Third Quarter 2016 Highlights:
-
Net sales of $1,023.4 million driven by volume and pricing growth of
4.4%, offset by unfavorable foreign currency translation
-
Net loss attributable to Axalta of $10.7 million including refinancing
charges of $81.9 million versus net income attributable to Axalta of
$35.1 million in Q3 2015; Adjusted net income attributable to Axalta
of $77.5 million for Q3 2016 versus $64.2 million in Q3 2015
-
Adjusted EBITDA of $233.2 million versus $216.9 million in Q3 2015
-
Debt refinancings will reduce annual cash interest expense by $20.6
million. USD term loan prepayment in October of $150 million will save
an additional $5.6 million in annual cash interest expense
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, 2016.
“Third quarter results demonstrated strong top line and Adjusted EBITDA
performance thanks to ongoing base business development, recent
acquisitions, and strong operating profitability, against a continued
challenging macroeconomic backdrop. We continued to make good progress
towards both our full year and longer term objectives of achieving
consistent growth as well as improved productivity,” said Charles W.
Shaver, Axalta’s Chairman and Chief Executive Officer. “Our capital
structure was also significantly improved this quarter with two
successful debt refinancings and a subsequent prepayment in October.
Rounding out the quarter, we closed our largest acquisition to date and
launched several notable new products which are expected to contribute
to our planned growth.”
Third Quarter Consolidated Financial Results
Net sales of $1,023.4 million for the third quarter of 2016 benefited
from volume and pricing growth, offset in part by a 2.1% negative impact
from foreign currency translation. Constant currency net sales increased
4.4% compared to the year-ago quarter, driven by 1.9% higher average
selling prices. Acquisitions contributed 2.6 percentage points of growth
in the quarter. The strongest regional contributors to net sales growth
were Asia Pacific, North America and Latin America, which benefited from
price adjustments to offset ongoing currency weakness.
We reported a net loss attributable to Axalta of $10.7 million for the
third quarter of 2016 compared with net income attributable to Axalta of
$35.1 million in Q3 2015. The net loss in Q3 2016 was primarily driven
by an $81.9 million loss on the extinguishment of our indebtedness and
refinancing charges coupled with severance charges. Adjusted net income
attributable to Axalta of $77.5 million for the third quarter of 2016
increased from $64.2 million in Q3 2015.
Adjusted EBITDA of $233.2 million for the third quarter increased
compared to $216.9 million in Q3 2015. This result benefitted from
strong volume and acquisition growth in Asia Pacific and EMEA, pricing
contributions and lower variable costs as well as savings from our
operating enhancement initiatives. These factors were somewhat offset by
negative foreign currency translation and operational expenditures to
support planned growth.
Performance Coatings Results
Performance Coatings net sales were $619.3 million in Q3 2016, an
increase of 3.1% year-over-year including a 2.7% unfavorable foreign
currency translation impact. Constant currency net sales increased 5.8%,
driven by a 2.9% increase in volumes and higher average selling prices
of 2.9% in the period. Acquisitions added 3.4% to volume growth in the
quarter. Refinish end-market net sales increased 1.8% to $434.5 million
in Q3 2016 (increased 4.9% excluding foreign currency translation),
while our Industrial end-market increased 6.4% to $184.8 million
(increased 8.2% excluding foreign currency translation).
The Performance Coatings segment generated Adjusted EBITDA of $148.5
million in the third quarter, a 6.8% 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 24.0% in Q3 2016 reflected a 90 basis point
increase compared to the corresponding prior year quarter.
