Results

Axalta Coating Systems Ltd.

10/29/2026 | Press release | Distributed by Public on 10/29/2026 13:13

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the interim unaudited condensed consolidated financial statements and the condensed notes thereto included elsewhere in this Quarterly Report on Form 10-Q, as well as the Company's Annual Report on Form 10-K for the year ended December 31, 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," "estimated," "designed to," "likely," "could," "would," "may," "will," "plans" and "future" 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 raw material and freight prices, as well as mitigation strategies developed in response thereto) 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 planned divestiture of our North America Building Products business, 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, 52 customer training centers and approximately 12,100 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.
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 increased 1.5%, driven primarily by a 3.1% benefit from favorable foreign currency translation, for the nine months ended September 30, 2026 compared with the nine months ended September 30, 2025. The increased net sales were furthered by contributions of 0.9% from acquisitions completed during 2025 and 2026 in the Performance Coatings segment (the "Recent Acquisitions"), partially offset by lower sales volumes of 2.4% and unfavorable average selling prices and product mix of 0.1%. The following trends impacted our segment net sales performance for the nine months ended September 30, 2026:
•Performance Coatings: Net sales increased 0.3% for the nine months ended September 30, 2026 compared with the nine months ended September 30, 2025. The increased net sales were driven by favorable foreign currency translation of 2.5% driven by fluctuations of the Euro, Mexican Peso and Chinese Yuan, in each case compared to the U.S. Dollar, furthered by contributions of 1.4% from the Recent Acquisitions and favorable average selling prices and product mix of 0.3%. The increased net sales were partially offset by lower sales volumes of 3.9%.
•Mobility Coatings: Net sales increased 3.6% for the nine months ended September 30, 2026 compared with the nine months ended September 30, 2025. The increased net sales were driven by favorable foreign currency translation of 4.1% driven by fluctuations of the Chinese Yuan, Brazilian Real, Mexican Peso and Euro, in each case compared to the U.S. Dollar, and higher sales volumes of 0.2%. The increased net sales were partially offset by unfavorable average selling prices and product mix of 0.7%.
Our business serves four end-markets globally with net sales for the three and nine months ended September 30, 2026 and 2025, as follows:
(In millions) Three Months Ended
September 30, 		2026 vs 2025 Nine Months Ended
September 30, 		2026 vs 2025
2026 2025 % change 2026 2025 % change
Performance Coatings
Refinish $ 504 $ 517 (2.3) % $ 1,547 $ 1,542 0.4 %
Industrial 314 311 0.9 % 945 944 0.2 %
Total Net sales Performance Coatings 818 828 (1.1) % 2,492 2,486 0.3 %
Mobility Coatings
Light Vehicle 374 364 2.4 % 1,083 1,066 1.5 %
Commercial Vehicle 119 96 24.4 % 336 303 10.8 %
Total Net sales Mobility Coatings 493 460 7.0 % 1,419 1,369 3.6 %
Total Net sales $ 1,311 $ 1,288 1.8 % $ 3,911 $ 3,855 1.5 %
Proposed Merger with Akzo Nobel N.V.
During November 2025, we entered into a Merger Agreement with AkzoNobel (as amended on May 27, 2026 and on July 23, 2026), providing for the combination of the Company and AkzoNobel in an all-stock merger. On August 5, 2026, the Company's shareholders approved and adopted the Merger Agreement and the transactions contemplated therein at a special general meeting of shareholders held for that purpose, and AkzoNobel's shareholders approved the Merger on the same date. The completion of the Merger remains subject to the satisfaction or waiver of other customary closing conditions, including receipt of required regulatory approvals. On October 20, 2026, the Company announced it plans to divest its North American Building Products business to address regulatory requirements. 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 involving 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, during the three months ended September 30, 2026, we were negatively impacted by the broader economic impact on raw material and freight costs, which were partially offset by mitigation strategies developed in response to these pressures. We will continue to monitor these conditions and take actions that we believe will help mitigate costs.
Capital and Liquidity Highlights
During the nine months ended September 30, 2026, we prepaid $195 million of the outstanding principal amount of the 2029 Dollar Term Loans. See Note 15 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.
