9

Indemnity (income) loss (h)								Indemnity (income) loss (h)	(0.1)		0.3		(0.2)		0.3

Operational matter ~~(h)~~(i)	Operational matter ~~(h)~~(i)		94.4		0			Operational matter ~~(h)~~(i)	(18.7)		—		3.9		—
Brazil indirect tax (j)								Brazil indirect tax (j)	—		—		(8.3)		—
Gain on sale of facility (k)								Gain on sale of facility (k)	(8.9)		—		(8.9)		—
Income before income taxes	Income before income taxes		$	19.5	$	27.8		Income before income taxes	$	93.3	$	99.6	$	277.9	$	29.0


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

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

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

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

(g)			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 acquisitions, which we do not consider indicative of our ongoing operating performance.

(i)			Represents expenses, changes in estimates and insurance recoveries for probable liabilities ~~associated with the~~related to an operational matter in the Mobility Coatings segment discussed further in Note 5,6, 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) expense, net.

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

2023

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Notes to Condensed Consolidated Financial Statements (Unaudited)

(In millions, unless otherwise noted)

~~(17)~~(18) ACCUMULATED OTHER COMPREHENSIVE LOSS


		Unrealized Currency Translation Adjustments		Pension Adjustments		Unrealized (Loss) Gain on Derivatives		Accumulated Other Comprehensive (Loss) Income			Unrealized Currency Translation Adjustments		Pension Adjustments		Unrealized (Loss) Gain on Derivatives		Accumulated Other Comprehensive (Loss) Income
Balance at December 31, 2020	Balance at December 31, 2020	$	(282.0)	$	(88.7)	$	(54.1)	$	(424.8)	Balance at December 31, 2020	$	(282.0)	$	(88.7)	$	(54.1)	$	(424.8)
Current year deferrals to AOCI	Current year deferrals to AOCI	(37.4)		0		1.3		(36.1)		Current year deferrals to AOCI	(37.4)		—		1.3		(36.1)
Reclassifications from AOCI to Net income	Reclassifications from AOCI to Net income	0		0.7		6.6		7.3		Reclassifications from AOCI to Net income	—		0.7		6.6		7.3
Net Change	Net Change	(37.4)		0.7		7.9		(28.8)		Net Change	(37.4)		0.7		7.9		(28.8)
Balance at March 31, 2021	Balance at March 31, 2021	$	(319.4)	$	(88.0)	$	(46.2)	$	(453.6)	Balance at March 31, 2021	(319.4)		(88.0)		(46.2)		(453.6)

Current year deferrals to AOCI										Current year deferrals to AOCI	38.7		—		(0.8)		37.9
Reclassifications from AOCI to Net income										Reclassifications from AOCI to Net income	—		1.0		6.7		7.7
Net Change										Net Change	38.7		1.0		5.9		45.6
Balance at June 30, 2021										Balance at June 30, 2021	(280.7)		(87.0)		(40.3)		(408.0)
Current year deferrals to AOCI										Current year deferrals to AOCI	(37.4)		—		(0.8)		(38.2)
Reclassifications from AOCI to Net income										Reclassifications from AOCI to Net income	—		0.8		7.1		7.9
Net Change										Net Change	(37.4)		0.8		6.3		(30.3)
Balance at September 30, 2021										Balance at September 30, 2021	$	(318.1)	$	(86.2)	$	(34.0)	$	(438.3)

The cumulative income tax benefit related to the adjustments for pension benefits at ~~March 31,~~September 30, 2021 was ~~$33.0~~$32.3 million. The cumulative income tax benefit related to the adjustments for unrealized loss on derivatives at ~~March 31,~~September 30, 2021 was ~~$7.5~~$5.4 million.


		Unrealized Currency Translation Adjustments		Pension Adjustments		Unrealized Gain (Loss) on Derivatives		Accumulated Other Comprehensive Income (Loss)			Unrealized Currency Translation Adjustments		Pension Adjustments		Unrealized (Loss) Gain on Derivatives		Accumulated Other Comprehensive (Loss) Income
Balance at December 31, 2019	Balance at December 31, 2019	$	(297.0)	$	(69.9)	$	(28.6)	$	(395.5)	Balance at December 31, 2019	$	(297.0)	$	(69.9)	$	(28.6)	$	(395.5)
Current year deferrals to AOCI	Current year deferrals to AOCI	(83.3)		0		(36.3)		(119.6)		Current year deferrals to AOCI	(83.3)		—		(36.3)		(119.6)
Reclassifications from AOCI to Net income	Reclassifications from AOCI to Net income	0		(0.4)		1.6		1.2		Reclassifications from AOCI to Net income	—		(0.4)		1.6		1.2
Net Change	Net Change	(83.3)		(0.4)		(34.7)		(118.4)		Net Change	(83.3)		(0.4)		(34.7)		(118.4)
Balance at March 31, 2020	Balance at March 31, 2020	$	(380.3)	$	(70.3)	$	(63.3)	$	(513.9)	Balance at March 31, 2020	(380.3)		(70.3)		(63.3)		(513.9)

Current year deferrals to AOCI										Current year deferrals to AOCI	6.1		—		(5.2)		0.9
Reclassifications from AOCI to Net loss										Reclassifications from AOCI to Net loss	—		0.4		3.0		3.4
Net Change										Net Change	6.1		0.4		(2.2)		4.3
Balance at June 30, 2020										Balance at June 30, 2020	(374.2)		(69.9)		(65.5)		(509.6)
Current year deferrals to AOCI										Current year deferrals to AOCI	33.9		(0.2)		(0.5)		33.2
Reclassifications from AOCI to Net income										Reclassifications from AOCI to Net income	—		(0.3)		6.5		6.2
Net Change										Net Change	33.9		(0.5)		6.0		39.4
Balance at September 30, 2020										Balance at September 30, 2020	$	(340.3)	$	(70.4)	$	(59.5)	$	(470.2)

Included within the reclassification from AOCI to Net Income for the three and nine months ended ~~March 31,~~September 30, 2020 ~~was $1.2~~were curtailment and settlement impacts of $1.3 million ~~of curtailment gains.~~and $3.1 million, respectively. The cumulative income tax benefit related to the adjustments for pension benefits at ~~March 31,~~September 30, 2020 was ~~$26.8~~$27.0 million. The cumulative income tax benefit related to the adjustments for unrealized loss on derivatives at ~~March 31,~~September 30, 2020 was ~~$10.3 million.~~

~~(18) SUBSEQUENT EVENTS~~

~~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 program, initially announced in March 2017, to a total of $1.3 billion, of which we have already repurchased approximately $500.0$9.7 million.

