Axalta Coating Systems Ltd.
10/29/2025 | Press release | Distributed by Public on 10/29/2025 10:34
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
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, 2024.
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 "expect," "expected," "believe," "intended," "estimate," "estimated," "designed to," "likely", "could," "would," "may," "will," "future," "plans," and "potential," 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 and uncertainties, including, but not limited to, economic, competitive, governmental, including related to any new or existing tariffs imposed by the U.S. and retaliatory actions from other countries, geopolitical and technological factors outside of our control, as well as risks related to the execution of, and assumptions underlying, our capital allocation strategy and future share repurchases, the 2024 Transformation Initiative, and our previously-announced three-year 2024-2026 strategy, that may cause our business, industry, strategy, financing activities or actual results to differ materially. The timing and amount of share repurchases (if any) will be determined by us based on our evaluation of market conditions and other factors and our stated plans do not obligate us to acquire any particular amount of shares and may be suspended or discontinued at any time. More information on potential factors that could affect our financial results is available in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024 as well as "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 and in other documents that we have filed with, or furnished to, the U.S. Securities and Exchange Commission (the "SEC"), and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors, including, but not limited to, those described in "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, 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 forward-looking statements should not be construed by you to be exhaustive and are made only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise any of the forward-looking statements contained herein, whether as a result of new information, future events or otherwise.
We use our investor relations page at ir.axalta.com as a means of disclosing material information to the public in a broad, non-exclusionary manner for purposes of the SEC's Regulation Fair Disclosure (or Reg. FD). Investors should routinely monitor that site, in addition to our press releases, SEC filings and public conference calls and webcasts, as information posted on that page could be deemed to be material information.
OVERVIEW
We are a leading global manufacturer, marketer and distributor of high-performance 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 42 manufacturing facilities, four technology centers, 46 customer training centers and approximately 12,600 team members, inclusive of team members added from recent acquisitions, allows us to meet the needs of customers in over 140 countries. We serve our customer base through an extensive sales force and technical support organization, as well as through approximately 5,000 independent, locally based distributors.
We operate our business in two operating segments, Performance Coatings and Mobility Coatings. Our segments are based on the type and concentration of customers served, service requirements, methods of distribution and major product lines.
Through our Performance Coatings segment, we provide high-quality sustainable liquid and powder coating solutions to both large regional and global customers and to a fragmented and local customer base. These customers comprise, among others, independent or multi-shop operator body shops as well as a wide variety of industrial manufacturers. 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 coatings technologies for light vehicle and commercial vehicle OEMs. These global customers are faced with evolving megatrends in electrification, sustainability, personalization and autonomous driving that require a high level of technical expertise. The OEMs require efficient, environmentally responsible coatings systems that can be applied with a high degree of precision, consistency and speed. The end-markets within this segment are light vehicle and commercial vehicle.
BUSINESS HIGHLIGHTS
General Business Highlights
Our net sales decreased 2.8%, including an offsetting 0.2% benefit from favorable foreign currency translation, for the nine months ended September 30, 2025 compared with the nine months ended September 30, 2024. The decreased net sales were driven by lower sales volumes of 3.8%, partially offset by contributions of 0.7% from the acquisition of The CoverFlexx Group completed in July 2024 (the "CoverFlexx Acquisition") and higher average selling prices and favorable product mix of 0.1%. The following trends impacted our segment net sales performance for the nine months ended September 30, 2025:
•Performance Coatings: Net sales decreased 4.8% for the nine months ended September 30, 2025 compared with the nine months ended September 30, 2024. The decreased net sales were driven by lower sales volumes of 5.2% and furthered by lower average selling prices and unfavorable product mix of 1.4%, partially offset by contributions of 1.1% from the CoverFlexx Acquisition and favorable foreign currency translation of 0.7% driven by favorable fluctuations of the Euro, partially offset by unfavorable fluctuations of the Mexican Peso, in each case compared to the U.S. Dollar.
•Mobility Coatings:Net sales increased 1.2% for the nine months ended September 30, 2025 compared with the nine months ended September 30, 2024. The increased net sales were driven by higher average selling prices and favorable product mix of 3.2%, partially offset by lower sales volumes of 1.1% and unfavorable foreign currency translation of 0.9% driven by unfavorable fluctuations of the Mexican Peso and Brazilian Real, partially offset by favorable fluctuations of the Euro, in each case compared to the U.S. Dollar.
