Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

April 25, 2019

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     .
Commission File Number: 001-36733
 
AXALTA COATING SYSTEMS LTD.
(Exact name of registrant as specified in its charter)
 
Bermuda
 
2851
 
98-1073028
(State or other jurisdiction of
incorporation or organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer
Identification No.)
Two Commerce Square
2001 Market Street
Suite 3600
Philadelphia, Pennsylvania 19103
(855) 547-1461
(Address, including zip code, and telephone number, including area code, of the registrant’s principal executive offices)
 
Securities registered pursuant to Section 12(b) of the Act:
Common Shares, $1.00 par value
 
 
 
New York Stock Exchange
(title of class)
 
 
 
(Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨

Indicate by check mark whether the Company is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer ý Non-accelerated filer ¨ Accelerated filer ¨ Smaller reporting company ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

As of April 18, 2019, there were 234,601,688 shares of the registrant’s common shares outstanding.

 
 
 
 
 


Table of Contents

Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2

Table of Contents

PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

AXALTA COATING SYSTEMS LTD.
Condensed Consolidated Statements of Operations (Unaudited)
(In millions, except per share data)
    
 
 
Three Months Ended March 31,

 
2019
 
2018
Net sales
 
$
1,119.3

 
$
1,172.0

Cost of goods sold
 
751.3

 
776.0

Selling, general and administrative expenses
 
217.5

 
227.8

Loss on assets held for sale
 
5.2

 

Research and development expenses
 
18.2

 
19.3

Amortization of acquired intangibles
 
28.5

 
28.9

Income from operations
 
98.6

 
120.0

Interest expense, net
 
41.3

 
39.4

Other income, net
 
(1.0
)
 
(2.2
)
Income before income taxes
 
58.3

 
82.8

Provision for income taxes
 
14.2

 
11.8

Net income
 
44.1

 
71.0

Less: Net income attributable to noncontrolling interests
 
0.7

 
1.1

Net income attributable to controlling interests
 
$
43.4

 
$
69.9

Basic earnings per share
 
$
0.19

 
$
0.29

Diluted earnings per share
 
$
0.18

 
$
0.28


The accompanying notes are an integral part of these condensed consolidated financial statements.


3

Table of Contents

AXALTA COATING SYSTEMS LTD.
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(In millions)
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Net income
 
$
44.1

 
$
71.0

Other comprehensive (loss) income, before tax:
 
 
 
 
Foreign currency translation adjustments
 
13.3

 
43.1

Unrealized (loss) gain on derivatives
 
(14.6
)
 
7.9

Unrealized gain on pension plan obligations
 
0.5

 
0.3

Other comprehensive (loss) income, before tax
 
(0.8
)
 
51.3

Income tax (benefit) provision related to items of other comprehensive (loss) income
 
(1.7
)
 
1.3

Other comprehensive income, net of tax
 
0.9

 
50.0

Comprehensive income
 
45.0

 
121.0

Less: Comprehensive (loss) income attributable to noncontrolling interests
 
1.2

 
2.0

Comprehensive income attributable to controlling interests
 
$
43.8

 
$
119.0


The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Table of Contents

AXALTA COATING SYSTEMS LTD.
Condensed Consolidated Balance Sheets (Unaudited)
(In millions, except per share data)

 
March 31, 2019
 
December 31, 2018
Assets
 

 

Current assets:
 

 

Cash and cash equivalents
 
$
501.1

 
$
693.6

Restricted cash
 
2.8

 
2.8

Accounts and notes receivable, net
 
920.5

 
860.8

Inventories
 
626.8

 
613.0

Prepaid expenses and other current assets
 
210.4

 
139.4

Total current assets
 
2,261.6

 
2,309.6

Property, plant and equipment, net
 
1,274.4

 
1,298.2

Goodwill
 
1,216.1

 
1,230.8

Identifiable intangibles, net
 
1,310.8

 
1,348.0

Other assets
 
610.5

 
489.1

Total assets
 
$
6,673.4

 
$
6,675.7

Liabilities, Shareholders’ Equity
 

 

Current liabilities:
 

 

Accounts payable
 
$
530.9

 
$
522.8

Current portion of borrowings
 
43.5

 
42.2

Other accrued liabilities
 
447.1

 
475.6

Total current liabilities
 
1,021.5

 
1,040.6

Long-term borrowings
 
3,809.0

 
3,821.8

Accrued pensions
 
257.6

 
261.9

Deferred income taxes
 
138.5

 
140.8

Other liabilities
 
167.2

 
100.1

Total liabilities
 
5,393.8

 
5,365.2

Commitments and contingencies (Note 6)
 

 

Shareholders’ equity
 

 

Common shares, $1.00 par, 1,000.0 shares authorized, 247.8 and 246.7 shares issued at March 31, 2019 and December 31, 2018, respectively
 
247.0

 
245.3

Capital in excess of par
 
1,431.6

 
1,409.5

Retained earnings
 
241.3

 
198.6

Treasury shares, at cost 13.6 and 11.1 shares at March 31, 2019 and December 31, 2018, respectively
 
(378.0
)
 
(312.2
)
Accumulated other comprehensive loss
 
(335.7
)
 
(336.1
)
Total Axalta shareholders’ equity
 
1,206.2

 
1,205.1

Noncontrolling interests
 
73.4

 
105.4

Total shareholders’ equity
 
1,279.6

 
1,310.5

Total liabilities and shareholders’ equity
 
$
6,673.4

 
$
6,675.7


The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Table of Contents

AXALTA COATING SYSTEMS LTD.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In millions)
 
 
Three months ended March 31,

 
2019
 
2018
Operating activities:
 

 

Net income
 
$
44.1


$
71.0

Adjustment to reconcile net income to cash used for operating activities:
 

 

Depreciation and amortization
 
91.6

 
91.9

Amortization of deferred financing costs and original issue discount
 
2.2

 
1.9

Deferred income taxes
 
0.4

 
(4.9
)
Realized and unrealized foreign exchange (gains) losses, net
 
0.9

 
(1.3
)
Stock-based compensation
 
6.7

 
8.4

Loss on assets held for sale
 
5.2

 

Interest income on swaps designated as net investment hedges
 
(3.5
)
 

Other non-cash, net
 
(0.3
)
 
