-
Net sales of $1.0 billion, a 3.1% year-over-year increase before
unfavorable foreign currency translation
-
Adjusted EBITDA of $216.9 million with Adjusted EBITDA margin of 21.7%
versus 20.6% in Q3 2014
-
Free cash flow generation of $122 million with $100 million debt
prepayment made subsequent to quarter end
PHILADELPHIA--(BUSINESS WIRE)--
Axalta Coating Systems Ltd. (NYSE:AXTA) (“Axalta”), a leading global
coatings company, announced its financial results for the third quarter
ended September 30, 2015.
Charles W. Shaver, Axalta’s Chairman and Chief Executive Officer,
commented that “Axalta produced a solid third quarter, including ongoing
volume growth and margin expansion, which enabled us to exceed the
mid-point of our Adjusted EBITDA guidance for the period. This result
was delivered notwithstanding persistent foreign exchange headwinds for
our global businesses, which masked otherwise strong profit growth in
nearly all segments and regions. Although we also faced some challenges
in the quarter from the slowdown in the Chinese economy, including
automotive end-markets, we are encouraged that demand indicators now
show signs of recovery.”
“Regarding our 2015 operating and financial goals, we are pleased with
the progress we have made to date, and we continue to execute our plan
in a disciplined way with the goal of creating shareholder value through
profitable revenue growth, strong cash generation, and effective capital
allocation,” Mr. Shaver continued. “We made good progress on our growth
and productivity initiatives in the third quarter, including our first
realized savings from The Axalta Way program.”
Third Quarter Consolidated Financial Results
Net sales of $1.0 billion for the third quarter of 2015 increased 3.1%
year-over-year excluding unfavorable foreign currency translation, while
declining 9.8% on an as-reported basis. Net sales growth excluding
currency was driven by 2.1% volume increases, indicating continued
underlying strength in our global coatings markets. Higher average
selling prices in the quarter added modestly to net sales, while
unfavorable foreign currency translation reduced net sales by 12.9%
compared to the third quarter last year.
Adjusted EBITDA of $216.9 million for the third quarter compared with
$228.0 million in Q3 2014, while Adjusted EBITDA margins in the quarter
expanded to 21.7% from 20.6% reported last year. Margin improvement was
driven by several factors including increased volumes, improved mix and
pricing, as well as lower costs resulting from our operating improvement
initiatives. These factors were offset by negative foreign currency
translation and incremental investments to support growth of key
businesses.
Performance Coatings Results
Net sales in Performance Coatings of $600.6 million for Q3 2015
represented a 5.1% year-over-year increase excluding foreign currency
translation, and a decrease of 9.5% on an as-reported basis. Net sales
growth drivers included volume growth of 3.4% and higher average selling
prices of 1.7% in the period, more than offset by 14.6% unfavorable
currency translation. Refinish end-market Q3 net sales increased 5.2% on
a constant currency basis (decreased 10.7% as-reported), while our
Industrial end-market posted 4.7% growth excluding the impact of
currency (decreased 6.3% as-reported).
The Performance Coatings segment generated Adjusted EBITDA of $139.0
million in the third quarter, a 6.4% year-over-year decrease. Positive
volume and pricing contributions, coupled with variable cost savings,
were more than offset by negative foreign currency translation and
incremental investments in growth initiatives. Performance Coatings
segment Adjusted EBITDA margin of 23.1% for the third quarter reflected
a 70 basis point increase compared to the corresponding quarter of the
prior year.
