Axalta Coating Systems Ltd. (AXTA)

CIK: 0001616862. SIC: 2851 Paints, Varnishes, Lacquers, Enamels & Allied Prods. Latest 10-K as of: 2026-02-13.

SIC breadcrumb: Manufacturing > Chemicals And Allied Products > SIC 2851 Paints, Varnishes, Lacquers, Enamels & Allied Prods

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1616862. Latest filing source: 0001628280-26-008008.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-13. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001616862.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-04-30. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001616862.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001628280-26-028698.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-04-30. Report date: 2026-03-31.

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, 2025.

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,” “expects,” “expected,” “believe,” “intended,” “estimate,” “estimated,” “designed to,” “likely,” “could,” “would,” “may,” “will,” “future” and “plans,” 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 any retaliatory actions from other countries, geopolitical (including the current conflict in the Middle East and related effects on commodity prices) and technological factors outside of our control, as well as risks related to the proposed Merger with AkzoNobel (including our ability to consummate the Merger and realize the anticipated benefits thereof), execution of, and assumptions underlying, our tariff mitigation strategies, capital allocation strategy and future share repurchases (if any), our previously-announced global transformation initiative (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. 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, 2025 as well as “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 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, 2025, 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, 50 customer training centers and approximately 12,300 team members 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 over 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.

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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 0.6%, including a 5.7% benefit from favorable foreign currency translation, for the three months ended March 31, 2026 compared with the three months ended March 31, 2025. The decreased net sales were driven by lower sales volumes of 6.2%, furthered by lower average selling prices and unfavorable product mix of 1.1%, partially offset by contributions of 1.0% from acquisitions completed during 2025 and 2026 in the Performance Coatings segment (the “Recent Acquisitions”). The following trends impacted our segment net sales performance for the three months ended March 31, 2026:

•Performance Coatings: Net sales decreased 2.4% for the three months ended March 31, 2026 compared with the three months ended March 31, 2025. The decreased net sales were driven by lower sales volumes of 7.9%, furthered by lower average selling prices and unfavorable product mix of 1.8%, partially offset by contributions of 1.6% from the Recent Acquisitions and favorable foreign currency translation of 5.7% driven by fluctuations of the Euro and Mexican Peso, in each case compared to the U.S. Dollar.

•Mobility Coatings: Net sales increased 2.8% for the three months ended March 31, 2026 compared with the three months ended March 31, 2025. The increased net sales were driven by favorable foreign currency translation of 5.8% driven by fluctuations of the Euro, Mexican Peso, Chinese Yuan and Brazilian Real, in each case compared to the U.S. Dollar, and furthered by higher average selling prices and favorable product mix of 0.1%, partially offset by lower sales volumes of 3.1%.

Our business serves four end-markets globally with net sales for the three months ended March 31, 2026 and 2025, as follows:

(In millions)

Three Months Ended

March 31,

2026 vs 2025

2026

2025

% change

Performance Coatings

Refinish

$

498 

$

511 

(2.7)

%

Industrial

304 

311 

(2.0)

%

Total Net sales Performance Coatings

802 

822 

(2.4)

%

Mobility Coatings

Light Vehicle

349 

340 

2.9 

%

Commercial Vehicle

103 

100 

2.5 

%

Total Net sales Mobility Coatings

452 

440 

2.8 

%

Total Net sales

$

1,254 

$

1,262 

(0.6)

%

Proposed Merger with Akzo Nobel N.V.

During November 2025, we entered into a Merger Agreement with AkzoNobel, providing for the combination of the Company and AkzoNobel in an all-stock merger. See Note 1 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

Middle East Conflict

The conflict in the Middle East within Iran has increased the level of economic and political uncertainty globally. While our operations in the Middle East region do not constitute a material portion of our business, a significant escalation or expansion of economic disruption, countries subject to sanctions or the conflict's current scope, or a prolonged continuation of the conflict’s current scope, could have a material adverse effect on our results of operations, financial condition and cash flows. We are actively monitoring the broader global economic impact on commodities from the current conflict, including the price and supply of raw materials, transportation costs and utilities, among others.

Capital and Liquidity Highlights

During the three months ended March 31, 2026, we prepaid $50 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.

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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, 2025.

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

March 31,

2026 vs 2025

2026

2025

$ Change

% Change

Net sales

$

1,254 

$

1,262 

$

(8)

(0.6)

%

Volume effect

(6.2)

%

Price/Mix effect

(1.1)

%

Exchange rate effect

5.7 

%

Impact of the Recent Acquisitions

1.0 

%

Three months ended March 31, 2026 compared to the three months ended March 31, 2025

Net sales decreased primarily due to the following:

n Lower sales volumes driven primarily by North America Performance Coatings

n Lower average selling prices and unfavorable product mix primarily in Performance Coatings

Partially offset by:

n Favorable impacts of currency translation driven by fluctuations of the Euro, Mexican Peso, Chinese Yuan and Brazilian Real, in each case compared to the U.S. Dollar

n Contributions from the Recent Acquisitions

Cost of sales

Three Months Ended

March 31,

2026 vs 2025

2026

2025

$ Change

% Change

Cost of sales

$

838 

$

829 

$

9 

1.1

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-13. Report date: 2025-12-31.

ITEM 7. 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 our consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K.

This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for 2025 and 2024. For the comparison of 2024 and 2023, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2024 Annual Report on Form 10-K, filed with the SEC on February 13, 2025.

