# Dear Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NYSE_AXTA_2017/NYSE_AXTA_2017.mmd` · pages 2-8_

---

Dear Shareholders,

2017 was another exciting year for Axalta. Our passion for coatings and for delivering exceptional products, performance, and service to our customers has made us a major player in the coatings industry and continues to drive our growth. As we enter our sixth year as an independent company, we are confident in our 2018 outlook and expect another strong year.

## 2017 Financial Performance

Overall Financial Performance:

![](images/2_0.jpg)

![](images/2_1.jpg)

The 2017 Annual Report to Shareholders includes certain non-GAAP financial measures, including adjusted EBITDA. These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP. Please refer to the Annual Report on Form 10-K included within the 2017 Annual Report to Shareholders for a reconciliation of the non-GAAP financial measures included herein to the most directly comparable financial measures prepared in accordance with GAAP. Adjusted EBITDA means earnings, before interest, taxes, depreciation, and amortization adjusted for non-cash, non-recurring or other items.

All of these statements are based on management's expectations as well as estimates and assumptions prepared by management that, although they believe to be reasonable, are inherently uncertain. These statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of Axalta's control that may cause its business, industry, strategy, financing activities or actual results to differ materially. Axalta undertakes 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.

In 2017, Axalta reported net sales of \(4,353 million, an increase of 7.0 percent versus 2016, adjusted EBITDA of \)885 million, and cash from operations of \(540 million. Each of these key financial metrics represents overall solid performance from Axalta in 2017 and demonstrates continued across-the-board strength of our business segments.

Axalta's Performance Coatings segment, which includes Refinish and Industrial, had a strong year with overall sales growth of 11.2 percent, excluding foreign currency impacts. Industrial grew 43.0 percent (excluding foreign currency impacts) driven by significant contributions from acquisitions of 36.4 percent and strong organic growth in the high single digits. The strength in Industrial more than offset a slight decline in our Refinish business, largely attributable to certain distributor working capital adjustments during part of the year in North America which we do not expect to recur going forward.

Our Transportation Coatings segment, which serves both Light Vehicle and Commercial Vehicle original equipment manufacturers (OEMs), had positive organic volume growth including high single digit growth in Commercial Vehicle resulting from strength in the North American heavy-duty truck market.

Although Axalta had much success in 2017, we saw higher overall raw material costs globally during the year. We plan to implement pricing increases both to offset higher costs (where applicable) and to pay for the continuous product innovations we develop and provide to our customers. We are also

<--- Page Split --->

addressing higher raw material costs with a focus on our internal processes to increase productivity and to lower our overall cost of doing business.

Axalta completed our regional restructuring to combine Latin America management with North America in 2017 to lower costs, create economies of scale, and improve pricing opportunities with suppliers. More importantly, to better serve our global customers, a single Americas region enables us to leverage our tremendous leadership, resources, and experience.

## Mergers & Acquisitions

In 2017, we made terrific progress executing on our acquisition strategy, which is a key element of our overall cash deployment plan. We added eight businesses to Axalta through acquisitions last year and believe each will be an important contributor to our performance in 2018.

Our acquisition of the Ellis Paint Company, a prominent manufacturer of industrial and automotive refinish paint in North America, helped expand our portfolio of innovative and sustainable coatings in both the Industrial and Refinish segments.

Axalta acquired Century Industrial Coatings, a leading North American manufacturer of high performance industrial coatings for structural steel, oil and gas, rail cars, and other OEM applications. As a manufacturer of coatings that are among the leaders in performance and environmental compliance, Century products complement our existing durable and sustainable coatings.

We also completed the acquisition of our North American Industrial Wood Coatings business, which provided us an entry into the fast-growing wood coatings space and a market we had long admired. Axalta can now serve customers in the OEM and aftermarket Industrial Wood markets, including building products, cabinets, flooring, and furniture in North America.

Axalta also acquired the Spencer Coatings Group, the largest independent industrial coatings manufacturer in the U.K. Spencer provides high performance industrial coatings for the heavy-duty equipment, general industrial, oil and gas, and glass coatings segments. Its acquisition expands our global industrial reach by adding new products and technology expertise to our portfolio.

Our acquisition of Plascoat Systems Limited in EMEA is a great example of bringing technology expertise into Axalta. As a leading supplier of thermoplastic powder coatings, Plascoat augments our existing business and provides additional innovative products and solutions for customers. Plascoat pioneered the development, manufacturing, and application of thermoplastic polyolefin coatings, enabling our customer base access to additional tough and highly durable plastic coatings used in a wide variety of outdoor applications.

We also added three Refinish distributors through acquisitions in EMEA: CH Coatings, SPS, and Fargmix.