Transportation Coatings Results
The Transportation Coatings segment reported net sales of $399.7 million
in the third quarter, largely flat excluding foreign currency
translation, and a decrease of 10.3% on an as-reported basis versus
third quarter 2014. Volume and price combined for 0.2% net sales growth,
offset by 10.5% unfavorable foreign currency translation versus the
prior year. Light Vehicle end-market net sales declined slightly by 0.9%
on a constant currency basis compared to the third quarter of 2014
(decreased 11.3% as-reported). Our Commercial Vehicle end-market
reported net sales growth of 4.0% on a constant currency basis versus
last year (decreased 6.7% as-reported). While North America continued to
experience solid volume growth in both Light Vehicle and Commercial
end-markets, this growth was partially offset by lower demand in regions
of Latin America impacted by an ongoing economic recession, as well as a
slowdown in China vehicle production during the quarter.
The Transportation Coatings segment generated Adjusted EBITDA of $77.9
million, a decrease of 2.0% compared to the third quarter of 2014 with
positive volume, price, and variable cost initiatives more than offset
by unfavorable foreign currency translation and moderate incremental
investments. The Transportation Coatings segment generated an Adjusted
EBITDA margin of 19.5%, an increase of 170 basis points compared to
17.8% in Q3 2014.
Balance Sheet and Cash Flow Highlights
We ended the quarter with cash and cash equivalents of $411.6 million.
Our net debt was $3.1 billion as of September 30, 2015, which resulted
in Net Debt to latest twelve month Adjusted EBITDA of 3.7x, consistent
with our last quarter.
Third quarter operating cash flow was $159 million versus $46 million in
the corresponding quarter of 2014. Free cash flow after capital
expenditures of $37 million totaled $122 million.
“Axalta’s financial progress in the third quarter remained on track with
our goals for the year,” said Robert W. Bryant, Axalta’s Executive Vice
President and Chief Financial Officer. “We continue to drive profitable
volume growth, ongoing margin expansion and solid free cash flow
generation, which enabled us to prepay $100 million on our Term Loan in
October 2015.”
2015 Outlook
We are updating our outlook for the full year 2015, including:
-
Net sales growth of 5-7% in constant currency; down mid-single digits
including currency impacts versus our previous assumption of down low-
to mid-single digits;
-
Adjusted EBITDA of $870-$900 million, with currency translation
headwinds anticipated to drive Adjusted EBITDA to the lower end of the
range; and
-
Other guidance assumptions remain unchanged including normalized
effective tax rate of 27-29%, capital expenditures of approximately
$150 million, and net working capital of 13-15% of net sales,
excluding non-recurring items.
Conference Call Information
As previously announced, Axalta will hold a conference call to discuss
its third quarter 2015 financial results on Wednesday, October 28th, at
8:00 a.m. EDT. The U.S. dial-in phone number for the conference call is
(877) 407-0784 and the international dial-in number is +1
(201) 689-8560. A live webcast of the conference call will also be
available online at http://ir.axaltacs.com.
For those unable to participate in the conference call, a replay will be
available through November 4, 2015. The U.S. replay dial-in phone number
is (877) 870-5176 and the international replay dial-in number is +1
(858) 384-5517. The replay passcode is 13621709.
Cautionary Statement Concerning Forward-Looking Statements
This release may contain certain forward-looking statements regarding
Axalta and its subsidiaries including those relating to our 2015 full
year outlook, net sales growth, Adjusted EBITDA, effective tax rate,
capital expenditures and net working capital. 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.
Non-GAAP Financial Measures
The historical financial information included in this presentation
includes financial information that is not presented in accordance with
generally accepted accounting principles in the United States (“GAAP”),
including constant currency net sales growth, Adjusted EBITDA, free cash
flow, Net Debt and Adjusted Net Income. Management uses these non-GAAP
financial measures in the analysis of our financial and operating
performance because they assist in the evaluation of underlying trends
in our business. Our use of the terms constant currency net sales
growth, Adjusted EBITDA, Net Debt and Adjusted Net Income may differ
from that of others in our industry. Constant currency net sales growth,
Adjusted EBITDA, free cash flow, Net Debt and Adjusted Net Income should
not be considered as alternatives to net sales, net income (loss),
income (loss) before operations or any other performance measures
derived in accordance with GAAP as measures of operating performance or
operating cash flows or as measures of liquidity. Constant currency net
sales growth, Adjusted EBITDA, operating free cash flow, net free cash
flow, Net Debt and Adjusted Net Income have important limitations as
analytical tools and should be considered in conjunction with, and not
as substitutes for, our results as reported under GAAP. This
presentation includes a reconciliation of certain non-GAAP financial
measures with the most directly comparable financial measures calculated
in accordance with GAAP.