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

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

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 terminology. We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this Quarterly Report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions, including, but not limited to, the risks and uncertainties described in "Forward-Looking Statements," as well as "Risk Factors", in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020, and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors, including, but not limited to, those described in "Risk Factors", could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections.

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

OVERVIEW

We are a leading global manufacturer, marketer and distributor of high performance coatings systems and products. We have over a 150-year heritage in the coatings industry and are known for manufacturing high-quality products with well-recognized brands supported by market-leading technology and customer service. Our diverse global footprint of 4647 manufacturing facilities, four technology centers, 5248 customer training centers and approximately 13,000 people allows us to meet the needs of customers in over ~~130~~140 countries. We serve our customer base through an extensive sales force and technical support organization, as well as through approximately 4,000 independent, locally based distributors.

We operate our business in two operating segments, Performance Coatings and Mobility Coatings. Previously named Transportation Coatings, our Mobility Coatings segment was renamed ~~during the three months ended March 31,~~earlier in 2021 with no changes to the underlying business or segment structure. Our segments are based on the type and concentration of customers served, service requirements, methods of distribution and major product lines.

Through our Mobility Coatings segment, we provide advanced coating technologies to 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.

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BUSINESS HIGHLIGHTS

General Business Highlights

Our net sales increased ~~8.1%~~23.1%, including a ~~3.2%~~3.0% benefit from foreign currency translation, for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared with the ~~three~~nine months ended ~~March 31,~~September 30, 2020. The increased sales were primarily driven by higher volumes of ~~4.6%~~14.9% as a result of demand recovery from the impacts of COVID-19, partially offset by the impacts of semiconductor chip and other supply chain shortages on our customers, as well as ~~slightly~~ higher average selling price and product mix of ~~0.3%~~4.1%. The following trends have impacted our segment and end-market net sales performance:

•Performance Coatings: Net sales increased ~~9.2%~~26.5%, including a ~~4.2%~~3.4% benefit from foreign currency translation, for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared with the ~~three~~nine months ended ~~March 31,~~September 30, 2020. The increased sales were primarily driven by higher volumes of ~~6.2%~~16.3% as a result of demand recovery from the impacts of COVID-19 and higher average selling prices and product mix of 5.2%. 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 16.0%, including a 2.1% benefit from foreign currency translation, for the nine months ended September 30, 2021 compared with the nine months ended September 30, 2020. The increased sales were primarily due to higher volumes of 12.0% as a result of demand recovery from the impacts of COVID-19, partially offset by ~~a 1.2% decrease in~~semiconductor chip and other supply chain shortages, as well as higher average selling prices and product ~~mix.~~mix of 1.9%. 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 6.1%, including a 1.5% benefit from foreign currency translation, for the three months ended March 31, 2021 compared with the three months ended March 31, 2020. The increased sales were primarily driven by 3.1% higher average selling prices and product mix, as well as higher volumes of 1.5% as a result of demand recovery from the impacts of COVID-19.

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


(In millions)	(In millions)	Three Months Ended March 31,			2021 vs 2020		(In millions)		Three Months Ended September 30,				2021 vs 2020		Nine Months Ended September 30,				2021 vs 2020
			2021		2020			% change			2021		2020		% change		2021		2020		% change
Performance Coatings	Performance Coatings									Performance Coatings
Refinish	Refinish		$	399.0	$	367.8		8.5	%	Refinish	$	443.4	$	401.7	10.4	%	$	1,305.5	$	1,031.4	26.6	%
Industrial	Industrial		308.3		279.9			10.1	%	Industrial	335.8		281.0		19.5	%	986.8		781.1		26.3	%
Total Net sales Performance Coatings	Total Net sales Performance Coatings		707.3		647.7			9.2	%	Total Net sales Performance Coatings	779.2		682.7		14.1	%	2,292.3		1,812.5		26.5	%
Mobility Coatings	Mobility Coatings									Mobility Coatings
Light Vehicle	Light Vehicle		278.9		260.1			7.2	%	Light Vehicle	235.4		276.3		(14.8)	%	758.2		662.7		14.4	%
Commercial Vehicle	Commercial Vehicle		77.4		75.7			2.2	%	Commercial Vehicle	74.0		67.9		9.0	%	228.5		187.9		21.6	%
Total Net sales Mobility Coatings	Total Net sales Mobility Coatings		356.3		335.8			6.1	%	Total Net sales Mobility Coatings	309.4		344.2		(10.1)	%	986.7		850.6		16.0	%
Total Net sales	Total Net sales		$	1,063.6	$	983.5		8.1	%	Total Net sales	$	1,088.6	$	1,026.9	6.0	%	$	3,279.0	$	2,663.1	23.1	%

Semiconductor chip shortages, supply chain shortages and raw material inflation

During the nine months ended September 30, 2021, we were impacted by supply chain shortages as a result of semiconductor chip shortages affecting Light Vehicle production globally, severe weather in the U.S., inflation of raw material costs, and logistics constraints. We anticipate these conditions will continue to impact our results into 2022. We will continue to monitor these conditions and take appropriate actions that we believe will help mitigate costs and other operational impacts.