FACTORS AFFECTING OUR OPERATING RESULTS
There have been no changes in the factors affecting our operating results previously disclosed under such heading in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 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
September 30, 		2026 vs 2025 Nine Months Ended
September 30, 		2026 vs 2025
2026 2025 $ Change % Change 2026 2025 $ Change % Change
Net sales
$ 1,311 $ 1,288 $ 23 1.8 % $ 3,911 $ 3,855 $ 56 1.5 %
Exchange rate effect 0.9 % 3.1 %
Impact of the Recent Acquisitions 0.8 % 0.9 %
Price/Mix effect 0.4 % (0.1) %
Volume effect (0.3) % (2.4) %
Three months ended September 30, 2026 compared to the three months ended September 30, 2025
Net sales increased primarily due to the following:
n Favorable impacts of currency translation driven by the strengthening of the Chinese Yuan and Mexican Peso, partially offset by the weakening of the Euro, in each case compared to the U.S. Dollar
n Contributions from the Recent Acquisitions
n Favorable average selling prices and product mix in Performance Coatings
Partially offset by:
n Lower sales volumes driven primarily by Performance Coatings in Europe
Nine months ended September 30, 2026 compared to the nine months ended September 30, 2025
Net sales increased primarily due to the following:
n Favorable impacts of currency translation driven by fluctuations of the Euro, Chinese Yuan, Mexican Peso and Brazilian Real, in each case compared to the U.S. Dollar
n Contributions from the Recent Acquisitions
Partially offset by:
n Lower sales volumes driven primarily by Performance Coatings in North America
n Unfavorable average selling prices and product mix primarily in Mobility Coatings
Cost of sales
Three Months Ended
September 30, 		2026 vs 2025 Nine Months Ended
September 30, 		2026 vs 2025
2026 2025 $ Change % Change 2026 2025 $ Change % Change
Cost of sales $ 877 $ 838 $ 39 4.7 % $ 2,596 $ 2,515 $ 81 3.2 %
% of net sales 66.9 % 65.1 % 66.4 % 65.2 %
Three months ended September 30, 2026 compared to the three months ended September 30, 2025
Cost of sales increased primarily due to the following:
n Higher variable input costs, primarily driven by raw material and freight cost increases from the Middle East conflict
n Contributions from the Recent Acquisitions
n Unfavorable impacts of currency translation of 0.6% driven by the strengthening of the Chinese Yuan and Mexican Peso, partially offset by the weakening of the Euro, in each case compared to the U.S. Dollar
Partially offset by:
n Lower sales volumes driven primarily by Performance Coatings in Europe
n Lower operating expenses, inclusive of contributions from cost savings initiatives
Cost of sales as a percentage of net sales increased primarily due to the following:
n Higher variable input costs, primarily driven by raw material and freight cost increases from the Middle East conflict
n Less effective coverage of fixed costs as a result of lower sales volumes
Partially offset by:
n Lower operating expenses, inclusive of contributions from cost savings initiatives
n Favorable average selling prices and product mix primarily in Performance Coatings
Nine months ended September 30, 2026 compared to the nine months ended September 30, 2025
Cost of sales increased primarily due to the following:
n Unfavorable impacts of currency translation of 2.8% driven by fluctuations of the Euro, Chinese Yuan, Mexican Peso and Brazilian Real, in each case compared to the U.S. Dollar
n Increased freight costs driven by the Middle East conflict
n Contributions from the Recent Acquisitions
Partially offset by:
n Lower sales volumes driven primarily by Performance Coatings in North America
n Lower variable input costs
n Lower operating expenses, inclusive of contributions from cost savings initiatives
Cost of sales as a percentage of net sales increased primarily due to the following:
n Less effective coverage of fixed costs as a result of lower sales volumes
n Increased freight costs driven by the Middle East conflict
n Unfavorable average selling prices and product mix primarily in Mobility Coatings
Partially offset by:
n Lower variable input costs
n Lower operating expenses, inclusive of contributions from cost savings initiatives
