First Quarter 2016 Highlights:
-
Net sales of $955.6 million, a 3.0% year-over-year increase before
unfavorable foreign currency translation of 6.4%
-
Adjusted EBITDA of $194.8 million, up 7.0% compared to Q1 2015;
Adjusted EBITDA margin of 20.4% versus 18.4% in Q1 2015
-
Operating cash flow use of $18.0 million versus $98.7 million in the
same quarter last year; $100 million debt prepayment made subsequent
to quarter end
-
Continued focus on innovation with the global launch of AquaEC 6100,
Axalta’s newest cathodic epoxy electrocoat product, offering the next
evolution of technology with improved performance and productivity
PHILADELPHIA--(BUSINESS WIRE)--
Axalta Coating Systems Ltd. (NYSE:AXTA) (“Axalta”), a leading global
coatings company, announced its financial results for the first quarter
ended March 31, 2016.
“We are pleased that our first quarter results met our expectations and
that our core markets continued to perform well,” said Charles W.
Shaver, Axalta’s Chairman and Chief Executive Officer. “Our team
continues to execute well and deliver on our key goals in spite of
ongoing foreign currency volatility and uneven economic conditions in
certain emerging markets.” Mr. Shaver added, “We remain on track with
our productivity programs, which continued to drive incremental margin
contribution, while also focusing on long-term opportunities to refine
our operating strengths with solid investments and management
concentrating on reducing complexity across our global businesses.”
First Quarter Consolidated Financial Results
Net sales of $955.6 million for the first quarter of 2016 increased 3.0%
year-over-year excluding unfavorable foreign currency translation
(decreased 3.4% as-reported). Net sales growth was driven by 5.1% higher
average selling prices, offset by a 2.1% volume decline, primarily from
slower demand in Latin America. Excluding Latin America, overall volumes
increased low single digits for the quarter. Unfavorable foreign
currency translation reduced net sales by 6.4%.
Adjusted EBITDA of $194.8 million for the first quarter grew 7.0% from
$182.0 million in Q1 2015, while Adjusted EBITDA margin in the quarter
expanded to 20.4% from 18.4% last year. Margin improvement was driven by
favorable product mix and pricing, as well as lower input costs and
savings from our operating improvement initiatives. These factors were
partially offset by negative foreign currency translation, volume
declines in Latin America, and modest operational expenditures for
planned growth initiatives.
Performance Coatings Results
Net sales in Performance Coatings for Q1 2016 were $543.0 million, a
4.8% year-over-year increase excluding foreign currency translation
(decrease of 2.5% as-reported). Net sales growth drivers included higher
average selling prices of 5.4% in the period, more than offset by 7.3%
unfavorable foreign currency translation and volume declines of 0.6%.
Refinish end-market Q1 2016 net sales increased 5.3% on a constant
currency basis (decreased 3.7% as-reported), while our Industrial
end-market grew 3.8% excluding the impact of currency (increased 0.2%
as-reported).
The Performance Coatings segment generated Adjusted EBITDA of $110.1
million in the first quarter, a 2.8% year-over-year increase. Positive
pricing contributions, coupled with variable cost savings, were
partially offset by negative foreign currency translation and
incremental operating expense to support growth initiatives. Segment
Adjusted EBITDA margin of 20.3% in Q1 2016 reflected a 110 basis point
increase compared to the corresponding prior year quarter.
Transportation Coatings Results
The Transportation Coatings segment produced net sales of $412.6 million
in the first quarter, a 0.7% increase excluding foreign currency
translation versus first quarter 2015 (decrease of 4.5% as-reported). A
4.0% decrease in volume was offset by 4.7% positive contribution from
price, while a 5.2% unfavorable foreign currency translation impact more
than offset this modest net sales gain in the quarter. Transportation
Coatings demand varied by end-market in Q1, with ongoing growth in Light
Vehicle offset by a pullback in Commercial Vehicle. Light Vehicle net
sales increased 3.6% on a constant currency basis year-over-year
(decreased 1.1% as-reported), with ongoing strength in North America
offset partly by the impact of incremental weakness in Latin America.
Asia Pacific posted solid above-market net sales growth for the period.