FORWARD-LOOKING STATEMENTS

Many statements made in the following discussion and analysis of our financial condition and results of operations and elsewhere in this Annual Report on Form 10-K 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”, “anticipates,” “anticipated,” “expect,” “expects,” “expected,” “believe,” “believes,” “intend,” “intended,” “estimate,” “estimated,” “projections,” “could,” “would,” “should,” “may,” “will,” “future,” “goals,” “targets,” “can,” “assumptions,” “plans,” “projected,” “proposed,” “potential,” “potentially,” “possible,” “strategy,” “threatened,” “seek” and “forecasts” 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 Annual Report on Form 10-K, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks and uncertainties, including, but not limited to, economic, competitive, governmental, including related to any new or existing tariffs imposed by the U.S. and any retaliatory actions from other countries, geopolitical and technological factors outside of our control, as well as risks related to the proposed Merger with AkzoNobel (including our ability to consummate the proposed transaction and realize the anticipated benefits thereof), execution of, and assumptions underlying, our tariff mitigation strategies, the 2024 Transformation Initiative, and the 2026 A Plan, that may cause our business, industry, strategy, financing activities or actual results to differ materially. More information on potential factors that could affect our financial results is available in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as “Risk Factors” in this Annual Report on Form 10-K and in other documents that we have filed with, or furnished to, the SEC, and you should not place undue reliance on these forward-looking statements or projections. 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 forward-looking statements should not be construed by you to be exhaustive and are made only as of the date of this Annual Report on Form 10-K. 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, 48 customer training centers and approximately 12,300 team members 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 over 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.

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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. These 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 3.0%, including a 1.1% benefit from foreign currency translation, for the year ended December 31, 2025 compared with the year ended December 31, 2024. The decreased net sales were driven by lower volumes of 4.6%, partially offset by contributions of 0.5% from the acquisition of The CoverFlexx Group completed in July 2024 (the “CoverFlexx acquisition”). The following trends have impacted our segment net sales performance:

•Performance Coatings: Net sales decreased 5.2% for the year ended December 31, 2025 compared with the year ended December 31, 2024. The decreased net sales were driven by lower sales volumes of 5.8% and furthered by lower average selling prices and unfavorable product mix of 1.7%, partially offset by favorable foreign currency translation of 1.5% driven by the strengthening of the Euro and Swiss Franc, partially offset by unfavorable fluctuations of the Mexican Peso, in each case compared to the U.S. Dollar, and contributions of 0.8% from the CoverFlexx acquisition.

•Mobility Coatings: Net sales increased 1.1% for the year ended December 31, 2025 compared with the year ended December 31, 2024. The increased net sales were driven by higher average selling prices and favorable product mix of 3.2%, and favorable foreign currency translation of 0.2% driven by the strengthening of the Euro, partially offset by unfavorable fluctuations of the Mexican Peso and Brazilian Real, in each case compared to the U.S. Dollar, and lower sales volumes of 2.3%.

Our business serves four end-markets globally with net sales for the years ended December 31, 2025 and 2024 as follows:

(In millions)

Year Ended December 31,

2025 vs 2024

2025

2024

% change

Performance Coatings

Refinish

$

2,051 

$

2,164 

(5.2)

%

Industrial

1,226 

1,291 

(5.1)

%

Total Net sales Performance Coatings

3,277 

3,455 

(5.2)

%

Mobility Coatings

Light Vehicle

1,438 

1,405 

2.3 

%

Commercial Vehicle

402 

416 

(3.1)

%

Total Net sales Mobility Coatings

1,840 

1,821 

1.1 

%

Total Net sales

$

5,117 

$

5,276 

(3.0)

%

Proposed Merger with Akzo Nobel N.V.

During November 2025, we entered into a Merger Agreement with Akzo Nobel N.V., a public company with limited liability incorporated under the laws of the Netherlands (“AkzoNobel”) providing for the combination of the Company and AkzoNobel in an all-stock merger. See Note 1 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

Leadership Transition

On January 23, 2025, the Company announced that Tim Bowes was appointed President, Global Industrial Coatings, effective January 27, 2025. Mr. Bowes succeeded Shelley Bausch who stepped down from the role and left the Company.

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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 Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and Note 4 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

Capital and Liquidity Highlights

During the year ended December 31, 2025, we repurchased 5.3 million shares of our common stock for total consideration of $165 million pursuant to our $700 million share repurchase program. We have $435 million remaining available under the authorization. The Merger Agreement prohibits us from repurchasing shares, whether under the repurchase program or otherwise, without the prior written consent of AkzoNobel.

During the year ended December 31, 2025, we prepaid $210 million of the outstanding principal amount of the 2029 Dollar Term Loans (as defined in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K). See Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

During October 2025, we entered into the Seventeenth Amendment to the Credit Agreement (as defined in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K) to permit the use of borrowings under the Credit Agreement to fund repurchases of our common shares subject to the conditions set forth therein.

FACTORS AFFECTING OUR OPERATING RESULTS

The following discussion sets forth certain components of our statements of operations as well as factors that impact those items.

Net sales

We generate revenue from the sale of our products and services across all major geographic areas. Our net sales include total sales less estimates for returns and price allowances. Price allowances include discounts for prompt payment as well as volume-based incentives. Our overall net sales are generally impacted by the following factors:

•fluctuations in overall economic activity within the geographic markets in which we operate;

•underlying growth (or lack thereof) in one or more of our end-markets, either worldwide or in particular geographies in which we operate;

•the type of products used within existing customer applications, or the development of new applications requiring products similar to ours;

•changes in product sales prices (including volume discounts, cash discounts for prompt payment and impacts from raw material indexing);

•changes in the level of competition faced by our products, including price competition, quality competition and the launch of new products by competitors;

•changes in the mix of products we offer and sell to our customers;

•our ability to successfully develop and launch new products and applications;

•changes in buying habits of our customers (including our distributors);

•overall vehicle repair costs; and

•fluctuations in foreign exchange rates.