Our business serves four end-markets globally with net sales for the three and nine months ended September 30, 2025 and 2024, as follows:
| (In millions) |
Three Months Ended September 30, |
2025 vs 2024 |
Nine Months Ended September 30, |
2025 vs 2024 | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | % change | 2025 | 2024 | % change | |||||||||||||||||||||||||||||||||
| Performance Coatings | ||||||||||||||||||||||||||||||||||||||
| Refinish | $ | 517 | $ | 554 | (6.7) | % | $ | 1,542 | $ | 1,619 | (4.7) | % | ||||||||||||||||||||||||||
| Industrial | 311 | 323 | (3.8) | % | 944 | 993 | (5.0) | % | ||||||||||||||||||||||||||||||
| Total Net sales Performance Coatings | 828 | 877 | (5.6) | % | 2,486 | 2,612 | (4.8) | % | ||||||||||||||||||||||||||||||
| Mobility Coatings | ||||||||||||||||||||||||||||||||||||||
| Light Vehicle | 364 | 340 | 7.1 | % | 1,066 | 1,036 | 2.9 | % | ||||||||||||||||||||||||||||||
| Commercial Vehicle | 96 | 103 | (6.5) | % | 303 | 317 | (4.4) | % | ||||||||||||||||||||||||||||||
| Total Net sales Mobility Coatings | 460 | 443 | 4.0 | % | 1,369 | 1,353 | 1.2 | % | ||||||||||||||||||||||||||||||
| Total Net sales | $ | 1,288 | $ | 1,320 | (2.4) | % | $ | 3,855 | $ | 3,965 | (2.8) | % | ||||||||||||||||||||||||||
2024 Transformation Initiative
During February 2024, we announced the 2024 Transformation Initiative intended to simplify the Company's organizational structure and enable us to be more proactive, responsive, and agile and to better serve our customers and to lower our cost base and improve financial performance and generate greater cash flows. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" and Note 4 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.
Capital and Liquidity Highlights
During the nine months ended September 30, 2025, we repurchased 5.3 million shares of our common stock for total consideration of $165 million pursuant to our share repurchase program, authorized by our Board of Directors. See Part II, Item 2 of this Quarterly Report on Form 10-Q for additional information.
During the three months ended September 30, 2025, we prepaid $10 million of the outstanding principal amount of the 2029 Dollar Term Loans. See Note 15 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.
FACTORS AFFECTING OUR OPERATING RESULTS
There have been no changes in the factors affecting our operating results previously disclosed under such heading in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information contained in the accompanying unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. Our historical results of operations summarized and analyzed below may not necessarily reflect what will occur in the future.
Net sales
|
Three Months Ended September 30, |
2025 vs 2024 |
Nine Months Ended September 30, |
2025 vs 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
|
Net sales
|
$ | 1,288 | $ | 1,320 | $ | (32) | (2.4) | % | $ | 3,855 | $ | 3,965 | $ | (110) | (2.8) | % | ||||||||||||||||||||||||||||||||||
| Volume effect | (4.2) | % | (3.8) | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Price/Mix effect | (0.3) | % | 0.1 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Exchange rate effect | 2.1 | % | 0.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Impact of CoverFlexx | - | % | 0.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Three months ended September 30, 2025 compared to the three months ended September 30, 2024
|
Net sales decreased primarily due to the following:
|
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n Lower sales volumes driven primarily by Performance Coatings
|
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n Unfavorable geographic and product mix, partially offset by positive price actions
|
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Partially offset by:
|
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n Favorable impacts of currency translation driven by fluctuations of the Euro compared to the U.S. Dollar
|
||
Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024
|
Net sales decreased primarily due to the following:
|
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|
n Lower sales volumes driven primarily by Performance Coatings
|
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Partially offset by:
|
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n Contributions from the CoverFlexx Acquisition
|
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n Favorable impacts of currency translation driven by fluctuations of the Euro, partially offset by the Mexican Peso, in each case compared to the U.S. Dollar
|
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n Higher average selling prices and favorable product mix driven by Mobility Coatings
|
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Cost of sales
|
Three Months Ended September 30, |
2025 vs 2024 |
Nine Months Ended September 30, |
2025 vs 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | $ | 838 | $ | 858 | $ | (20) | (2.3) | % | $ | 2,515 | $ | 2,614 | $ | (99) | (3.8) | % | ||||||||||||||||||||||||||||||||||
| % of net sales | 65.1 | % | 65.0 | % | 65.2 | % | 65.9 | % | ||||||||||||||||||||||||||||||||||||||||||
Three months ended September 30, 2025 compared to the three months ended September 30, 2024
|
Cost of sales decreased primarily due to the following:
|
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n Lower sales volumes driven by Performance Coatings