## Technology & Product Launches

At its core, Axalta is a technology company and we remain committed to investing in R&D. The continued development of new products allows us to better meet our customers' current and future business needs. In 2017, we successfully introduced more than 250 products across our businesses.

In Industrial, we expanded the Alesta \( ^{®} \)  powder coatings line, with products such as the ICONICA collection of Alesta Super Durable architectural powder coatings for metal substrates. We also added to our Tufcote \( ^{®} \)  and Nap-Gard \( ^{®} \)  product families. Other key new Industrial products include FlexBase \( ^{®} \)  7700

<--- Page Split --->

PB, a premium quality polyurethane product line that is designed to meet the custom-color and impact-resistant requirements of the sports equipment market in North America; Voltalube \( ^{™} \) , a new line of lubricants that is designed to ensure excellent wire winding in electric motors, generators and transformers, and reduce the risk of wire breaks during the production process; and Durapon 70TM HS-PVDF, a spray technology for the aluminum extrusion industry.

Refinish launched our Syrox \( ^{®} \)  product line in China, following its initial launch in EMEA in 2016. We also added Cromax \( ^{®} \)  EZ to our well-established Cromax line of waterborne and low-Volatile Organic Company (VOC) solvent basecoats. Cromax EZ is a low-VOC waterborne basecoat that is designed to spray wet-on-dry, much like traditional solvent-based paints.

Commercial Vehicle launched Imron \( ^{®} \)  Elite 8831S low-VOC Productive Clearcoat. 8831S is a two-component, low HAPs polyurethane clearcoat recommended for customers with force-dry capabilities, and is designed for use on panel repairs and overall applications.

In addition to new product launches, we introduced our fifth-generation spectrophotometer, the Acquire \( ^{™} \)  Quantum EFX (mini), into our color retrieval system for automotive repair and refinish shops. The EFX mini incorporates innovative technology in a lighter, faster, and more accurate unit that is designed to improve shop productivity and efficiency.

## New Facilities

In 2017, we made significant investments in building, repurposing, and updating our facilities around the world. From technology centers, to customer training facilities, we aim to better serve our customers by constantly improving and localizing our resources.

We inaugurated the Asia-Pacific Technology Center in Shanghai and the India Technical Center in Savli, and expanded our Americas Technology Center in Detroit. The objective of these modern facilities is to bring tailored solutions to our customers in their local markets. Staffed with expert technologists who develop unique coating formulations that meet local market demands, our facilities are an investment in our customers' future, as much as our own. These facilities allow us to better satisfy customer-specific, local application and performance needs, and we trust that they will continue to help us win business and maintain our reputation as an industry leader.

We also opened various customer training centers that we expect will contribute to our customers' long-term success. Within each of our training centers, the courses and amenities have been developed with our customers in mind, to ensure that the refinishers who train at Axalta receive the best possible experience and return to their body shops with greater confidence and a stronger skill set.

The Refinish Academy Nordic is an ultra-modern facility that provides training programs to body shop, repair, and refinish technicians who seek to hone their application skills using Axalta's global refinish brands Spies Hecker \( ^{®} \) , Standox \( ^{®} \) , and Cromax \( ^{®} \) . The Dubai Automotive Refinish Training Centre is the first of its kind in the industry to offer training to refinish and repair shops in its region. It will provide continuous support and development to vehicle repair specialists with the goal of enhancing their refinishing service capabilities and optimizing the use of Axalta technologies in the Middle-East and North Africa.

The grand opening of our Customer Experience Center (CEC) in Concord, North Carolina on the Hendrick Motorsports campus is another example of our global commitment to putting our customers first and revolutionizing the coatings landscape. The 36,000-square foot training and conference complex is

<--- Page Split --->

designed to serve Axalta's Performance Coatings and Transportation Coatings customers with two world-class paint application centers, a collaborative mixing lab, and an exhibit lobby that showcases vehicles and products finished with our beautiful coatings. We marked the CEC grand opening with a celebration that was attended by special guests including government officials, NASCAR champions, and customers. At Axalta, we appreciate occasions where we can demonstrate our passion for our products, celebrate the industry, and collaborate with our customers and communities.

Our partnership extends from the CEC to the racetrack, and in 2017 Axalta significantly broadened our racing brand. We expanded on the strong relationship we have with our premium Spies Hecker waterborne paint customer, Mercedes AMG, making it more visible in the Formula One arena. In our first year of sponsorship of Mercedes-AMG Petronas Motorsports, we saw our team win 12 times, secure 15 pole positions, and finish with 1-2 podium finishes on four different occasions. Our team won its 4 \( ^{th} \)  consecutive Constructor's Championship and driver Lewis Hamilton clinched his 4 \( ^{th} \)  World Drivers' Championship.