Transportation Coatings Results
The Transportation Coatings segment produced net sales of $404.1 million
in the third quarter, an increase of 1.1% versus third quarter 2015,
largely driven by volume and price increases partially offset by
negative currency translation. Constant currency net sales increased by
2.3%, including a 1.8% increase in volume and a 0.5% positive
contribution from price. Acquisitions added 1.3% to volume growth in the
period. Unfavorable foreign currency translation impacted net sales by
1.2% in the quarter. Transportation Coatings Q3 2016 net sales included
a rebound in Light Vehicle growth compared to Q3 2015, particularly in
the Asia Pacific region, offset by ongoing weakness in Commercial
Vehicle particularly in North and South America. Light Vehicle net sales
increased 5.7% to $321.1 million year-over-year (increased 6.7%
excluding foreign currency translation), driven principally by the
improvement in Asia Pacific versus last year, slight growth in North
America and modest declines in EMEA. Commercial Vehicle net sales
decreased 13.5% to $83.0 million versus last year (decreased 11.9%
excluding foreign currency translation), driven by a combination of
continued slower heavy truck production and ongoing slower volumes from
our other non-truck product customers.
The Transportation Coatings segment generated Adjusted EBITDA of $84.7
million in Q3 2016, an increase of 8.7% compared to the third quarter of
2015, with positive volume, price and variable cost contributions
partially offset by unfavorable foreign currency translation and ongoing
operating expense increases to support planned growth. Segment Adjusted
EBITDA margin of 21.0% in Q3 2016 represented a 150 basis point increase
from 19.5% in the prior year quarter.
Balance Sheet and Cash Flow Highlights
We ended the quarter with cash and cash equivalents of $528.3 million.
Our debt, net of cash, was $2,954.0 million as of September 30, 2016,
compared to $3,141.9 million as of September 30, 2015. During the
quarter we completed two refinancing transactions totaling $500 million
and €785 million with a weighted average coupon of 4.29%. The
transactions reduced annual pre-tax cash interest by approximately $20.6
million, extended maturities from 2021 to 2024 and 2025, and replaced
€450 million of secured debt with unsecured debt. We also extended the
maturity of our Revolving Credit Facility from 2018 to 2021 and improved
pricing and certain terms of the facility. Subsequent to quarter end, we
continued our debt reduction efforts by prepaying $150 million of our
USD term loan, which will generate additional annual pre-tax interest
savings of $5.6 million.
Third quarter operating cash flow was $144.5 million versus $158.8
million in the corresponding quarter of 2015, reflecting slightly higher
working capital use. Free cash flow, calculated as operating cash flow
less capital expenditures, totaled $114.0 million based on capital
expenditures of $30.5 million.
“We are very pleased that in the third quarter we were able to
substantially lower our interest expense through the refinancings while
also extending and improving other terms in our debt agreements. In
addition, we also saw continued strong free cash flow in the quarter,”
said Robert W. Bryant, Axalta’s Executive Vice President and Chief
Financial Officer. “Axalta also opened its new European headquarters in
Switzerland in July which was done to achieve key operational and
financial benefits, while also yielding a more favorable after-tax
profit for the balance of 2016 and beyond.”
2016 Guidance Update
We are updating our outlook for the full year 2016 as follows:
-
Flat net sales; lower end of 4-6% guidance on a constant currency
basis, including acquisition contribution
-
Adjusted EBITDA at the lower end of our $900-940 million guidance
range, including acquisition contribution
-
Interest expense of about $180 million
-
Income tax rate, as adjusted, of 24-26%
-
Diluted shares of 242-245 million
-
Working capital as a percentage of net sales of 11-13%
-
Capital expenditures of ~$150 million
-
Depreciation and amortization of ~$320 million
Conference Call Information
As previously announced, Axalta will hold a conference call to discuss
its third quarter 2016 financial results on Thursday, October 27th, 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 3, 2016. The U.S. replay dial-in phone number
is (844) 512-2921 and the international replay dial-in number is +1
(412) 317-6671. The replay passcode is 13648024.