While the factors described above impact net sales in each of our operating segments, the impact of these factors on our operating segments can differ, as described below. For more information about risks relating to our business, see Part I, Item 1A, “Risk Factors—Risks Related to our Business.”

Cost of goods sold (“cost of sales”)

Our cost of sales consists principally of the following:

•Production materials costs. These include costs of the materials needed to manufacture products for distribution. These costs generally increase on an aggregate basis as production volumes increase, but materials prices are also influenced by changes in market dynamics. A significant amount of the materials used in production are purchased on a global lowest-cost basis.

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•Employee costs. These include the compensation and benefit costs, including share-based compensation expense, for employees involved in our manufacturing operations and on-site technical support services. These costs generally increase on an aggregate basis as production volumes increase and may decline as a percent of net sales as a result of economies of scale associated with higher production volumes.

•Depreciation expense. Property, plant and equipment are stated at cost and depreciated or amortized on a straight-line basis over their estimated useful lives.

•Other. Our remaining cost of sales consists of freight costs, warehousing expenses, purchasing costs, costs associated with closing or idling of production facilities, functional costs supporting manufacturing, cost of poor quality, including product claims, and other general manufacturing expenses, such as expenses for utilities and energy consumption.

The main factors that influence our cost of sales as a percentage of net sales include:

•changes in the price of raw materials, including as a result of tariffs;

•changes in the costs of labor, logistics and energy;

•production volumes;

•the implementation of cost control measures aimed at improving productivity, including reduction of fixed production costs, refinements in inventory management and the coordination of purchasing within each subsidiary and at the business level;

•changes in sales volumes, average selling prices and product mix;

•inventory obsolescence, quality and yield loss from manufacturing; and

•fluctuations in foreign exchange rates.

Selling, general and administrative expenses (“SG&A”)

Our SG&A expenses consist of all expenditures incurred in connection with the sales and marketing of our products, as well as technical support for our customers and administrative overhead costs, including:

•compensation and benefit costs for management, sales personnel and administrative staff, including share-based compensation expense. Expenses relating to our sales personnel increase or decrease principally with changes in sales volume due to the need to increase or decrease sales personnel to meet changes in demand. Expenses relating to administrative personnel generally do not increase or decrease directly with changes in sales volume; and

•depreciation, advertising and other selling expenses, such as expenses incurred in connection with travel and communications.

Changes in SG&A expenses as a percentage of net sales have historically been impacted by a number of factors, including:

•changes in the costs of labor, including inflationary pressures;

•changes in sales volume, as higher volumes enable us to spread the fixed portion of our administrative expense over higher sales;

•changes in our customer base, as new customers may require different levels of sales and marketing attention;

•new product launches in existing and new markets, as these launches typically involve a more intense sales activity and technical support before they are integrated into customer applications;

•customer credit issues requiring increases to the allowance for doubtful accounts; and

•fluctuations in foreign exchange rates.

Other operating charges

Our other operating charges include termination benefits and other employee-related costs, acquisition, merger and divestiture-related costs, impairment charges, certain environmental charges, and gains or losses on sales of facilities, details of which are included in our reconciliations of segment operating performance to income before income taxes as shown in Note 20 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Research and development expenses

Research and development expenses represent costs incurred to develop new products, services, processes and technologies or to generate significant improvements to existing products, services or processes.

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Interest expense, net

Interest expense, net consists primarily of interest expense on institutional borrowings and other financing obligations and changes in fair value of interest rate derivative instruments, net of capitalized interest expense. Interest expense, net also includes the amortization of debt issuance costs and debt discounts associated with our Senior Secured Credit Facilities, Senior Notes and other indebtedness.

Other expense, net

Other expense, net represents costs incurred on various non-operational items including costs incurred in conjunction with our debt refinancing and extinguishment transactions, interest income, as well as foreign exchange gains and losses and non-operational impairment losses unrelated to our core business.

Provision for income taxes

We and our subsidiaries are subject to income tax in the various jurisdictions in which we operate. While the extent of our future tax liability is uncertain, changes to the debt and equity capitalization of our subsidiaries, the realignment of the functions performed, and risks assumed by the various subsidiaries are among the factors that will determine the future book and taxable income of the Company and its subsidiaries.

RESULTS OF OPERATIONS

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

Net sales

Year Ended December 31,

2025 vs 2024

2025

2024

$ Change

% Change

Net sales

5,117 

5,276 

$

(159)

(3.0)

%

Volume effect

(4.6)

%

Impact of CoverFlexx

0.5 

%

Exchange rate effect

1.1 

%

Net sales decreased primarily due to the following:

n Lower sales volumes driven primarily by Performance Coatings as a result of unfavorable macro trends in North America

Partially offset by:

n Favorable impacts of currency translation primarily due to the strengthening of the Euro and Swiss Franc, partially offset by unfavorable fluctuations of the Mexican Peso and Brazilian Real, in each case compared to the U.S. Dollar

n Contributions from the CoverFlexx acquisition

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Cost of sales

Year Ended December 31,

2025 vs 2024

2025

2024

$ Change

% Change

Cost of sales

$

3,355 

$

3,478 

$

(123)

(3.5)

%

% of net sales

65.6 

%

65.9 

%

Cost of sales decreased primarily due to the following:

n Lower sales volume in North America driven primarily by Performance Coatings

n Lower operating expenses, inclusive of lower incentive compensation and contributions from savings initiatives

n Decreased costs of $17 million related to our multi-year ERP system implementation and productivity programs

n Lower variable input costs

Partially offset by:

n Unfavorable impacts of currency translation of 3.7% primarily due to the strengthening of the Euro and Swiss Franc, partially offset by unfavorable fluctuations of the Mexican Peso and Brazilian Real, in each case compared to the U.S. Dollar