(5.3
)
Changes in operating assets and liabilities:
 

 

Trade accounts and notes receivable
 
(90.4
)
 
(52.3
)
Inventories
 
(22.2
)
 
(42.9
)
Prepaid expenses and other assets
 
(60.5
)
 
(30.2
)
Accounts payable
 
35.4

 
33.9

Other accrued liabilities
 
(69.2
)
 
(87.0
)
Other liabilities
 
1.7

 
(4.2
)
Cash used for operating activities
 
(57.9
)
 
(21.0
)
Investing activities:
 

 

Acquisitions, net of cash acquired
 
(1.7
)
 
(78.2
)
Purchase of property, plant and equipment
 
(20.5
)
 
(39.5
)
Interest proceeds on swaps designated as net investment hedges
 
3.5

 

Other investing activities, net
 
(0.1
)
 

Cash used for investing activities
 
(18.8
)
 
(117.7
)
Financing activities:
 


 


Payments on short-term borrowings
 
(11.3
)
 
(9.3
)
Payments on long-term borrowings
 
(7.3
)
 
(6.9
)
Financing-related costs
 
(0.9
)
 

Purchase of treasury stock
 
(65.7
)
 
(3.3
)
Proceeds from option exercises
 
11.4

 
6.2

Dividends paid to non-controlling interests
 
(1.1
)
 
(1.0
)
Investment in non-controlling interest
 
(26.9
)
 
(26.9
)
Cash used for financing activities
 
(101.8
)
 
(41.2
)
Decrease in cash
 
(178.5
)
 
(179.9
)
Effect of exchange rate changes on cash
 
0.8

 
10.3

Cash at beginning of period
 
696.4

 
772.9

Cash at end of period
 
$
518.7

 
$
603.3


 


 


Cash at end of period reconciliation:
 


 


Cash and cash equivalents
 
$
501.1

 
$
600.4

Restricted cash
 
2.8

 
2.9

Cash and restricted cash held for sale
 
14.8

 

Cash at end of period
 
$
518.7

 
$
603.3

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Table of Contents
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions, unless otherwise noted)



(1)     BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim condensed consolidated financial statements included herein are unaudited. In the opinion of management, these statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair statement of the financial position of Axalta Coating Systems Ltd., a Bermuda exempted company limited by shares, and its consolidated subsidiaries ("Axalta," the "Company," "we," "our" and "us") at March 31, 2019 and December 31, 2018, the results of operations and comprehensive income (loss) for the three months ended March 31, 2019 and 2018, and its cash flows for the three months then ended. All intercompany balances and transactions have been eliminated.
These interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
The interim unaudited condensed consolidated financial statements include the accounts of Axalta and its subsidiaries, and entities in which a controlling interest is maintained. Certain of our joint ventures are accounted for on a one-month lag basis, the effect of which is not material.
The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results to be expected for a full year.
Reclassifications
During the three months ended March 31, 2019, the condensed consolidated statements of operations were updated to combine "Net sales" and "Other revenue" into "Net sales". The 2018 condensed consolidated statements of operations have been updated for comparability with the current year presentation.
Correction of Immaterial Errors to Prior Period Financial Statements
During the three months ended March 31, 2019, the Company identified and corrected an error that affected the 2018 previously-issued consolidated and condensed financial statements. Specifically, the financial statements reflected an investment in noncontrolling interest payment of $26.9 million within investing activities as opposed to its appropriate classification within financing activities. The Company determined that these corrections were immaterial to the previously-issued financial statements. However, given the significance of the error and for comparability purposes, we have revised the condensed consolidated statements of cash flows for the three months ended March 31, 2018, and will revise annual and interim periods in future filings. This revision has no impacts on the consolidated or condensed statements of operations or balance sheets.
 
 
Three months ended March 31, 2018
 
 
As Reported
 
Revised
Cash used for investing activities
 
$
(144.6
)
 
$
(117.7
)
Cash used for financing activities
 
$
(14.3
)
 
$
(41.2
)

Recently Adopted Accounting Guidance
In February 2016, the FASB issued ASU 2016-02, "Leases," which, together with amendments comprising ASC 842, requires lessees to identify arrangements that should be accounted for as leases and generally recognized, for operating and finance leases with terms exceeding twelve months, a right-of-use asset (or "ROU") and lease liability on the balance sheet. In addition to this main provision, this standard included a number of additional changes to lease accounting. This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted prior to this date. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either the adoption date or the beginning of the earliest comparative period presented in the financial statements as its date of initial application. We elected to adopt the new standard on January 1, 2019 and use the adoption date as our date of initial application. As a result, historical financial information will not be updated, and the disclosures required under the new standard will not be provided as of and for periods before January 1, 2019. See Note 7 for further information on the implementation of the standard.

7


The new standard provides a number of optional practical expedients in transition. We have elected the package of practical expedients, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We have also elected the practical expedient pertaining to land easements which permits entities to forgo the evaluation of existing land easement arrangements in transition to determine if they contain a lease. We did not elect the use-of-hindsight practical expedient. The new standard also provides practical expedients for an entity’s ongoing accounting. We have elected the short term lease exception and we will not recognize ROU assets or lease liabilities for qualifying leases (leases with a term of less than 12 months from lease commencement). We also elected the accounting policy election to not separate lease and non-lease components for all asset classes.
The Company implemented an outsourced software solution to support the ongoing accounting requirements that this standard will have on our consolidated financial statements. We have evaluated the completeness and accuracy of lease data entered into the software solution and updated our processes, policies and internal controls. Changes to our internal controls covered the identification, accounting and disclosure of leases both upon adoption and subsequent to adoption. Adoption of the new standard at January 1, 2019 resulted in a one-time loss to retained earnings of $0.7 million on our condensed consolidated balance sheets and consolidated statement of changes in shareholders’ equity related to the net difference of derecognition of existing assets and debt obligations associated with our leases currently accounted for as sale-leaseback financings, for which the ASU requires accounting for as a lease at the date of initial application.
Of the accounting standards we have adopted in 2019, the below standard did not have a material impact:
ASU
 
 
 