Selling, general and administrative expenses
Three Months Ended
September 30, 		2026 vs 2025 Nine Months Ended
September 30, 		2026 vs 2025
2026 2025 $ Change % Change 2026 2025 $ Change % Change
Selling, general and administrative expenses $ 201 $ 197 $ 4 2.0 % $ 614 $ 607 $ 7 1.2 %
Three months ended September 30, 2026 compared to the three months ended September 30, 2025
Selling, general and administrative expenses increased primarily due to the following:
n Contributions from the Recent Acquisitions
n Unfavorable impacts of currency translation of 0.2% due primarily to the strengthening of the Chinese Yuan, partially offset by the weakening of the Euro, in each case compared to the U.S. Dollar
Partially offset by:
n Decrease of $2 million in bad debt expense
Nine months ended September 30, 2026 compared to the nine months ended September 30, 2025
Selling, general and administrative expenses increased primarily due to the following:
n Unfavorable impacts of currency translation of 2.7% due primarily to fluctuations of the Euro, Chinese Yuan and Mexican Peso, in each case compared to the U.S. Dollar
n Contributions from the Recent Acquisitions
Partially offset by:
n Lower operating expenses, inclusive of contributions from savings initiatives
n Decrease of $6 million in bad debt expense
Other operating charges
Three Months Ended
September 30, 		2026 vs 2025 Nine Months Ended
September 30, 		2026 vs 2025
2026 2025 $ Change % Change 2026 2025 $ Change % Change
Other operating charges $ 24 $ 6 $ 18 300.0 % $ 92 $ 32 $ 60 187.5 %
Three months ended September 30, 2026 compared to the three months ended September 30, 2025
Other operating charges increased primarily due to the following:
n Increase of $14 million in merger and acquisition-related costs, primarily driven by the proposed Merger with AkzoNobel
n Increase of $5 million due to the absence of gains from the sale of previously closed manufacturing facilities recognized in the prior year period
n Increase of $3 million in termination benefits and other employee-related costs
Nine months ended September 30, 2026 compared to the nine months ended September 30, 2025
Other operating charges increased primarily due to the following:
n Increase of $65 million in merger and acquisition-related costs, primarily driven by the proposed Merger with AkzoNobel
n Increase of $5 million due to the absence of gains from the sale of previously closed manufacturing facilities recognized in the prior year period
Partially offset by:
n Decrease of $11 million in termination benefits and other employee-related costs primarily as a result of significantly higher costs associated with the 2024 Transformation Initiative in the prior year period
Research and development expenses
Three Months Ended
September 30, 		2026 vs 2025 Nine Months Ended
September 30, 		2026 vs 2025
2026 2025 $ Change % Change 2026 2025 $ Change % Change
Research and development expenses $ 18 $ 18 $ - - % $ 54 $ 55 $ (1) (1.8) %
Three and nine months ended September 30, 2026 compared to the three and nine months ended September 30, 2025
n Research and development expenses remained generally consistent and impacts of currency translation were immaterial compared to the prior year period
Amortization of acquired intangibles
Three Months Ended
September 30, 		2026 vs 2025 Nine Months Ended
September 30, 		2026 vs 2025
2026 2025 $ Change % Change 2026 2025 $ Change % Change
Amortization of acquired intangibles $ 26 $ 25 $ 1 4.0 % $ 77 $ 73 $ 4 5.5 %
Three months ended September 30, 2026 compared to the three months ended September 30, 2025
Amortization of acquired intangibles increased primarily due to the following:
n Assets acquired in the past 12 months contributed $1 million
n Impacts of currency translation were immaterial compared to the prior year period
Nine months ended September 30, 2026 compared to the nine months ended September 30, 2025
Amortization of acquired intangibles increased primarily due to the following:
n Assets acquired in the past 12 months contributed $3 million
n Unfavorable impacts of currency translation of 1.8% due primarily to fluctuations of the Euro compared to the U.S. Dollar
Interest expense, net
Three Months Ended
September 30, 		2026 vs 2025 Nine Months Ended