Cost of sales as a percentage of net sales decreased primarily due to the following:

n Lower operating expenses, inclusive of lower incentive compensation and contributions from savings initiatives

n Decreased costs of $17 million related to our multi-year ERP system implementation and productivity programs

n Lower variable input costs

Partially offset by:

n Less effective coverage of fixed costs as a result of lower sales volumes

Selling, general and administrative expenses

Year Ended December 31,

2025 vs 2024

2025

2024

$ Change

% Change

Selling, general and administrative expenses

$

805 

$

847 

$

(42)

(5.0)

%

Selling, general and administrative expenses decreased primarily due to the following:

n Lower operating expenses, inclusive of lower incentive compensation and contributions from savings initiatives

Partially offset by:

n Unfavorable impacts of currency translation of 6.5% due primarily to the strengthening of the Euro compared to the U.S. Dollar

n Increased expenses related to the CoverFlexx acquisition and various other immaterial acquisitions

Other operating charges

Year Ended December 31,

2025 vs 2024

2025

2024

$ Change

% Change

Other operating charges

$

53 

$

79 

$

(26)

(32.9)

%

Other operating charges decreased primarily due to the following:

n Decrease of $44 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

n Gains of $6 million from the sale of assets in 2025

Partially offset by:

n Increase of $22 million in merger and acquisition-related costs

Research and development expenses

Year Ended December 31,

2025 vs 2024

2025

2024

$ Change

% Change

Research and development expenses

$

71 

$

74 

$

(3.0)

(4.1)

%

Research and development expenses decreased primarily due to the following:

n Lower operating expenses, inclusive of contributions from savings initiatives

n Impacts of currency translation were immaterial when compared to the prior year

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Amortization of acquired intangibles

Year Ended December 31,

2025 vs 2024

2025

2024

$ Change

% Change

Amortization of acquired intangibles

$

98 

$

92 

$

6 

6.5 

%

Amortization of acquired intangibles increased primarily due to the following:

n Increased amortization of $5 million associated with assets acquired in the past 18 months

n Impacts of currency translation were immaterial when compared to the prior year

Interest expense, net

Year Ended December 31,

2025 vs 2024

2025

2024

$ Change

% Change

Interest expense, net

$

176 

$

205 

$

(29)

(14.1)

%

Interest expense, net decreased primarily due to the following:

n Favorable impact of $24 million attributable to lower principal and decreased variable interest rate on our 2029 Dollar Term Loans

Other expense, net

Year Ended December 31,

2025 vs 2024

2025

2024

$ Change

% Change

Other expense, net

$

13 

$

5 

$

8 

160.0 

%

Other expense, net increased primarily due to the following:

n Decreased miscellaneous income of $5 million compared to the prior year period

n Unfavorable impact of foreign exchange losses of $4 million compared to the prior year period

Partially offset by:

n Decreased debt extinguishment and refinancing-related costs of $3 million compared to the prior year due to the repricing, prepayment and amendment activity associated with our debt agreements explained in more detail in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information

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Provision for income taxes

Year Ended December 31,

2025

2024

Income before income taxes

$

546 

$

496 

Provision for income taxes

167 

105 

Statutory income tax rate (1)

15.0 

%

21.0 

%

Effective tax rate

30.5 

%

21.1 

%

Effective tax rate vs. statutory income tax rate (1)

15.5 

%

0.1 

%

(Favorable) Unfavorable Impact

Items impacting the effective tax rate vs. statutory income tax

2025

2024

Earnings generated in jurisdictions where the statutory rate is different from the statutory rate (2) (3)

$

17 

$

(25)

Changes in valuation allowance (4) (5) (7) (8)

23 

14 

Foreign exchange gains and losses

13 

(14)

Tax credits

(11)

(7)

Non-deductible expenses and interest

12 

7 

Change in unrecognized tax benefits (5)

23 

13 

State taxes (6)

— 

6 

Foreign taxes

20 

8 

Bermuda CITA (7)

— 

(27)

Other - net (8)

(12)

26 

(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, the Government of Bermuda did not impose a corporate income tax rate. For the year ended December 31, 2025, the statutory income tax rate reflects the Bermuda statutory income tax rate. For the year ended December 31, 2024, the statutory income tax rate reflects the U.S. federal statutory income tax rate.

(2)For the year ended December 31, 2025, earnings generated in jurisdictions where the statutory rate is different from the Bermuda rate is primarily related to earnings in Brazil, China, Germany, Switzerland, and the United States. For the year ended December 31, 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)For the year ended December 31, 2025, earnings generated in jurisdictions where the statutory rate is different from the statutory rate includes $16 million of foreign state and local income taxes generated in Switzerland, Germany, and the United States.

(4)Changes in valuation allowance primarily relates to operations in Luxembourg, Netherlands, the United Kingdom and Bermuda, as discussed in item 7 below.

(5)For the year ended December 31, 2025, changes in unrecognized tax benefits is net of associated changes in valuation allowance.

(6)For the year ended December 31, 2025, the domestic state taxes represent Bermuda operations; Bermuda has no state corporate income tax. For the years ended December 31, 2024, the domestic state taxes represent U.S. operations.

(7)For the year ended December 31, 2024, the Company recorded adjustments to recognize the impacts of Bermuda CITA, effective January 1, 2025, resulting in a net deferred tax benefit of $27 million. For the year ended December 31, 2025, the Company recorded a valuation allowance of $19 million, offsetting a portion of the deferred tax benefit recognized in 2024 as a result of Bermuda CITA

(8)For the year ended December 31, 2024, the Company recorded tax expense of $26 million in the Netherlands related to the write off of an expired net operating loss carryforward, which was fully offset by tax benefit of $26 million for a decrease to the valuation allowance.

