Fourth Quarter 2017 Highlights:
-
Net sales of $1,164.8 million, up 13.4% as-reported and 9.9% on a
constant currency basis versus Q4 2016, including 8.6% from
acquisition contribution
-
Net loss driven by U.S. tax reform impacts, severance charges and
acquisition-related costs
-
Adjusted EBITDA growth largely driven by acquisition contribution and
incremental productivity savings, offset partly by higher raw material
prices
-
Operating cash flow of $233.6 million in Q4 versus $228.0 million in
Q4 2016; free cash flow of $195.8 million in Q4 versus $187.1 million
in Q4 2016
Full Year 2017 Highlights:
-
Net sales of $4,352.9 million, up 7.0% versus 2016, largely driven by
acquisition contribution
-
Net income muted by impacts of U.S. tax reform, Venezuela
deconsolidation, severance charges and acquisition-related costs
-
Slightly lower Adjusted EBITDA due to moderate pricing pressure in
Transportation Coatings, lower volumes in Performance Coatings, raw
material inflation and natural disasters
-
Operating cash flow of $540.0 million in 2017 versus $559.3 million in
2016; free cash flow of $415.0 million versus $423.1 million in 2016
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, 2017.
Fourth Quarter Consolidated Financial Results
Net sales of $1,164.8 million for the fourth quarter of 2017 increased
13.4%, including 3.5% favorable foreign currency translation
contribution. Constant currency net sales increased 9.9% in the period,
driven by 8.6% in acquisition contribution, coupled with 0.7% volume
growth and 0.6% higher average selling prices. Modest organic net sales
growth included growth from Industrial and Commercial Vehicle
end-markets globally, but was offset somewhat by the completion of
distributor working capital adjustments in North America Performance
Coatings as well as slightly lower Light Vehicle net sales.
Net loss attributable to Axalta for the fourth quarter was $61.5 million
compared with $37.2 million in Q4 2016, primarily driven by after-tax
charges of $24.4 million in severance, $10.5 million in
acquisition-related costs and the impact of the U.S. Tax Cuts and Jobs
Act legislation. This tax reform resulted in a provisional net tax
charge of $112.5 million primarily from the write-down of net deferred
tax assets to the lower enacted U.S. corporate tax rate of 21%. The
provisionally estimated net tax charge reflects Axalta's current
estimate of the new legislation’s impact, which may differ with further
regulatory guidance, changes in Axalta's current interpretations and
assumptions. Fourth quarter adjusted net income of $90.2 million
increased versus $70.5 million in Q4 2016 due to the contribution of
recent acquisitions, benefit from productivity initiatives and moderate
improved average pricing, offset partially by higher raw material costs.
Adjusted EBITDA of $245.4 million for the fourth quarter compared with
$224.5 million in Q4 2016. This result was driven by the contribution of
recent acquisitions, savings from our operating improvement initiatives,
and by moderate foreign exchange and pricing tailwinds. These were
offset partly by low teens raw material inflation impacts.
“Axalta's fourth quarter demonstrated a return to solid growth following
our more challenged third quarter result, with net sales and Adjusted
EBITDA performance both at or above our revised guidance ranges,” said
Charles W. Shaver, Axalta’s Chairman and Chief Executive Officer. “Our
stated expectation of improved financial performance beginning in the
fourth quarter was met and was supported by broad based market strength
and sound execution by our business teams,” Mr. Shaver said.
Mr. Shaver continued, “For the full year 2017, we are pleased to have
met many of our key objectives, with highlights including significant
cash deployment to M&A, substantial organic growth in our Industrial
coatings end-market, ongoing share gains in our Refinish end-market,
continued innovation investment resulting in more than 250 new product
launches, and key completed investments in new R&D and training centers
globally.”
“Looking ahead at 2018, we anticipate generally stable market conditions
in each segment, and are encouraged by recent and anticipated core
volume growth across most end-markets we serve. Overall, we continue to
expect Axalta to outgrow our end-markets on the basis of strong
technology and innovation and careful execution on our global growth
strategy,” Mr. Shaver noted. “Although we continue to face notable
headwinds from raw material inflation, we have plans in place to
mitigate this through a combination of price increases and substantial
productivity savings which we have already initiated for the current
year.”
Performance Coatings Results
Performance Coatings net sales were $732.3 million in Q4 2017, an
increase of 20.7% year-over-year including 4.2% favorable foreign
currency contribution. Constant currency net sales increased 16.5%,
driven by a 14.5% acquisition contribution and 2.5% higher average
selling prices.
Net sales in our Refinish end-market increased 4.7% in Q4 2017
(increased 0.6% excluding foreign currency translation), driven by price
increases from all regions which were partially offset by lower volumes
from distributor working capital adjustments earlier in the quarter in
North America. Industrial end-market net sales increased 56.8% in the
fourth quarter (increased 52.8% excluding foreign currency translation)
as volume grew high single digits before acquisition contribution and
price increased low single digits.