September 30, 		2026 vs 2025
2026 2025 $ Change % Change 2026 2025 $ Change % Change
Interest expense, net $ 37 $ 45 $ (8) (17.8) % $ 112 $ 134 $ (22) (16.4) %
Three and nine months ended September 30, 2026 compared to the three and nine months ended September 30, 2025
Interest expense, net decreased primarily due to the following:
n Favorable impact attributable to lower principal and decreased variable interest rate on our 2029 Dollar Term Loans
Other expense (income), net
Three Months Ended
September 30, 		2026 vs 2025 Nine Months Ended
September 30, 		2026 vs 2025
2026 2025 $ Change % Change 2026 2025 $ Change % Change
Other expense (income), net $ - $ 4 $ (4) 100.0 % $ (1) $ 12 $ (13) 108.3 %
Three months ended September 30, 2026 compared to the three months ended September 30, 2025
The change in other expense (income), net was primarily due to the following:
n Increased miscellaneous income of $2 million compared to the prior year period
n Favorable impact of foreign exchange gains of $2 million compared to the prior year period
Nine months ended September 30, 2026 compared to the nine months ended September 30, 2025
The change in other expense (income), net was primarily due to the following:
n $9 million related to government incentive income in China recognized in the current year period
n Favorable impact of foreign exchange gains of $4 million compared to the prior year period
Provision for income taxes
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2026 2025 2026 2025
Income before income taxes $ 128 $ 155 $ 367 $ 427
Provision for income taxes 33 45 92 108
Statutory income tax rate 15.0 % 15.0 % 15.0 % 15.0 %
Effective tax rate
25.8 % 29.2 % 25.1 % 25.3 %
Effective tax rate vs. statutory income tax rate 10.8 % 14.2 % 10.1 % 10.3 %
(Favorable) Unfavorable Impact
Three Months Ended
September 30, 		Nine Months Ended
September 30,
Items impacting the effective tax rate vs. statutory income tax rate 2026 2025 2026 2025
Earnings generated in jurisdictions where the income tax rate is different from the statutory rate (1)
$ 4 $ 4 $ 11 $ 9
Changes in valuation allowance (2)
3 9 (15) 60
Foreign exchange (gains) losses, net (1) 1 (4) (6)
Non-deductible expenses and interest (3)
5 3 21 6
Changes in unrecognized tax benefits (4)
- 7 13 (31)
Foreign taxes (5)
6 3 17 12
(1) For the three and nine months ended September 30, 2026, earnings generated in jurisdictions where the statutory rate is different from the Bermuda rate is primarily related to earnings in Brazil, Germany, and the United States. For the three and nine months ended September 30, 2025, earnings generated in jurisdictions where the statutory rate is different from the Bermuda statutory tax rate is primarily related to earnings in Brazil, Germany, Switzerland, and the United States.
(2) Changes in valuation allowance primarily relate to operations in Luxembourg, the Netherlands, and the United Kingdom. During the nine months ended September 30, 2026, the Company released $25 million of valuation allowance which is fully offset by changes in unrecognized tax benefits.
(3) Non-deductible expenses and interest includes tax impacts of $3 million and $15 million for the three and nine months ended September 30, 2026, respectively, related to merger and acquisition-related costs, driven by the proposed Merger with AkzoNobel.
(4) The Company recorded tax of $0 million and $12 million for the three and nine months ended September 30, 2026, respectively, related to unrecognized tax benefit adjustments resulting from ongoing discussions with tax authorities in jurisdictions where we have open audits. The increase to unrecognized tax benefits for the nine months ended September 30, 2026 is partially offset by changes in valuation allowance.
(5) Foreign taxes includes Pillar Two top-up taxes primarily attributable to Swiss operations of $2 million, $6 million, $0 million and $3 million for the three and nine months ended September 30, 2026 and September 30, 2025, respectively.
SEGMENT RESULTS
The Company's products and operations are managed and reported in two operating segments: Performance Coatings and Mobility Coatings. See Note 17 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.
