# Dear Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NYSE_AXTA_2019/NYSE_AXTA_2019.mmd` · pages 1-7_

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Dear Shareholders,

2019 was a very strong year for Axalta. All of our businesses continued to prosper, despite ongoing headwinds from inflation, foreign exchange, and uneven macroeconomic conditions.

We continued to operate safely and efficiently in 2019, driving solid financial performance that not only met our target margins, but also exceeded our operating earnings and free cash flow expectations. We improved our balance sheet and net leverage as of December 31, 2019, while returning $105 million to shareholders through stock repurchases. We also successfully increased the average price mix in both our Transportation and Performance Coatings segments to better reflect the value of our products along with the pass-through costs associated with persistent raw material headwinds.

In 2019, Axalta generated \(4.5 billion in net sales, achieved a 5% increase in Adjusted EBIT to \)706 million, saw a 6% rise in Adjusted EPS to \(1.80, and recorded free cash flow of \)475 million, a 31% increase from 2018. Our solid financial performance underscores the resilience of our business model, the breadth and depth of our products and services, and our deep commitment to driving value for shareholders.

## Fast Facts

A leading global supplier to light vehicle OEMs

No. 1 global supplier to the refinish sector

No. 1 global supplier to the heavy-duty truck and bus segments

No. 2 global powder coatings supplier

No. 2 industrial wood coatings supplier in North America

## Financial Snapshot

$4.5 bln in net sales

5% increase in Adjusted EBIT to $706 mln

6% rise in Adjusted EPS to $1.80

Free cash flow of $475 mln, a 31% increase from 2018

![](images/1_0.jpg)

The 2019 Annual Report to Shareholders includes certain non-GAAP financial measures, including adjusted EBIT. 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 2019 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 EBIT means earnings before interest and taxes, 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 may of the forward looking statements contained herein, whether as a result of new information, future events or otherwise.

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Throughout 2019, we continued to execute on the second phase of Axalta Way, a multi-year cost savings initiative designed to leverage innovation to create value for our customers, generate significant free cash flow and achieve the highest return possible on our asset base. Our previously-announced goal of $200 million in savings by the end of 2021 is on track to be realized. In order to achieve phase two objectives in 2019, we invested in new systems to improve our internal processes, streamline operations and enable greater productivity and profitability throughout our global organization. Capitalizing on the growth and efficiencies achieved in 2019, we are confident that we can deliver more value in the future.

We are proud to maintain our position as a market leader, having retained the No. 1 or 2 share position in the majority of the markets we serve. Specifically, we have upheld the leading position in both the refinish end-market and heavy-duty truck and bus segments, and the No. 2 position in the light vehicle original equipment manufacturer (OEM) space, the global powder coatings market, and the North American industrial wood coatings market.

In mid-2019, we announced that our Board of Directors initiated a comprehensive review of strategic alternatives to maximize shareholder value. At this time, the strategic review is on-going and our Board and Management are keenly focused on the process to ensure the best result for our Company and our shareholders.

## Safety at Axalta

Safety is a top priority at Axalta. Our safety program is structured on the foundation that every employee is engaged and committed to improving safe operating practices and eliminating injuries. When health and safety incidents do occur, we strive to determine the causes and eliminate the potential for future similar incidents. In 2019, Axalta's injury and illness performance resulted in a 0.27 OSHA Recordable Incident Rate (number of Incidents x 200,000 / total number of hours worked in a year). This was a notable improvement compared to an incident rate of 0.45 in 2017 and 0.38 in 2018, and significantly lower than the U.S. paint and coatings industry average of 1.9. Honing in on the importance of this, we reinforced our commitment to employee safety by introducing a new global safety campaign called "Driving Perfect Performance." Our employees have rallied around this slogan, evidenced by our improved safety results year over year.

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## Innovation Drives Growth

Since our entry into the coatings industry over 150 years ago, we have endeavored to remain at the forefront of coatings technology innovation. In 2019, we introduced more than 250 new products that help keep our customers products more durable, sustainable, and looking great.

Key new product introductions in each business segment include:

![](images/3_0.jpg)

## Refinish

We launched a new ultra-high productivity non-sanding primer in Europe, the Middle East and Africa (EMEA) regions, and a new waterborne basecoat performance additive in our Cromax \( ^{®} \)  product suite. These products, which deliver a smoother and superior topcoat appearance, perform well even in challenging climates like low humidity. We also launched our Spies Hecker \( ^{®} \)  2K sealer, which reduces sealer application time by up to 75%.

![](images/3_1.jpg)

## Industrial

New product introductions addressed the prefinished commercial siding market and the successful extension of our Durapon \( ^{®} \)  coil and extrusion product line to the China markets. We also introduced Voltatex \( ^{®} \)  4224, a high-thermal conductivity impregnating resin, which reduces the operating temperature of the motor by up to 30° Celsius, enabling higher motor efficiency and smaller, lighter electrical devices.