About Axalta Coating Systems
Axalta is a global leader in the coatings industry, providing customers
with innovative, colorful, beautiful and sustainable coatings solutions.
From light vehicles, commercial vehicles and refinish applications to
electric motors, building facades and other industrial applications, our
coatings are designed to prevent corrosion, increase productivity and
enhance durability. With more than 150 years of experience in the
coatings industry, the 12,800 people of Axalta continue to find ways to
serve our more than 120,000 customers in 130 countries better every day
with the finest coatings, application systems and technology. For more
information visit axaltacoatingsystems.com
and follow us @axalta on Twitter.
|
|
|
|
|
|
|
|
|
Financial Statement Tables
|
AXALTA COATING SYSTEMS LTD.
|
Condensed Consolidated Statements of Operations (Unaudited)
|
(In millions, except per share data)
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
2015
|
|
|
2014
|
Net sales
|
|
$
|
1,000.3
|
|
$
|
1,108.9
|
|
|
$
|
3,083.6
|
|
$
|
3,282.9
|
Other revenue
|
|
|
4.8
|
|
|
6.9
|
|
|
|
20.1
|
|
|
21.6
|
Total revenue
|
|
|
1,005.1
|
|
|
1,115.8
|
|
|
|
3,103.7
|
|
|
3,304.5
|
Cost of goods sold
|
|
|
628.6
|
|
|
728.1
|
|
|
|
1,958.1
|
|
|
2,174.1
|
Selling, general and administrative expenses
|
|
|
219.2
|
|
|
249.4
|
|
|
|
677.7
|
|
|
746.7
|
Research and development expenses
|
|
|
13.0
|
|
|
13.4
|
|
|
|
38.7
|
|
|
36.8
|
Amortization of acquired intangibles
|
|
|
20.4
|
|
|
20.9
|
|
|
|
60.5
|
|
|
63.3
|
Income from operations
|
|
|
123.9
|
|
|
104.0
|
|
|
|
368.7
|
|
|
283.6
|
Interest expense, net
|
|
|
50.8
|
|
|
52.6
|
|
|
|
150.0
|
|
|
166.5
|
Other expense, net
|
|
|
18.9
|
|
|
62.2
|
|
|
|
111.4
|
|
|
65.1
|
Income (loss) before income taxes
|
|
|
54.2
|
|
|
(10.8
|
)
|
|
|
107.3
|
|
|
52.0
|
Provision for income taxes
|
|
|
17.8
|
|
|
7.5
|
|
|
|
48.5
|
|
|
18.2
|
Net income (loss)
|
|
|
36.4
|
|
|
(18.3
|
)
|
|
|
58.8
|
|
|
33.8
|
Less: Net income attributable to noncontrolling interests
|
|
|
1.3
|
|
|
1.6
|
|
|
|
3.7
|
|
|
4.2
|
Net income (loss) attributable to controlling interests
|
|
$
|
35.1
|
|
$
|
(19.9
|
)
|
|
$
|
55.1
|
|
$
|
29.6
|
Basic net income (loss) per share
|
|
$
|
0.15
|
|
$
|
(0.09
|
)
|
|
$
|
0.24
|
|
$
|
0.13
|
Diluted net income (loss) per share
|
|
$
|
0.15
|
|
$
|
(0.09
|
)
|
|
$
|
0.23
|
|
$
|
0.13
|
Basic weighted average shares outstanding
|
|
|
235.9
|
|
|
229.5
|
|
|
|
232.7
|
|
|
229.2
|
Diluted weighted average shares outstanding
|
|
|
240.9
|
|
|
229.5
|
|
|
|
239.1
|
|
|
229.3
|
|
|
|
|
|
AXALTA COATING SYSTEMS LTD.