Performance Coatings Segment
Three Months Ended
September 30, 		2026 vs 2025 Nine Months Ended
September 30, 		2026 vs 2025
2026 2025 $ Change % Change 2026 2025 $ Change % Change
Net sales
$ 818 $ 828 $ (10) (1.1) % $ 2,492 $ 2,486 $ 6 0.3 %
Exchange rate effect 0.1 % 2.5 %
Impact of the Recent Acquisitions 1.3 % 1.4 %
Price/Mix effect 1.1 % 0.3 %
Volume effect (3.6) % (3.9) %
Adjusted EBITDA $ 188 $ 211 $ (23) (10.7) % $ 586 $ 608 $ (22) (3.5) %
Adjusted EBITDA Margin 23.0 % 25.5 % 23.5 % 24.5 %
Three months ended September 30, 2026 compared to the three months ended September 30, 2025
Net sales decreased primarily due to the following:
n Lower sales volumes primarily in the European refinish end-market
Partially offset by:
n Contributions from the Recent Acquisitions
n Favorable average selling prices and product mix primarily in the refinish end-market
n Favorable impacts of currency translation due primarily to the strengthening of the Chinese Yuan and Mexican Peso, partially offset by the weakening of the Euro, in each case compared to the U.S. Dollar
Adjusted EBITDA and Adjusted EBITDA margin decreased primarily due to the following:
n Lower sales volumes primarily in the European refinish end-market
n Higher variable input costs, primarily driven by raw material and freight cost increases from the Middle East conflict
n Unfavorable impacts of currency translation due primarily to the weakening of the Euro compared to the U.S. Dollar
Partially offset by:
n Favorable average selling prices and product mix primarily in the refinish end-market
n Contributions from the Recent Acquisitions
n Lower operating expenses, inclusive of contributions from savings initiatives
Nine months ended September 30, 2026 compared to the nine months ended September 30, 2025
Net sales increased primarily due to the following:
n Favorable impacts of currency translation due primarily to fluctuations of the Euro, Mexican Peso and Chinese Yuan, in each case compared to the U.S. Dollar
n Contributions from the Recent Acquisitions
n Favorable average selling prices and product mix primarily in the industrial end-market
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 decreased due to the following:
n Lower sales volumes across both end-markets due primarily to unfavorable macro trends in North America
n Increased freight costs driven by the Middle East conflict
Partially offset by:
n Lower operating expenses, inclusive of contributions from savings initiatives
n Favorable impacts of currency translation due primarily to fluctuations of the Euro and Mexican Peso compared to the U.S. Dollar
n Contributions from the Recent Acquisitions
n Favorable average selling prices and product mix primarily in the industrial end-market
n Lower variable input costs
Mobility Coatings Segment
Three Months Ended
September 30, 		2026 vs 2025 Nine Months Ended
September 30, 		2026 vs 2025
2026 2025 $ Change % Change 2026 2025 $ Change % Change
Net sales $ 493 $ 460 $ 33 7.0 % $ 1,419 $ 1,369 $ 50 3.6 %
Exchange rate effect 2.4 % 4.1 %
Volume effect 5.5 % 0.2 %
Price/Mix effect (0.9) % (0.7) %
Adjusted EBITDA $ 94 $ 83 $ 11 12.8 % $ 260 $ 248 $ 12 4.7 %
Adjusted EBITDA Margin 19.0 % 18.0 % 18.3 % 18.1 %
Three months ended September 30, 2026 compared to the three months ended September 30, 2025
Net sales increased primarily due to the following:
n Increased sales volumes primarily in the commercial vehicle end-market
n Favorable impacts of currency translation driven by the strengthening of the Chinese Yuan, Mexican Peso and Brazilian Real, partially offset by the weakening of the Euro, in each case compared to the U.S. Dollar
Partially offset by:
n Unfavorable average selling prices and product mix in both end-markets
Adjusted EBITDA and Adjusted EBITDA margin increased primarily due to the following:
n Increased sales volumes primarily in the commercial vehicle end-market
n Favorable impacts of currency translation driven by the strengthening of the Chinese Yuan compared to the U.S. Dollar
n Lower operating expenses, inclusive of contributions from cost savings initiatives
Partially offset by:
n Unfavorable average selling prices and product mix
n Higher variable input costs, primarily driven by raw material and freight cost increases from the Middle East conflict
Nine months ended September 30, 2026 compared to the nine months ended September 30, 2025
Net sales increased primarily due to the following:
n Favorable impacts of currency translation driven by fluctuations of the Chinese Yuan, Brazilian Real, Mexican Peso and Euro, in each case compared to the U.S. Dollar
n Increased sales volumes in the commercial vehicle end-market
Partially offset by:
n Unfavorable average selling prices and product mix in both end-markets
Adjusted EBITDA and Adjusted EBITDA margin increased due to the following:
n Favorable impacts of currency translation driven by the strengthening of the Chinese Yuan, Mexican Peso and Brazilian Real, in each case compared to the U.S. Dollar
n Lower variable input costs
n $7 million of benefit related to government incentive income in China
n Higher sales volumes in the commercial vehicle end-market
Partially offset by:
n Unfavorable average selling prices and product mix in both end-markets
n Increased freight costs driven by the Middle East conflict
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are cash on hand, net cash provided by operating activities and available borrowing capacity under our Senior Secured Credit Facilities.