Cautionary Statement Concerning Forward-Looking Statements
This release may contain certain forward-looking statements regarding
Axalta and its subsidiaries including those relating to returns
generated by acquisitions and our plans for excess cash as well as our
2016 full year outlook, including net sales growth, Adjusted EBITDA,
interest expense, income tax rate, as adjusted, diluted shares
outstanding, working capital, capital expenditures and depreciation and
amortization. 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. Adjusted EBITDA
consists of EBITDA adjusted for (i) non-cash items included within net
income, (ii) items the Company does not believe are indicative of
ongoing operating performance or (iii) nonrecurring or infrequent items
that the Company believes are not reasonably likely to recur within the
next two years. We believe that making such adjustments provides
investors meaningful information to understand our operating results and
ability to analyze financial and business trends on a period-to-period
basis. Adjusted Net Income shows the adjusted value of Net Income
attributable to controlling interests after removing the items that are
determined by management to be items that we do not consider indicative
of our ongoing operating performance or unusual or nonrecurring in
nature. 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. Axalta does not
provide a reconciliation for non-GAAP estimates for net income or income
tax rate, as-reported, on a forward-looking basis because the
information necessary to calculate a meaningful or accurate estimation
of reconciling items is not available without unreasonable effort. For
example, such reconciling items include the impact of foreign currency
exchange gains or losses, gains or losses that are unusual or
nonrecurring in nature, as well as discrete taxable events. We cannot
estimate or project these items and they may have a substantial and
unpredictable impact on our US GAAP results.
Segment Financial Measures
The primary measure of segment operating performance is Adjusted EBITDA,
which is a key metric that is used by management to evaluate business
performance in comparison to budgets, forecasts, and prior year
financial results, providing a measure that management believes reflects
the Company’s core operating performance. As we do not measure segment
operating performance based on Net Income, a reconciliation of this
non-GAAP financial measure with the most directly comparable financial
measure calculated in accordance with GAAP is not available.
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 13,000 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.
|
|
|
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,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Net sales
|
|
$
|
1,023.4
|
|
|
$
|
1,000.3
|
|
$
|
3,044.1
|
|
$
|
3,083.6
|
|
Other revenue
|
|
|
5.7
|
|
|
|
4.8
|
|
|
18.7
|
|
|
20.1
|
|
Total revenue
|
|
|
1,029.1
|
|
|
|
1,005.1
|
|
|
3,062.8
|
|
|
3,103.7
|
|
Cost of goods sold
|
|
|
630.4
|
|
|
|
628.6
|
|
|
1,885.8
|
|
|
1,958.1
|
|
Selling, general and administrative expenses
|
|
|
242.3
|
|
|
|
219.2
|
|
|
699.1
|
|
|
677.7
|
|
Research and development expenses
|
|
|
14.9
|
|
|
|
13.0
|
|
|
41.6
|
|
|
38.7
|
|
Amortization of acquired intangibles
|
|
|
21.3
|
|
|
|
20.4
|
|
|
61.8
|
|
|
60.5
|
|
Income from operations
|
|
|
120.2
|
|
|
|
123.9
|
|
|
374.5
|
|
|
368.7
|
|
Interest expense, net
|
|
|
42.9
|
|
|
|
50.8
|
|
|
140.8
|
|
|
150.0
|
|
Other expense, net
|
|
|
87.4
|
|
|
|
18.9
|
|
|
128.2
|
|
|
111.4
|
|
Income (loss) before income taxes
|
|
|
(10.1
|
)
|
|
|
54.2
|
|
|
105.5
|
|
|
107.3
|
|
Provision (benefit) for income taxes
|
|
|
(0.6
|
)
|
|
|
17.8
|
|
|
34.3
|
|
|
48.5
|
|
Net income (loss)
|
|
|
(9.5
|
)
|
|
|
36.4
|
|
|
71.2
|
|
|
58.8
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
1.2
|
|
|
|
1.3
|
|
|
3.7
|
|
|
3.7
|
|
Net income (loss) attributable to controlling interests
|
|
|
(10.7
|
)
|
|
|
35.1
|
|
|
67.5
|
|
|
55.1
|
|
Basic net income (loss) per share
|
|
$
|
(0.04
|
)
|
|
$
|
0.15
|
|
$
|
0.28
|
|
$
|
0.24
|
|
Diluted net income (loss) per share
|
|
$
|
(0.04
|
)
|
|
$
|
0.15
|
|
$
|
0.28
|
|
$
|
0.23
|
|
Basic weighted average shares outstanding
|
|
|
238.5
|
|
|
|
235.9
|
|
|
237.8
|
|
|
232.7
|
|
Diluted weighted average shares outstanding
|
|
|
238.5
|
|
|
|
240.9
|
|
|
242.4
|
|
|
239.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXALTA COATING SYSTEMS LTD.