Coronavirus (COVID-19) Pandemic

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, ~~the Company~~we continued ~~its recovery, which began in the second half of 2020,~~to recover from the significant adverse impact on the demand for our products and, thus, our income from operations, caused by the COVID-19 pandemic, ~~during the first half of~~which began in early 2020. While we have ~~continued~~seen a return to ~~see sequential improvements quarter over quarter,~~more stable quarter-over-quarter demand for our products, we remain cognizant of the potential impacts of new variants, shutdowns or restrictions put in place on our future results of operations, financial condition and cash flows. The risks and uncertainties related to the COVID-19 pandemic are discussed in further detail within Note 1 to the interim unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

~~We continue~~

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Acquisitions Highlights

During the nine months ended September 30, 2021, we successfully completed two strategic acquisitions within our Performance Coatings segment, including the acquisition of U-POL Holdings Limited, which are discussed in further detail within Note 3 to actively monitor and manage supply chain challenges, including logistics, but thus far, there have been no significant disruptions. Our supply chain team is coordinating with our suppliers to identify and mitigate potential areas of risk and manage inventories. Our business continues to be impactedthe interim unaudited condensed consolidated financial statements included elsewhere in ~~certain regions and end-markets as a result of government restrictions which were in place for parts of the first quarter and we will continue to monitor impacts.~~

From a liquidity standpoint, we have $1,266.9 million of cash and cash equivalents and $366.0 million of available borrowing capacity under our Senior Secured Credit Facilities. We have no outstanding borrowingthis Quarterly Report on ~~the Revolving Credit Facility and, therefore, are not currently subject to any financial covenants under the Senior Secured Credit Facility.~~Form 10-Q.

Capital and Liquidity Highlights

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, ~~the Company~~we repurchased ~~2.3~~7.3 million shares of our common stock for total consideration of ~~$63.6~~$213.7 million as we continue to execute against our ~~previously approved~~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 program, initially announced in March 2017, to a total of $1.3 billion, of which we have already repurchased $652.6 million through September 30, 2021.

During the nine months ended September 30, 2021, in connection with the Tenth Amendment to the Credit Agreement (the "Tenth Amendment") discussed within Note 15 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, 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.

FACTORS AFFECTING OUR OPERATING RESULTS

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

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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 March 31,	2021 vs 2020						Three Months Ended September 30,				2021 vs 2020				Nine Months Ended September 30,				2021 vs 2020
			2021		2020		$ Change			% Change			2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Net sales	Net sales		$	1,063.6	$	983.5	$	80.1		8.1	%	Net sales	$	1,088.6	$	1,026.9	$	61.7	6.0	%	$	3,279.0	$	2,663.1	$	615.9	23.1	%
Volume effect	Volume effect									4.6	%	Volume effect							(1.6)	%							14.9	%

Impact of acquisitions												Impact of acquisitions							1.8	%							1.1	%
Price/Mix effect	Price/Mix effect									0.3	%	Price/Mix effect							4.5	%							4.1	%
Exchange rate effect	Exchange rate effect									3.2	%	Exchange rate effect							1.3	%							3.0	%

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


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

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


Net sales increased due to the following:
n Higher sales volumes across both segments as a result of demand recovery from the impacts of COVID-19, ~~which~~muted by customer production limitations resulting from semiconductor and other supply-chain shortages
n Higher average selling price driven in both segments and most ~~severely impacted the Asia Pacific region during the three months ended March 31, 2020~~regions as a result of pricing actions taken to offset input price inflation
n Favorable impacts of currency translation, due primarily to the fluctuations of the Euro and Chinese Renminbi ~~partially offset by the weakening of the Brazilian Real,~~ compared to the U.S. dollar

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Cost of sales


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

Cost of sales	Cost of sales		$	684.5		$	646.8		$	37.7		5.8	%	Cost of sales	$	745.3		$	634.1		$	111.2	17.5	%	$	2,182.6		$	1,780.1		$	402.5	22.6	%

% of net sales	% of net sales		64.4		%	65.8		%						% of net sales	68.5		%	61.7		%					66.6		%	66.8		%

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


Cost of sales increased due to the following:
n Higher variable input costs due to raw material inflation and supply chain impacts
n Increased compensation-related expenses compared to the prior year, which were lower due to temporary COVID-19 related cost reduction actions
n Higher operating costs due to the lapse of temporary cost savings in the prior year, partially offset by the reduction in costs resulting from operational efficiencies associated with our structural cost savings initiatives
n Unfavorable impacts of currency translation, due primarily to the fluctuations of the Euro and Chinese Renminbi compared to the U.S. dollar
n Increased costs associated with the acquisitions
Partially offset by:

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

n Higher average selling prices

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


Cost of sales increased due to the following:
n Higher sales volumes across both segments ~~driven by~~as a result of demand recovery from the impacts of COVID-19
n Higher variable input costs due to raw material inflation and supply chain impacts
n Increased compensation-related expenses compared to the prior year, which ~~most significantly impacted the Asia Pacific region during the three months ended March 31, 2020~~were lower due to temporary COVID-19 related cost reduction actions
n Unfavorable impacts of currency translation, due primarily to the fluctuations of the Euro and Chinese Renminbi ~~partially offset by the weakening of the Brazilian Real,~~ compared to the U.S. dollar
n Increased costs associated with the acquisitions
Partially offset by:
n Reduction in costs ~~due to~~resulting from operational efficiencies associated with our structural cost savings initiatives, partially offset by the lapse of temporary cost savings in the prior year
n Decreased expenses of ~~$4.1~~$35.2 million associated with improved utilization at manufacturing sites in the current year as manufacturing utilization was negatively impacted ~~during~~in the 2020 period due to impacts from COVID-19
n ~~Decline~~Lower expenses in ~~depreciation expense for operating equipment, primarily related~~2021 compared to ~~the closure~~2020 of ~~our Mechelen, Belgium site~~$7.9 million resulting from fewer inventory 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~~Decreased expenses of $35.2 million associated with improved utilization at manufacturing sites in the current year as manufacturing utilization was negatively impacted in the 2020 period due to impacts from COVID-19
Partially offset by:
n Higher variable input costs due to ~~operational efficiencies associated with~~raw material inflation
n Increased compensation-related expenses compared to the prior year, which were lower due to temporary COVID-19 related cost ~~savings initiatives~~reduction actions