Effective Date
2018-16
 
Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes
 
January 1, 2019

(2)    REVENUE
We recognize revenue at the point our contractual performance obligations with our customers are satisfied. This occurs at the point in time when control of our products transfers to the customer based on considerations of right to payment, transfer of legal title, physical possession, risks and rewards of ownership and customer acceptance. For the majority of our revenue, control transfers upon shipment of our products to our customers. Our remaining revenue is recorded upon delivery or consumption for our product sales or as incurred for services provided and royalties earned.
For certain customer arrangements within our light vehicle, industrial and commercial vehicle end-markets, revenue is recognized upon shipment, as this is the point in time we have concluded that control of our product has transferred to our customer based on our considerations of the indicators of control in the contracts, including right of use and risk and reward of ownership. For consignment arrangements, revenue is recognized upon actual consumption by our customers, as this represents the point in time that control is determined to have transferred to the customer based on the contractual arrangement.
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, are 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 or incurred. 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 in estimates in the future.
Consideration for products in which control has transferred to our customers that is conditional on something other than the passage of time is recorded as a contract asset within prepaid expenses and other on the balance sheet. The contract asset balances at March 31, 2019 and December 31, 2018 were $45.2 million and $47.2 million, respectively.

8

Table of Contents
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions, unless otherwise noted)


We provide certain customers with incremental up-front consideration, subject to clawback provisions, including Business Incentive Plan assets ("BIPs"), which is capitalized as a component of other assets and amortized over the estimated life of the contractual arrangement as a reduction of net sales. At March 31, 2019 and December 31, 2018, the total carrying value of BIPs were $190.5 million and $190.8 million, respectively, and are presented within other assets on the condensed consolidated balance sheets. For the three months ended March 31, 2019 and 2018, $17.1 million and $16.3 million, respectively, were amortized and reflected as reductions of net sales in the condensed consolidated statements of operations. The total carrying value of BIPs exclude other upfront incentives made in conjunction with long-term customer commitments of $81.9 million and $56.0 million at March 31, 2019 and December 31, 2018, respectively, which will be repaid in future periods.
See Note 18 for disaggregated net sales by end-market.
(3)    ACQUISITIONS AND DIVESTITURES
During the three months ended March 31, 2019, we entered into an agreement to sell our 60.0% interest in a consolidated joint venture within our Performance Coatings segment. The results of operations of the portion of the business to be sold is included in continuing operations within the condensed consolidated statements of operations. All assets and liabilities of the disposal group have been classified as held for sale on our condensed consolidated balance sheet and recorded at the lower of carrying value and fair value less cost to sell, which resulted in a loss of $5.2 million for the three months ended March 31, 2019. The carrying amounts of the major classes of assets and liabilities that were classified as held for sale at March 31, 2019, within prepaid and other current assets and other accrued liabilities, respectively, as follows:
 
 
March 31, 2019
Assets
 
 
Cash and cash equivalents
 
$
7.3

Restricted cash
 
7.5

Accounts and notes receivable, net
 
30.4

Inventories
 
7.3

Property, plant and equipment, net
 
8.4

Goodwill
 
5.6

Identifiable intangibles, net
 
1.8

Other assets
 
5.2

Loss on assets held for sale
 
(5.2
)
Assets held for sale
 
$
68.3

Liabilities
 
 
Accounts payable
 
16.5

Other accrued liabilities
 
6.5

Other liabilities
 
4.4

Liabilities held for sale
 
$
27.4

Other Activity
In addition, during the three months ended March 31, 2019, pursuant to the stock purchase agreement for a joint venture acquired during the year ended December 31, 2016, we were required to purchase the remaining interest in our consolidated entity of 24.5% for $26.9 million, increasing our total ownership percentage to 100.0%.
At March 31, 2019, for any business combination completed after March 31, 2018, we have not finalized the related purchase accounting and the amounts recorded represent preliminary values. We expect to finalize our purchase accounting during the respective measurement periods which will be no later than one year following the closing dates.

9

Table of Contents
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions, unless otherwise noted)



(4)    GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS
Goodwill
The following table shows changes in the carrying amount of goodwill from December 31, 2018 to March 31, 2019 by reportable segment:
 
 
Performance
Coatings
 
Transportation
Coatings
 
Total
December 31, 2018
 
$
1,151.5

 
$
79.3

 
$
1,230.8

Purchase accounting adjustments
 
0.7

 

 
0.7

Held for sale adjustment
 
(5.6
)
 

 
(5.6
)
Foreign currency translation
 
(9.1
)
 
(0.7
)
 
(9.8
)
March 31, 2019
 
$
1,137.5

 
$
78.6

 
$
1,216.1


Identifiable Intangible Assets
The following tables summarize the gross carrying amounts and accumulated amortization of identifiable intangible assets by major class:
March 31, 2019
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Book
Value
 
Weighted average
amortization periods (years)
Technology
 
$
541.5

 
$
(271.4
)
 
$
270.1

 
10.4
Trademarks - indefinite-lived
 
265.8

 

 
265.8

 
Indefinite
Trademarks - definite-lived
 
100.2

 
(25.5
)
 
74.7

 
15.8
Customer relationships
 
924.4

 
(233.8
)
 
690.6

 
19.1
Other
 
15.7

 
(6.1
)
 
9.6

 
5.1
Total
 
$
1,847.6

 
$
(536.8
)
 
$
1,310.8

 
 
December 31, 2018
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Book
Value
 
Weighted average
amortization periods (years)
Technology
 
$
545.7

 
$
(260.7
)
 
$
285.0

 
10.4
Trademarks—indefinite-lived
 
269.0

 

 
269.0

 
Indefinite
Trademarks—definite-lived
 
100.6

 
(24.0
)
 
76.6

 
15.8
Customer relationships
 
929.9

 
(222.9
)
 
707.0

 
19.1
Other
 
15.7

 
(5.3
)
 
10.4

 
5.1
Total
 
$
1,860.9

 
$
(512.9
)
 
$
1,348.0

 
 

The estimated amortization expense related to the fair value of acquired intangible assets for the remainder of 2019 and each of the succeeding five years is:
Remainder of 2019
 
$
87.5

2020
 
113.5

2021
 
112.9

2022
 
110.7

2023
 
71.5

2024
 
66.6



10

Table of Contents
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions, unless otherwise noted)