Commercial Vehicle net sales declined by 9.3% on a constant currency
basis versus last year (decreased 15.8% as-reported), driven by a
combination of slower heavy truck production as well as weaker demand
from a variety of non-truck vehicle types served.
The Transportation Coatings segment generated Adjusted EBITDA of $84.7
million in Q1 2016, an increase of 13.1% compared to the first quarter
of 2015, with positive price / mix and variable cost contributions
partially offset by unfavorable foreign currency translation, lower
volume effects, and moderate ongoing operating expense increases to
support planned growth. Segment Adjusted EBITDA margin of 20.5% in Q1
2016 represented a significant increase from 17.3% in the prior year
quarter.
Balance Sheet and Cash Flow Highlights
We ended the quarter with cash and cash equivalents of $419.5 million.
Our net debt was $3.0 billion as of March 31, 2016, which resulted in a
net debt to trailing twelve month Adjusted EBITDA ratio of 3.5x.
First quarter operating cash flow was a use of $18.0 million versus a
use of $98.7 million in the corresponding quarter of 2015 reflecting
lower working capital use and reduced restructuring cash outflows. Free
cash flow, calculated as operating cash flow less capital expenditures,
totaled a use of $58.3 million based on capital expenditures of $40.3
million.
“We were pleased that our balance sheet remained solid and cash flows
notably improved in the first quarter, including a narrower use of
working capital versus the prior year period,” said Robert W. Bryant,
Axalta’s Executive Vice President and Chief Financial Officer. “For
2016, we continue to expect strong progress in reducing net debt
leverage from a combination of Adjusted EBITDA growth, improved free
cash flow, and further planned debt reduction during the course of the
year.”
2016 Guidance Update
We are reiterating our outlook for the full year 2016 as follows:
• Net sales growth of 4-6% in constant currency; flat to down slightly
as-reported
• Adjusted EBITDA of $900-940 million
• Interest expense of $180-190 million
• Income tax rate, as adjusted, of 25-27%
• Diluted shares of 242-245 million
• Working capital as a percentage of net sales of 11-13%
• Capital expenditures of ~$150 million
Conference Call Information
As previously announced, Axalta will hold a conference call to discuss
its first quarter 2016 financial results on Thursday, April 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 May 5, 2016. 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 13635701.
Cautionary Statement Concerning Forward-Looking Statements
This release may contain certain forward-looking statements regarding
Axalta and its subsidiaries including those relating to our 2016 full
year outlook, net sales growth, Adjusted EBITDA, interest expense,
income tax rate, as adjusted, diluted shares outstanding, capital
expenditures, cash flow, net debt 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, income tax rate, as
adjusted, EBITDA, 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, income tax rate, as adjusted,
EBITDA, Adjusted EBITDA, free cash flow, net debt and Adjusted Net
Income may differ from that of others in our industry. Constant currency
net sales growth, income tax rate, as adjusted, EBITDA, 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, income tax rate, as adjusted, EBITDA, Adjusted EBITDA, 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 – Celebrating 150 Years in the Coatings
Industry
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 100,000 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.
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|
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Financial Statement Tables
|
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AXALTA COATING SYSTEMS LTD.
|
|
Condensed Consolidated Statements of Operations (Unaudited)
|
|
(In millions, except per share data)
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2016
|
|
2015
|
|
Net sales
|
|
$
|
955.6
|
|
$
|
989.2
|
|
|
Other revenue
|
|
|
6.0
|
|
|
8.3
|
|
|
Total revenue
|
|
|
961.6
|
|
|
997.5
|
|
|
Cost of goods sold
|
|
|
606.4
|
|
|
649.8
|
|
|
Selling, general and administrative expenses
|
|
|
219.1
|
|
|
213.0
|
|
|
Research and development expenses
|
|
|
12.6
|
|
|
12.9
|
|
|
Amortization of acquired intangibles
|
|
|
20.2
|
|
|
20.0
|
|
|
Income from operations
|
|
|
103.3
|
|
|
101.8
|
|
|
Interest expense, net
|
|
|
50.1
|
|
|
50.0
|
|
|
Other expense, net
|
|
|
8.0
|
|
|
3.9
|
|
|
Income before income taxes
|
|
|
45.2
|
|
|
47.9
|
|
|
Provision for income taxes
|
|
|
14.6
|
|
|
1.2
|
|
|
Net income
|
|
|
30.6
|
|
|
46.7
|
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
0.9
|
|
|
1.6
|
|
|
Net income attributable to controlling interests
|
|
$
|
29.7
|
|
$
|
45.1
|
|
|
Basic net income per share
|
|
$
|
0.13
|
|
$
|
0.20
|
|
|
Diluted net income per share
|
|
$
|
0.12
|
|
$
|
0.19
|
|
|
Basic weighted average shares outstanding
|
|
|
237.1
|
|
|
229.8
|
|
|
Diluted weighted average shares outstanding
|
|
|
241.6
|
|
|
237.0
|
|
|
|
|
|
|
|
|
AXALTA COATING SYSTEMS LTD.