|
|
Condensed Consolidated Balance Sheets (Unaudited)
|
|
(In millions, except per share data)
|
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
|
Assets
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
528.3
|
|
|
$
|
485.0
|
|
|
Restricted cash
|
|
|
2.8
|
|
|
|
2.7
|
|
|
Accounts and notes receivable, net
|
|
|
871.3
|
|
|
|
765.8
|
|
|
Inventories
|
|
|
545.6
|
|
|
|
530.7
|
|
|
Prepaid expenses and other
|
|
|
58.9
|
|
|
|
63.6
|
|
|
Deferred income taxes
|
|
|
65.7
|
|
|
|
69.5
|
|
|
Total current assets
|
|
|
2,072.6
|
|
|
|
1,917.3
|
|
|
Property, plant and equipment, net
|
|
|
1,372.3
|
|
|
|
1,382.9
|
|
|
Goodwill
|
|
|
1,015.9
|
|
|
|
928.2
|
|
|
Identifiable intangibles, net
|
|
|
1,239.9
|
|
|
|
1,191.6
|
|
|
Other assets
|
|
|
441.8
|
|
|
|
434.2
|
|
|
Total assets
|
|
$
|
6,142.5
|
|
|
$
|
5,854.2
|
|
|
Liabilities, Shareholders’ Equity
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
|
|
469.2
|
|
|
|
454.7
|
|
|
Current portion of borrowings
|
|
|
54.2
|
|
|
|
50.1
|
|
|
Deferred income taxes
|
|
|
6.5
|
|
|
|
6.6
|
|
|
Other accrued liabilities
|
|
|
386.2
|
|
|
|
370.2
|
|
|
Total current liabilities
|
|
|
916.1
|
|
|
|
881.6
|
|
|
Long-term borrowings
|
|
|
3,428.1
|
|
|
|
3,391.4
|
|
|
Long-term employee benefits
|
|
|
243.3
|
|
|
|
252.3
|
|
|
Deferred income taxes
|
|
|
192.3
|
|
|
|
165.5
|
|
|
Other liabilities
|
|
|
31.9
|
|
|
|
22.2
|
|
|
Total liabilities
|
|
|
4,811.7
|
|
|
|
4,713.0
|
|
|
Commitments and contingencies
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
Common shares, $1.00 par, 1,000.0 shares authorized, 240.1 and 237.9
shares issued and outstanding at September 30, 2016 and December 31,
2015, respectively
|
|
|
238.9
|
|
|
|
237.0
|
|
|
Capital in excess of par
|
|
|
1,289.8
|
|
|
|
1,238.8
|
|
|
Accumulated deficit
|
|
|
(65.3
|
)
|
|
|
(132.8
|
)
|
|
Accumulated other comprehensive loss
|
|
|
(252.9
|
)
|
|
|
(269.3
|
)
|
|
Total Axalta shareholders’ equity
|
|
|
1,210.5
|
|
|
|
1,073.7
|
|
|
Noncontrolling interests
|
|
|
120.3
|
|
|
|
67.5
|
|
|
Total shareholders’ equity
|
|
|
1,330.8
|
|
|
|
1,141.2
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
6,142.5
|
|
|
$
|
5,854.2
|
|
|
|
|
|
|
|
|
|
|
AXALTA COATING SYSTEMS LTD.