|
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n Lower operating expenses
|
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n Lower variable input costs
|
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| Partially offset by: | ||
|
n Unfavorable impacts of currency translation of 1.9% driven by fluctuations of the Euro compared to the U.S. Dollar
|
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|
Cost of sales as a percentage of net sales increased primarily due to the following:
|
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n Less effective coverage of fixed costs as a result of lower sales volumes
|
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Partially offset by:
|
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n Lower operating expenses
|
||
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n Lower variable input costs
|
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Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024
|
Cost of sales decreased primarily due to the following:
|
||
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n Lower sales volumes driven by Performance Coatings, partially offset by contributions from the CoverFlexx Acquisition
|
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n Decreased costs of $11 million related to our multi-year ERP system implementation and productivity programs
|
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n Lower operating expenses
|
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n Lower variable input costs
|
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n Impacts of currency translation were immaterial compared to the prior year period
|
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Cost of sales as a percentage of net sales decreased primarily due to the following:
|
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n Decreased costs of $11 million related to our multi-year ERP system implementation and productivity programs
|
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n Lower operating expenses
|
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n Lower variable input costs
|
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Selling, general and administrative expenses
|
Three Months Ended September 30, |
2025 vs 2024 |
Nine Months Ended September 30, |
2025 vs 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | $ | 197 | $ | 211 | $ | (14) | (6.6) | % | $ | 607 | $ | 631 | $ | (24) | (3.8) | % | ||||||||||||||||||||||||||||||||||
Three months ended September 30, 2025 compared to the three months ended September 30, 2024
|
Selling, general and administrative expenses decreased primarily due to the following:
|
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|
n Lower operating expenses, inclusive of incentive compensation and contributions from savings initiatives
|
||
|
Partially offset by:
|
||
|
n Unfavorable impacts of currency translation of 2.7% driven by fluctuations of the Euro compared to the U.S. Dollar
|
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Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024
|
Selling, general and administrative expenses decreased primarily due to the following:
|
||
|
n Lower operating expenses, inclusive of incentive compensation and contributions from savings initiatives
|
||
|
Partially offset by:
|
||
|
n Unfavorable impacts of currency translation of 0.8% due primarily to fluctuations of the Euro, partially offset by fluctuations of the Mexican Peso, in each case compared to the U.S. Dollar
|
||
|
n Contributions from the CoverFlexx Acquisition
|
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Other operating charges
|
Three Months Ended September 30, |
2025 vs 2024 |
Nine Months Ended September 30, |
2025 vs 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| Other operating charges | $ | 6 | $ | 15 | $ | (9) | (60.0) | % | $ | 32 | $ | 78 | $ | (46) | (59.0) | % | ||||||||||||||||||||||||||||||||||
Three months ended September 30, 2025 compared to the three months ended September 30, 2024
|
Other operating charges decreased primarily due to the following:
|
||
|
n Decrease of $9 million in termination benefits and other employee-related costs primarily as a result of higher costs associated with the 2024 Transformation Initiative in the prior year period
|
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n $5 million of gains from the sale of previously closed manufacturing facilities
|
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| Partially offset by: | ||
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n Increase of $2 million from environmental remediation costs
|
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Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024
|
Other operating charges decreased primarily due to the following:
|
||
|
n Decrease of $45 million in termination benefits and other employee-related costs primarily as a result of significantly higher costs associated with the 2024 Transformation Initiative in the prior year period
|
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n $5 million of gains from the sale of previously closed manufacturing facilities
|
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Research and development expenses
|
Three Months Ended September 30, |
2025 vs 2024 |
Nine Months Ended September 30, |