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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 20 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

Performance Coatings Segment

Year Ended December 31,

2025 vs 2024

2025

2024

$ Change

% Change

Net sales

$

3,277 

$

3,455 

$

(178)

(5.2)

%

Volume effect

(5.8)

%

Price/Mix effect

(1.7)

%

Impact of CoverFlexx

0.8 

%

Exchange rate effect

1.5 

%

Adjusted EBITDA

$

788 

$

838 

$

(50)

(6.0)

%

Adjusted EBITDA Margin

24.0 

%

24.3 

%

Net sales decreased primarily due to the following:

n Lower sales volume across both end-markets due primarily to unfavorable macro trends in North America, including 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 the strengthening of the Euro and Swiss Franc, partially offset by unfavorable fluctuations of the Mexican Peso, in each case, compared to the U.S. Dollar

n Contributions from the CoverFlexx acquisition

Adjusted EBITDA and Adjusted EBITDA margin decreased primarily due to the following:

n Lower sales volume across both end-markets due primarily to unfavorable macro trends in North America, including 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 lower incentive compensation and contributions from savings initiatives

n Decreased variable input costs

n Decreased costs of $11 million related to our multi-year ERP system implementation and productivity programs compared to the prior year

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Mobility Coatings Segment

Year Ended December 31,

2025 vs 2024

2025

2024

$ Change

% Change

Net sales

$

1,840 

$

1,821 

$

19 

1.1 

%

Price/Mix effect

3.2 

%

Exchange rate effect

0.2 

%

Volume effect

(2.3)

%

Adjusted EBITDA

$

340 

$

278 

$

62 

22.4 

%

Adjusted EBITDA Margin

18.5 

%

15.3 

%

Net sales increased primarily due to the following:

n Higher average selling prices and favorable product mix across both end-markets

n Favorable impacts of currency translation driven by the strengthening of the Euro, partially offset by unfavorable fluctuations of the Mexican Peso and Brazilian Real, in each case compared to the U.S. Dollar

Partially offset by:

n Lower sales volumes across both end-markets due primarily to unfavorable macro trends in North America

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, inclusive of lower incentive compensation and contributions from savings initiatives

n Decreased variable input costs

n Decreased costs of $6 million related to our multi-year ERP system implementation and productivity programs compared to the prior year

Partially offset by:

n Lower sales volumes across both end-markets due primarily to unfavorable macro trends in North America

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 December 31, 2025, availability under the Revolving Credit Facility was $770 million, net of $30 million of letters of credit outstanding. All such availability may be utilized without violating any covenants under the Credit Agreement or the indentures governing the Senior Notes. Our remaining available borrowing capacity under other lines of credit in certain non-U.S. jurisdictions totaled $63 million at December 31, 2025.

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 consolidated balance sheets. Our supplier financing programs are more fully described in Note 17 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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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 $90 million on an annualized basis. We have realized approximately $20 million and $50 million of the run-rate savings from the 2024 Transformation Initiative in 2024 and 2025, respectively and we expect approximately $20 million to be realized in 2026. See Note 4 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

Cash Flows

Years ended December 31, 2025 and 2024

Years Ended December 31,

(In millions)

2025

2024

Net cash provided by (used for):

Operating activities:

Net income

$

379 

$

391 

Depreciation and amortization

295 

280 

Amortization of deferred financing costs and original issue discount

8 

7 

Debt extinguishment and refinancing-related costs

2 

5 

Deferred income taxes

45 

(17)

Realized and unrealized foreign exchange losses, net

31 

11 

Stock-based compensation

25 

28 

Impairment charges

1 

— 

Interest income on swaps designated as net investment hedges

(13)

(15)

Other non-cash, net

3 

9 

Net income adjusted for non-cash items

776 

699 

Changes in operating assets and liabilities

(127)

(123)

Operating activities

649 

576 

Investing activities

(212)

(440)

Financing activities

(401)

(201)

Effect of exchange rate changes on cash

28 

(42)

Net increase (decrease) in cash

$

64 

$

(107)

Year Ended December 31, 2025

Net Cash Provided by Operating Activities

Net cash provided by operating activities for the year ended December 31, 2025 was $649 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $776 million. This was partially offset by net uses of working capital of $127 million, for which the most significant drivers were increases in prepaid expenses and other assets of $129 million and decreases in accounts payable and other accrued liabilities of $77 million and $64 million, respectively. These outflows were driven primarily by timing of payments of Business Incentive Plan assets (“BIPs”) and payments to vendors. These outflows were partially offset by decreases in accounts and notes receivable and inventories of $97 million and $33 million, respectively, driven primarily by the timing of collections and decreased production.

Net Cash Used for Investing Activities

Net cash used for investing activities for the year ended December 31, 2025 was $212 million. The primary uses were $196 million for purchases of property, plant and equipment and $48 million for the acquisitions discussed in Note 3 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, net of cash acquired, partially offset by proceeds of $21 million from the sale of assets and $13 million from settlements and interest proceeds from swaps designated as net investment hedges, which are discussed further in Note 19 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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Net Cash Used for Financing Activities

Net cash used for financing activities for the year ended December 31, 2025 was $401 million. The primary uses were prepayments of $210 million of the outstanding principal amounts of the 2029 Dollar Term Loans, purchases of our common stock of $165 million and contractual debt repayments of $20 million.

