Fourth Quarter 2015 Highlights:
-
Net sales of $1.0 billion, a 4.5% year-over-year increase before
unfavorable foreign currency translation of 11.5%
-
Adjusted EBITDA of $212.8 million up 4.0% compared to Q4 2014 with an
Adjusted EBITDA margin of 21.2% versus 19.0% in Q4 2014
-
Free cash flow generation of $191.5 million
-
Pre-payment of $100.0 million on Term Loans
Full Year 2015 Highlights:
-
Net sales of $4.1 billion, a 5.3% increase in local currency before
unfavorable foreign currency translation of 11.6%
-
Adjusted EBITDA of $867.2 million, up 3.2% despite substantial
negative currency translation impacts. Adjusted EBITDA margin of 21.2%
versus 19.3% in 2014
-
$52 million in combined savings from productivity improvement
initiatives and on track for $200 million goal for total savings
exiting 2017
-
Free cash flow generation of $261.5 million
PHILADELPHIA--(BUSINESS WIRE)--
Axalta Coating Systems Ltd. (NYSE:AXTA) (“Axalta”), a leading global
coatings company, announced its financial results for the fourth quarter
and full year ended December 31, 2015.
“Axalta finished the year with a strong fourth quarter performance,
highlighted by 4.5% net sales growth year-over-year excluding currency
and continued margin improvement,” said Charles W. Shaver, Axalta’s
Chairman and Chief Executive Officer. “Our team executed well on our
core goal of delivering consistent and profitable growth throughout the
quarter and the year despite headwinds from unfavorable currency
exchange rates and economic pressures in emerging economies. We are
proud of this progress, and expect to continue to build on this in 2016.”
Mr. Shaver added, “We continued to make substantial progress towards
optimizing our cost structure in 2015, nearly completing our
Fit-For-Growth initiative while beginning to realize productivity
savings from The Axalta Way. We also largely completed four major
capital projects, each of which has been executed on time and on budget.
We remain confident in our ability to exceed end-market growth and drive
further improvements to our operating model despite uneven global macro
demand and exchange rate pressures. We are encouraged that our
end-markets remain stable in the aggregate, and our commercial progress
has been strong as we grow market share with our existing customers and
win new customers with our industry leading coatings solutions.”
Fourth Quarter Consolidated Financial Results
Net sales of $1.0 billion for the fourth quarter of 2015 increased 4.5%
year-over-year excluding unfavorable foreign currency translation
(decreased 7.0% as-reported). Net sales growth was driven by 3.9% volume
increases, indicating continued underlying strength in our global
coatings end-markets. Higher average selling prices in the quarter added
0.6% to net sales, while unfavorable foreign currency translation more
than offset the volume and price gains.
Adjusted EBITDA of $212.8 million for the fourth quarter grew 4.0% from
$204.7 million in Q4 2014, while Adjusted EBITDA margins in the quarter
expanded to 21.2% from 19.0% last year. Margin improvement was driven by
increased volumes, 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.
Performance Coatings Results
Net sales in Performance Coatings for Q4 2015 were $588.5 million, a
4.8% year-over-year increase excluding foreign currency translation
(decrease of 8.1% as-reported). Net sales growth drivers included volume
growth of 3.6% and higher average selling prices of 1.2% in the period,
more than offset by 12.9% unfavorable foreign currency translation.
Refinish end-market Q4 net sales increased 4.8% on a constant currency
basis (decreased 9.6% as-reported), while our Industrial end-market grew
4.6% excluding the impact of currency (decreased 4.2% as-reported).
The Performance Coatings segment generated Adjusted EBITDA of $130.9
million in the fourth quarter, a 5.1% year-over-year decrease. Positive
volume and pricing contributions, coupled with variable cost savings,
were more than offset by negative foreign currency translation. Segment
Adjusted EBITDA margin of 22.2% in Q4 2015 reflected a 70 basis point
increase compared to the corresponding prior year quarter.
Transportation Coatings Results
The Transportation Coatings segment reported net sales of $415.1 million
in the fourth quarter, a 4.2% increase excluding foreign currency
translation versus fourth quarter 2014 (decrease of 5.3% as-reported).