|
|
Condensed Consolidated Balance Sheets (Unaudited)
|
|
(In millions, except per share data)
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
December 31, 2015
|
|
Assets
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
419.5
|
|
|
$
|
485.0
|
|
|
Restricted cash
|
|
|
2.8
|
|
|
|
2.7
|
|
|
Accounts and notes receivable, net
|
|
|
792.7
|
|
|
|
765.8
|
|
|
Inventories
|
|
|
543.4
|
|
|
|
530.7
|
|
|
Prepaid expenses and other
|
|
|
64.7
|
|
|
|
63.6
|
|
|
Deferred income taxes
|
|
|
54.9
|
|
|
|
69.5
|
|
|
Total current assets
|
|
|
1,878.0
|
|
|
|
1,917.3
|
|
|
Property, plant and equipment, net
|
|
|
1,377.5
|
|
|
|
1,382.9
|
|
|
Goodwill
|
|
|
942.1
|
|
|
|
928.2
|
|
|
Identifiable intangibles, net
|
|
|
1,177.2
|
|
|
|
1,191.6
|
|
|
Other assets
|
|
|
458.3
|
|
|
|
434.2
|
|
|
Total assets
|
|
$
|
5,833.1
|
|
|
$
|
5,854.2
|
|
|
Liabilities, Shareholders’ Equity
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
|
|
419.8
|
|
|
|
454.7
|
|
|
Current portion of borrowings
|
|
|
53.7
|
|
|
|
50.1
|
|
|
Deferred income taxes
|
|
|
7.1
|
|
|
|
6.6
|
|
|
Other accrued liabilities
|
|
|
300.6
|
|
|
|
370.2
|
|
|
Total current liabilities
|
|
|
781.2
|
|
|
|
881.6
|
|
|
Long-term borrowings
|
|
|
3,405.1
|
|
|
|
3,391.4
|
|
|
Long-term employee benefits
|
|
|
252.2
|
|
|
|
252.3
|
|
|
Deferred income taxes
|
|
|
166.8
|
|
|
|
165.5
|
|
|
Other liabilities
|
|
|
26.8
|
|
|
|
22.2
|
|
|
Total liabilities
|
|
|
4,632.1
|
|
|
|
4,713.0
|
|
|
Commitments and contingencies
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
Common shares, $1.00 par, 1,000.0 shares authorized, 238.5 and 237.9
shares issued and outstanding at March 31, 2016 and December 31,
2015, respectively
|
|
|
237.2
|
|
|
|
237.0
|
|
|
Capital in excess of par
|
|
|
1,255.5
|
|
|
|
1,238.8
|
|
|
Accumulated deficit
|
|
|
(103.1
|
)
|
|
|
(132.8
|
)
|
|
Accumulated other comprehensive loss
|
|
|
(255.5
|
)
|
|
|
(269.3
|
)
|
|
Total Axalta shareholders’ equity
|
|
|
1,134.1
|
|
|
|
1,073.7
|
|
|
Noncontrolling interests
|
|
|
66.9
|
|
|
|
67.5
|
|
|
Total shareholders’ equity
|
|
|
1,201.0
|
|
|
|
1,141.2
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
5,833.1
|
|
|
$
|
5,854.2
|
|
|
|
|
|
|
|
|
AXALTA COATING SYSTEMS LTD.