At September 30, 2026, availability under the Revolving Credit Facility was $768 million, net of $32 million of letters of credit outstanding. All such availability may be utilized without violating any covenants under the Credit Agreement or the indentures governing our senior notes (the "Senior Notes"). Our remaining available borrowing capacity under other lines of credit in certain non-U.S. jurisdictions totaled $20 million at September 30, 2026.
We, or our affiliates, at any time and from time to time, may purchase shares of our common stock or the Senior Notes, and may prepay our 2029 Dollar Term Loans or other indebtedness. Any such purchases of our common stock or Senior Notes may be made through the open market or privately negotiated transactions with third parties or pursuant to one or more redemptions, tender or exchange offers or otherwise, upon such terms and at such prices, as well as with such consideration, as we, or any of our affiliates, may determine. Our 2027 Dollar Senior Notes have a principal amount of $500 million, bear interest at 4.750% and are due on June 15, 2027. We have intentionally not repaid or refinanced the 2027 Dollar Senior Notes as of September 30, 2026; therefore, the related balances are classified as current liabilities on our condensed consolidated balance sheets at September 30, 2026. We expect to repay or refinance the 2027 Dollar Senior Notes prior to or on their maturity date.
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. The liabilities under the programs are classified as accounts payable on our unaudited condensed consolidated balance sheets. Our supplier finance programs are more fully described in Note 14 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Cash Flows
Nine Months Ended
September 30,
(In millions) 2026 2025
Net cash provided by (used for):
Operating activities:
Net income $ 275 $ 319
Depreciation and amortization 233 218
Amortization of deferred financing costs and original issue discount 6 6
Deferred income taxes 24 28
Realized and unrealized foreign exchange (gains) losses, net (8) 31
Stock-based compensation 23 19
Interest income on swaps designated as net investment hedges (9) (9)
Other non-cash, net (2) 8
Net income adjusted for non-cash items 542 620
Changes in operating assets and liabilities (187) (315)
Operating activities 355 305
Investing activities (138) (122)
Financing activities (221) (195)
Effect of exchange rate changes on cash - 26
Net (decrease) increase in cash $ (4) $ 14
Nine months ended September 30, 2026
Net Cash Provided by Operating Activities
Net cash provided by operating activities for the nine months ended September 30, 2026 was $355 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $542 million. This was partially offset by changes in operating assets and liabilities of $187 million, for which the most significant drivers were increases in accounts and notes receivable, inventories, and prepaid expenses and other assets of $132 million, $99 million, and $75 million, respectively. These outflows were driven primarily by timing of collections from customers, decreased sales volumes, higher variable costs and payments of BIPs. These outflows were partially offset by increases in accounts payable of $146 million, driven by timing of payments to vendors.
Net Cash Used for Investing Activities
Net cash used for investing activities for the nine months ended September 30, 2026 was $138 million. The primary uses were for purchases of property, plant and equipment of $144 million and business acquisitions of $8 million, partially offset by $9 million from interest proceeds from swaps designated as net investment hedges and $8 million from payments received on customer loans. Details of the interest proceeds from swaps designated as net investment hedges are discussed further in Note 16 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Net Cash Used for Financing Activities
Net cash used for financing activities for the nine months ended September 30, 2026 was $221 million. The primary use was for prepayments of $195 million of the outstanding principal amount of the 2029 Dollar Term Loans, contractual debt repayments of $16 million and cash outflows of $7 million primarily due to stock-based compensation withholding tax settlements.