And, in our 26 \( ^{th} \)  year as the sole supplier to Hendrick Auto Dealerships, Collision Repair, and Motorsports, we celebrated the career of 15-time NASCAR "Most Popular Driver" and Axalta-sponsored driver Dale Earnhardt Jr., who retired at the end of the 2017 season. We also sponsored the #9 JR Motorsports NASCAR Xfinity Series Team in 2017 and saw driver William Byron win twice in an Axalta-sponsored car and win the NASCAR Xfinity Series Championship. Also racing in an Axalta-sponsored vehicle, Kyle Busch Motorsports' driver Christopher Bell won 5 times, notched 15 Top 5 finishes, and won the NASCAR Camping World Truck Championship.

## Corporate Social Responsibility and Sustainability

Around the world in 2017, we had many opportunities to collaborate with customers and partners in executing programs that improve our communities. Axalta's global Corporate Social Responsibility (CSR) initiatives focus on Science, Technology, Engineering, Math (STEM) education, and sustainability and the environment.

Our annual CSR Summit in our global hometown of Philadelphia has become one of the pinnacles of our CSR program. This year we expanded the CSR Summit to include additional partner organizations and customers that want to work collectively to make their programs more effective. We received enthusiastic feedback about the event, which included fruitful discussions about best practices for sustainability, employee volunteer programs, and creating STEM education curriculum for students.

We also hosted a training event in collaboration with China's Tianjin Vehicle Maintenance Administrative Office to offer advanced, technical education on waterborne coating technology to more than 60 Tianjin automotive service companies. Our participation supported the "Tianjin Blue Sky project", a local, government-led, sustainable auto repair program. Technicians received training on the benefits of waterborne coatings and learned to improve their application skills using Cromax \( ^{®} \)  Pro waterborne refinish products, one of Axalta's premium refinish brands, which is highly regarded for its sustainable attributes. Axalta also joined with the China Green Foundation (CGF) in 2017 to sponsor the Beibayao Wetland Protection Project. Our sponsorship will help to improve management of the Beibayao wetlands by developing new management models, conducting scientific monitoring, as well as training wetland professionals.

Sustainability and the environment are central to what we do as a coatings company; therefore, we understand the importance of, and will continue to contribute to, the care and protection of earth's

<--- Page Split --->

valuable resources. Our partnership with Ducks Unlimited Inc. (DU) and Ducks Unlimited de Mexico (DUMAC) benefited wetland conservation projects throughout the U.S. and Mexico. Our projects enhance several public use areas along the Delaware Bay coastline, the Great Lakes, Gulf Coast, and across Mexico helping to permanently protect thousands of coastal acres that are used for recreation and waterfowl migration. We continue to expand our partnership with DU and, in 2018, we will begin projects in collaboration with DU Canada.

Our Axalta All-Pro Teachers program encapsulates our vision for building future generations of STEM-focused workers, including scientists, mathematicians, and engineers. In collaboration with the World Champion Philadelphia Eagles, our annual All-Pro Teachers program honors outstanding STEM-educators that are local to the Philadelphia region, for their ongoing contributions to their students, school, and community. This was the third year of the program and we continue to receive hundreds of nominations for exceptional teachers.

We celebrated the victory of two student teams at the Bridgestone World Solar Challenge 2017, a competition of experimental solar cars in Australia. With help from Axalta, the Bochum SolarCar Team and The Punch Powertrain Solar Team both developed effective and reliable solar vehicles that successfully completed a 3,021-kilometer race from Darwin to Adelaide. Axalta supported both teams by providing them with coatings as well as technical assistance and expertise.

We also support STEM-education initiatives through our own university relations program, which includes partnerships with top universities around the world. Our InventU Internship program matches students' academic and career interests with relevant roles at Axalta and supports our vision for cultivating future generations of talent in our industry. In 2017, more than 70 percent of Axalta interns received offers for full-time employment within our company.

## Summary

As I reflect on the past year, I am proud of all that we have accomplished. We have a solid infrastructure, good processes, and strong corporate governance. Our Board welcomed Elizabeth Lempres, retired Senior Partner at McKinsey & Company, as a director in 2017 and she brings to us a wealth of experience working with companies all around the world. We are proud to have a strong and diverse set of directors to guide our Company forward.

Axalta's people will continue to help our customers achieve success and drive our growth as a leading coatings company by applying their passion for delivering sustainable, brilliant solutions to the market. We look to 2018 with great confidence, believing that there is much value to unlock and create at Axalta.

We are confident that Axalta will deliver even stronger financial performance in 2018. Our leadership team and more than 13,000 employees are up for the challenge.

Sincerely,

![](images/6_0.jpg)

Charles W. Shaver

Chairman & Chief Executive Officer

<--- Page Split --->

"This Page Intentionally Left Blank"