|
Condensed Consolidated Balance Sheets (Unaudited)
|
(In millions, except per share data)
|
|
|
|
|
|
|
|
September 30, 2015
|
|
December 31, 2014
|
Assets
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
411.6
|
|
|
$
|
382.1
|
|
Restricted cash
|
|
|
2.9
|
|
|
|
4.7
|
|
Accounts and notes receivable, net
|
|
|
833.3
|
|
|
|
820.4
|
|
Inventories
|
|
|
540.7
|
|
|
|
538.3
|
|
Prepaid expenses and other
|
|
|
75.8
|
|
|
|
62.9
|
|
Deferred income taxes
|
|
|
50.9
|
|
|
|
64.5
|
|
Total current assets
|
|
|
1,915.2
|
|
|
|
1,872.9
|
|
Property, plant and equipment, net
|
|
|
1,374.6
|
|
|
|
1,514.1
|
|
Goodwill
|
|
|
944.5
|
|
|
|
1,001.1
|
|
Identifiable intangibles, net
|
|
|
1,214.4
|
|
|
|
1,300.0
|
|
Other assets
|
|
|
450.2
|
|
|
|
482.6
|
|
Total assets
|
|
$
|
5,898.9
|
|
|
$
|
6,170.7
|
|
Liabilities, Shareholders’ Equity
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
|
|
443.9
|
|
|
|
494.5
|
|
Current portion of borrowings
|
|
|
48.8
|
|
|
|
40.1
|
|
Deferred income taxes
|
|
|
6.7
|
|
|
|
7.3
|
|
Other accrued liabilities
|
|
|
330.5
|
|
|
|
404.8
|
|
Total current liabilities
|
|
|
829.9
|
|
|
|
946.7
|
|
Long-term borrowings
|
|
|
3,504.7
|
|
|
|
3,574.2
|
|
Accrued pensions and other long-term employee benefits
|
|
|
265.7
|
|
|
|
306.4
|
|
Deferred income taxes
|
|
|
167.9
|
|
|
|
208.2
|
|
Other liabilities
|
|
|
26.4
|
|
|
|
23.2
|
|
Total liabilities
|
|
|
4,794.6
|
|
|
|
5,058.7
|
|
Commitments and contingencies
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
Common shares, $1.00 par, 1,000.0 shares authorized, 237.6 and 229.8
shares issued and outstanding at September 30, 2015 and December 31,
2014, respectively
|
|
|
236.6
|
|
|
|
229.8
|
|
Capital in excess of par
|
|
|
1,226.4
|
|
|
|
1,144.7
|
|
Accumulated deficit
|
|
|
(171.4
|
)
|
|
|
(226.5
|
)
|
Accumulated other comprehensive loss
|
|
|
(255.9
|
)
|
|
|
(103.3
|
)
|
Total Axalta shareholders’ equity
|
|
|
1,035.7
|
|
|
|
1,044.7
|
|
Noncontrolling interests
|
|
|
68.6
|
|
|
|
67.3
|
|
Total shareholders’ equity
|
|
|
1,104.3
|
|
|
|
1,112.0
|
|
Total liabilities and shareholders’ equity
|
|
$
|
5,898.9
|
|
|
$
|
6,170.7
|
|
|
|
|
|
|
AXALTA COATING SYSTEMS LTD.