Volume and price generated 4.2% net sales growth, offset by 9.5%
unfavorable foreign currency translation versus the prior year. Light
Vehicle net sales increased 5.5% on a constant currency basis
year-over-year (decreased 3.7% as-reported). Commercial Vehicle net
sales declined slightly by 0.5% on a constant currency basis versus last
year (decreased 10.9% as-reported). Demand trends in Transportation
Coatings were fairly consistent with the third quarter of 2015, though
China saw a rebound of automotive production after the notable drop in
the third quarter. North America and EMEA continued to drive growth in
Light Vehicle, partially offset by ongoing weaker demand in South
America.
The Transportation Coatings segment generated Adjusted EBITDA of $81.9
million in Q4 2015, an increase of 22.6% compared to the fourth quarter
of 2014, with positive volume, mix and variable cost contributions
partially offset by unfavorable foreign currency translation. Segment
Adjusted EBITDA margin of 19.7% in Q4 2015 represented a significant
increase from 15.2% in the prior year quarter.
Balance Sheet and Cash Flow Highlights
We ended the quarter with cash and cash equivalents of $485.0 million,
following the $100.0 million debt pre-payment made in the fourth
quarter. Our net debt was $3.0 billion as of December 31, which resulted
in a net debt to 2015 Adjusted EBITDA ratio of 3.4x.
Fourth quarter operating cash flow was $235.8 million versus $192.0
million in the corresponding quarter of 2014. Free cash flow after
capital expenditures of $44.3 million totaled $191.5 million.
“We achieved our financial goals for 2015 in spite of the challenging
emerging market economic environment,” said Robert W. Bryant, Axalta’s
Executive Vice President and Chief Financial Officer. “In our first full
year as a publicly held company, Axalta produced solid volume growth
well above end-market rates, strong ongoing margin expansion and solid
free cash flow generation, which allowed us to reduce our financial
leverage and to make two high-ROI bolt-on acquisitions in the U.S. and
Europe. We look forward to more progress on each of these fronts in
2016.”
2016 Guidance
We are providing the following outlook for the full year 2016:
-
Net sales growth of 4-6% in constant currency; flat to slightly down
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 fourth quarter and full year 2015 financial results on Wednesday,
February 10th, at 8:00 a.m. EST. 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 February 17, 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 13629062.
Cautionary Statement Concerning Forward-Looking Statements
This release may contain certain forward-looking statements regarding
Axalta and its subsidiaries including those relating to global
macroeconomic conditions and currency exchange rates as well as our 2016
full year outlook, net sales growth, Adjusted EBITDA, interest expense,
income tax rate, as adjusted, diluted shares outstanding, 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, 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
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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Financial Statement Tables
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AXALTA COATING SYSTEMS LTD.
|
|
Consolidated Statements of Operations (Unaudited)
|
|
(In millions, except per share data)
|
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Net sales
|
|
$
|
1,003.6
|
|
|
$
|
1,078.8
|
|
|
$
|
4,087.2
|
|
$
|
4,361.7
|
|
Other revenue
|
|
|
6.0
|
|
|
|
8.2
|
|
|
|
26.1
|
|
|
29.8
|
|
Total revenue
|
|
|
1,009.6
|
|
|
|
1,087.0
|
|
|
|
4,113.3
|
|
|
4,391.5
|
|
Cost of goods sold
|
|
|
639.2
|
|
|
|
723.1
|
|
|
|
2,597.3
|
|
|
2,897.2
