Axalta ting Systems .(AXTA) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents Axalta's unaudited condensed consolidated financial statements and management's discussion and analysis ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) This section presents Axalta's unaudited condensed consolidated financial statements and notes for Q2 and YTD 2025 Condensed Consolidated Statements of Operations Net sales decreased for Q2 and YTD 2025, while YTD net income attributable to common shareholders significantly increased | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net sales | $1,305 | $1,351 | $2,567 | $2,645 | | Income from operations | $193 | $205 | $369 | $326 | | Net income | $110 | $113 | $209 | $152 | | Net income attributable to common shareholders | $109 | $112 | $208 | $153 | | Basic net income per share | $0.50 | $0.51 | $0.96 | $0.70 | | Diluted net income per share | $0.50 | $0.51 | $0.95 | $0.69 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income significantly increased for Q2 and YTD 2025, driven by favorable currency translation adjustments | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net income | $110 | $113 | $209 | $152 | | Foreign currency translation adjustments | $128 | $(29) | $190 | $(73) | | Other comprehensive income (loss), net of tax | $136 | $(29) | $200 | $(73) | | Comprehensive income | $246 | $84 | $409 | $79 | Condensed Consolidated Balance Sheets Total assets and equity increased as of June 30, 2025, driven by receivables, inventories, and goodwill | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------------- | :-------------------------- | :------------------------------ | | Cash and cash equivalents | $625 | $593 | | Accounts and notes receivable, net | $1,348 | $1,248 | | Inventories | $831 | $734 | | Total current assets | $2,987 | $2,723 | | Property, plant and equipment, net | $1,255 | $1,181 | | Goodwill | $1,775 | $1,640 | | Total assets | $7,781 | $7,249 | | Accounts payable | $764 | $659 | | Total current liabilities | $1,406 | $1,354 | | Total liabilities | $5,470 | $5,293 | | Total shareholders' equity | $2,311 | $1,956 | Condensed Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased from December 2024 to June 2025, from net income and currency translation | Metric | December 31, 2024 (in millions) | March 31, 2025 (in millions) | June 30, 2025 (in millions) | | :-------------------------------- | :------------------------------ | :--------------------------- | :-------------------------- | | Balance at period start | $1,956 | $2,122 | $2,122 | | Net income | $99 (Q1) | $109 (Q2) | $208 (YTD) | | Foreign currency translation | $61 (Q1) | $136 (Q2) | $197 (YTD) | | Total comprehensive income | $163 (Q1) | $246 (Q2) | $409 (YTD) | | Common stock purchases | — | $(65) | $(65) | | Balance at period end | $2,122 | $2,311 | $2,311 | Condensed Consolidated Statements of Cash Flows Operating cash flow increased for YTD 2025; investing and financing used more cash for acquisitions and buybacks | Cash Flow Activity | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | $168 | $148 | | Net cash used for investing activities | $(83) | $(36) | | Net cash used for financing activities | $(78) | $48 | | Effect of exchange rate changes on cash | $25 | $(20) | | Net increase in cash | $32 | $140 | | Cash at end of period | $628 | $843 | Notes to Condensed Consolidated Financial Statements The notes provide detailed explanations for the financial statements, covering policies, revenue, assets, liabilities, and segment information (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Interim financial statements are unaudited, with ASU 2023-07 adopted and future ASUs under evaluation for impact - Adopted ASU 2023-07, Segment Reporting, in January 2024, expanding disclosures without impacting financial position, results, or cash flows[23] - ASU 2023-09, Income Taxes, effective for fiscal years beginning after December 15, 2024, will enhance income tax disclosures[24] - ASU 2024-03, Expense Disaggregation Disclosures, effective for fiscal years beginning after December 15, 2026, is being evaluated for impact on financial statements[25] (2) REVENUE Contract assets and Business Incentive Plan (BIP) carrying values increased as of June 30, 2025 | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------- | :-------------------------- | :------------------------------ | | Contract asset balances | $45 | $36 | | BIPs carrying value | $193 | $169 | - BIPs amortization (net of clawbacks) reduced net sales by $16 million for Q2 2025 and $31 million for YTD 2025[27] (3) GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS Goodwill and identifiable intangible assets increased, primarily due to foreign currency translation and acquisitions | Metric | December 31, 2024 (in millions) | June 30, 2025 (in millions) | | :-------------------------- | :------------------------------ | :-------------------------- | | Goodwill | $1,640 | $1,775 | | Identifiable intangibles, net | $1,149 | $1,167 | - Goodwill increased by $132 million due to foreign currency translation and $2 million from acquisitions in Performance Coatings[30] Estimated Amortization Expense | Year | Estimated Amortization Expense (in millions) | | :---------------- | :----------------------------------------- | | Remainder of 2025 | $50 | | 2026 | $100 | | 2027 | $99 | | 2028 | $85 | | 2029 | $80 | | 2030 | $80 | (4) RESTRUCTURING The 2024 Transformation Initiative targets workforce reduction and is expected to incur approximately $82 million in pre-tax charges - 2024 Transformation Initiative targets workforce reduction of over 500 employees globally[33] - Expected total pre-tax charges of approximately $82 million, with $76 million for severance and $6 million for accelerated depreciation[33] - Total cash expenditures related to the initiative are expected to be approximately $105-115 million, including $30-40 million for capital expenditures[33] | Metric | December 31, 20