Skip to main content

Axalta Coating Systems Ltd

For the period ended Dec 31, 2024. Filed Feb 13, 2025.

View on SEC.gov

About this filing

A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.

FY2024 · Filed Feb 13, 2025

AXTA$37.38-0.4%Stored close · as of Nov 10, 2026

Extracted filing text, with the paragraph anchors used by the comparison.

See the whole filing, with its images and exhibits
Contents

) FINANCIAL INSTRUMENTS, HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENTS

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

Fair value of financial instruments

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

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

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

Fair value of contingent consideration

Contingent consideration is valued 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 of contingent consideration is valued at each balance sheet date, until amounts become payable, with adjustments recorded within other expense, net in the consolidated statements of operations. Due to the significant unobservable inputs used in the valuations, these liabilities are categorized within Level 3 of the fair value hierarchy.

The table below presents the fair values of our financial instruments measured on a recurring basis by level within the fair value hierarchy at December 31, 2024 and 2023.

December 31, 2024December 31, 2023
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets
Prepaid expenses and other current assets:
Cross-currency swaps (1)$—$12$—$12$—$8$—$8
Other assets:
Cross-currency swaps (1)—5—5————
Investments in equity securities1——11——1
Liabilities
Other accrued liabilities:
Interest rate swaps (2)—1—1————
Cross-currency swaps (1)—————8—8
Contingent consideration——22——88
Other liabilities:
Cross-currency swaps (1)—————38—38
Long-term borrowings:
2029 Dollar Term Loans—1,709—1,709—1,794—1,794
2027 Dollar Senior Notes—490—490—487—487
2029 Dollar Senior Notes—637—637—633—633
2031 Dollar Senior Notes—519—519—527—527

(1) Net investment hedge

(2) Cash flow hedge

The table below presents a roll forward of activity for the Level 3 liabilities for the year ended December 31, 2024.

Fair Value Using Significant Unobservable Inputs (Level 3)
Beginning balance January 1, 2024$8
Business acquisition1
Change in fair value4
Payments(11)
Ending balance at December 31, 2024$2

Derivative Financial Instruments

We selectively use derivative instruments to reduce market risk associated with changes in foreign currency exchange rates and interest rates. The use of derivatives is intended for hedging purposes only, and we do not enter into derivative instruments for speculative purposes. A description of each type of derivative used to manage risk is included in the following paragraphs and our policies regarding accounting treatments of derivative movements are detailed in Note 1.

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

Interest Rate Swaps Designated as Cash Flow Hedges

Notional amount$475$500$200$200$150$150
Interest rate pay2.720%2.590%1.610%1.180%0.5% - 4.256%4.692%
Interest rate receive3-month LIBOR3-month LIBOR3-month LIBOR3-month LIBOR3-month SOFR3-month SOFR
Initial effective date4/10/201812/31/20191/15/20201/15/20203/31/20233/27/2024
Maximum expiration date3/31/202312/31/202212/31/202212/31/20223/31/2024 (1)9/30/2025

(1) The interest rate swap was terminated early on March 27, 2024.

Cross-Currency Swaps Designated as Net Investment Hedges

Notional exchanged$475$365$150$500
Interest rate receive4.470%3.375%6.692%7.250%
Notional received€417€335€142€467
Interest rate pay1.440%2.040%4.899%5.623%
Initial effective date11/07/201811/24/20183/31/202311/17/2023
Maximum expiration date3/31/20232/15/20299/30/202511/16/2026

The following tables set forth the locations and amounts recognized during the year ended December 31, 2024, 2023 and 2022 for these cash flow and net investment hedges.

Year Ended December 31,
2024 · 2023 · 2022
Derivatives in Cash Flow and Net Investment HedgesLocation of Loss (Gain) Recognized in Income on DerivativesNet Amount of Loss (Gain) Recognized in OCI on DerivativesAmount of Gain Recognized in IncomeNet Amount of (Gain) Loss Recognized in OCI on DerivativesAmount of Gain Recognized in IncomeNet Amount of Gain Recognized in OCI on DerivativesAmount of Loss (Gain) Recognized in Income
Interest rate swapsInterest expense, net$1$—$(2)$(4)$(22)$7
Cross-currency swapsInterest expense, net(70)(16)47(10)(68)(20)

Over the next 12 months, we expect a loss of $1 million pertaining to cash flow hedges to be reclassified from AOCI into earnings, related to our interest rate swaps.

Derivative Instruments Not Designated as Cash Flow Hedges

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

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

Derivatives Not Designated asHedging Instruments underASC 815 · Location of (Gain) Loss Recognized in Income onDerivatives · Year Ended December 31,
2024 · 2023 · 2022
Foreign currency forward contractsOther expense, net$(1)$1$—
ContentsView on SEC.gov

The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.