|
|
Selling, general and administrative expenses
|
|
|
237.1
|
|
|
|
244.8
|
|
|
|
914.8
|
|
|
991.5
|
|
Research and development expenses
|
|
|
12.9
|
|
|
|
12.7
|
|
|
|
51.6
|
|
|
49.5
|
|
Amortization of acquired intangibles
|
|
|
20.2
|
|
|
|
20.5
|
|
|
|
80.7
|
|
|
83.8
|
|
Income from operations
|
|
|
100.2
|
|
|
|
85.9
|
|
|
|
468.9
|
|
|
369.5
|
|
Interest expense, net
|
|
|
46.5
|
|
|
|
51.2
|
|
|
|
196.5
|
|
|
217.7
|
|
Other expense (income), net
|
|
|
(0.2
|
)
|
|
|
49.9
|
|
|
|
111.2
|
|
|
115.0
|
|
Income (loss) before income taxes
|
|
|
53.9
|
|
|
|
(15.2
|
)
|
|
|
161.2
|
|
|
36.8
|
|
Provision (benefit) for income taxes
|
|
|
14.8
|
|
|
|
(16.1
|
)
|
|
|
63.3
|
|
|
2.1
|
|
Net income
|
|
|
39.1
|
|
|
|
0.9
|
|
|
|
97.9
|
|
|
34.7
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
0.5
|
|
|
|
3.1
|
|
|
|
4.2
|
|
|
7.3
|
|
Net income (loss) attributable to controlling interests
|
|
$
|
38.6
|
|
|
$
|
(2.2
|
)
|
|
$
|
93.7
|
|
$
|
27.4
|
|
Basic net income (loss) per share
|
|
$
|
0.16
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.40
|
|
$
|
0.12
|
|
Diluted net income (loss) per share
|
|
$
|
0.16
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.39
|
|
$
|
0.12
|
|
Basic weighted average shares outstanding
|
|
|
236.9
|
|
|
|
229.8
|
|
|
|
233.8
|
|
|
229.3
|
|
Diluted weighted average shares outstanding
|
|
|
241.5
|
|
|
|
229.8
|
|
|
|
239.7
|
|
|
230.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXALTA COATING SYSTEMS LTD.
|
|
Consolidated Balance Sheets (Unaudited)
|
|
(In millions, except per share data)
|
|
|
|
December 31, 2015
|
|
December 31, 2014
|
|
Assets
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
485.0
|
|
|
$
|
382.1
|
|
|
Restricted cash
|
|
|
2.7
|
|
|
|
4.7
|
|
|
Accounts and notes receivable, net
|
|
|
765.8
|
|
|
|
820.4
|
|
|
Inventories
|
|
|
530.7
|
|
|
|
538.3
|
|
|
Prepaid expenses and other
|
|
|
63.6
|
|
|
|
62.9
|
|
|
Deferred income taxes
|
|
|
69.5
|
|
|
|
64.5
|
|
|
Total current assets
|
|
|
1,917.3
|
|
|
|
1,872.9
|
|
|
Property, plant and equipment, net
|
|
|
1,382.9
|
|
|
|
1,514.1
|
|
|
Goodwill
|
|
|
928.2
|
|
|
|
1,001.1
|
|
|
Identifiable intangibles, net
|
|
|
1,191.6
|
|
|
|
1,300.0
|
|
|
Other assets
|
|
|
434.2
|
|
|
|
482.6
|
|
|
Total assets
|
|
$
|
5,854.2
|
|
|
$
|
6,170.7
|
|
|
Liabilities, Shareholders’ Equity
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
|
|
454.7
|
|
|
|
494.5
|
|
|
Current portion of borrowings
|
|
|
50.1
|
|
|
|
40.1
|
|
|
Deferred income taxes
|
|
|
6.6
|
|
|
|
7.3
|
|
|
Other accrued liabilities
|
|
|
370.2
|
|
|
|
404.8
|
|
|
Total current liabilities
|
|
|
881.6
|
|
|
|
946.7
|
|
|
Long-term borrowings
|
|
|
3,391.4
|
|
|
|
3,574.2
|
|
|
Accrued pensions and other long-term employee benefits
|
|
|
252.3
|
|
|
|
306.4
|
|
|
Deferred income taxes
|
|
|
165.5
|
|
|
|
208.2
|
|
|
Other liabilities
|
|
|
22.2
|
|
|
|
23.2
|
|
|
Total liabilities
|
|
|
4,713.0
|
|
|
|
5,058.7
|
|
|
Commitments and contingencies
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
Common shares, $1.00 par, 1,000.0 shares authorized, 237.9 and 229.8
shares issued and outstanding at December 31, 2015 and 2014,
respectively
|
|
|
237.0
|
|
|
|
229.8
|
|
|
Capital in excess of par
|
|
|
1,238.8
|
|
|
|
1,144.7
|
|
|
Accumulated deficit
|
|
|
(132.8
|
)
|
|
|
(226.5
|
)
|
|
Accumulated other comprehensive loss
|
|
|
(269.3
|
)
|
|
|
(103.3
|
)
|
|
Total Axalta shareholders’ equity
|
|
|
1,073.7
|
|
|
|
1,044.7
|
|
|
Noncontrolling interests
|
|
|
67.5
|
|
|
|
67.3
|
|
|
Total shareholders’ equity
|
|
|
1,141.2
|
|
|
|
1,112.0
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
5,854.2
|
|
|
$
|
6,170.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXALTA COATING SYSTEMS LTD.