|
Condensed Consolidated Statements of Cash Flows (Unaudited)
|
(In millions)
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2015
|
|
|
|
2014
|
|
Operating activities:
|
|
|
|
|
Net income
|
|
$
|
58.8
|
|
|
$
|
33.8
|
|
Adjustment to reconcile net income to cash provided by operating
activities:
|
|
|
|
|
Depreciation and amortization
|
|
|
225.5
|
|
|
|
229.1
|
|
Amortization of financing costs and original issue discount
|
|
|
15.5
|
|
|
|
15.7
|
|
Loss on extinguishment and modification of debt
|
|
|
-
|
|
|
|
6.1
|
|
Deferred income taxes
|
|
|
(1.1
|
)
|
|
|
(15.9
|
)
|
Unrealized losses on derivatives
|
|
|
2.5
|
|
|
|
3.1
|
|
Realized and unrealized foreign exchange losses, net
|
|
|
90.2
|
|
|
|
46.7
|
|
Stock-based compensation
|
|
|
22.1
|
|
|
|
6.1
|
|
Asset impairment
|
|
|
30.6
|
|
|
|
-
|
|
Other non-cash, net
|
|
|
2.7
|
|
|
|
(26.0
|
)
|
Decrease (increase) in operating assets and liabilities:
|
|
|
|
|
Trade accounts and notes receivable
|
|
|
(111.6
|
)
|
|
|
(109.7
|
)
|
Inventories
|
|
|
(44.7
|
)
|
|
|
(50.6
|
)
|
Prepaid expenses and other assets
|
|
|
(57.3
|
)
|
|
|
(47.7
|
)
|
Accounts payable
|
|
|
(10.1
|
)
|
|
|
52.4
|
|
Other accrued liabilities
|
|
|
(41.5
|
)
|
|
|
(74.2
|
)
|
Other liabilities
|
|
|
(17.8
|
)
|
|
|
(9.5
|
)
|
Cash provided by operating activities
|
|
|
163.8
|
|
|
|
59.4
|
|
Investing activities:
|
|
|
|
|
Business acquisitions and purchases of controlling interests in
affiliates (net of cash acquired)
|
|
|
(19.9
|
)
|
|
|
-
|
|
Purchase of property, plant and equipment
|
|
|
(93.8
|
)
|
|
|
(155.6
|
)
|
Restricted cash
|
|
|
1.7
|
|
|
|
(4.3
|
)
|
Proceeds (purchases) of interest in affiliates, net
|
|
|
0.7
|
|
|
|
(6.5
|
)
|
Proceeds from sale of assets
|
|
|
0.5
|
|
|
|
17.6
|
|
Other investing activities
|
|
|
(0.3
|
)
|
|
|
(0.2
|
)
|
Cash used for investing activities
|
|
|
(111.1
|
)
|
|
|
(149.0
|
)
|
Financing activities:
|
|
|
|
|
Proceeds from short-term borrowings
|
|
|
3.0
|
|
|
|
23.7
|
|
Payments on short-term borrowings
|
|
|
(15.6
|
)
|
|
|
(30.9
|
)
|
Payments on long-term debt
|
|
|
(20.5
|
)
|
|
|
(114.1
|
)
|
Dividends paid to noncontrolling interests
|
|
|
(4.4
|
)
|
|
|
(1.6
|
)
|
Debt modification fees
|
|
|
-
|
|
|
|
(3.0
|
)
|
Equity contribution
|
|
|
-
|
|
|
|
2.5
|
|
Proceeds from option exercises
|
|
|
60.4
|
|
|
|
2.9
|
|
Tax windfall due to option exercises
|
|
|
7.4
|
|
|
|
-
|
|
Other financing activities
|
|
|
(0.2
|
)
|
|
|
-
|
|
Cash provided by (used for) financing activities
|
|
|
30.1
|
|
|
|
(120.5
|
)
|
Increase (decrease) in cash and cash equivalents
|
|
|
82.8
|
|
|
|
(210.1
|
)
|
Effect of exchange rate changes on cash
|
|
|
(53.3
|
)
|
|
|
(15.9