2025 vs 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| Research and development expenses | $ | 18 | $ | 19 | $ | (1) | (5.3) | % | $ | 55 | $ | 55 | $ | - | - | % | ||||||||||||||||||||||||||||||||||
Three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024
|
n Research and development expenses remained generally consistent and impacts of currency translation were immaterial compared to the prior year periods
|
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Amortization of acquired intangibles
|
Three Months Ended September 30, |
2025 vs 2024 |
Nine Months Ended September 30, |
2025 vs 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | $ | 25 | $ | 24 | $ | 1 | 4.2 | % | $ | 73 | $ | 68 | $ | 5 | 7.4 | % | ||||||||||||||||||||||||||||||||||
Three months ended September 30, 2025 compared to the three months ended September 30, 2024
|
n Amortization of acquired intangibles remained generally consistent and impacts of currency translation were immaterial compared to the prior year period
|
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Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024
|
Amortization of acquired intangibles increased due to the following:
|
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n Increased amortization of $5 million associated with assets acquired in the past 12 months
|
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n Impacts of currency translation were immaterial compared to the prior year period
|
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Interest expense, net
|
Three Months Ended September 30, |
2025 vs 2024 |
Nine Months Ended September 30, |
2025 vs 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | $ | 45 | $ | 54 | $ | (9) | (16.7) | % | $ | 134 | $ | 158 | $ | (24) | (15.2) | % | ||||||||||||||||||||||||||||||||||
Three months ended September 30, 2025 compared to the three months ended September 30, 2024
|
Interest expense, net decreased primarily due to the following:
|
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|
n Favorable impact of $6 million attributable to lower principal and decreased variable interest rate on our 2029 Dollar Term Loans
|
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n Favorable impact of $2 million attributable to borrowings against our Revolving Credit Facility in the prior year period
|
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Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024
|
Interest expense, net decreased primarily due to the following:
|
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|
n Favorable impact of $20 million attributable to lower principal and decreased variable interest rate on our 2029 Dollar Term Loans
|
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Other expense (income), net
|
Three Months Ended September 30, |
2025 vs 2024 |
Nine Months Ended September 30, |
2025 vs 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| Other expense (income), net | $ | 4 | $ | (3) | $ | 7 | 233.3 | % | $ | 12 | $ | 4 | $ | 8 | 200.0 | % | ||||||||||||||||||||||||||||||||||
Three months ended September 30, 2025 compared to the three months ended September 30, 2024
|
Other expense (income), net increased primarily due to the following:
|
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n Unfavorable impact of foreign exchange losses of $4 million compared to the prior year period
|
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n Decreased miscellaneous income of $3 million compared to the prior year period
|
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Other expense (income), net increased primarily due to the following:
|
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n Decreased miscellaneous income of $8 million compared to the prior year period
|
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n Unfavorable impact of foreign exchange losses of $3 million compared to the prior year period
|
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| Partially offset by: | ||
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n $3 million debt extinguishment and refinancing-related costs recognized in the prior year period as part of the repricing of our 2029 Dollar Term Loans
|
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Provision for income taxes
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Income before income taxes | $ | 155 | $ | 142 | $ | 427 | $ | 357 | ||||||||||||||||||
| Provision for income taxes | 45 | 40 | 108 | 103 | ||||||||||||||||||||||
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Statutory income tax rate (1)
|
15.0 | % | 21.0 | % | 15.0 | % | 21.0 | % | ||||||||||||||||||
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Effective tax rate
|
29.2 | % | 28.6 | % | 25.3 | % | 28.9 | % | ||||||||||||||||||
| Effective tax rate vs. statutory income tax rate | 14.2 | % | 7.6 | % | 10.3 | % | 7.9 | % | ||||||||||||||||||
(1) The Government of Bermuda enacted the Bermuda Corporate Income Tax Act 2023 ("Bermuda CITA"), which imposes a 15% corporate income tax effective for tax years beginning on or after January 1, 2025. Prior to January 1, 2025, Bermuda did not impose a corporate income tax rate. For the three and nine months ended September 30, 2025, the statutory income tax rate reflects the Bermuda statutory income tax rate. For the three and nine months ended September 30, 2024, the statutory income tax rate reflects the U.S. federal statutory income tax rate.