|
|
Condensed Consolidated Statements of Cash Flows (Unaudited)
|
|
(In millions)
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2016
|
|
2015
|
|
Operating activities:
|
|
|
|
|
|
Net income
|
|
$
|
71.2
|
|
|
$
|
58.8
|
|
|
Adjustment to reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
|
235.8
|
|
|
|
225.5
|
|
|
Amortization of financing costs and original issue discount
|
|
|
14.6
|
|
|
|
15.5
|
|
|
Debt extinguishment and refinancing related costs
|
|
|
84.2
|
|
|
|
-
|
|
|
Deferred income taxes
|
|
|
(14.0
|
)
|
|
|
(1.1
|
)
|
|
Realized and unrealized foreign exchange losses, net
|
|
|
30.6
|
|
|
|
90.2
|
|
|
Stock-based compensation
|
|
|
31.6
|
|
|
|
22.1
|
|
|
Asset impairment
|
|
|
10.5
|
|
|
|
30.6
|
|
|
Other non-cash, net
|
|
|
(10.4
|
)
|
|
|
5.2
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Trade accounts and notes receivable
|
|
|
(103.8
|
)
|
|
|
(111.6
|
)
|
|
Inventories
|
|
|
0.1
|
|
|
|
(44.7
|
)
|
|
Prepaid expenses and other
|
|
|
(31.2
|
)
|
|
|
(57.3
|
)
|
|
Accounts payable
|
|
|
14.0
|
|
|
|
(10.1
|
)
|
|
Other accrued liabilities
|
|
|
0.4
|
|
|
|
(41.5
|
)
|
|
Other liabilities
|
|
|
(9.8
|
)
|
|
|
(17.8
|
)
|
|
Cash provided by operating activities
|
|
|
323.8
|
|
|
|
163.8
|
|
|
Investing activities:
|
|
|
|
|
|
Business acquisitions (net of cash acquired)
|
|
|
(103.5
|
)
|
|
|
(19.9
|
)
|
|
Purchase of property, plant and equipment
|
|
|
(95.3
|
)
|
|
|
(93.8
|
)
|
|
Restricted cash
|
|
|
-
|
|
|
|
1.7
|
|
|
Purchase of intangibles
|
|
|
(3.9
|
)
|
|
|
(0.3
|
)
|
|
Other investing activities
|
|
|
(2.4
|
)
|
|
|
1.2
|
|
|
Cash used for investing activities
|
|
|
(205.1
|
)
|
|
|
(111.1
|
)
|
|
Financing activities:
|
|
|
|
|
|
Proceeds from short-term borrowings
|
|
|
-
|
|
|
|
3.0
|
|
|
Proceeds from long-term borrowings
|
|
|
1,377.6
|
|
|
|
-
|
|
|
Payments on short-term borrowings
|
|
|
(7.2
|
)
|
|
|
(15.6
|
)
|
|
Payments on long-term borrowings
|
|
|
(1,375.5
|
)
|
|
|
(20.5
|
)
|
|
Payments for refinancing related costs
|
|
|
(78.3
|
)
|
|
|
-
|
|
|
Dividends paid to noncontrolling interests
|
|
|
(3.0
|
)
|
|
|
(4.4
|
)
|
|
Proceeds from option exercises and associated tax benefits
|
|
|
21.3
|
|
|
|
67.8
|
|
|
Other financing activities
|
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
|
Cash provided by (used for) financing activities
|
|
|
(65.3
|
)
|
|
|
30.1
|
|
|
Increase in cash and cash equivalents
|
|
|
53.4
|
|
|
|
82.8
|
|
|
Effect of exchange rate changes on cash
|
|
|
(10.1
|
)
|
|
|
(53.3
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
485.0
|
|
|
|
382.1
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
528.3
|
|
|
$
|
411.6
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles net income (loss) to EBITDA and Adjusted