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Selling, general and administrative expenses

Three Months Ended March 31, 2021 vs 2020
2021 2020 $ Change % Change
SG&A $ 179.1 $ 195.4 $ (16.3) (8.3) %


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

SG&A	$	181.0	$	166.5	$	14.5	8.7	%	$	544.3	$	516.1	$	28.2	5.5	%

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


Selling, general and administrative expenses ~~decreased~~increased due to the following:
n ~~Reduction~~Higher operating costs due to the lapse of temporary cost savings in the prior year, partially offset by the reduction in costs ~~due to~~resulting from operational efficiencies associated with our structural cost savings initiatives
n ~~Lower bad debt~~Increased expenses ~~associated with trade receivables~~as a result of ~~$2.7 million~~acquisitions
~~Partially offset by:~~ n Increased compensation-related expenses compared to the prior year, which were lower due to temporary COVID-19 related cost reduction actions
n Unfavorable impacts of currency translation, due primarily to the fluctuations of the Euro and Chinese Renminbi compared to the U.S. dollar
Partially offset by:

n Lower bad debt expenses in 2021 compared to 2020 of $2.0 million associated with trade receivables

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~~Other operating charges~~

Three Months Ended March 31, 2021 vs 2020
2021 2020 $ Change % Change
Other operating charges $ 102.8 $ 31.6 $ 71.2 225.3 %
Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020


~~Other operating charges~~Selling, general and administrative expenses increased due to the following:
n Higher operating costs due to the lapse of temporary cost savings in the prior year, partially offset by the reduction in costs resulting from operational efficiencies associated with our structural cost savings initiatives
n Increase in commissions and sales incentive compensation driven by increased sales
n Increased expenses as a result of ~~$94.4~~acquisitions
n Increased compensation-related expenses compared to the prior year, which were lower due to temporary COVID-19 related cost reduction actions
n Unfavorable impacts of currency translation, due primarily to the fluctuations of the Euro and Chinese Renminbi compared to the U.S. dollar
Partially offset by:
n Lower bad debt expenses in 2021 compared to 2020 of $11.5 million associated with trade receivables

Other operating (benefits) charges


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

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


Other operating (benefits) charges changed due to the following:
nDecrease of $26.1 million in termination benefits and other employee related costs associated with our cost saving initiatives from $35.7 million in the prior year to ~~a charge recorded~~$9.6 million in ~~relation~~the current year
nBenefits of $18.7 million in the current year related to an operational matter in our Mobility Coatings segment discussed further in Note 56 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q
nGain of $7.9 million in the current year related to the sale of a manufacturing facility
nDecrease of $4.8 million associated with retention award amortization, from $6.9 million in the prior year to $2.1 million the current year
Partially offset by:
nIncrease of $7.9 million related to expenses for acquisition activity during the current year

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


Other operating (benefits) charges changed due to the following:
n Decrease of ~~$16.5~~$35.3 million in termination benefits and other employee related costs associated with our cost saving initiatives from ~~$19.5~~$70.4 million in the prior year to ~~$3.0~~$35.1 million in the current year
n~~Decreased expenses~~Decrease of ~~$6.1~~$15.4 million associated with the review of strategic alternatives that was concluded in March 2020 and retention awards, from $25.1 million in the prior year to $9.7 million in the current year
n Gain of $7.9 million in the current year related to the sale of a manufacturing facility
nDecrease of $4.3 in impairment charges primarily related to impairments and associated write-downs in the prior year resulting from our decision to exit the Performance Coatings segment business in Argentina, which did not exist in the current year
Partially offset by:
nIncrease of $9.3 million related to expenses for acquisition activity during the current year
nIncrease of $3.9 million in the current year as a result of a charge recorded in relation to probable liabilities for an operational matter in our Mobility Coatings segment discussed further in Note 6 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q

Research and development expenses

Three Months Ended March 31, 2021 vs 2020
2021 2020 $ Change % Change
Research and development expenses $ 15.6 $ 16.6 $ (1.0) (6.0) %


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

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


Research and development expenses ~~decreased~~increased due to the following:
n ~~Decrease~~Increase in ~~operating~~compensation-related expenses ~~as a result~~and other spending due to the absence of ~~operational efficiencies associated with~~temporary cost savings initiatives that were in place during 2020

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


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

Amortization of acquired intangibles

Three Months Ended March 31, 2021 vs 2020
2021 2020 $ Change % Change
Amortization of acquired intangibles $ 29.0 $ 28.0 $ 1.0 3.6 %


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

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


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

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


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

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Interest expense, net

Three Months Ended March 31, 2021 vs 2020
2021 2020 $ Change % Change
Interest expense, net $ 33.5 $ 36.5 $ (3.0) (8.2) %


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

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


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

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


Interest expense, net decreased primarily due to the following:
n Decrease in variable and fixed interest rates due to LIBOR decreases on our variable rate debt over the comparable period and benefits on our fixed rate debt obtained during our debt refinancing activity in November 2020
Partially offset by:
n Unfavorable impacts of our derivative instruments used to hedge the variable interest rate exposure on certain debt arrangements
n ~~Net increase in debt principal base as a result of our 2020 refinancing and debt issuance activities~~

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Other (income) expense, net

Three Months Ended March 31, 2021 vs 2020
2021 2020 $ Change % Change
Other (income) expense, net $ (0.4) $ 0.8 $ (1.2) (150.0) %


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

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


Other (income) expense, net changed due to the following:
n ~~Debt~~Favorable impact of foreign exchange gain of $6.2 million when compared with the prior year period
Partially offset by:
n A net benefit of $0.7 million during the prior period as a result of pension curtailment and settlements released from accumulated other comprehensive loss, partially offset by special termination benefits, which does not exist in the current year