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
382.1
|
|
|
|
459.3
|
|
Cash and cash equivalents at end of period
|
|
$
|
411.6
|
|
|
$
|
233.3
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles net income (loss) to EBITDA and Adjusted
EBITDA calculations discussed above to net income (loss) for the periods
presented (in millions):
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
2015
|
|
|
|
2014
|
|
Net income (loss)
|
|
$
|
36.4
|
|
|
$
|
(18.3
|
)
|
|
$
|
58.8
|
|
|
$
|
33.8
|
|
Interest expense, net
|
|
|
50.8
|
|
|
|
52.6
|
|
|
|
150.0
|
|
|
|
166.5
|
|
Provision (benefit) for income taxes
|
|
|
17.8
|
|
|
|
7.5
|
|
|
|
48.5
|
|
|
|
18.2
|
|
Depreciation and amortization
|
|
|
75.4
|
|
|
|
76.2
|
|
|
|
225.5
|
|
|
|
229.1
|
|
EBITDA
|
|
|
180.4
|
|
|
|
118.0
|
|
|
|
482.8
|
|
|
|
447.6
|
|
Inventory step-up (a)
|
|
|
0.5
|
|
|
|
-
|
|
|
|
1.0
|
|
|
|
-
|
|
Financing fees and debt extinguishment (b)
|
|
|
-
|
|
|
|
3.0
|
|
|
|
-
|
|
|
|
6.1
|
|
Foreign exchange remeasurement losses, net (c)
|
|
|
23.7
|
|
|
|
59.6
|
|
|
|
90.2
|
|
|
|
45.1
|
|
Long-term employee benefit plan adjustments (d)
|
|
|
(0.5
|
)
|
|
|
(4.7
|
)
|
|
|
(0.1
|
)
|
|
|
(0.2
|
)
|
Termination benefits and other employee related costs (e)
|
|
|
0.8
|
|
|
|
3.2
|
|
|
|
19.3
|
|
|
|
9.1
|
|
Consulting and advisory fees (f)
|
|
|
7.2
|
|
|
|
8.8
|
|
|
|
17.1
|
|
|
|
29.5
|
|
Transition related costs (g)
|
|
|
-
|
|
|
|
33.5
|
|
|
|
-
|
|
|
|
81.0
|
|
Offering related costs (h)
|
|
|
1.4
|
|
|
|
3.2
|
|
|
|
3.1
|
|
|
|
3.2
|
|
Other adjustments (i)
|
|
|
3.7
|
|
|
|
2.6
|
|
|
|
14.8
|
|
|
|
13.6
|
|
Dividends in respect of noncontrolling interest (j)
|
|
|
(0.3
|
)
|
|
|
-
|
|
|
|
(4.4
|
)
|
|
|
(1.6
|
)
|
Management fee expense (k)
|
|
|
-
|
|
|
|
0.8
|
|
|
|
-
|
|
|
|
2.4
|
|
Asset impairment (l)
|
|
|
-
|
|
|
|
-
|
|
|
|
30.6
|
|
|
|
-
|
|
Adjusted EBITDA
|
|
$
|
216.9
|
|
|
$
|
228.0
|
|
|
$
|
654.4
|
|
|
$
|
635.8
|
|
|
(a)
|
|
During the nine months ended September 30, 2015, we recorded
non-cash fair value inventory adjustments associated with our
acquisitions. These adjustments increased cost of goods sold by $0.5
million and $1.0 million for the three and nine months ended
September 30, 2015, respectively.
|
(b)
|
|
In connection with an amendment to the Senior Secured Credit
Facilities in February 2014, we recognized $3.1 million of costs
during the nine months ended September 30, 2014. At September 30,
2014, we prepaid $100.0 million of the outstanding New Dollar Term
Loan and recorded a pre-tax loss on extinguishment of $3.0 million
|
(c)
|
|
Eliminates foreign currency exchange gains and losses resulting from
the remeasurement of assets and liabilities denominated in foreign
currencies.