EBITDA for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Net income (loss)
|
|
$
|
(9.5
|
)
|
|
$
|
36.4
|
|
|
$
|
71.2
|
|
|
$
|
58.8
|
|
|
Interest expense, net
|
|
|
42.9
|
|
|
|
50.8
|
|
|
|
140.8
|
|
|
|
150.0
|
|
|
Provision (benefit) for income taxes
|
|
|
(0.6
|
)
|
|
|
17.8
|
|
|
|
34.3
|
|
|
|
48.5
|
|
|
Depreciation and amortization
|
|
|
81.2
|
|
|
|
75.4
|
|
|
|
235.8
|
|
|
|
225.5
|
|
|
EBITDA
|
|
|
114.0
|
|
|
|
180.4
|
|
|
|
482.1
|
|
|
|
482.8
|
|
|
Debt extinguishment and refinancing related costs (a)
|
|
|
81.9
|
|
|
|
-
|
|
|
|
84.2
|
|
|
|
-
|
|
|
Foreign exchange remeasurement losses (b)
|
|
|
4.5
|
|
|
|
23.7
|
|
|
|
30.0
|
|
|
|
90.2
|
|
|
Long-term employee benefit plan adjustments (c)
|
|
|
0.8
|
|
|
|
(0.5
|
)
|
|
|
2.1
|
|
|
|
(0.1
|
)
|
|
Termination benefits and other employee related costs (d)
|
|
|
16.3
|
|
|
|
0.8
|
|
|
|
25.2
|
|
|
|
19.3
|
|
|
Consulting and advisory fees (e)
|
|
|
2.7
|
|
|
|
7.2
|
|
|
|
8.3
|
|
|
|
17.1
|
|
|
Offering and transactional costs (f)
|
|
|
3.0
|
|
|
|
1.4
|
|
|
|
4.4
|
|
|
|
(2.3
|
)
|
|
Stock-based compensation (g)
|
|
|
10.0
|
|
|
|
7.9
|
|
|
|
31.6
|
|
|
|
22.1
|
|
|
Other adjustments (h)
|
|
|
1.5
|
|
|
|
(3.7
|
)
|
|
|
5.2
|
|
|
|
(0.9
|
)
|
|
Dividends in respect of noncontrolling interest (i)
|
|
|
(1.5
|
)
|
|
|
(0.3
|
)
|
|
|
(3.0
|
)
|
|
|
(4.4
|
)
|
|
Asset impairment (j)
|
|
|
-
|
|
|
|
-
|
|
|
|
10.5
|
|
|
|
30.6
|
|
|
Adjusted EBITDA
|
|
$
|
233.2
|
|
|
$
|
216.9
|
|
|
$
|
680.6
|
|
|
$
|
654.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
During the three and nine months ended September 30, 2016, we
prepaid outstanding principal on our term loans, resulting in
non-cash pre-tax losses on extinguishment of $4.3 million and $6.6
million, respectively. During the three and nine months ended
September 30, 2016, we amended the terms of the Credit Agreement,
resulting in a non-cash pre-tax loss on extinguishment of $2.3
million. In connection with the refinancings during the three and
nine months ended September 30, 2016, we recorded a non-cash pre-tax
loss on extinguishment of $18.6 million and incurred call premiums
and other fees of $56.7 million. We do not consider these items to
be indicative of our ongoing operating performance.
|
|
|
|
(b)
|
|
Eliminates foreign exchange losses resulting from the remeasurement
of assets and liabilities denominated in foreign currencies, net of
the impacts of our foreign currency instruments used to hedge our
balance sheet exposures. Exchange effects attributable to the
remeasurement of our Venezuelan subsidiary represented losses of
$1.2 million and $23.9 million for the three and nine months ended
September 30, 2016, respectively, and gains of $0.6 million and
losses of $52.6 million for the three and nine months ended
September 30, 2015, respectively.