| (Favorable) Unfavorable Impact | ||||||||||||||||||||||||||
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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Items impacting the effective tax rate vs. statutory income tax rate (1)
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2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
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Earnings generated in jurisdictions where the income tax rate is different from the statutory rate (2)
|
$ | 4 | $ | (2) | $ | 9 | $ | (17) | ||||||||||||||||||
|
Changes in valuation allowance (3) (4) (5)
|
9 | (30) | 60 | - | ||||||||||||||||||||||
| Foreign exchange losses, net | 1 | 7 | (6) | (1) | ||||||||||||||||||||||
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Non-deductible expenses and interest
|
3 | 2 | 6 | 4 | ||||||||||||||||||||||
|
Changes in unrecognized tax benefits (4)
|
7 | 7 | (31) | 11 | ||||||||||||||||||||||
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Other - net (5)
|
(5) | 24 | (5) | 22 | ||||||||||||||||||||||
(1) The Government of Bermuda enacted the Bermuda CITA, which imposes a 15% corporate income tax effective for tax years beginning on or after January 1, 2025. Prior to January 1, 2025, Bermuda did not impose a corporate income tax rate. For the three and nine months ended September 30, 2025, the statutory income tax rate reflects the Bermuda statutory income tax rate. For the three and nine months ended September 30, 2024, the statutory income tax rate reflects the U.S. federal statutory income tax rate.
(2) For the three and nine months ended September 30, 2025, earnings generated in jurisdictions where the statutory rate is different from the Bermuda rate is primarily related to earnings in Brazil, Germany, Switzerland, and the United States. For the three and nine months ended September 30, 2024, earnings generated in jurisdictions where the statutory rate is different from the U.S. federal rate is primarily related to earnings in Bermuda, Germany, Luxembourg, and Switzerland.
(3) Changes in valuation allowance primarily relate to operations in Luxembourg, the Netherlands, and the United Kingdom.
(4) During the nine months ended September 30, 2025, the Company recorded a tax benefit of $35 million in the Netherlands due to the expiration of statute of limitations, which was fully offset by tax expense of $35 million for an increase to the valuation allowance.
(5) The activity during the three and nine months ended September 30, 2024, includes a $26 million unfavorable impact related to the write off of an expired Netherlands net operating loss carryforward, which was fully offset by tax benefit of $26 million for a decrease to the valuation allowance.
SEGMENT RESULTS
The Company's products and operations are managed and reported in two operating segments: Performance Coatings and Mobility Coatings. See Note 17 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.
Performance Coatings Segment
|
Three Months Ended September 30, |
2025 vs 2024 |
Nine Months Ended September 30, |
2025 vs 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
|
Net sales
|
$ | 828 | $ | 877 | $ | (49) | (5.6) | % | $ | 2,486 | $ | 2,612 | $ | (126) | (4.8) | % | ||||||||||||||||||||||||||||||||||
| Volume effect | (5.7) | % | (5.2) | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Price/Mix effect | (2.4) | % | (1.4) | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Exchange rate effect | 2.5 | % | 0.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Impact of CoverFlexx | - | % | 1.1 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 211 | $ | 221 | $ | (10) | (4.8) | % | $ | 608 | $ | 640 | $ | (32) | (5.0) | % | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA Margin | 25.5 | % | 25.3 | % | 24.5 | % | 24.5 | % | ||||||||||||||||||||||||||||||||||||||||||
Three months ended September 30, 2025 compared to the three months ended September 30, 2024
|
Net sales decreased primarily due to the following:
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||
|
n Lower sales volumes across both end-markets due primarily to unfavorable macro trends in North America and lower body shop activity
|
||
|
n Unfavorable geographic and product mix, partially offset by positive price actions
|
||
|
Partially offset by:
|
||
|
n Favorable impacts of currency translation due primarily to fluctuations of the Euro compared to the U.S. Dollar
|
||
|
Adjusted EBITDA decreased primarily due to the following:
|
||
|
n Lower sales volumes across both end-markets due primarily to unfavorable macro trends in North America and lower body shop activity
|
||
|
n Unfavorable geographic and product mix, partially offset by positive price actions
|
||
|
Partially offset by:
|
||
|
n Decreased operating expenses, inclusive of incentive compensation and contributions from savings initiatives
|
||
|
n Decreased variable input costs
|
||
|
n Favorable impacts of currency translation due primarily to fluctuations of the Euro, compared to the U.S. Dollar
|
||
| Adjusted EBITDA margin improved primarily due to: | ||
|
n Decreased operating expenses, inclusive of incentive compensation and contributions from savings initiatives
|
||
|
n Decreased variable input costs
|
||
|
Partially offset by:
|
||
|