|
(d)
|
|
Eliminates the non-service cost components of long-term employee
benefit costs. Additionally, we deducted a pension curtailment gain
of $6.6 million recorded during the three and nine months ended
September 30, 2014.
|
(e)
|
|
Represents expenses primarily related to employee termination
benefits and other employee-related costs. Termination benefits
include the costs associated with our headcount initiatives
associated with cost saving opportunities that were related to our
transition to a standalone entity and our Axalta Way cost savings
initiatives in 2015.
|
(f)
|
|
Represents fees paid to consultants, advisors, and other third-party
professional organizations for professional services. Amounts
incurred for the three and nine months ended September 30, 2015
primarily relate to our Axalta Way cost savings initiatives. Amounts
incurred for the three and nine months ended September 30, 2014
relate to our transition from DuPont to a standalone entity.
|
(g)
|
|
Represents charges associated with the transition from DuPont to a
standalone entity, including branding and marketing, information
technology related costs, and facility transition costs.
|
(h)
|
|
Represents costs associated with the offering of our common shares
through the Carlyle Offerings.
|
(i)
|
|
Represents costs for certain unusual or non-operational (gains) and
losses, including a $5.4 million gain recognized during the nine
months ended September 30, 2015 resulting from the remeasurement of
our previously held interest in an equity method investee upon the
acquisition of a controlling interest, stock-based compensation,
equity investee dividends, indemnity losses associated with the
Acquisition, and loss (gain) on sale and disposal of property, plant
and equipment.
|
(j)
|
|
Represents the payment of dividends to our joint venture partners by
our consolidated entities that are not wholly owned.
|
(k)
|
|
Pursuant to Axalta’s management agreement with Carlyle Investment
for management and financial advisory services and oversight
provided to Axalta and its subsidiaries, Axalta was required to pay
an annual management fee of $3.0 million and out-of-pocket expenses.
This agreement terminated upon completion of the IPO in November
2014.
|
(l)
|
|
As a result of the currency devaluation in Venezuela, we evaluated
the carrying values of our long-lived assets for impairment and
recorded an impairment charge relating to a real estate investment
of $30.6 million during the nine months ended September 30, 2015.
|
|
|
|
The following table reconciles net income (loss) to adjusted net income
for the periods presented (in millions):
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
2015
|
|
|
2014
|
|
Net income (loss)
|
|
$
|
36.4
|
|
$
|
(18.3
|
)
|
|
$
|
58.8
|
|
$
|
33.8
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
1.3
|
|
|
1.6
|
|
|
|
3.7
|
|
|
4.2
|
|
Net income (loss) attributable to controlling interests
|
|
|
35.1
|
|
|
(19.9
|
)
|
|
|
55.1
|
|
|
29.6
|
|
Inventory step-up (a)
|
|
|
0.5
|
|
|
-
|
|
|
|
1.0
|
|
|
-
|
|
Financing costs and debt extinguishment (b)
|
|
|
-
|
|
|
3.0
|
|
|
|
-
|
|
|
6.1
|
|
Foreign exchange remeasurement losses, net (c)
|
|
|
23.7
|
|
|
59.6
|
|
|
|
90.2
|
|
|
45.1
|
|
Termination benefits and other employee related costs (d)
|
|
|
0.8
|
|
|
3.2
|
|
|
|
19.3
|
|
|
9.1
|
|
Consulting and advisory fees (e)
|
|
|
7.2
|
|
|
8.8
|
|
|
|
17.1
|
|
|
29.5
|
|
Transition related costs (f)
|
|
|
-
|
|
|
33.5
|
|
|
|
-
|
|
|
81.0
|
|
Offering related costs (g)
|
|
|
1.4
|
|
|
3.2
|
|
|
|
3.1
|
|
|
3.2
|
|
Other adjustments (h)
|
|
|
0.3
|
|
|
0.3
|
|
|
|
7.5
|
|
|
7.7
|
|
Management fee expense (i)
|
|
|
-
|
|
|
0.8
|
|
|
|
-
|
|
|
2.4
|
|