|
|
Condensed Consolidated Statements of Cash Flows (Unaudited)
|
|
(In millions)
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
Operating activities:
|
|
|
|
|
|
Net income
|
|
$
|
30.6
|
|
|
$
|
46.7
|
|
|
Adjustment to reconcile net income to cash used for operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
|
76.0
|
|
|
|
72.6
|
|
|
Amortization of financing costs and original issue discount
|
|
|
5.1
|
|
|
|
5.0
|
|
|
Deferred income taxes
|
|
|
(2.4
|
)
|
|
|
(17.2
|
)
|
|
Realized and unrealized foreign exchange losses, net
|
|
|
7.5
|
|
|
|
4.8
|
|
|
Stock-based compensation
|
|
|
10.2
|
|
|
|
1.8
|
|
|
Other non-cash, net
|
|
|
(3.0
|
)
|
|
|
0.1
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Trade accounts and notes receivable
|
|
|
(26.5
|
)
|
|
|
(53.5
|
)
|
|
Inventories
|
|
|
(7.5
|
)
|
|
|
(25.9
|
)
|
|
Prepaid expenses and other
|
|
|
(13.8
|
)
|
|
|
(36.3
|
)
|
|
Accounts payable
|
|
|
(16.6
|
)
|
|
|
(1.0
|
)
|
|
Other accrued liabilities
|
|
|
(74.2
|
)
|
|
|
(91.1
|
)
|
|
Other liabilities
|
|
|
(3.4
|
)
|
|
|
(4.7
|
)
|
|
Cash used for operating activities
|
|
|
(18.0
|
)
|
|
|
(98.7
|
)
|
|
Investing activities:
|
|
|
|
|
|
Business acquisitions and purchases of controlling interests in
affiliates (net of cash acquired)
|
|
|
—
|
|
|
|
(3.2
|
)
|
|
Purchase of property, plant and equipment
|
|
|
(40.3
|
)
|
|
|
(31.5
|
)
|
|
Restricted cash
|
|
|
(0.1
|
)
|
|
|
1.8
|
|
|
Other investing
|
|
|
(2.9
|
)
|
|
|
2.7
|
|
|
Cash used for investing activities
|
|
|
(43.3
|
)
|
|
|
(30.2
|
)
|
|
Financing activities:
|
|
|
|
|
|
Proceeds from short-term borrowings
|
|
|
—
|
|
|
|
1.5
|
|
|
Payments on short-term borrowings
|
|
|
(0.3
|
)
|
|
|
(10.7
|
)
|
|
Payments on long-term borrowings
|
|
|
(6.9
|
)
|
|
|
(6.8
|
)
|
|
Dividends paid to noncontrolling interests
|
|
|
(1.5
|
)
|
|
|
(3.5
|
)
|
|
Proceeds from option exercises and associated tax benefits
|
|
|
6.7
|
|
|
|
—
|
|
|
Other financing activities
|
|
|
(0.3
|
)
|
|
|
(0.2
|
)
|
|
Cash used for financing activities
|
|
|
(2.3
|
)
|
|
|
(19.7
|
)
|
|
Decrease in cash and cash equivalents
|
|
|
(63.6
|
)
|
|
|
(148.6
|
)
|
|
Effect of exchange rate changes on cash
|
|
|
(1.9
|
)
|
|
|
(10.6
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
485.0
|
|
|
|
382.1
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
419.5
|
|
|
$
|
222.9
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles net income to EBITDA and Adjusted EBITDA
for the periods presented (in millions):
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
Net income
|
|
$
|
30.6
|
|
|
$
|
46.7
|
|
|
Interest expense, net
|
|
|
50.1
|
|
|
|
50.0
|
|
|
Provision for income taxes
|
|
|
14.6
|
|
|
|
1.2
|
|
|
Depreciation and amortization
|
|
|
76.0
|
|
|
|
72.6
|
|
|
EBITDA
|
|
|
171.3
|
|
|
|
170.5
|
|
|
Foreign exchange remeasurement losses (a)
|
|
|
7.5
|
|
|
|
8.7
|
|
|
Long-term employee benefit plan adjustments (b)
|
|
|
0.6
|
|
|
|
0.2
|
|
|
Termination benefits and other employee related costs (c)
|
|
|
1.9
|
|
|
|
3.7
|
|
|
Consulting and advisory fees (d)
|
|
|
3.0
|
|
|
|
3.1
|
|
|
Offering related costs (e)
|
|
|
-
|
|
|
|
1.4
|
|
|
Stock-based compensation (f)
|
|
|
10.2
|
|
|
|
1.8
|
|
|
Other adjustments (g)
|
|
|
1.8
|
|
|
|
(3.9
|
)
|
|
Dividends in respect of noncontrolling interest (h)
|
|
|
(1.5
|
)
|
|
|
(3.5
|
)
|
|
Adjusted EBITDA
|
|
$
|
194.8
|
|
|
$
|
182.0
|
|
|
|
|
|
|
(a)
|
|
Eliminates foreign exchange gains and losses resulting from the
remeasurement of assets and liabilities denominated in foreign
currencies.