n Lower sales volumes across both end-markets due primarily to lower body shop activity and unfavorable macro trends in North America
|
||
|
n Unfavorable geographic and product mix
|
||
Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024
|
Net sales decreased primarily due to the following:
|
||
|
n Lower sales volumes across both end-markets due primarily to unfavorable macro trends in North America and lower body shop activity
|
||
|
n Unfavorable geographic and product mix, partially offset by positive price actions
|
||
|
Partially offset by:
|
||
|
n Contributions from the CoverFlexx Acquisition
|
||
|
n Favorable impacts of currency translation due primarily to fluctuations of the Euro, partially offset by fluctuations of the Mexican Peso, in each case, compared to the U.S. Dollar
|
||
|
Adjusted EBITDA decreased primarily due to the following:
|
||
|
n Lower sales volumes across both end-markets due primarily to unfavorable macro trends in North America and lower body shop activity
|
||
|
n Unfavorable geographic and product mix, partially offset by positive price actions
|
||
|
Partially offset by:
|
||
|
n Decreased operating expenses, inclusive of incentive compensation and contributions from savings initiatives
|
||
|
n Decreased variable input costs
|
||
|
n Decreased costs of $7 million related to our multi-year ERP system implementation and productivity programs compared to the prior year period
|
||
|
n Contributions from the CoverFlexx Acquisition
|
||
| Adjusted EBITDA margin remained flat primarily due to: | ||
|
n Decreased operating expenses, inclusive of incentive compensation and contributions from savings initiatives
|
||
|
n Decreased variable input costs
|
||
|
n Decreased costs of $7 million related to our multi-year ERP system implementation and productivity programs compared to the prior year period
|
||
|
Partially offset by:
|
||
|
n Lower sales volumes across both end-markets due primarily to lower body shop activity and unfavorable macro trends in North America
|
||
|
n Unfavorable geographic and product mix
|
||
Mobility Coatings Segment
|
Three Months Ended September 30, |
2025 vs 2024 |
Nine Months Ended September 30, |
2025 vs 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 460 | $ | 443 | $ | 17 | 4.0 | % | $ | 1,369 | $ | 1,353 | $ | 16 | 1.2 | % | ||||||||||||||||||||||||||||||||||
| Price/Mix effect | 3.7 | % | 3.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Exchange rate effect | 1.5 | % | (0.9) | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Volume effect | (1.2) | % | (1.1) | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 83 | $ | 70 | $ | 13 | 19.5 | % | $ | 248 | $ | 201 | $ | 47 | 23.4 | % | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA Margin | 18.0 | % | 15.7 | % | 18.1 | % | 14.9 | % | ||||||||||||||||||||||||||||||||||||||||||
Three months ended September 30, 2025 compared to the three months ended September 30, 2024
|
Net sales increased primarily due to the following:
|
||
|
n Higher average selling prices and favorable product mix across both end-markets
|
||
|
n Favorable contributions from new business wins in Brazil
|
||
|
n Favorable impacts of currency translation driven by fluctuations of the Euro compared to the U.S. Dollar
|
||
|
Partially offset by:
|
||
|
n Lower sales volumes driven by the commercial vehicle end-market
|
||
|
Adjusted EBITDA and Adjusted EBITDA margin increased primarily due to the following:
|
||
|
n Higher average selling prices and favorable product mix across both end-markets
|
||
|
n Favorable contributions from new business wins in Brazil
|
||
|
n Decreased operating expenses
|
||
|
Partially offset by:
|
||
|
n Lower sales volumes driven by the commercial vehicle end-market
|
||
Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024
|
Net sales increased primarily due to the following:
|
||
|
n Higher average selling prices and favorable product mix across both end-markets
|
||
|
Partially offset by:
|
||
|
n Lower sales volumes driven by the commercial vehicle end-market, partially offset by new business wins in the light vehicle end-market
|
||
|
n Unfavorable impacts of currency translation driven by fluctuations of the Mexican Peso and Brazilian Real, partially offset by the Euro, in each case compared to the U.S. Dollar
|
||
|
Adjusted EBITDA and Adjusted EBITDA margin increased primarily due to the following:
|
||
|
n Higher average selling prices and favorable product mix across both end-markets
|
||
|
n Decreased operating expenses
|
||
|
n Decreased variable input costs
|
||
|
n Decreased costs of $4 million related to our multi-year ERP system implementation and productivity programs compared to the prior year period
|
||
|
n Decrease of $3 million in inventory charges from obsolescence, quality and yield loss from manufacturing compared to the prior year period
|
||
|
Partially offset by:
|
||
|
n Lower sales volumes driven by the commercial vehicle end-market, partially offset by new business wins in the light vehicle end-market
|
||
|
n Unfavorable impacts of currency translation driven by fluctuations of the Mexican Peso and Brazilian Real, in each case compared to the U.S. Dollar
|
||
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are cash on hand, net cash provided by operating activities and available borrowing capacity under our Senior Secured Credit Facilities.