|
|
Consolidated Statements of Cash Flows (Unaudited)
|
|
(In millions)
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
Operating activities:
|
|
|
|
|
|
Net income
|
|
$
|
97.9
|
|
|
$
|
34.7
|
|
|
Adjustment to reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
|
307.7
|
|
|
|
308.7
|
|
|
Amortization of financing costs and original issue discount
|
|
|
20.6
|
|
|
|
21.0
|
|
|
Loss on extinguishment and modification of debt
|
|
|
2.5
|
|
|
|
6.1
|
|
|
Deferred income taxes
|
|
|
(5.0
|
)
|
|
|
(38.2
|
)
|
|
Unrealized losses on derivatives
|
|
|
0.5
|
|
|
|
3.7
|
|
|
Realized and unrealized foreign exchange losses, net
|
|
|
93.7
|
|
|
|
75.1
|
|
|
Stock-based compensation
|
|
|
30.2
|
|
|
|
8.0
|
|
|
Asset impairment
|
|
|
30.6
|
|
|
|
-
|
|
|
Other non-cash, net
|
|
|
12.0
|
|
|
|
(29.0
|
)
|
|
Decrease (increase) in operating assets and liabilities:
|
|
|
|
|
|
Trade accounts and notes receivable
|
|
|
(61.1
|
)
|
|
|
(40.2
|
)
|
|
Inventories
|
|
|
(35.2
|
)
|
|
|
(24.7
|
)
|
|
Prepaid expenses and other assets
|
|
|
(65.6
|
)
|
|
|
(54.1
|
)
|
|
Accounts payable
|
|
|
(6.7
|
)
|
|
|
53.6
|
|
|
Other accrued liabilities
|
|
|
(0.1
|
)
|
|
|
(54.8
|
)
|
|
Other liabilities
|
|
|
(22.4
|
)
|
|
|
(18.5
|
)
|
|
Cash provided by operating activities
|
|
|
399.6
|
|
|
|
251.4
|
|
|
Investing activities:
|
|
|
|
|
|
Business acquisitions (net of cash acquired)
|
|
|
(29.6
|
)
|
|
|
-
|
|
|
Purchase of property, plant and equipment
|
|
|
(138.1
|
)
|
|
|
(188.4
|
)
|
|
Restricted cash
|
|
|
1.9
|
|
|
|
(4.7
|
)
|
|
Purchase of intangibles
|
|
|
(0.4
|
)
|
|
|
(0.2
|
)
|
|
Proceeds (purchases) of interest in affiliates, net
|
|
|
1.3
|
|
|
|
(6.5
|
)
|
|
Proceeds from sale of assets
|
|
|
0.6
|
|
|
|
21.3
|
|
|
Cash used for investing activities
|
|
|
(164.3
|
)
|
|
|
(178.5
|
)
|
|
Financing activities:
|
|
|
|
|
|
Proceeds from long-term borrowings
|
|
|
-
|
|
|
|
0.7
|
|
|
Proceeds from short-term borrowings
|
|
|
2.0
|
|
|
|
30.7
|
|
|
Payments on short-term borrowings
|
|
|
(16.9
|
)
|
|
|
(33.8
|
)
|
|
Payments on long-term debt
|
|
|
(127.3
|
)
|
|
|
(121.1
|
)
|
|
Dividends paid to noncontrolling interests
|
|
|
(4.7
|
)
|
|
|
(2.2
|
)
|
|
Debt modification fees
|
|
|
-
|
|
|
|
(3.0
|
)
|
|
Equity contribution
|
|
|
-
|
|
|
|
2.5
|
|
|
Proceeds from option exercises and associated tax benefits
|
|
|
72.6
|
|
|
|
3.0
|
|
|
Other financing activities
|
|
|
(0.2
|
)
|
|
|
-
|
|
|
Cash used for financing activities
|
|
|
(74.5
|
)
|
|
|
(123.2
|
)
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
160.8
|
|
|
|
(50.3
|
)
|
|
Effect of exchange rate changes on cash
|
|
|
(57.9
|
)
|
|
|
(26.9
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
382.1
|