(5)    RESTRUCTURING
In accordance with the applicable guidance for ASC 712, Nonretirement Postemployment Benefits, we accounted for termination benefits and recognized liabilities when the loss was considered probable that employees were entitled to benefits and the amounts could be reasonably estimated.
We have incurred costs in connection with involuntary termination benefits associated with our corporate-related initiatives and cost-saving opportunities associated with our Fit For Growth and Axalta Way initiatives. These amounts are recorded within selling, general and administrative expenses in the condensed consolidated statements of operations. The payments associated with these actions are expected to be completed within 12 to 24 months from the balance sheet date.
The following table summarizes the activities related to the restructuring reserves and expenses from December 31, 2018 to March 31, 2019:
 
 
2019 Activity
Balance at December 31, 2018
 
$
102.7

Expenses, net of changes to estimates
 
1.3

Payments made
 
(14.0
)
Foreign currency translation
 
(1.5
)
Balance at March 31, 2019
 
$
88.5


The impacts to pre-tax earnings from incremental accelerated depreciation resulting from the previously announced closure of our manufacturing facility in Mechelen, Belgium site, for the three months ended March 31, 2019 were $6.1 million, which were recorded to cost of goods sold. There was no accelerated depreciation recorded during the three months ended March 31, 2018.
(6)    COMMITMENTS AND CONTINGENCIES
Guarantees
We guarantee certain of our customers’ obligations to third parties, whereby any default by our customers on their obligations could force us to make payments to the applicable creditors. At March 31, 2019 and December 31, 2018, we had outstanding bank guarantees of $12.1 million and $12.7 million, respectively, which expire between 2019 and 2022. We monitor the obligations to evaluate whether we have a liability at the balance sheet date, for which none existed at March 31, 2019 and December 31, 2018.
Other
We are subject to various pending lawsuits, legal proceedings and other claims in the ordinary course of business, including civil, regulatory and environmental matters. These litigation matters may involve third-party indemnification obligations and/or insurance covering all or part of any potential damage against us. All of these matters are subject to many uncertainties and, accordingly, we cannot determine the ultimate outcome of the proceedings and other claims at this time, although management does not believe that such proceedings, individually or in the aggregate, will have a material adverse effect on the unaudited condensed consolidated financial statements of Axalta. The potential effects, if any, on such condensed consolidated financial statements will be recorded in the period in which these matters are probable and estimable.
(7)    LEASES
We have operating and finance leases for certain warehouses, office spaces, land, and equipment. As described within Note 1, we adopted ASU 2016-02, "Leases," on January 1, 2019 requiring, among other changes, operating and finance leases with terms exceeding twelve months to be recognized as ROU assets and lease liabilities on the balance sheet.

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Table of Contents
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions, unless otherwise noted)


Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The lease term is determined to be the non-cancelable period including any lessee renewal options which are considered to be reasonably certain of exercise. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company used judgment to determine an appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term in a similar economic environment.
Certain of our lease agreements include rental payments based on an index or adjusted periodically for inflation. The changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. In addition, variable lease expense also includes elements of a contract that is based on usage during the term. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Supplemental balance sheet information related to leases is summarized as follows:
 
 
 
March 31, 2019
Assets
Classification
 
 
Operating lease assets
Other assets (1)
 
$
95.5

Finance lease assets
Property, plant and equipment, net (2)
 
70.3

Total leased assets
 
 
$
165.8

Liabilities
 
 
 
Current
 
 
 
Operating
Other accrued liabilities
 
$
28.1

Finance
Current portion of borrowings
 
2.9

Noncurrent
 
 
 
Operating
Other liabilities
 
71.8

Finance
Long-term borrowings
 
64.0

Total lease liabilities
 
 
$
166.8

(1) Operating lease assets are recorded net of accumulated amortization of $5.0 million as of March 31, 2019.
(2) Finance lease assets are recorded net of accumulated amortization of $1.4 million as of March 31, 2019.
Components of lease expense are summarized as follows:
 
 
Three months ended March 31
 
 
2019
Finance lease cost
 
 
Amortization of right-of-use assets
 
$
1.0

Interest on lease liabilities
 
0.9

Operating lease cost
 
8.9

Variable lease cost
 
0.8

Short-term lease cost
 
0.3

Net lease cost
 
$
11.9


12

Table of Contents
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions, unless otherwise noted)


Supplemental cash flow information related to leases is summarized as follows:
 
 
Three months ended March 31
 
 
2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Operating cash flows from operating leases
 
$
9.1

Operating cash flows from finance leases
 
$
0.9

Financing cash flows from finance leases
 
$
1.2

Right-of-use assets obtained in exchange for lease obligations:
 
 
Operating leases
 
$
5.9

Finance leases
 
$


Lease term and discount rate information is summarized as follows:
 
 
March 31, 2019
Weighted-average remaining lease term (years)
 
 
Operating leases
 
5.5

Finance leases
 
17.7

Weighted-average discount rate
 
 
Operating leases
 
3.6
%
Finance leases
 
5.3
%

Maturities of lease liabilities as of March 31, 2019 is as follows:
 
 
Operating Leases
 
Finance Leases
Year
 
 
 
 
Remainder of 2019
 
$
23.8

 
$
3.4

2020
 
25.9

 
5.5

2021
 
19.2

 
5.6

2022
 
13.0

 
5.7

2023
 
10.9

 
5.8

Thereafter
 
22.0

 
79.3

Total lease payments
 
$
114.8

 
$
105.3

Less: imputed interest
 
14.9

 
38.4

Present value of lease liabilities
 
$
99.9

 
$
66.9



13

Table of Contents
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions, unless otherwise noted)


As discussed in Note 1, we have elected the transition methodology to apply the standard at the beginning of the period of adoption, January 1, 2019, through a cumulative-effect adjustment to retained earnings. Under this transition method, the application date of the new standard shall begin in the reporting period in which we have adopted the standard. For comparability purposes, the following table reflects the total remaining cash payments related to all transactions during the rental term at December 31, 2018 associated with three lease arrangements that were treated as sale-leaseback financing transactions under ASC 840 and disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2018:
 