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


Other (income) expense, net changed due to the following:
n Income of $8.3 million recorded in 2021 related to a law change with respect to certain Brazilian indirect taxes
n Reduction in debt extinguishment and refinancing related costs of ~~$2.4~~$2.2 million in
n Favorable impact of foreign exchange losses of $4.6 million when compared with the prior year quarter, driven 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 compared to no similar activity in the current year quarterperiod
Partially offset byby:
n ~~Net benefits~~A net benefit of ~~$1.2~~$2.5 million during the prior ~~year~~ period ~~resulting from~~as a result of pension ~~curtailments~~curtailment and settlements released from accumulated other comprehensive loss, ~~compared to no pension~~partially offset by special ~~events~~termination benefits, which does not exist in the current year ~~quarter~~

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Provision (benefit) for income taxes


		Three Months Ended March 31,						Three Months Ended September 30,					Nine Months Ended September 30,
			2021			2020				2021			2020			2021			2020
Income before income taxes	Income before income taxes		$	19.5		$	27.8		Income before income taxes	$	93.3		$	99.6		$	277.9		$	29.0
Provision (benefit) for income taxes	Provision (benefit) for income taxes		3.8			(24.6)			Provision (benefit) for income taxes	24.4			17.1			66.9			(22.7)
Statutory U.S. Federal income tax rate	Statutory U.S. Federal income tax rate		21.0		%	21.0		%	Statutory U.S. Federal income tax rate	21.0		%	21.0		%	21.0		%	21.0		%
Effective tax rate	Effective tax rate		19.5		%	(88.5)		%	Effective tax rate	26.2		%	17.2		%	24.1		%	(78.3)		%
Effective tax rate vs. statutory U.S. Federal income tax rate	Effective tax rate vs. statutory U.S. Federal income tax rate		(1.5)		%	(109.5)		%	Effective tax rate vs. statutory U.S. Federal income tax rate	5.2		%	(3.8)		%	3.1		%	(99.3)		%


			(Favorable) Unfavorable Impact							(Favorable) Unfavorable Impact
		Three Months Ended March 31,						Three Months Ended September 30,				Nine Months Ended September 30,
Items impacting the effective tax rate vs. statutory U.S. federal income tax rate	Items impacting the effective tax rate vs. statutory U.S. federal income tax rate			2021		2020			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)	Earnings generated in jurisdictions where the statutory rate is different from the U.S. Federal rate (1)			$	(4.6)	$	(4.3)		Earnings generated in jurisdictions where the statutory rate is different from the U.S. Federal rate (1)	$	(3.7)	$	(7.0)	$	(10.7)	$	(12.9)
Changes in valuation allowance	Changes in valuation allowance			7.0		(4.5)			Changes in valuation allowance	4.7		(1.1)		17.2		(3.5)
Foreign exchange (loss) gain, net				(1.6)		8.5
Foreign exchange gain (loss), net									Foreign exchange gain (loss), net	(0.6)		2.1		(1.2)		10.6
Non-deductible expenses and interest	Non-deductible expenses and interest			0.7		1.3			Non-deductible expenses and interest	2.1		0.9		4.2		4.0
Increase in unrecognized tax benefits(2)	Increase in unrecognized tax benefits(2)			2.2		17.9			Increase in unrecognized tax benefits(2)	1.8		1.8		5.5		21.1
Intra-entity asset transfer (3)	Intra-entity asset transfer (3)			—		(50.5)			Intra-entity asset transfer (3)	—		—		—		(50.5)
Foreign taxes									Foreign taxes	1.2		0.9		4.5		4.4

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

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

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

2632

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SEGMENT RESULTS

The Company's products and operations are managed and reported in two operating segments: Performance Coatings and Mobility Coatings. See Note 1617 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

Performance Coatings Segment


		Three Months Ended March 31,	2021 vs 2020								Three Months Ended September 30,				2021 vs 2020						Nine Months Ended September 30,				2021 vs 2020
			2021			2020			$ Change			% Change			2021			2020			$ Change		% Change		2021			2020			$ Change		% Change
Net sales	Net sales		$	707.3		$	647.7		$	59.6		9.2	%	Net sales	$	779.2		$	682.7		$	96.5	14.1	%	$	2,292.3		$	1,812.5		$	479.8	26.5	%
Volume effect	Volume effect											6.2	%	Volume effect									5.2	%									16.3	%

Impact of acquisitions														Impact of acquisitions									2.7	%									1.6	%
Price/Mix effect	Price/Mix effect											(1.2)	%	Price/Mix effect									5.0	%									5.2	%
Exchange rate effect	Exchange rate effect											4.2	%	Exchange rate effect									1.2	%									3.4	%

Adjusted EBIT	Adjusted EBIT		$	117.2		$	79.4		$	37.8		47.6	%	Adjusted EBIT	$	122.8		$	133.9		$	(11.1)	(8.3)	%	$	379.7		$	214.8		$	164.9	76.8	%
Adjusted EBIT Margin	Adjusted EBIT Margin		16.6		%	12.3		%						Adjusted EBIT Margin	15.8		%	19.6		%					16.6		%	11.9		%

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


Net sales increased due to the following:
n Higher sales volumes across both end-markets ~~and most regions~~ 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 compared to the U.S. dollar~~
~~Partially offset by:~~
n ~~Lower~~Higher average selling prices and product mix across both end-markets, ~~and~~ driven by ~~North America and EMEA~~