|
|
|
459.3
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
485.0
|
|
|
$
|
382.1
|
|
|
|
|
|
|
|
The following table reconciles net income to EBITDA and Adjusted EBITDA
for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Net income
|
|
$
|
39.1
|
|
|
$
|
0.9
|
|
|
$
|
97.9
|
|
|
$
|
34.7
|
|
|
Interest expense, net
|
|
|
46.5
|
|
|
|
51.2
|
|
|
|
196.5
|
|
|
|
217.7
|
|
|
Provision (benefit) for income taxes
|
|
|
14.8
|
|
|
|
(16.1
|
)
|
|
|
63.3
|
|
|
|
2.1
|
|
|
Depreciation and amortization
|
|
|
82.2
|
|
|
|
79.6
|
|
|
|
307.7
|
|
|
|
308.7
|
|
|
EBITDA
|
|
|
182.6
|
|
|
|
115.6
|
|
|
|
665.4
|
|
|
|
563.2
|
|
|
Financing fees and debt extinguishment (a)
|
|
|
2.5
|
|
|
|
-
|
|
|
|
2.5
|
|
|
|
6.1
|
|
|
Foreign exchange remeasurement losses (b)
|
|
|
3.5
|
|
|
|
36.1
|
|
|
|
93.7
|
|
|
|
81.2
|
|
|
Termination benefits and other employee related costs (c)
|
|
|
17.1
|
|
|
|
8.9
|
|
|
|
36.3
|
|
|
|
17.8
|
|
|
Consulting and advisory fees (d)
|
|
|
7.6
|
|
|
|
6.8
|
|
|
|
24.7
|
|
|
|
36.3
|
|
|
Transition-related costs (e)
|
|
|
(3.4
|
)
|
|
|
20.8
|
|
|
|
(3.4
|
)
|
|
|
101.8
|
|
|
Offering related costs (f)
|
|
|
-
|
|
|
|
19.1
|
|
|
|
3.1
|
|
|
|
22.3
|
|
|
Stock-based compensation (g)
|
|
|
8.1
|
|
|
|
1.9
|
|
|
|
30.2
|
|
|
|
8.0
|
|
|
Other adjustments (h)
|
|
|
(4.9
|
)
|
|
|
(4.7
|
)
|
|
|
(11.2
|
)
|
|
|
2.8
|
|
|
Dividends in respect of noncontrolling interest (i)
|
|
|
(0.3
|
)
|
|
|
(0.6
|
)
|
|
|
(4.7
|
)
|
|
|
(2.2
|
)
|
|
Management fee expense (j)
|
|
|
-
|
|
|
|
0.8
|
|
|
|
-
|
|
|
|
3.2
|
|
|
Asset impairment (k)
|
|
|
-
|
|
|
|
-
|
|
|
|
30.6
|
|
|
|
-
|
|
|
Adjusted EBITDA
|
|
$
|
212.8
|
|
|
$
|
204.7
|
|
|
$
|
867.2
|
|
|
$
|
840.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
In connection with an amendment to the Senior Secured Credit
Facilities in February 2014, we recognized $3.1 million of costs
during the year ended December 31, 2014. In addition to the credit
facility amendment, we also incurred $2.5 million and $3.0 million
of losses on extinguishment of debt recognized during the years
ended December 31, 2015 and 2014, respectively, which resulted
directly from the pro-rata write offs of unamortized deferred
financing costs and original issue discounts associated with the
separate pay-downs of $100.0 million of principal on the New Dollar
Term Loan in each year.
|
|
(b)
|
|
Eliminates foreign exchange gains and losses resulting from the
remeasurement of assets and liabilities denominated in foreign
currencies.
|
|
(c)
|
|
Represents expenses primarily related to employee termination
benefits and other employee-related costs, including our initiative
to improve the overall cost structure within the European region.