|
|
(b)
|
|
Eliminates the non-service cost components of long-term employee
benefit costs.
|
|
(c)
|
|
Represents expenses primarily related to employee termination
benefits and other employee-related costs including our initiative
to improve overall cost structure within the European region as well
as costs associated with our Axalta Way initiatives.
|
|
(d)
|
|
Represents fees paid to consultants for professional services
primarily related to our Axalta Way cost-savings initiatives.
|
|
(e)
|
|
Represents costs associated with the offering of our common shares
in the Carlyle Offerings.
|
|
(f)
|
|
Represents costs associated with stock-based compensation.
|
|
(g)
|
|
Represents costs for certain unusual or non-operational (gains) and
losses, including a $5.4 million gain recognized during the three
months ended March 31, 2015 resulting from the remeasurement of our
previously held interest in an equity method investee upon the
acquisition of a controlling interest, equity investee dividends,
indemnity losses (gains) associated with the Acquisition, losses
(gains) on sale and disposal of property, plant and equipment,
losses (gains) on foreign currency derivative instruments and
non-cash fair value inventory adjustments associated with our 2015
acquisitions.
|
|
(h)
|
|
Represents the payment of dividends to our joint venture partners by
our consolidated entities that are not wholly owned.
|
|
|
|
|
The following table reconciles net income to adjusted net income for the
periods presented (in millions):
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Net income
|
|
$
|
30.6
|
|
$
|
46.7
|
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
0.9
|
|
|
1.6
|
|
|
Net income attributable to controlling interests
|
|
|
29.7
|
|
|
45.1
|
|
|
Foreign exchange remeasurement losses, net (a)
|
|
|
7.5
|
|
|
8.7
|
|
|
Termination benefits and other employee related costs (b)
|
|
|
1.9
|
|
|
3.7
|
|
|
Consulting and advisory fees (c)
|
|
|
3.0
|
|
|
3.1
|
|
|
Offering related costs (d)
|
|
|
-
|
|
|
1.4
|
|
|
Other adjustments (e)
|
|
|
-
|
|
|
(3.9
|
)
|
|
Total adjustments
|
|
|
12.4
|
|
|
13.0
|
|
|
Income tax impacts (f)
|
|
|
0.3
|
|
|
19.1
|
|
|
Adjusted net income attributable to controlling interests
|
|
$
|
41.8
|
|
$
|
39.0
|
|
|
Diluted adjusted net income per share
|
|
$
|
0.17
|
|
$
|
0.16
|
|
|
Diluted weighted average shares outstanding
|
|
|
241.6
|
|
|
237.0
|
|
|
|
|
|
|
(a)
|
|
Eliminates foreign exchange gains and losses resulting from the
remeasurement of assets and liabilities denominated in foreign
currencies.
|
|
(b)
|
|
Represents expenses primarily related to employee termination
benefits and other employee-related costs including our initiative
to improve overall cost structure within the European region as well
as costs associated with our Axalta Way initiatives.
|
|
(c)
|
|
Represents fees paid to consultants for professional services
primarily related to our Axalta Way cost-savings initiatives.
|
|
(d)
|
|
Represents costs associated with the offering of our common shares
in the Carlyle Offerings.
|
|
(e)
|
|
Represents costs for certain unusual or non-operational (gains) and
losses, including a $5.4 million gain resulting from the acquisition
of a controlling interest in our previously held equity method
investee during 2015, indemnity losses associated with the
Acquisition, losses (gains) on sale and disposal of property, plant
and equipment and losses (gains) on foreign currency derivative
instruments.
|
|
(f)
|
|
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/20160428005278/en/
Source: Axalta Coating Systems Ltd.