Asset impairment (j)
|
|
|
-
|
|
|
-
|
|
|
|
30.6
|
|
|
-
|
|
Pension curtailment gain (k)
|
|
|
-
|
|
|
(6.6
|
)
|
|
|
-
|
|
|
(6.6
|
)
|
Total adjustments
|
|
|
33.9
|
|
|
105.8
|
|
|
|
168.8
|
|
|
177.5
|
|
Income tax impacts (l)
|
|
|
4.8
|
|
|
21.2
|
|
|
|
38.1
|
|
|
56.9
|
|
Adjusted net income
|
|
$
|
64.2
|
|
$
|
64.7
|
|
|
$
|
185.8
|
|
$
|
150.2
|
|
|
(a)
|
|
During the nine months ended September 30, 2015, we recorded
non-cash fair value inventory adjustments associated with our
acquisitions. These adjustments increased cost of goods sold by $0.5
million and $1.0 million for the three and nine months ended
September 30, 2015, respectively.
|
(b)
|
|
In connection with an amendment to the Senior Secured Credit
Facilities in February 2014, we recognized $3.1 million of costs
during the nine months ended September 30, 2014. At September 30,
2014, we prepaid $100.0 million of the outstanding New Dollar Term
Loan and recorded a pre-tax loss on extinguishment of $3.0 million
|
(c)
|
|
Eliminates foreign currency exchange gains and losses resulting from
the remeasurement of assets and liabilities denominated in foreign
currencies.
|
(d)
|
|
Represents expenses primarily related to employee termination
benefits and other employee-related costs. Termination benefits
include the costs associated with our headcount initiatives
associated with cost saving opportunities that were related to our
transition to a standalone entity and our Axalta Way cost savings
initiatives in 2015.
|
(e)
|
|
Represents fees paid to consultants, advisors, and other third-party
professional organizations for professional services. Amounts
incurred for the three and nine months ended September 30, 2015
primarily relate to our Axalta Way cost savings initiatives. Amounts
incurred for the three and nine months ended September 30, 2014
relate to our transition from DuPont to a standalone entity.
|
(f)
|
|
Represents charges associated with the transition from DuPont to a
standalone entity, including branding and marketing, information
technology related costs, and facility transition costs.
|
(g)
|
|
Represents costs associated with the offering of our common shares
through the Carlyle Offerings.
|
(h)
|
|
Represents costs for certain unusual or non-operational (gains) and
losses, including a $5.4 million gain recognized during the nine
months ended September 30, 2015 resulting from the remeasurement of
our previously held interest in an equity method investee upon the
acquisition of a controlling interest, accelerated stock-based
compensation, indemnity losses associated with the Acquisition, and
loss (gain) on sale and disposal of property, plant and equipment.
|
(i)
|
|
Pursuant to Axalta’s management agreement with Carlyle Investment
for management and financial advisory services and oversight
provided to Axalta and its subsidiaries, Axalta was required to pay
an annual management fee of $3.0 million and out-of-pocket expenses.
This agreement terminated upon completion of the IPO in November
2014.
|
(j)
|
|
As a result of the currency devaluation in Venezuela, we evaluated
the carrying values of our long-lived assets for impairment and
recorded an impairment charge relating to a real estate investment
of $30.6 million during the nine months ended September 30, 2015.
|
(k)
|
|
We deducted a pension curtailment gain of $6.6 million recorded
during the three and nine months ended September 30, 2014.
|
(l)
|
|
Represents income tax impact associated with the pre-tax
adjustments, as well as the impact of the removal of discrete income
tax adjustments within our effective tax rate.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20151028005139/en/
Source: Axalta Coating Systems