Other Impacts on Cash

Currency exchange impacts on cash for the year ended December 31, 2025 were favorable by $28 million, which was driven primarily by the fluctuations of the Euro, Chinese Renminbi and Mexican Peso, in each case compared to the U.S. Dollar.

Year Ended December 31, 2024

Net Cash Provided by Operating Activities

Net cash provided by operating activities for the year ended December 31, 2024 was $576 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $699 million. This was partially offset by net uses of working capital of $123 million, for which the most significant drivers were increases in prepaid expenses and other assets of $130 million, and decreases in accounts payable of $49 million. These outflows were driven primarily by the timing of payments of BIPs, timing of purchasing and payments to vendors. These outflows were partially offset by increases in other accrued liabilities of $36 million largely driven by accruals related to the 2024 Transformation Initiative and customer rebates.

Net Cash Used for Investing Activities

Net cash used for investing activities for the year ended December 31, 2024 was $440 million. The primary uses were $301 million for acquisitions net of cash acquired, $140 million for purchases of property, plant and equipment and $22 million for the disbursements to customers for loans which primarily have a repayment period of five years, partially offset by proceeds of $15 million from settlements and interest proceeds from swaps designated as net investment hedges, which are discussed further in Note 19 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Net Cash Used for Financing Activities

Net cash used for financing activities for the year ended December 31, 2024 was $201 million. The primary uses were prepayments of $75 million for the 2029 Dollar Term Loans, purchases of our common stock of $100 million, contractual debt repayments of $17 million, payments of $6 million for fees associated with repricing our 2029 Dollar Term Loans in March 2024 and November 2024 and increasing borrowing capacity and extending the maturity date of our Revolving Credit Facility in June 2024 and payments totaling $6 million for deferred acquisition-related consideration. The two repricings of the 2029 Dollar Term Loans completed in 2024 resulted in an aggregate $148 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, which had been repaid as of December 31, 2024.

Other Impacts on Cash

Currency exchange impacts on cash for the year ended December 31, 2024 were unfavorable by $42 million, which was driven primarily by the fluctuations of the Euro, Mexican Peso and Brazilian Real, in each case compared to the U.S. Dollar.

Financial Condition

We had cash and cash equivalents at December 31, 2025 and 2024 of $657 million and $593 million, respectively. Of these balances, $555 million and $497 million were maintained in non-U.S. jurisdictions as of December 31, 2025 and 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.

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Our ability to make scheduled or pre-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 and is subject to restrictions in the Merger Agreement. 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 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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 $770 million and $778 million at December 31, 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.

During October 2025, we entered into the Seventeenth Amendment to the Credit Agreement (as defined in Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K) to permit the use of borrowings under the Credit Agreement to fund repurchases of our common shares. The Merger Agreement prohibits us from repurchasing shares, whether under the repurchase program or otherwise, without the prior written consent of AkzoNobel.

The following table details our borrowings outstanding, average effective interest rates and the associated interest expense for the years ended December 31, 2025 and 2024. Interest expense is inclusive of the amortization of debt issuance costs, debt discounts, and the impact of derivative instruments for the years ended December 31, 2025 and 2024, respectively:

Years Ended December 31,

2025

2024

(In millions)

Principal

Average Effective

Interest Rate

Interest

Expense

Principal

Average Effective

Interest Rate

Interest

Expense

Term Loans

$

1,475 

6.3%

$

91 

$

1,702 

7.6%

$

118 

Revolving Credit Facility (1)

— 

N/A

3 

— 

7.3%

5 

Senior Notes

1,700 

5.1%

85 

1,700 

5.1%

82 

Short-term and other borrowings

50 

Various

4 

54 

Various

4 

Capitalized interest

N/A

N/A

(7)

N/A

N/A

(4)

Total

$

3,225 

$

176 

$

3,456 

$

205 

(1)    The computation for Average Effective Interest Rate excludes undrawn revolver fees.

After giving effect to our cross-currency and interest rate hedges, our borrowings denominated in U.S. Dollars as of December 31, 2025 and 2024 were $2,184 million and $2,440 million, respectively, with weighted average interest rates of 5.2% and 5.5%, respectively. After giving effect to our cross-currency and interest rate hedges, borrowings denominated in Euros as of December 31, 2025 and 2024 were $1,041 million and $1,016 million with weighted average interest rates of 4.0% and 4.2%, respectively.

Contractual Obligations

See Note 6 and Note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for disclosure of our material contractual obligations.

Off Balance Sheet Arrangements

See Note 5 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for disclosure of our guarantees of certain customers’ obligations to third parties.

Recent Accounting Guidance

See Note 1 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a summary of recent accounting guidance.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of results of operations and financial condition are based upon our consolidated financial statements. These financial statements have been prepared in accordance with U.S. GAAP unless otherwise noted. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts reported in the financial statements. 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. Our significant accounting policies, which may be affected by our estimates and assumptions, are more fully described in Note 1 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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. Management believes the following critical accounting policies reflect its most significant estimates and assumptions used in the preparation of the financial statements.

Accounting for Business Combinations

Determining the fair value of assets acquired and liabilities assumed in business combinations requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, royalty rates, customer attrition rates, technology migration rates, asset lives and market multiples, among other items.

The fair values of intangible assets are estimated using an income approach, either the excess earnings method (customer relationships) or the relief from royalty method (technology and trademarks). Under the excess earnings method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows attributable solely to the intangible asset over its remaining useful life. With respect to customer relationships, fair values are calculated using the excess earnings method and customer attrition is a key input used to determine the applicable after-tax cash flows. Under the relief from royalty method, fair value is measured by estimating future revenue associated with the intangible asset over its useful life and applying a royalty rate to the revenue estimate. These intangible assets enable us to secure markets for our products, develop new products to meet evolving business needs and competitively produce our existing products.