Other Impacts on Cash
Currency exchange impacts on cash for the nine months ended September 30, 2026 were immaterial.
Nine months ended September 30, 2025
Net Cash Provided by Operating Activities
Net cash provided by operating activities for the nine months ended September 30, 2025 was $305 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $620 million. This was partially offset by net uses of working capital of $315 million, for which the most significant drivers were increases in prepaid expenses and other assets, inventories and accounts and notes receivable of $132 million, $53 million and $48 million, respectively, as well as decreases in other accrued liabilities and accounts payable of $71 million and $15 million, respectively. These outflows were driven primarily by payments of BIPs and rebates, decreased sales volumes and timing of collections from customers and payments to vendors.
Net Cash Used for Investing Activities
Net cash used for investing activities for the nine months ended September 30, 2025 was $122 million. The primary uses were for purchases of property, plant and equipment of $138 million and a business acquisition of $6 million, partially offset by proceeds of $10 million from the sales of two previously closed manufacturing sites and proceeds of $9 million from interest proceeds from swaps designated as net investment hedges.
Net Cash Used for Financing Activities
Net cash used for financing activities for the nine months ended September 30, 2025 was $195 million. The primary use was for purchases of our common shares of $165 million, prepayments of $10 million of the outstanding principal amount of the 2029 Dollar Term Loans, and contractual debt repayments of $15 million.
Other Impacts on Cash
Currency exchange impacts on cash for the nine months ended September 30, 2025 were favorable by $26 million, which was driven primarily by fluctuations of the Euro, Brazilian Real and Mexican Peso, in each case compared to the U.S. Dollar.
Financial Condition
We had cash and cash equivalents at September 30, 2026 and December 31, 2025 of $650 million and $657 million, respectively. Of these balances, $568 million and $555 million were maintained in non-U.S. jurisdictions as of September 30, 2026 and December 31, 2025, respectively. We believe at this time our organizational structure allows us the necessary flexibility to move funds throughout our subsidiaries to meet our operational and working capital needs.
Our business may not generate sufficient cash flow from operations and future borrowings may not be available under our Senior Secured Credit Facilities in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs, including planned capital expenditures. In such circumstances, we may need to refinance all or a portion of our indebtedness on or before maturity. We may not be able to refinance any of our indebtedness on commercially reasonable terms or at all. If we cannot service our indebtedness, we may have to take actions such as selling assets, selling additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances. Our primary sources of liquidity are cash on hand, cash flow from operations and available borrowing capacity under our Senior Secured Credit Facilities. Based on our forecasts, we believe that cash flow from operations, available cash on hand and available borrowing capacity under our Senior Secured Credit Facilities and other existing lines of credit will be adequate to service debt, fund our cost saving initiatives, meet liquidity needs and fund necessary capital expenditures for the next twelve months.
Our ability to make scheduled or prepayments 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 15 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and in Note 18 to the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025.
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 $768 million and $770 million at September 30, 2026 and December 31, 2025, respectively, all of which may be borrowed by us without violating any covenants under the Credit Agreement or the indentures governing the Senior Notes.
Contractual Obligations
Information related to our material contractual obligations and cash requirements can be found in Note 6 and Note 18 to the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. As noted above and within Note 15 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, we have made voluntary prepayments during the nine months ended September 30, 2026 of $195 million of the outstanding principal amount of the 2029 Dollar Term Loans. There have been no other material changes in the Company's contractual obligations and cash requirements as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
Off-Balance Sheet Arrangements
See Note 5 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for disclosure of our guarantees of certain customers' obligations to third parties.
Recent Accounting Guidance
See Note 1 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a summary of recent accounting guidance.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. The preparation of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q requires us to make estimates and judgments that affect the amounts reported in the financial statements. We base our estimates and judgments on historical experiences and assumptions believed to be reasonable under the circumstances and re-evaluate them on an ongoing basis. Actual results could differ from our estimates under different assumptions or conditions. There have been no material changes to our critical accounting policies and estimates previously disclosed under "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025.
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