At September 30, 2025, availability under the Revolving Credit Facility was $772 million, net of $28 million of letters of credit outstanding. All such availability may be utilized without violating any covenants under the Credit Agreement or the indentures governing our senior notes (the "Senior Notes"). Our remaining available borrowing capacity under other lines of credit in certain non-U.S. jurisdictions totaled $62 million at September 30, 2025.
We, or our affiliates, at any time and from time to time, may purchase shares of our common stock or the Senior Notes, and may prepay our 2029 Dollar Term Loans or other indebtedness. Any such purchases of our common stock or Senior Notes may be made through the open market or privately negotiated transactions with third parties or pursuant to one or more redemptions, tender or exchange offers or otherwise, upon such terms and at such prices, as well as with such consideration, as we, or any of our affiliates, may determine.
We have various supplier finance programs in place around the world. We partner with large banking institutions and utilize these programs to enhance our liquidity profile. Depending on the program, the liabilities under the program are classified either as accounts payable or current portion of borrowings on our unaudited condensed consolidated balance sheets. Our supplier financing programs are more fully described in Note 14 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
During February 2024, we announced the 2024 Transformation Initiative intended to simplify the Company's organizational structure and enable us to be more proactive, responsive, and agile and to better serve our customers and to lower our cost base and improve financial performance and generate greater cash flows. Total cash expenditures related to the 2024 Transformation Initiative are expected to be approximately $105-115 million. We estimate that, once fully executed, the 2024 Transformation Initiative will yield net savings, inclusive of non-labor savings and costs for backfilling certain roles, of approximately $75 million on an annualized basis. We realized approximately $20 million of the run-rate savings from the 2024 Transformation Initiative in 2024, which was better than expected, and expect $75-90 million to be realized in 2025 with the remaining portion of the full run-rate to be realized during 2026. See Note 4 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.
Cash Flows
|
Nine Months Ended September 30, |
||||||||||||||
| (In millions) | 2025 | 2024 | ||||||||||||
| Net cash provided by (used for): | ||||||||||||||
| Operating activities: | ||||||||||||||
| Net income | $ | 319 | $ | 254 | ||||||||||
| Depreciation and amortization | 218 | 207 | ||||||||||||
| Amortization of deferred financing costs and original issue discount | 6 | 6 | ||||||||||||
| Debt extinguishment and refinancing-related costs | - | 3 | ||||||||||||
| Deferred income taxes | 28 | 10 | ||||||||||||
| Realized and unrealized foreign exchange losses, net | 31 | 12 | ||||||||||||
| Stock-based compensation | 19 | 21 | ||||||||||||
| Interest income on swaps designated as net investment hedges | (9) | (10) | ||||||||||||
| Other non-cash, net | 8 | 5 | ||||||||||||
| Net income adjusted for non-cash items | 620 | 508 | ||||||||||||
| Changes in operating assets and liabilities | (315) | (166) | ||||||||||||
| Operating activities | 305 | 342 | ||||||||||||
| Investing activities | (122) | (374) | ||||||||||||
| Financing activities | (195) | (90) | ||||||||||||
| Effect of exchange rate changes on cash | 26 | (10) | ||||||||||||
| Net increase (decrease) in cash | $ | 14 | $ | (132) | ||||||||||
Nine months ended September 30, 2025
Net Cash Provided by Operating Activities
Net cash provided by operating activities for the nine months ended September 30, 2025 was $305 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $620 million. This was partially offset by net uses of working capital of $315 million, for which the most significant drivers were increases in prepaid expenses and other assets, inventories and accounts and notes receivable of $132 million, $53 million and $48 million, respectively, as well as decreases in other accrued liabilities and accounts payable of $71 million and $15 million, respectively. These outflows were driven primarily by payments of BIPs and rebates, decreased sales volumes and timing of collections from customers and payments to vendors.
Net Cash Used for Investing Activities
Net cash used for investing activities for the nine months ended September 30, 2025 was $122 million. The primary uses were for purchases of property, plant and equipment of $138 million and a business acquisition of $6 million, partially offset by proceeds of $10 million from the sales of two previously closed manufacturing sites and proceeds of $9 million from interest proceeds from swaps designated as net investment hedges, which are discussed further in Note 16 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Net Cash Used for Financing Activities
Net cash used for financing activities for the nine months ended September 30, 2025 was $195 million. The primary use was for purchases of our common shares of $165 million, prepayments of $10 million of the outstanding principal amount of the 2029 Dollar Term Loans, and contractual debt repayments of $15 million.