The fair values of real properties acquired are based on the consideration of their highest and best use in the market. The fair values of property, plant and equipment, other than real properties, are based on the consideration that unless otherwise identified, they will continue to be used “as is” and as part of the ongoing business. In contemplation of the in-use premise and the nature of the assets, the fair value is developed primarily using a cost approach.

The fair value of noncontrolling interests, when applicable, are estimated by applying an income approach and is based on significant inputs that are not observable in the market. Key assumptions in the valuation of a noncontrolling interest include a discount rate, a terminal value based on a range of long-term sustainable growth rates and adjustments because of the lack of control that market participants would consider when measuring the fair value of the noncontrolling interests.

The fair value of contingent consideration liabilities is estimated by using a probability-weighted expected payment method that considers the timing of expected future cash flows and the probability of whether key elements of the contingent event are completed. The fair value measurements are based on significant inputs that are not observable in the market. Key assumptions in the valuation of contingent consideration liabilities include discount rates, expected terms, volatility rates and operating results as applicable based on the targets identified in the respective acquisition agreements.

See Notes 1 and 3 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

Asset Impairments

Factors that could result in future impairment charges or changes in useful lives, among others, include changes in worldwide economic conditions, changes in technology, changes in competitive conditions and customer preferences, and fluctuations in foreign currency exchange rates. These risk factors are discussed in Part I, Item 1A, “Risk Factors,” included elsewhere in this Annual Report on Form 10-K.

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Goodwill and indefinite-lived intangible assets

The Company tests indefinite-lived intangible assets and goodwill for impairment annually by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair values of a reporting unit or indefinite-lived intangible asset is less than its carrying amount. Fair values used under the quantitative impairment assessment are estimated using a combination of discounted projected future earnings or cash flow methods that are based on projections of the amounts and timing of future revenue and cash flows, and multiples of earnings in estimating fair value. In conjunction with our impairment assessments of indefinite-lived intangible assets, we also review the reasonableness of the indefinite useful lives associated with these assets, in which we evaluate whether indicators exist that future cash flows associated with these assets could be realized over a finite period.

In 2025, as a result of the time lapsed since our last quantitative evaluation in 2022, we bypassed the qualitative evaluation and tested for impairment of the goodwill of our reporting units and our indefinite-lived intangible assets by performing a quantitative evaluation. The quantitative analysis concluded that all reporting units and indefinite-lived intangible assets had fair values substantially in excess of their carrying values.

The inputs utilized in a quantitative analysis are classified as Level 3 inputs within the fair value hierarchy as defined in Accounting Standards Codification (“ASC”) 820, Fair Value Measurement. The process of evaluating the potential impairment of goodwill and indefinite-lived intangible assets is subjective because it requires the use of estimates and assumptions as to our future cash flows, discount rates commensurate with the risks involved in the assets, future economic and market conditions, as well as other key assumptions. We believe that the amounts recorded in the financial statements related to goodwill and indefinite-lived intangible assets are based on the best estimates and judgments of the appropriate Axalta management, although actual outcomes could differ from our estimates.

See Note 1 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

Long-Lived Assets

Long-lived assets, which includes property, plant and equipment, and definite-lived intangible assets, such as technology, trademarks, customer relationships and non-compete agreements, are continually assessed for impairment at the asset group level whenever events or changes in circumstances indicate the carrying amount of the asset group may not be recoverable. Such impairment assessments involve comparing the carrying amount of the asset group, as defined within ASC 360, Property, Plant and Equipment, as the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets, to the forecasted undiscounted future cash flows generated by that asset group (i.e., a recoverability test). In the event the carrying amount of the asset group exceeds the undiscounted future cash flows generated by that asset group and the carrying amount is not considered recoverable, an impairment exists. An impairment loss is measured as the excess of the asset group’s carrying amount over its fair value.

Stock-Based Compensation

Compensation expense related to restricted stock units is equal to the grant-date fair value of the awards determined by the closing share price on the date of the grant. The related expense is recognized as compensation expense over the service period utilizing the graded vesting attribution method.

Compensation expense related to performance share units, which are determined to have a market condition, is determined at the grant-date of the awards using a valuation methodology (Monte Carlo simulation model) to account for the market conditions linked to these awards and is recognized over the service period utilizing the graded vesting attribution method.

Compensation expense related to performance share units, which are determined to have a performance condition, is determined by the closing share price on the date of the grant and is recognized over the service period utilizing the graded vesting attribution method. The expense is adjusted for shares expected to vest based on performance conditions at each reporting date.

We recognize compensation expense net of forfeitures, which we have elected to record at the time of occurrence. Awards that are modified are evaluated for the type of modification and, if necessary, the fair value is adjusted and expense is recorded over any remaining service period.

See Notes 1 and 8 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail on stock-based compensation.

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Retirement Benefits

The amounts recognized in the consolidated financial statements related to pension benefits are determined from actuarial valuations. Inherent in these valuations are assumptions including expected return on plan assets, discount rates at which liabilities could have been settled, rate of increase in future compensations levels, and mortality rates. These assumptions are updated annually and are disclosed in Note 7 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. In accordance with U.S. GAAP, actual results that differed from the assumptions are accumulated and amortized over future periods and therefore affect expense recognized in future periods.

The estimated impact of either a 100 basis point increase or decrease of the discount rate or the expected return on assets assumption to the net periodic benefit cost for 2026 would be immaterial.

Derivative Instruments

As dictated by ASC 820, Fair Value Measurement, the fair market value recognized in the consolidated financial statements related to derivative instruments is determined by using valuation models whose inputs are derived using market observable inputs, including interest rate yield curves, as well as foreign exchange and commodity spot and forward rates, and reflects the asset or liability position as of the end of each reporting period.