 
Sale-leaseback obligations
2019
 
$
5.3

2020
 
5.4

2021
 
5.4

2022
 
5.7

2023
 
5.7

Thereafter
 
77.1

Total minimum payments
 
$
104.6


At December 31, 2018, future minimum payments under non-cancelable operating leases under ASC 840 were as follows:
 
 
Operating
Leases
2019
 
$
34.6

2020
 
23.5

2021
 
17.1

2022
 
13.2

2023
 
11.5

Thereafter
 
16.6

Total minimum payments
 
$
116.5


(8)    LONG-TERM EMPLOYEE BENEFITS
Components of Net Periodic Benefit Cost
The following table sets forth the components of net periodic benefit cost for the three months ended March 31, 2019 and 2018:
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Components of net periodic benefit cost:
 
 
 
 
Net periodic benefit cost:
 
 
 
 
Service cost
 
$
1.9

 
$
2.3

Interest cost
 
3.2

 
3.4

Expected return on plan assets
 
(3.5
)
 
(4.2
)
Amortization of actuarial loss, net
 
0.5

 
0.3

Net periodic benefit cost
 
$
2.1

 
$
1.8


(9)    STOCK-BASED COMPENSATION
During the three months ended March 31, 2019 and 2018, we recognized $6.7 million and $8.4 million, respectively, in stock-based compensation expense which was allocated between costs of goods sold and selling, general and administrative expenses on the condensed consolidated statements of operations. We recognized tax benefits of $1.3 million and $1.5 million for the three months ended March 31, 2019 and 2018, respectively. Forfeitures are recorded in the period they occur.

14

Table of Contents
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions, unless otherwise noted)


2019 Activity
In February 2019, we granted non-qualified service-based stock options, restricted stock units and performance share units to certain employees and directors. All awards were granted under the Company's Amended and Restated 2014 Incentive Award Plan. The performance share units are subject to certain performance and market conditions, in addition to the service-based vesting conditions. A summary of award activity by type for the three months ended March 31, 2019 is presented below.
Stock Options
 
Awards/Units (in millions)
 
Weighted-
Average
Exercise
Price
 
Aggregate
Intrinsic
Value
 (in millions)
 
Weighted
Average
Remaining
Contractual
Life (years)
Outstanding at January 1, 2019
 
7.2

 
$
19.32

 
 
 
 
Granted
 
0.8

 
27.01

 
 
 
 
Exercised
 
(1.2
)
 
10.04

 
 
 
 
Forfeited
 
(0.1
)
 
28.52

 
 
 
 
Outstanding at March 31, 2019
 
6.7

 
$
21.64

 
 
 
 
Vested and expected to vest at March 31, 2019
 
6.7

 
$
21.64

 
$
38.9

 
6.08
Exercisable at March 31, 2019
 
5.2

 
$
19.72

 
$
38.9

 
5.17

Cash received by the Company upon exercise of options for the three months ended March 31, 2019 was $11.4 million. Excess tax benefits on these exercises were $3.7 million.
At March 31, 2019, there is $7.6 million of unrecognized expense relating to unvested stock options that is expected to be amortized over a weighted average period of 1.7 years.
Restricted Stock Awards and Restricted Stock Units
 
Awards
(millions)
 
Weighted-Average
Fair Value
Outstanding at January 1, 2019
 
1.6

 
$
29.12

Granted
 
0.6

 
27.01

Vested
 
(0.6
)
 
27.99

Forfeited
 

 
26.89

Outstanding at March 31, 2019
 
1.6

 
$
28.76


Tax shortfall expenses on the vesting of restricted stock and restricted stock units during the three months ended March 31, 2019 was $0.1 million.
At March 31, 2019, there is $29.5 million of unamortized expense relating to unvested restricted stock and restricted stock units that is expected to be amortized over a weighted average period of 1.7 years.
Performance Stock Awards and Performance Share Units
 
Awards
(millions)
 
Weighted-Average
Fair Value
Outstanding at January 1, 2019
 
0.8

 
$
31.82

Granted
 
0.3

 
29.28

Vested
 

 

Forfeited
 
(0.3
)
 
25.66

Outstanding at March 31, 2019
 
0.8

 
$
33.47

At March 31, 2019, there is $16.5 million of unamortized expense relating to unvested performance stock awards and performance share units that is expected to be amortized over a weighted average period of 2.2 years. The forfeitures include performance stock awards and performance share units that did not meet the performance target required for vesting.

15

Table of Contents
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions, unless otherwise noted)


(10)    OTHER INCOME, NET
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Foreign exchange losses, net
 
$
2.4

 
$

Other miscellaneous income, net
 
(3.4
)
 
(2.2
)
Total
 
$
(1.0
)
 
$
(2.2
)

(11)    INCOME TAXES
Our effective income tax rates for the three months ended March 31, 2019 and 2018 are as follows:
 
 
Three months ended March 31,
 
 
2019
 
2018
Effective Tax Rate
 
24.3
%
 
14.3
%

The higher effective tax rate for the three months ended March 31, 2019 was primarily due to the unfavorable impact of net currency exchange losses in 2019 and the one-time favorable impact related to the reduction of the U.S. Tax Cuts and Jobs Act tax charge which lowered the effective tax rate in 2018. These adjustments were partially offset by an increase in net excess tax benefits related to stock-based compensation of $3.6 million compared with $2.4 million for the three months ended March 31, 2019 and 2018, respectively.
The effective tax rate for the three months ended March 31, 2019 differs from the U.S. Federal statutory rate due to various items that impacted the effective rate both favorably and unfavorably. We recorded the unfavorable impact of pre-tax losses attributable to jurisdictions where a tax benefit is not expected to be realized, net currency exchange losses and the unfavorable impact associated with the loss on assets held for sale. These adjustments were offset by the favorable adjustments for earnings in jurisdictions where the statutory rate is lower than the U.S. Federal statutory rate, and current year net excess tax benefits related to stock-based compensation.
(12)    EARNINGS PER COMMON SHARE
Basic earnings per common share excludes the dilutive impact of potentially dilutive securities and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per common share includes the effect of potential dilution from the hypothetical exercise of outstanding stock options and vesting of restricted shares and performance shares. A reconciliation of our basic and diluted earnings per common share is as follows:
 
 
Three Months Ended March 31,
(In millions, except per share data)
 
2019
 
2018
Net income to common shareholders
 
$
43.4

 
$
69.9

Basic weighted average shares outstanding
 
234.1

 
240.9

Diluted weighted average shares outstanding
 
236.6

 
245.8

Earnings per common share:
 
 
 
 
Basic earnings per share
 
$
0.19

 
$
0.29

Diluted earnings per share
 
$
0.18

 
$
0.28

The number of anti-dilutive shares that have been excluded in the computation of diluted earnings per share for the three months ended March 31, 2019 and 2018 were 2.9 million and 2.5 million, respectively.