Other Impacts on Cash
Currency exchange impacts on cash for the nine months ended September 30, 2025 were favorable by $26 million, which was driven primarily by fluctuations of the Euro, Brazilian Real and Mexican Peso, in each case compared to the U.S. Dollar.
Nine months ended September 30, 2024
Net Cash Provided by Operating Activities
Net cash provided by operating activities for the nine months ended September 30, 2024 was $342 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $508 million. This was partially offset by net uses of working capital of $166 million, for which the most significant drivers were increases in prepaid expenses and other assets, inventories and accounts and notes receivable of $106 million, $54 million and $16 million, respectively, as well as decreases in accounts payable of $18 million. These outflows were driven primarily by payments of BIPs, increased production and timing of collections from customers and payments to vendors. These outflows were partially offset by increases in other liabilities of $30 million largely driven by accruals related to the 2024 Transformation Initiative.
Net Cash Used for Investing Activities
Net cash used for investing activities for the nine months ended September 30, 2024 was $374 million. The primary uses were $290 million for the CoverFlexx Acquisition, purchases of property, plant and equipment of $78 million and $21 million for the disbursements to customers for loans which primarily have a repayment period of five years, partially offset by proceeds of $10 million from interest proceeds from swaps designated as net investment hedges.
Net Cash Used for Financing Activities
Net cash used for financing activities for the nine months ended September 30, 2024 was $90 million. The primary uses were purchases of our common stock of $100 million, prepayments of $80 million of the outstanding principal amount of the Revolving Credit Facility and $75 million of the outstanding principal amount of the 2029 Dollar Term Loans, contractual debt repayments of $16 million and payments of $5 million for fees associated with repricing our 2029 Dollar Term Loans in March 2024 and increasing borrowing capacity and extending the maturity date of our Revolving Credit Facility in June 2024. The 2029 Dollar Term Loans repricing resulted in $107 million of constructive financing cash inflows and corresponding constructive financing cash outflows. The primary financing inflow was from borrowing $185 million against our Revolving Credit Facility.
Other Impacts on Cash
Currency exchange impacts on cash for the nine months ended September 30, 2024 were unfavorable by $10 million, which was driven primarily by fluctuations of the Mexican Peso and Brazilian Real, in each case compared to the U.S. Dollar.
Financial Condition
We had cash and cash equivalents at September 30, 2025 and December 31, 2024 of $606 million and $593 million, respectively. Of these balances, $498 million and $497 million were maintained in non-U.S. jurisdictions as of September 30, 2025 and December 31, 2024, respectively. We believe at this time our organizational structure allows us the necessary flexibility to move funds throughout our subsidiaries to meet our operational and working capital needs.
Our business may not generate sufficient 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, 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 other existing lines of credit will be adequate to service debt, fund our cost saving initiatives, meet liquidity needs and fund necessary capital expenditures for the next twelve months.
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.
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 and elevated interest rate environments may increase our interest expense and weaken our financial condition.
Our indebtedness, including the Senior Secured Credit Facilities, Senior Notes and short-term borrowings, is more fully described in Note 15 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and in Note 19 to the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024.
We believe that we continue to maintain sufficient liquidity to meet our cash requirements, including our debt service obligations as well as our working capital needs. Availability under the Revolving Credit Facility was $772 million and $778 million at September 30, 2025 and December 31, 2024, respectively, all of which may be borrowed by us without violating any covenants under the Credit Agreement or the indentures governing the Senior Notes.
Contractual Obligations
Information related to our material contractual obligations and cash requirements can be found in Note 7 and Note 19 to the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes in the Company's contractual obligations and cash requirements as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.
Off-Balance Sheet Arrangements
See Note 5 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 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
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. The preparation of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q requires us to make estimates and judgments that affect the amounts reported in the financial statements. We base our estimates and judgments on historical experiences and assumptions believed to be reasonable under the circumstances and re-evaluate them on an ongoing basis. Actual results could differ from our estimates under different assumptions or conditions. There have been no material changes to our critical accounting policies and estimates previously disclosed under "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.
Axalta Coating Systems Ltd. published this content on October 29, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 29, 2025 at 16:34 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]