|
|
|
|
(c)
|
|
Eliminates the non-cash non-service cost components of long-term
employee benefit costs.
|
|
|
|
(d)
|
|
Represents expenses primarily related to employee termination
benefits including our initiative to improve the overall cost
structure within the European region as well as costs associated
with our Axalta Way initiatives, which are not considered indicative
of our ongoing operating performance.
|
|
|
|
(e)
|
|
Represents fees paid to consultants for professional services
primarily related to our Axalta Way initiatives, which are not
considered indicative of our ongoing operating performance.
|
|
|
|
(f)
|
|
Represents costs associated with the offerings of our common shares
by Carlyle, acquisition-related costs, 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, and
costs associated with changes in the fair value of contingent
consideration associated with our acquisitions, all of which are not
considered indicative of our ongoing operating performance.
|
|
|
|
(g)
|
|
Represents non-cash costs associated with stock-based compensation,
including $8.2 million of expense during the nine months ended
September 30, 2015 attributable to the accelerated vesting of all
issued and outstanding stock options issued under the 2013 Plan as a
result of the Change in Control.
|
|
|
|
(h)
|
|
Represents costs for certain non-operational or non-cash (gains) and
losses unrelated to our core business and which we do not consider
indicative of ongoing operations, including equity investee
dividends, indemnity losses (gains) associated with the Acquisition,
losses (gains) on sale and disposal of property, plant and
equipment, losses (gains) on the remaining foreign currency
derivative instruments and non-cash fair value inventory adjustments
associated with our business combinations.
|
|
|
|
(i)
|
|
Represents the payment of dividends to our joint venture partners by
our consolidated entities that are not wholly owned, which are
reflected to show the cash operating performance of these entities
on Axalta's financial statements.
|
|
|
|
(j)
|
|
As a result of currency devaluations in Venezuela, we recorded
non-cash impairment charges relating to a real estate investment of
$10.5 million and $30.6 million during the nine months ended
September 30, 2016 and 2015, respectively. We do not consider these
impairments to be indicative of our ongoing operating performance.
|
|
|
|
|
|
|
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,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Net income (loss)
|
|
$
|
(9.5
|
)
|
|
$
|
36.4
|
|
$
|
71.2
|
|
$
|
58.8
|
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
1.2
|
|
|
|
1.3
|
|
|
3.7
|
|
|
3.7
|
|
|
Net income (loss) attributable to controlling interests
|
|
|
(10.7
|
)
|
|
|
35.1
|
|
|
67.5
|
|
|
55.1
|
|
|
Debt extinguishment and refinancing related costs (a)
|
|
|
81.9
|
|
|
|
-
|
|
|
84.2
|
|
|
-
|
|
|
Foreign exchange remeasurement losses (b)
|
|
|
4.5
|
|
|
|
23.7
|
|
|
30.0
|
|
|
90.2
|
|
|
Termination benefits and other employee related costs (c)
|
|
|
16.3
|
|
|
|
0.8
|
|
|
25.2
|
|
|
19.3
|
|
|
Consulting and advisory fees (d)
|
|
|
2.7
|
|
|
|
7.2
|
|
|
8.3
|
|
|
17.1
|
|
|
Offering and transactional costs (e)
|
|
|
3.0
|
|
|
|
1.4
|
|
|
4.4
|
|
|
(2.3
|
)
|
|
Other adjustments (f)
|
|
|
0.8
|
|
|
|
0.8
|
|
|
0.8
|
|
|
13.9
|
|
|
Asset impairment (g)
|
|
|
-
|
|
|
|
-
|
|
|
10.5
|
|
|
30.6
|
|
|
Total adjustments
|
|
|
109.2
|
|
|
|
33.9
|
|
|
163.4
|
|
|
168.8
|
|
|
Income tax impacts (h)
|
|
|
21.0
|
|
|
|
4.8
|
|
|
30.1
|
|
|
38.1
|
|
|
Adjusted net income
|
|
$
|
77.5
|
|
|
$
|
64.2
|
|
$
|
200.8
|
|
$
|
185.8
|
|
|
Diluted adjusted net income per share
|
|
$
|
0.32
|
|
|
$
|
0.27
|
|
$
|
0.83
|
|
$
|
0.78
|
|
|
Diluted weighted average shares outstanding (1)
|
|
|
242.1
|
|
|
|
240.9
|
|
|
242.4
|
|
|
239.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
For the three months ended September 30, 2016, represents what
diluted shares would have been compared to the 238.5 million diluted
shares, as reported, if the period had been in a net income position
versus the reported loss.