16


(13)    ACCOUNTS AND NOTES RECEIVABLE, NET
 
 
March 31, 2019
 
December 31, 2018
Accounts receivable - trade, net (1)
 
$
809.9

 
$
739.9

Notes receivable
 
26.2

 
36.1

Other
 
84.4

 
84.8

Total
 
$
920.5

 
$
860.8


(1) Allowance for doubtful accounts was $13.9 million and $15.4 million at March 31, 2019 and December 31, 2018, respectively.
Bad debt expense of $1.0 million and $0.2 million was included within selling, general and administrative expenses for the three months ended March 31, 2019 and March 31, 2018.
(14)    INVENTORIES
 
 
March 31, 2019
 
December 31, 2018
Finished products
 
$
349.3

 
$
334.0

Semi-finished products
 
110.0

 
108.0

Raw materials
 
146.4

 
149.9

Stores and supplies
 
21.1

 
21.1

Total
 
$
626.8

 
$
613.0


(15) PROPERTY, PLANT AND EQUIPMENT, NET
Depreciation expense amounted to $45.4 million and $46.4 million for the three months ended March 31, 2019 and March 31, 2018, respectively.
 
 
March 31, 2019
 
December 31, 2018
Property, plant and equipment
 
$
2,224.8

 
$
2,218.8

Accumulated depreciation
 
(950.4
)
 
(920.6
)
Property, plant, and equipment, net
 
$
1,274.4

 
$
1,298.2


(16)    BORROWINGS
Borrowings are summarized as follows:
 
 
March 31, 2019
 
December 31, 2018
2024 Dollar Term Loans
 
$
2,405.7

 
$
2,411.8

2024 Dollar Senior Notes
 
500.0

 
500.0

2024 Euro Senior Notes
 
376.9

 
383.3

2025 Euro Senior Notes
 
506.3

 
514.9

Short-term and other borrowings
 
111.4

 
103.8

Unamortized original issue discount
 
(12.1
)
 
(12.6
)
Unamortized deferred financing costs
 
(35.7
)
 
(37.2
)

 
$
3,852.5

 
$
3,864.0

Less:
 

 

Short-term borrowings
 
$
19.2

 
$
17.9

Current portion of long-term borrowings
 
24.3

 
24.3

Long-term debt
 
$
3,809.0

 
$
3,821.8



17

Table of Contents
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions, unless otherwise noted)


Senior Secured Credit Facilities, as amended
On December 15, 2016, Axalta Coating Systems Dutch B B.V. (“Dutch B B.V.”) and its indirect 100% owned subsidiary, Axalta Coating Systems U.S. Holdings Inc. (“Axalta US Holdings”) executed the fourth amendment (the "Fourth Amendment") to the credit agreement (the “Credit Agreement”) governing our Senior Secured Credit Facilities (as defined below). The Fourth Amendment (i) converted all of the outstanding U.S. Dollar term loans ($1,775.3 million) into a new tranche of term loans issued at par with principal of $1,545.0 million (the "2023 Dollar Term Loans"), (ii) converted all of the outstanding Euro term loans (199.0 million) into a new tranche of term loans issued at par with principal of 400.0 million (the "2023 Euro Term Loans" and, together with the 2023 Dollar Term Loans, the "2023 Term Loans").
On June 1, 2017, Dutch B B.V. and Axalta US Holdings executed the fifth amendment to the Credit Agreement (the "Fifth Amendment"). The Fifth Amendment converted all of the outstanding 2023 Dollar Term Loans ($1,541.1 million) into a new upsized tranche of term loans with principal of $2,000.0 million (the "2024 Dollar Term Loans"). The 2024 Dollar Term Loans were issued at 99.875% of par, or a $2.5 million discount.
On April 11, 2018, Dutch B B.V. and Axalta US Holdings executed the sixth amendment to the Credit Agreement (the "Sixth Amendment"). The Sixth Amendment repriced the 2024 Dollar Term Loans and increased the aggregate principal balance by $475.0 million to $2,430.0 million. The increased principal balance of the 2024 Dollar Term Loans under the Sixth Amendment was issued at 99.750% of par or a $6.0 million discount. Proceeds from the Sixth Amendment, along with cash on the balance sheet, were used to extinguish the existing 2023 Euro Term Loans. The 2024 Dollar Term Loans together with the Revolving Credit Facility, as defined herein, are referred to as the "Senior Secured Credit Facilities."
On October 31, 2018, Dutch B B.V. and Axalta US Holdings, the Company, and certain other subsidiaries of the Company as guarantors entered into the seventh amendment to the Credit Agreement (the "Seventh Amendment"). The Seventh Amendment amended the Credit Agreement to, among other things, (i) allow for the Company and certain wholly owned subsidiaries of the Company to be added as guarantors under the Credit Agreement, (ii) provide that (A) the covenants in the Credit Agreement generally apply to the Company and its restricted subsidiaries and (B) upon election at any time thereafter, a successor holdings guarantor may be designated and, upon the effectiveness of the guarantee of such successor parent guarantor, the covenants in the Credit Agreement will generally apply to such successor holdings guarantor and its restricted subsidiaries, (iii) otherwise amend the Credit Agreement in order to effect certain corporate transactions as part of a potential internal reorganization of certain of the Company's subsidiaries and certain potential future reorganizations involving the Company and (iv) update guarantee limitations for certain of the guarantors.
Interest was and is payable quarterly on both the 2023 Term Loans and 2024 Dollar Term Loans.
The 2024 Dollar Term Loans are subject to a floor of zero plus an applicable rate of 1.75% per annum for Eurocurrency Rate Loans as defined in the Credit Agreement and 0.75% per annum for Base Rate Loans as defined in the Credit Agreement.
Prior to the Sixth Amendment, interest on the 2024 Dollar Term Loans was subject to a floor of zero, plus an applicable rate. The applicable rate for such 2024 Dollar Term Loans was 2.00% per annum for Eurocurrency Rate Loans as defined in the Credit Agreement and 1.00% per annum for Base Rate Loans as defined in the Credit Agreement.
Prior to the Fifth Amendment, interest on the 2023 Dollar Term Loans was subject to a floor of 0.75%, plus an applicable rate. The applicable rate for such 2023 Dollar Term Loans was 2.50% per annum for Eurocurrency Rate Loans as defined in the Credit Agreement and 1.50% per annum for Base Rate Loans as defined in the Credit Agreement. The 2023 Euro Term Loans were also subject to a floor of 0.75%, plus an applicable rate of 2.25% per annum for Eurocurrency Rate Loans. The 2023 Euro Term Loans may not be Base Rate Loans.
Any indebtedness under the Senior Secured Credit Facilities may be voluntarily prepaid in whole or in part, in minimum amounts, subject to the provisions set forth in the Credit Agreement. Such indebtedness is subject to mandatory prepayments amounting to the proceeds of asset sales over $75.0 million annually, proceeds from certain debt issuances not otherwise permitted under the Credit Agreement and 50% (subject to a step-down to 25.0% or 0% if the First Lien Leverage Ratio falls below 4.25:1.00 or 3.50:1.00, respectively) of Excess Cash Flow.
The Senior Secured Credit Facilities are secured by substantially all assets of the Company and the other guarantors. The 2024 Dollar Term Loans mature on June 1, 2024. Principal is paid quarterly based on 1% per annum of the original principal amount outstanding on the most recent amendment date with the unpaid balance due at maturity.