See Notes 1 and 19 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail on derivative instruments.

Income taxes

The provision for income taxes was determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the period. Deferred taxes result from differences between the financial and tax basis of our assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Deferred tax assets and liabilities are measured using enacted tax rates applicable in the years in which they are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax law is recognized in income in the period that includes the enactment date.

We evaluate the recoverability of deferred tax assets on a jurisdictional basis by assessing the adequacy of future expected taxable income from all sources, including the reversal of taxable temporary differences, forecasted core business earnings and available tax planning strategies. Our recorded deferred tax liability balance as of December 31, 2025 is $52 million, which is net of valuation allowances of $337 million. The Company records a valuation allowance if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In instances where we are in a three-year cumulative loss, we assess all positive and negative factors, including any potential aberrational items that may be included within our taxable results. The aberrational items that have impacted our results include merger and acquisition, debt extinguishment, refinancing and certain global restructuring costs. We believe, and have assumed, these types of losses are not indicative of our core earnings for purposes of assessing the appropriateness of a valuation allowance. Assumptions around sources of taxable income inherently rely heavily on estimates. We use our historical experience and our short and long-range business forecasts to provide insight. While the Company believes that its judgments and estimations regarding deferred tax assets are appropriate, significant differences in actual experience may require the Company to adjust its valuation allowance and could materially affect the Company’s future financial results.

We provide for income and foreign withholding taxes, where applicable, on unremitted earnings of all subsidiaries and related companies to the extent that such earnings are not deemed to be permanently invested and cannot be repatriated in a tax-free manner. At December 31, 2025 and 2024, deferred income taxes of approximately $16 million and $14 million, respectively, have been provided on such subsidiary earnings. At December 31, 2025, and 2024, we have not recorded a deferred tax liability related to withholding taxes of approximately $147 million and $95 million, respectively, on unremitted earnings of subsidiaries that are permanently invested.

The breadth of our operations and the global complexity of tax regulations require assessments of uncertainties and judgments in estimating taxes we will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation and resolution of disputes arising from federal, state and international tax audits in the normal course of business. Interest and penalties accrued related to unrecognized tax benefits are included in the provision for income taxes. At December 31, 2025 and 2024, the Company had gross unrecognized tax benefits, excluding interest and penalties, for both domestic and foreign operations of $99 million and $107 million, respectively.

See Note 10 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail on our accounting for income taxes.

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Sales deductions

In our refinish end-market, our product sales are typically supplied through a network of distributors. Control transfers and revenue is recognized when our products are delivered to our distribution customers. Variable consideration in the form of price, less discounts and rebates, is estimated and recorded, as a reduction to net sales, upon the sale of our products based on our ability to make a reasonable estimate of the amounts expected to be received. The estimates of variable consideration involve significant assumptions based on the best estimates of inventory held by distributors, applicable pricing, as well as the use of historical actuals for sales, discounts and rebates, which may result in changes to estimates in the future.

The timing of payments associated with the above arrangements may differ from the timing associated with the satisfaction of our performance obligations. The period between the satisfaction of the performance obligation and the receipt of payment is dependent on terms and conditions specific to the customers. For transactions in which we expect, at contract inception, the period between the transfer of our products or services to our customer and when the customer pays for that good or service to be greater than one year, we adjust the promised amount of consideration for the effects of any significant financing components that materially changes the amount of revenue under the contract.

See Note 2 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail on our revenue.

Contingencies

Contingencies, by their nature, relate to uncertainties that require management to exercise judgment both in assessing the likelihood that a liability has been incurred as well as in estimating the amount of potential loss. The most important contingencies impacting our financial statements at this time are those related to the operational matter, as described in Note 5 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K (the “Operational Matter”), environmental remediation, pending or threatened litigation against the Company and the resolution of matters related to open tax years as discussed in Note 10 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Insurance recoveries are recorded when probable to the extent they cover incurred or probable liabilities, while recoveries in excess of incurred or probable liabilities are recorded when collection is realizable.

Costs related to the Operational Matter are accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated. Estimates of probable liabilities for the Operational Matter require assumptions pertaining to costs incurred by our customers to repair the impacted products. Assumptions include the ultimate number of impacted products that are repaired, re-use of damaged materials, labor rates and efficiency of individuals performing the repairs. A 10% decrease in the total number of products repaired would result in an approximately $2 million reduction in the estimated liability.

Environmental remediation costs are accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated. Estimates of environmental reserves require evaluating the nature and extent of contamination, the outcome of discussions with regulatory agencies, available technology, site-specific information, remediation alternatives and, at multi-party sites, other PRPs and the number and financial viability of the other PRPs. We accrue an amount equal to our best estimate of the costs to remediate based upon the available information. The extent of environmental impacts may not be fully known, and the processes and costs of remediation may change as new information is obtained or technology for remediation improves. Adjustments to our estimates are made periodically as additional information is received and as remediation progresses. We do not believe that the amounts historically accrued for environmental remediation costs are material to our financial statements.

We are subject to legal proceedings, claims and potential claims arising out of our business operations. We routinely assess the likelihood of any adverse outcomes in these matters, as well as ranges of probable losses. A determination of the amount of the reserves required, if any, for these contingencies is made after analysis of each known matter. We have an active risk management program consisting of numerous insurance policies secured from many carriers. These policies often provide coverage that is intended to minimize the financial impact, if any, of the legal proceedings. The required reserves may change in the future due to new developments in each matter.

For more information on these matters, see Note 5 and Note 10 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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