~~Adjusted EBIT increased due to the following:~~
n ~~Lower operating expenses across~~price actions within both end-markets ~~and most regions, resulting from operational efficiencies associated with our cost savings initiatives~~
n Higher volumes across both end-markets, primarily in the Asia Pacific region as a result of demand recovery from the impacts of COVID-19 and the lack of expenses resulting from underutilized manufacturing assets in the prior year quarter
n ~~Lower variable input costs across both end-markets driven by North America and EMEA~~to offset raw material inflation
n Favorable ~~impacts of currency translation, due primarily to the fluctuations of the Euro compared to the U.S. dollar~~
~~Partially offset by:~~
n ~~Lower average selling prices and product mix across both end-markets~~
~~Adjusted EBIT margins increased~~impact from acquisitions closed during ~~the year due to the following:~~
n ~~Lower operating expenses across both end-markets and most regions, resulting from operational efficiencies associated with our cost savings initiatives~~
n Higher volumes covering fixed costs across both end-markets, primarily in the Asia Pacific region as a result of demand recovery from the impacts of COVID-19 and the lack of expenses resulting from underutilized manufacturing assets in the prior year quarter

~~Table of Contents~~

~~Mobility Coatings Segment~~

Three Months Ended March 31, 2021 vs 2020
2021 2020 $ Change % Change
Net sales $ 356.3 $ 335.8 $ 20.5 6.1 %
Volume effect 1.5 %
Price/Mix effect 3.1 %
Exchange rate effect 1.5 %
Adjusted EBIT $ 39.2 $ 25.8 $ 13.4 51.9 %
Adjusted EBIT Margin 11.0 % 7.7 %


~~Net sales increased due to the following:~~
n ~~Higher average selling prices and product mix in the Light Vehicle end-market~~
n ~~Higher volumes across both end-markets, primarily in the Asia Pacific region as a result of demand recovery from the impacts of COVID-19~~2021
n 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 decreased due to the following:
n Higher variable input costs across both end-markets and all regions due to raw material inflation
n Higher operating costs due to the lapse of temporary cost savings in the prior year, partially offset by the reduction in costs resulting from operational efficiencies associated with our structural cost savings initiatives
Partially offset by:
n Higher average selling prices and product mix across both end-markets and most regions
n Higher sales volumes across both end-markets as a result of demand recovery from the impacts of COVID-19


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

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


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

Table of Contents


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

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

Mobility Coatings Segment


	Three Months Ended September 30,						2021 vs 2020				Nine Months Ended September 30,						2021 vs 2020
	2021			2020			$ Change		% Change		2021			2020			$ Change		% Change
Net sales	$	309.4		$	344.2		$	(34.8)	(10.1)	%	$	986.7		$	850.6		$	136.1	16.0	%
Volume effect									(15.2)	%									12.0	%

Price/Mix effect									3.6	%									1.9	%
Exchange rate effect									1.5	%									2.1	%

Adjusted EBIT	$	(2.7)		$	48.5		$	(51.2)	(105.6)	%	$	42.2		$	35.0		$	7.2	(20.6)	%
Adjusted EBIT Margin	(0.9)		%	14.1		%					4.3		%	4.1		%

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


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


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

Table of Contents

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


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


Adjusted EBIT increased due to the following:
n Higher ~~average selling prices and product mix in the Light Vehicle end-market~~
n ~~Lower operating expenses across both end-markets and most regions, resulting from operational efficiencies associated with our cost savings initiatives~~
n ~~Higher~~sales volumes across both end-markets ~~primarily in the Asia Pacific region~~ as a result of demand recovery from the impacts of COVID-19, partially offset by customer production limitations due to semiconductor chip and other supply chain shortages
n Higher average selling price and product mix driven by price actions
n Lower manufacturing expenses of $20.9 million compared to the ~~lack~~prior year as a result of ~~expenses resulting from~~ underutilized manufacturing assets in the prior year ~~quarter~~period due to COVID-19 demand impacts
Partially offset by:
n Higher variable input costs ~~driven by Light Vehicle~~
n ~~Unfavorable impacts of currency translation,~~ due ~~primarily~~ to ~~the weakening of the Brazilian Real compared to the U.S. dollar~~raw material inflation
Adjusted EBIT margins ~~increased~~remained roughly the same during the ~~year~~nine months ended September 30, 2021 due to the following:
n Higher ~~average selling prices and product mix in the Light Vehicle end-market~~
n ~~Lower operating expenses~~sales volumes across both end-markets ~~and most regions, resulting from operational efficiencies associated with our cost savings initiatives~~
n ~~Higher volumes covering fixed costs across both end-markets, primarily in the Asia Pacific region~~ as a result of demand recovery from the impacts of COVID-19 to cover fixed costs
n Higher average selling price and product mix driven by driven by price actions
n Lower manufacturing expenses of $20.9 million compared to the ~~lack~~prior year as a result of ~~expenses resulting from~~ underutilized manufacturing assets in the prior year ~~quarter~~period due to COVID-19 demand impacts
Largely offset by:
n Higher variable input costs due to raw material inflation

LIQUIDITY AND CAPITAL RESOURCES

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

At ~~March 31,~~September 30, 2021, availability under the Revolving Credit Facility was ~~$366.0~~$516.0 million, net of $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 ~~March 31,~~September 30, 2021, we had ~~$18.4~~$14.9 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 ~~$5.7~~$31.6 million.

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

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Cash Flows


		Three Months Ended March 31,					Nine Months Ended September 30,
(In millions)	(In millions)	2021		2020		(In millions)	2021		2020
Net cash provided by (used for):	Net cash provided by (used for):					Net cash provided by (used for):
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	15.7	$	52.4	Net income	$	211.0	$	51.7
Depreciation and amortization	Depreciation and amortization	76.4		86.6		Depreciation and amortization	234.7		243.6
Amortization of deferred financing costs and original issue discount	Amortization of deferred financing costs and original issue discount	2.2		2.2		Amortization of deferred financing costs and original issue discount	6.7		6.8
Debt extinguishment and refinancing related costs		—		2.4