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Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions, unless otherwise noted)


We are subject to customary negative covenants in addition to the First Lien Leverage Ratio financial covenant for purposes of determining any Excess Cash Flow mandatory payment. Further, the Senior Secured Credit Facilities, among other things, include customary restrictions (subject to certain exceptions) on the Company's ability to incur certain indebtedness, grant certain liens, make certain investments, declare or pay certain dividends, or repurchase shares of the Company's common stock. As of March 31, 2019, the Company is in compliance with all covenants under the Senior Secured Credit Facilities.
Revolving Credit Facility
On August 1, 2016 (the "Third Amendment Effective Date"), Dutch B B.V. and Axalta US Holdings executed the third amendment to the Credit Agreement (the "Third Amendment"). The Third Amendment impacted the revolving credit facility under the Senior Secured Credit Facilities (the "Revolving Credit Facility") by (i) extending the maturity of the Revolving Credit Facility to five years from the Third Amendment Effective Date, or August 1, 2021, provided that such date will be accelerated to the date that is 91 days prior to the maturity of the term loans borrowed under the Credit Agreement if the maturity of such term loans precedes the maturity of the Revolving Credit Facility, (ii) decreasing the applicable interest margins, and (iii) amending the financial covenant applicable to the Revolving Credit Facility to be applicable only when greater than 30% (previously 25%) of the Revolving Credit Facility (including letters of credit not cash collateralized to at least 103%) is outstanding at the end of the fiscal quarter. If such conditions are met, the First Lien Net Leverage Ratio (as defined by the Credit Agreement) at the end of the quarter is required to be greater than 5.50:1.00. At March 31, 2019, the financial covenant is not applicable as there were no borrowings.
Under the Third Amendment, interest on any outstanding borrowings under the Revolving Credit Facility is subject to a floor of zero for Adjusted Eurocurrency Rate Loans (as defined in the Credit Agreement) plus an applicable rate of 2.75% (previously 3.50%) subject to an additional step-down to 2.50% or 2.25%, if the First Lien Net Leverage Ratio falls below 3.00:1.00 or 2.50:1.00, respectively. For Base Rate Loans, the interest is subject to a floor of the greater of the federal funds rate plus 0.50%, the Prime Lending Rate or an Adjusted Eurocurrency Rate plus 1%, plus an applicable rate of 1.75% (previously 2.50%), subject to an additional step-down to 1.50% or 1.25%, if the First Lien Net Leverage Ratio falls below 3.00:1.00 and 2.50:1.00, respectively.
Under circumstances described in the Credit Agreement, we may increase available revolving or term facility borrowings by up to $700.0 million plus an additional amount subject to the Company not exceeding a maximum first lien leverage ratio described in the Credit Agreement.
There have been no borrowings on the Revolving Credit Facility since the issuance of the Senior Secured Credit Facilities. At March 31, 2019 and December 31, 2018, letters of credit issued under the Revolving Credit Facility totaled $43.9 million and $44.8 million, respectively, which reduced the availability under the Revolving Credit Facility. Availability under the Revolving Credit Facility was $356.1 million and $355.2 million at March 31, 2019 and December 31, 2018, respectively.
Significant Terms of the Senior Notes
On August 16, 2016, Axalta Coating Systems, LLC (the "U.S. Issuer") issued $500.0 million in aggregate principal amount of 4.875% senior unsecured notes (the “2024 Dollar Senior Notes”) and 335.0 million in aggregate principal amount of 4.250% senior unsecured notes (the “2024 Euro Senior Notes”), each due August 2024 (collectively the “2024 Senior Notes”).
On September 27, 2016, Dutch B B.V. (the "Dutch Issuer" and together with the U.S. Issuer, the "Issuers"), issued 450.0 million in aggregate principal amount of 3.750% Euro Senior Unsecured Notes due January 2025 (the “2025 Euro Senior Notes” and together with the 2024 Senior Notes, the "Senior Notes").
The indentures governing the Senior Notes contain covenants that restrict the ability of the Issuers and their subsidiaries to, among other things, incur additional debt, make certain payments including payment of dividends or repurchase equity interest of the Issuers, make loans or acquisitions or capital contributions and certain investments, incur certain liens, sell assets, merge or consolidate or liquidate other entities, and enter into transactions with affiliates.