Termination benefits include the costs associated with our headcount
initiatives for establishment of new roles and elimination of old
roles and other costs associated with cost savings opportunities
that were related to our transition to a standalone entity in 2014
and our Axalta Way cost savings initiatives in 2015. Other employee
related costs include the non-service costs components of employee
benefit costs and a pension curtailment gain of $7.3 million
recorded during the year ended December 31, 2014.
|
|
(d)
|
|
Represents fees paid to consultants, advisors, and other third-party
professional organizations for professional services. Amounts
incurred during 2015 primarily relate to our Axalta Way cost savings
initiatives. Amounts incurred during 2014 relate to services
rendered in conjunction with our transition from DuPont to a
standalone entity.
|
|
(e)
|
|
Represents charges associated with the transition from DuPont to a
standalone entity, including branding and marketing, information
technology related costs, and facility transition costs.
|
|
(f)
|
|
Represents costs associated with the offering of our common shares
in the Carlyle Offerings during 2015 and costs associated with the
IPO, including a $13.4 million pre-tax charge associated with the
termination of the management agreement with Carlyle Investment
Management, L.L.C., an affiliate of Carlyle, upon the completion of
the IPO during 2014. See note (j) below.
|
|
(g)
|
|
Represents costs associated with stock-based compensation, including
$8.2 million of expense during 2015 attributable to the accelerated
vesting of all issued and outstanding stock options issued under the
2013 Plan.
|
|
(h)
|
|
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, 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 acquisitions.
|
|
(i)
|
|
Represents the payment of dividends to our joint venture partners by
our consolidated entities that are not wholly owned.
|
|
(j)
|
|
Pursuant to Axalta’s management agreement with Carlyle Investment
Management, L.L.C., 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.
|
|
(k)
|
|
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 2015.
|
|
|
|
|
The following table reconciles net income to adjusted net income for the
periods presented (in millions):
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Net income
|
|
$
|
39.1
|
|
|
$
|
0.9
|
|
|
$
|
97.9
|
|
|
$
|
34.7
|
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
0.5
|
|
|
|
3.1
|
|
|
|
4.2
|
|
|
|
7.3
|
|
|
Net income (loss) attributable to controlling interests
|
|
|
38.6
|
|
|
|
(2.2
|
)
|
|
|
93.7
|
|
|
|
27.4
|
|
|
Financing costs and debt extinguishment (a)
|
|
|
2.5
|
|
|
|
-
|
|
|
|
2.5
|
|
|
|
6.1
|
|
|
Foreign exchange remeasurement losses, net (b)
|
|
|
3.5
|
|
|
|
36.1
|
|
|
|
93.7
|
|
|
|
81.2
|
|
|
Termination benefits and other employee related costs (c)
|
|
|
17.3
|
|
|
|
9.3
|
|
|
|
36.6
|
|
|
|
18.4
|
|
|
Consulting and advisory fees (d)
|
|
|
7.6
|
|
|
|
6.8
|
|
|
|
24.7
|
|
|
|
36.3
|
|
|
Transition related costs (e)
|
|
|
(3.4
|
)
|
|
|
20.8
|
|
|
|
(3.4
|
)
|
|
|
101.8
|
|
|
Offering related costs (f)
|
|
|
-
|
|
|
|
19.1
|
|
|
|
3.1
|
|
|
|
22.3
|
|
|
Other adjustments (g)
|
|
|
(5.7
|
)
|
|
|
(4.1
|
)
|
|
|
0.9
|
|
|
|
10.4
|
|
|
Management fee expense (h)
|
|
|
-
|
|
|
|
0.8
|
|
|
|
-
|
|
|
|
3.2
|
|
|
Asset impairment (i)
|
|
|
-
|
|
|
|
-
|
|
|
|
30.6
|
|
|
|
-
|
|
|
Employee benefit plan losses (gains) (j)
|
|
|
0.8
|
|
|
|
(0.7
|
)
|
|
|
0.8
|
|
|
|
(14.1
|
)
|
|
Total adjustments
|
|
|
22.6
|
|
|
|
88.1
|
|
|
|
189.5
|
|
|
|
265.6
|
|
|
Income tax impacts (k)
|
|
|
3.2
|
|
|
|
27.7
|
|
|
|
41.3
|
|
|
|
84.6
|
|
|
Adjusted net income attributable to controlling interests