|
|
|
|
(a)
|
|
During the three and nine months ended September 30, 2016, we
prepaid outstanding principal on our term loans, resulting in
non-cash pre-tax losses on extinguishment of $4.3 million and $6.6
million, respectively. During the three and nine months ended
September 30, 2016, we amended the terms of the Credit Agreement,
resulting in a non-cash pre-tax loss on extinguishment of $2.3
million. In connection with the refinancings during the three and
nine months ended September 30, 2016, we recorded a non-cash pre-tax
loss on extinguishment of $18.6 million and incurred call premiums
and other fees of $56.7 million. We do not consider these items to
be indicative of our ongoing operating performance.
|
|
|
|
(b)
|
|
Eliminates foreign exchange losses resulting from the remeasurement
of assets and liabilities denominated in foreign currencies, net of
the impacts of our foreign currency instruments used to hedge our
balance sheet exposures. Exchange effects attributable to the
remeasurement of our Venezuelan subsidiary represented losses of
$1.2 million and $23.9 million for the three and nine months ended
September 30, 2016, respectively, and gains of $0.6 million and
losses of $52.6 million for the three and nine months ended
September 30, 2015, respectively.
|
|
|
|
(c)
|
|
Represents expenses primarily related to employee termination
benefits including our initiative to improve the overall cost
structure within the European region as well as costs associated
with our Axalta Way initiatives, which are not considered indicative
of our ongoing operating performance.
|
|
|
|
(d)
|
|
Represents fees paid to consultants for professional services
primarily related to our Axalta Way initiatives, which are not
considered indicative of our ongoing operating performance.
|
|
|
|
(e)
|
|
Represents costs associated with the offerings of our common shares
by Carlyle, acquisition-related costs, 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, and
costs associated with changes in the fair value of contingent
consideration associated with our acquisitions, all of which are not
considered indicative of our ongoing operating performance.
|
|
|
|
(f)
|
|
Represents costs for certain non-operational or non-cash (gains) and
losses unrelated to our core business and which we do not consider
indicative of ongoing operations, including indemnity losses (gains)
associated with the Acquisition, losses (gains) on sale and disposal
of property, plant and equipment, losses (gains) on the remaining
foreign currency derivative instruments and non-cash fair value
inventory adjustments associated with our business combinations.
|
|
|
|
(g)
|
|
As a result of currency devaluations in Venezuela, we recorded
non-cash impairment charges relating to a real estate investment of
$10.5 million and $30.6 million during the nine months ended
September 30, 2016 and 2015, respectively. We do not consider these
impairments to be indicative of our ongoing operating performance.
|
|
|
|
(h)
|
|
The income tax impacts are determined using the applicable rates in
the taxing jurisdictions in which expense or income occurred and
includes both current and deferred income tax expense (benefit)
based on the nature of the non-GAAP performance measure.
Additionally, our income tax expense (benefit) also includes the
impact of the removal of discrete income tax impacts within our
effective tax rate which were expenses of $3.2 million and benefits
of $4.6 million for the three months ended September 30, 2016 and
2015, respectively, and an expenses of $4.2 million and benefits of
$5.9 million for the nine months ended September 30, 2016 and 2015,
respectively.
|
|
|
|
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20161027005351/en/
Source: Axalta Coating Systems Ltd.