![](images/3_2.jpg)

## Transportation,

We expanded the introduction of our Lumeera 1K and 2K products globally. These high-performance clearcoats leverage our latest resin technology for improved appearance and enhanced scratch resistance, while reducing cost for our OEM customers. We also continued to focus on Harmonized Coating Technologies \( ^{™} \)  and completed the first commercial launch of a direct-to-plastic low-bake basecoat/clearcoat system, which significantly reduces overall cycle times for customers.

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## Focused on Growth in Emerging Markets

In 2019, we continued to expand our presence in Asia Pacific, the Middle East and Africa. China remains a large opportunity for Axalta and was once again a key growth focus geography in 2019. Last year brought many important developments in China, including the launch of Axalta's Refinish Standox \( ^{®} \)  Xtreme System, a fast-cure and patented technology that offers faster drying times and lower energy consumption – up to 70% – for our customers.

We also made two acquisitions in emerging markets in 2019. We acquired Capital Paints in the United Arab Emirates as well as a powder manufacturing facility in Turkey. Both transactions helped us to secure a stronger presence in countries where we see long-term growth opportunities.

![](images/4_0.jpg)

Standox \( ^{®} \)  Xtreme System

![](images/4_1.jpg)

Capital Paints Acquisition

## Driving New Operational Efficiencies for Greater Productivity

Axalta continued its drive toward organizational optimization in 2019. We lowered our cost structure and increased efficiencies on a global scale. In addition to executing on our Axalta Way objectives for 2019, we also launched a multi-year transformational project designed to align our IT systems around the world. We anticipate this project will result in a more agile, efficient and competitive coatings company.

## Capital Allocation to Drive Shareholder Value

Axalta generated strong free cash flow in 2019, which is being used, in part, to invest in our long-term strategic growth through mergers and acquisitions as well as share repurchases. Last year, we repurchased $105 million of our common stock. For the first time in our operating history, we ended the year with more than $1 billion of total cash on our balance sheet. We plan to continue to strategically deploy capital to enable growth, while creating additional opportunities for customers and maximizing value for shareholders.

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## Commitment to Sustainability and our Communities

In 2019, there was an uptick in demand for products that enhance environmental sustainability while maintaining reliability. As we continue to enhance our sustainability efforts, we are focused particularly on environmental protection, social performance, and good governance. We have collaborated with our customers, suppliers, and industry groups to advance responsible sourcing practices throughout the supply chain, with a particular focus on addressing human rights concerns. We remain engaged and committed to finding innovative ways to help our customers save energy, reduce waste, and increase productivity through their operations, as we strive to do the same through ours.

We leveraged global partnerships with organizations that promote environmental stewardship, as well as science, technology, engineering and math (STEM) education in 2019 through our Axalta Bright Futures program. In collaboration with our partners, our environmental protection efforts restored wetlands and wildlife habitats across North America, planted trees in China and provided clean water infrastructure in India, to name a few highlights. We also celebrated the fifth year of our Axalta All-Pro Teachers program in the Philadelphia region, honoring middle and high school STEM teachers for their outstanding dedication to students, schools, and communities.

![](images/5_0.jpg)

Bright Futures

![](images/5_1.jpg)

Mother River Protection program in China

![](images/5_2.jpg)

Axalta All-Pro Teachers program in Philadelphia

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## Recognition for our Achievements

Axalta received several awards in 2019, solidifying our position as an industry leader as well as our commitment to quality, safety, and sustainability. For example:

Axalta was named a Top 50 Best Environmental, Social and Corporate Governance Company by Investor's Business Daily.

Our VoltaTex \( ^{®} \)  4224 product won the R&D 100 Award. This prestigious award celebrates the top 100 revolutionary technologies of the past year and highlights leading products, technologies, and services.

Our Acquire \( ^{®} \)  Quantum EFX and Voltaprem 5000 products each won an Edison Award for revolutionary innovations demonstrating excellence in technological innovation, new product and service development, marketing, and human-centered design.

## Looking to the Future

As we enter a new decade, Axalta is well positioned to drive profitable growth and increase shareholder value by continuing to execute our strategy, which is focused on:

■ Driving organic and inorganic growth

■ Innovating for growth and introducing new products that are durable, sustainable, beautiful, and add value for our customers

■ Capturing price and driving margins

■ Strengthening our business through disciplined and strategic capital allocation, including internal productivity investments, incremental acquisitions, and opportunistic share repurchases.

Axalta has made great progress in recent years despite challenging macro headwinds, and our commitment to innovation and creating value remains as strong as ever. We are excited about our strategic plan, and we look forward to building on our progress. Our valued relationship with our shareholders will be a driving factor as we execute on our strategy.

I am incredibly proud of our achievements in 2019 and am confident that our unified, global team of more than 14,000 people will continue to deliver value for our customers and shareholders.

Robert W. Bryant

Robert W. Bryant