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Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions, unless otherwise noted)


On October 26, 2018, the U.S. Issuer and the party thereto entered into a seventh supplemental indenture (the “2024 Seventh Supplemental Indenture”) to the 2024 Senior Notes. In addition, on October 26, 2018, the Dutch Issuer and the new guarantors party thereto entered into a seventh supplemental indenture (the “2025 Seventh Supplemental Indenture” and, together with the 2024 Seventh Supplemental Indenture, the “October 2018 Supplemental Indentures”) to the 2025 Euro Senior Notes. The October 2018 Supplemental Indentures permit the Company and its subsidiaries to effect certain corporate transactions as part of a potential internal reorganization of certain of the Company's subsidiaries (the "Proposed Restructuring") and certain potential future reorganizations involving the Company. Each of the October 2018 Supplemental Indentures amended the applicable indenture in order to, among other things, (i) add the Company and certain wholly owned subsidiaries of the Company as guarantors of the applicable Senior Notes, (ii) provide that (A) the covenants of the applicable Indenture generally apply to the Company and its restricted subsidiaries and (B) upon an election by the relevant Issuer at any time thereafter, a successor parent guarantor may be designated and, upon the effectiveness of the guarantee of such successor parent guarantor, the covenants of the applicable Indenture will generally apply to such successor parent guarantor and its restricted subsidiaries, (iii) otherwise amend the applicable Indenture in order to effect the Proposed Restructuring (as defined below) and (iv) update guarantee limitations for certain of the guarantors.
In connection with the October 2018 Supplemental Indentures above, the Company became the parent guarantor of the Senior Notes.
(i) 2024 Dollar Senior Notes
The 2024 Dollar Senior Notes were issued at 99.951% of par, or $2.0 million discount, and are due August 15, 2024. The 2024 Dollar Senior Notes bear interest at 4.875% which is payable semi-annually on February 15 and August 15. We have the option to redeem all or part of the 2024 Dollar Senior Notes at the following redemption prices (expressed as percentages of principal amount) on or after August 15 of the years indicated:
Period
 
2024 Dollar Senior Notes Percentage
2019
 
103.656
%
2020
 
102.438
%
2021
 
101.219
%
2022 and thereafter
 
100.000
%

Notwithstanding the foregoing, at any time and from time to time prior to August 15, 2019, we may at our option redeem in the aggregate up to 40% of the original aggregate principal amount of the 2024 Dollar Senior Notes with the net cash proceeds of one or more Equity Offerings (as defined in the indenture governing the 2024 Dollar Senior Notes) at a redemption price of 104.875% plus accrued and unpaid interest, if any, to the redemption date. At least 50% of the original aggregate principal of the notes must remain outstanding after each such redemption.
Upon the occurrence of certain events constituting a change of control, holders of the 2024 Dollar Senior Notes have the right to require us to repurchase all or any part of the 2024 Dollar Senior Notes at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest, if any, to the repurchase date.
The 2024 Dollar Senior Notes, subject to local law limitations, are jointly and severally guaranteed on a senior unsecured basis by the Company and each of its existing and future direct and indirect subsidiaries that is a borrower under or that guarantees the Senior Secured Credit Facilities. Under certain circumstances, the guarantors may be released from their guarantees without the consent of the holders of the applicable series of notes.
The indebtedness issued through the 2024 Dollar Senior Notes is senior unsecured indebtedness of the U.S. Issuer, is senior in right of payment to all future subordinated indebtedness of the U.S. Issuer and guarantors and is equal in right of payment to all existing and future senior indebtedness of the U.S. Issuer and guarantors. The 2024 Dollar Senior Notes are effectively subordinated to any secured indebtedness of the U.S. Issuer and guarantors (including indebtedness outstanding under the Senior Secured Credit Facilities) to the extent of the value of the assets securing such indebtedness.

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Notes to Condensed Consolidated Financial Statements (Unaudited)
(In millions, unless otherwise noted)


(ii) 2024 Euro Senior Notes
The 2024 Euro Senior Notes were issued at par and are due August 15, 2024. The 2024 Euro Senior Notes bear interest at 4.250% which is payable semi-annually on February 15 and August 15. We have the option to redeem all or part of the 2024 Euro Senior Notes at the following redemption prices (expressed as percentages of principal amount) on or after August 15 of the years indicated:
Period
 
2024 Euro Senior Notes Percentage
2019
 
103.188
%
2020
 
102.125
%
2021
 
101.063
%
2022 and thereafter
 
100.000
%

Notwithstanding the foregoing, at any time and from time to time prior to August 15, 2019, we may at our option redeem in the aggregate up to 40% of the original aggregate principal amount of the 2024 Euro Senior Notes with the net cash proceeds of one or more Equity Offerings (as defined in the indenture governing the 2024 Euro Senior Notes) at a redemption price of 104.250% plus accrued and unpaid interest, if any, to the redemption date. At least 50% of the original aggregate principal of the notes must remain outstanding after each such redemption.
Upon the occurrence of certain events constituting a change of control, holders of the 2024 Euro Senior Notes have the right to require us to repurchase all or any part of the 2024 Euro Senior Notes at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest, if any, to the repurchase date.
The 2024 Euro Senior Notes, subject to local law limitations, are jointly and severally guaranteed on a senior unsecured basis by the Company and each of its existing and future direct and indirect subsidiaries that is a borrower under or that guarantees the Senior Secured Credit Facilities. Under certain circumstances, the guarantors may be released from their guarantees without the consent of the holders of the applicable series of notes.
The indebtedness issued through the 2024 Euro Senior Notes is senior unsecured indebtedness of the U.S. Issuer, is senior in right of payment to all future subordinated indebtedness of the U.S. Issuer and guarantors and is equal in right of payment to all existing and future senior indebtedness of the U.S. Issuer and guarantors. The 2024 Euro Senior Notes are effectively subordinated to any secured indebtedness of the U.S. Issuer and guarantors (including indebtedness outstanding under the Senior Secured Credit Facilities) to the extent of the value of the assets securing such indebtedness.
(iii) 2025 Euro Senior Notes
The 2025 Euro Senior Notes were issued at par and are due January 15, 2025. The 2025 Euro Senior Notes bear interest at 3.750% which is payable semi-annually on January 15 and July 15. We have the option to redeem all or part of the 2025 Euro Senior Notes at the following redemption prices (expressed as percentages of principal amount) on or after January 15 of the years indicated:
Period
 
2025 Euro Senior Notes Percentage
2019