Deferred income taxes	Deferred income taxes	(18.3)		(45.7)		Deferred income taxes	9.3		(57.2)
Realized and unrealized foreign exchange losses, net	Realized and unrealized foreign exchange losses, net	8.6		3.7		Realized and unrealized foreign exchange losses, net	9.5		12.7
Stock-based compensation	Stock-based compensation	3.6		5.1		Stock-based compensation	11.7		15.9
Divestiture and impairment charges		—		0.5

Gain on sale of facility						Gain on sale of facility	(8.9)		—
Interest income on swaps designated as net investment hedges	Interest income on swaps designated as net investment hedges	(3.5)		(3.7)		Interest income on swaps designated as net investment hedges	(14.3)		(11.0)
Other non-cash, net	Other non-cash, net	1.4		(1.9)		Other non-cash, net	11.3		8.6
Net income adjusted for non-cash items	Net income adjusted for non-cash items	86.1		101.6		Net income adjusted for non-cash items	471.0		271.1
Changes in operating assets and liabilities	Changes in operating assets and liabilities	(46.5)		(102.4)		Changes in operating assets and liabilities	(181.0)		(40.2)
Operating activities	Operating activities	39.6		(0.8)		Operating activities	290.0		230.9
Investing activities	Investing activities	(27.8)		(18.6)		Investing activities	(719.9)		(39.3)
Financing activities	Financing activities	(92.5)		(321.3)		Financing activities	(279.5)		136.8
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(13.5)		(19.8)		Effect of exchange rate changes on cash	(16.5)		(4.7)

Net decrease in cash, cash equivalents and restricted cash		$	(94.2)	$	(360.5)
Net (decrease) increase in cash, cash equivalents and restricted cash						Net (decrease) increase in cash, cash equivalents and restricted cash	$	(725.9)	$	323.7

~~Three~~Nine months ended ~~March 31,~~September 30, 2021

Net Cash Provided by Operating Activities

Net cash provided by operating activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 was ~~$39.6~~$290.0 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of ~~$86.1~~$471.0 million. This was offset by net uses of working capital of ~~$46.5~~$181.0 million, for which the most significant drivers were increases in accounts and notes receivable, inventory, and prepaid expenses and other assets of ~~$52.6~~$168.5 million, ~~$36.2~~$107.8 million, and ~~$18.0~~$64.3 million, respectively. These outflows were primarily driven by timing of collections and building inventory to pre-COVID levels to align with returning demand and inflation of raw material costs. The outflows were partially offset by increases in accounts payable of $33.4 million due to increased production and inflation of raw material costs and other accruals of $30.7 million due to accrualsinsurance receivables related to the operational matter within the Mobility Coatings segment, which is discussed further in Note 56 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, inflation of raw material costs and building inventory to pre-COVID-19 levels to align with returning demand. The outflows were partially offset by ~~the timing~~increases in accounts payable of ~~cash payments for employee related benefits, customer incentive payments~~$88.3 million due to increased production and ~~payments~~inflation of raw material costs and other accruals of $61.3 million primarily due to accruals related to ~~normal seasonal operating activities.~~the operational matter within the Mobility Coatings segment.

Net Cash Used for Investing Activities

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

Net Cash Used for Financing Activities

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

Other Impacts on Cash

Currency exchange impacts on cash for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 were unfavorable by ~~$13.5~~$16.5 million, which was driven primarily by ~~weakening of~~fluctuations in the Euro compared to the U.S. Dollar.

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~~Three~~Nine months ended ~~March 31,~~September 30, 2020

Net Cash ~~Used for~~Provided by Operating Activities

Net cash ~~used for~~provided by operating activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 was ~~$0.8~~$230.9 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of ~~$101.6~~$271.1 million. This was offset by net uses of working capital of ~~$102.4~~$40.2 million, for which the most significant drivers were ~~decreases in other accrued liabilities of $73.3 million and~~ increases in prepaid expenses and other assets of ~~$38.2~~$60.8 million and other accrued liabilities of $40.9 million, partially offset by decreases in inventory of ~~$27.1~~$43.2 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2020. These outflows were primarily related to the timing of cash payments for ~~employee related~~employee-related benefits, customer incentive payments, ~~and~~ payments ~~related to~~of normal seasonal operating ~~activities. Partially offsetting these outflows were increases in accounts payable of $29.0 million.~~activities and decreased business activity associated with the COVID-19 downturn.

Net Cash Used for Investing Activities

Net cash used for investing activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 was ~~$18.6~~$39.3 million. The primary use was for purchases of property, plant and equipment of ~~$22.7~~$56.2 million, partially offset by interest proceeds on swaps designated as net investment hedges of ~~$3.7~~$11.0 million.

Net Cash ~~Used for~~Provided by Financing Activities

Net cash ~~used for~~provided by financing activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 was ~~$321.3~~$136.8 million. This change was driven primarily by cash proceeds of $500.0 million from the issuance of our 2027 Senior Notes, partially offset by the voluntary prepayment of $300.0 million of the outstanding principal on the 2024 Dollar Term ~~Loans,~~Loans. Also offsetting the net inflows were routine repayments of ~~$17.8~~$48.5 million on short-term and long-term borrowings, ~~investments in~~payments of financing related costs of $8.4 million and purchases of noncontrolling interests of ~~$1.6 million, and net cash outflows related to stock-based awards of $1.1~~$5.8 million.

Other Impacts on Cash

Currency exchange impacts on cash for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 were unfavorable by ~~$19.8~~$4.7 million, which was driven primarily by weakening of the Mexican Peso, ~~British Pound,~~ South African Rand, Brazilian Real and Russian Ruble compared to the U.S. Dollar.

Financial Condition

We had cash and cash equivalents at ~~March 31,~~September 30, 2021 and December 31, 2020 of ~~$1,266.9~~$627.7 million and $1,360.9 million, respectively. Of these balances, ~~$664.3~~$393.3 million and $761.7 million were maintained in non-U.S. jurisdictions as of ~~March 31,~~September 30, 2021 and December 31, 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~~selling additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances. Our primary sources of liquidity are cash on hand, cash flow from operations and available borrowing capacity under our Senior Secured Credit Facilities. Based on our forecasts, we believe that cash flow from operations, available cash on hand and available borrowing capacity under our Senior Secured Credit Facilities and existing lines of credit will be adequate to service debt, fund our cost saving initiatives, meet liquidity needs and fund necessary capital expenditures for the next twelve months.