|
|
$
|
58.0
|
|
|
$
|
58.2
|
|
|
$
|
241.9
|
|
|
$
|
208.4
|
|
|
Diluted adjusted net income per share
|
|
$
|
0.24
|
|
|
$
|
0.25
|
|
|
$
|
1.01
|
|
|
$
|
0.91
|
|
|
Diluted weighted average shares outstanding (1)
|
|
|
241.5
|
|
|
|
234.7
|
|
|
|
239.7
|
|
|
|
230.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
For the three months ended December 31, 2014, represents what
diluted shares would have been compared to the as reported 229.8
million shares if the period had been in a net income position
versus the reported loss.
|
|
(a)
|
|
In connection with an amendment to the Senior Secured Credit
Facilities in February 2014, we recognized $3.1 million of costs
during the year ended December 31, 2014. In addition to the credit
facility amendment, we also incurred $2.5 million and $3.0 million
of losses on extinguishment of debt recognized during the years
ended December 31, 2015 and 2014, respectively, which resulted
directly from the pro-rata write offs of unamortized deferred
financing costs and original issue discounts associated with the
separate pay-downs of $100.0 million of principal on the New Dollar
Term Loan in each year.
|
|
(b)
|
|
Eliminates foreign currency exchange gains and losses resulting from
the remeasurement of assets and liabilities denominated in foreign
currencies.
|
|
(c)
|
|
Represents expenses primarily related to employee termination
benefits and other employee-related costs, including our initiative
to improve the overall cost structure within the European region.
Termination benefits include the costs associated with our headcount
initiatives for establishment of new roles and elimination of old
roles and other costs associated with cost savings opportunities
that were related to our transition to a standalone entity in 2014
and our Axalta Way cost savings initiatives in 2015.
|
|
(d)
|
|
Represents fees paid to consultants, advisors, and other third-party
professional organizations for professional services. Amounts
incurred during 2015 primarily relate to our Axalta Way cost savings
initiatives. Amounts incurred during 2014 relate to services
rendered in conjunction with our transition from DuPont to a
standalone entity.
|
|
(e)
|
|
Represents charges associated with the transition from DuPont to a
standalone entity, including branding and marketing, information
technology related costs, and facility transition costs.
|
|
(f)
|
|
Represents costs associated with the offering of our common shares
in the Carlyle Offerings during 2015 and costs associated with the
IPO, including a $13.4 million pre-tax charge associated with the
termination of the management agreement with Carlyle Investment
Management, L.L.C., an affiliate of Carlyle, upon the completion of
the IPO during 2014.
|
|
(g)
|
|
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, stock-based compensation of $8.2 million
during 2015 attributable to the accelerated vesting of all issued
and outstanding stock options issued under the 2013 Plan, indemnity
losses (gains) associated with the Acquisition, losses (gains) on
sale and disposal of property, plant and equipment, and non-cash
fair value inventory adjustments associated with our acquisitions.
|
|
(h)
|
|
Pursuant to Axalta’s management agreement with Carlyle Investment
Management, L.L.C., 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.
|
|
(i)
|
|
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 2015.
|
|
(j)
|
|
Represents losses (gains) associated with curtailments, settlements
and other non-recurring benefit plan adjustments.
|
|
(k)
|
|
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/20160210005348/en/
Source: Axalta Coating Systems