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

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

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


(In millions)	(In millions)	March 31, 2021		December 31, 2020		(In millions)	September 30, 2021		December 31, 2020
2024 Dollar Term Loans	2024 Dollar Term Loans	$	2,057.1	$	2,063.2	2024 Dollar Term Loans	$	2,045.0	$	2,063.2

2025 Euro Senior Notes	2025 Euro Senior Notes	528.6		552.1		2025 Euro Senior Notes	525.2		552.1
2027 Dollar Senior Notes	2027 Dollar Senior Notes	500.0		500.0		2027 Dollar Senior Notes	500.0		500.0
2029 Dollar Senior Notes	2029 Dollar Senior Notes	700.0		700.0		2029 Dollar Senior Notes	700.0		700.0
Short-term and other borrowings	Short-term and other borrowings	112.9		118.0		Short-term and other borrowings	106.4		118.0
Unamortized original issue discount	Unamortized original issue discount	(6.0)		(6.3)		Unamortized original issue discount	(5.1)		(6.3)
Unamortized deferred financing costs	Unamortized deferred financing costs	(32.6)		(34.3)		Unamortized deferred financing costs	(29.0)		(34.3)
Total borrowings, net	Total borrowings, net	3,860.0		3,892.7		Total borrowings, net	3,842.5		3,892.7
Less:	Less:					Less:
Short-term borrowings	Short-term borrowings	25.6		29.9		Short-term borrowings	19.0		29.9
Current portion of long-term borrowings	Current portion of long-term borrowings	24.3		24.3		Current portion of long-term borrowings	24.3		24.3
Long-term debt	Long-term debt	$	3,810.1	$	3,838.5	Long-term debt	$	3,799.2	$	3,838.5

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

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 nine months ended September 30, 2021, we entered into the Tenth Amendment to the Credit Agreement in order to, among other things, increase the commitments available pursuant to the Revolving Credit Facility from $400.0 million to $550.0 million and extend the maturity from 2024 to 2026, provided that such date will be accelerated in certain circumstances as set forth in the Tenth Amendment. As a result, availability under the Revolving Credit Facility was $516.0 million and $366.0 million at ~~March 31,~~September 30, 2021 and December 31, 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, 2020. There have been no material changes in the Company's contractual obligations since December 31, 2020.

Off-Balance Sheet Arrangements

See Note 56 "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, 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, 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, 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 ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 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 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, 2020.

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

Issuer Purchases of Equity Securities

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


(in millions, except per share data)	(in millions, except per share data)							(in millions, except per share data)
Month	Month	Total Number of Shares Purchased(1)(2)	Average Price Paid per Share(1)(2)		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)		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)
January 2021		0.7	$	27.63	0.7	$	216.9
February 2021		0.3	26.96		0.3	210.2
March 2021		1.3	28.28		1.3	172.5
July 2021								July 2021	1.4	$	28.97	1.4	$	697.5
August 2021								August 2021	—	—		—	697.5
September 2021								September 2021	1.7	29.09		1.7	647.4
Total	Total	2.3	$	27.94	2.3	$	172.5	Total	3.1	$	29.04	3.1	$	647.4

(1) ~~Substantially all~~All shares were repurchased through the ~~$675.0 million~~ share repurchase program announced in March 2017 (the "Program"). Under the Program, we repurchased ~~$63.6~~$90.1 million of our common shares during the three months ended ~~March 31, 2021 and $438.9 million in prior periods.~~September 30, 2021. At ~~March 31,~~September 30, 2021, the Company had remaining authorization to repurchase ~~$172.5~~$647.4 million of shares. There is no expiration date on the Program.

(2) In April 2021, our Board of Directors authorized an increase in the Program by $625.0 million, bringing the total size of the Program to $1.3 billion, of which we have already purchased ~~$502.5~~$652.6 million.

(2) These amounts include share repurchases totaling $0.1 million in February 2021 pursuant to the Company's 2014 Incentive Award Plan, as amended and restated (the "2014 Plan"), and applicable award agreements, under which participants may request the Company to withhold or may tender to the Company shares as satisfaction of applicable tax withholding on the vesting of restricted stock and performance stock. Shares so withheld or tendered will have been repurchased pursuant to the terms of the 2014 Plan and applicable award agreements and not pursuant to publicly announced share repurchase programs.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS


EXHIBIT NO.			DESCRIPTION OF EXHIBITS

~~10.1~~2.1*			Sale and Purchase Agreement related to U-POL Holdings Limited, dated as of July 6, 2021, by and between the Institutional and Management Sellers and Axalta Coating Systems UK Holding Limited and Axalta Coating Systems Ltd. ~~Restrictive Covenant and Severance Policy~~

~~10.2~~2.2*			~~Form~~Minority Sale and Purchase Agreement related to U-POL Holdings Limited, dated as of ~~Performance Share Unit Award Agreement for U.S. Employees~~

~~10.3~~			~~Form of Restricted Stock Unit Award Agreement for U.S. Employees~~July 6, 2021, by and between the Minority Sellers and Axalta Coating Systems UK Holding Limited and Axalta Coating Systems Ltd.

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

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

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

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

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

101			SCH - Inline XBRL Taxonomy Extension Schema Document

101			CAL - Inline XBRL Taxonomy Extension Calculation Linkbase Document

101			DEF - Inline XBRL Taxonomy Extension Definition Linkbase Document

101			LAB - Inline XBRL Taxonomy Extension Label Linkbase Document

101			PRE - Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

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

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

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Table of Contents

SIGNATURES

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



		AXALTA COATING SYSTEMS LTD.

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

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

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

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