The Performance Coatings segment generated Adjusted EBITDA of $165.4
million in the fourth quarter, a 21.2% year-over-year increase. This
strong increase was driven by substantial acquisition contribution as
well as significant benefit from ongoing productivity initiatives and
positive pricing contribution. These were offset in part by increased
variable cost headwinds. Segment Adjusted EBITDA margin of 22.6% in Q4
2017 reflected a 10 basis point increase compared to the corresponding
prior year quarter.
Transportation Coatings Results
The Transportation Coatings segment produced net sales of $432.5 million
in Q4 2017, an increase of 2.8% versus fourth quarter 2016. Constant
currency net sales increased 0.2% year-over-year, driven by a 2.4%
increase in volumes, largely offset by 2.2% lower average selling prices.
Light Vehicle net sales decreased 1.2% year-over-year (decreased 3.8%
excluding foreign currency translation), largely impacted by lower sales
in North America similar to last quarter, partially offset by solid
growth notably in EMEA. Commercial Vehicle net sales increased 20.4%
versus last year (increased 17.4% excluding foreign currency
translation), driven by ongoing strength in North America heavy duty
truck production as well as broad based global growth with both truck
and non-truck customers.
The Transportation Coatings segment generated Adjusted EBITDA of $80.0
million in Q4 2017, a decrease of 9.1% compared to the fourth quarter of
2016, with increased variable cost pressure and reduced average selling
prices offset partly by ramping benefits from lower operating expense.
Segment Adjusted EBITDA margin of 18.5% in Q4 2017 decreased compared to
20.9% in the prior year quarter.
Balance Sheet and Cash Flow Highlights
We ended the year with cash and cash equivalents of $769.8 million. Our
net debt was $3.1 billion as of year end, compared to $3.3 billion as of
September 30, 2017, driven by higher cash balances. We made no open
market purchases of our common stock in the fourth quarter.
Fourth quarter operating cash flow was $233.6 million versus $228.0
million in the corresponding quarter of 2016, reflecting stronger
Adjusted EBITDA performance and slightly improved working capital,
offset partly by several one-time cash expenses noted in our exhibits.
Free cash flow, calculated as operating cash flow less capital
expenditures, totaled $195.8 million including capital expenditures of
$37.8 million, an improvement versus $187.1 million in the prior year
quarter.
“We are pleased that the business overall returned to a more normal
operating profile in the fourth quarter, with broad based strength seen
in net sales including modest positive pricing and largely stable
margins in spite of raw material cost headwinds,” said Robert W. Bryant,
Axalta’s Executive Vice President and Chief Financial Officer. “We
further observe that our financial profile remains sound, and our cash
flow metrics underscore our strong business model. For 2018, we continue
to project solid top and bottom line growth, as well as strong free cash
flow, including the assumption of significant net raw material inflation
offset by a combination of positive net price and aggressive action to
continue to rationalize Axalta's cost structure. Our pre-tax charge
taken in Q4 2017 of $28.7 million for severance reflects a key component
of this effort.”
2018 Guidance Update
We are updating our outlook for the full year 2018 as follows:
-
Net sales growth of 8-9% as reported, or 6-7% excluding FX tailwinds
-
Adjusted EBITDA of $940-980 million
-
Interest expense of ~$165 million
-
Income tax rate, as adjusted, of 19-21% reflecting the anticipated
benefit of the enactment of the U.S. Tax Cuts and Jobs Act legislation
-
Free cash flow of $420-460 million
-
Capital expenditures of ~$160 million
-
Depreciation and amortization of ~$365 million
-
Diluted shares outstanding of ~249 million
Revision of Prior Year Financial Statements
During the three months ended June 30, 2017, as part of Axalta’s efforts
to analyze the impact of the 2018 U.S. GAAP accounting adoption of ASU
2014-09, "Revenue from Contracts with Customers (Topic 606)", Axalta
identified and corrected errors that affected previously-issued
consolidated financial statements. Axalta determined that these
corrections were immaterial to the previously-issued financial
statements; however, Axalta has revised certain amounts in the
previously issued condensed consolidated financial statements to reflect
those errors, including revisions to the condensed consolidated
statement of operations for the three months and full year ended
December 31, 2016, as discussed further below.
Axalta has corrected the errors in the timing of revenue recognition by
estimating the additional rebates and pricing concessions at the time of
sale to distribution customers and reducing net sales by $2.0 million
($0.7 million after tax) and $4.7 million ($3.0 million after tax) for
the three months and full year ended December 31, 2016, respectively, as
a result. These corrections did not have a material impact on the 2017
consolidated financial statements.
Conference Call Information
As previously announced, Axalta will hold a conference call to discuss
its fourth quarter and full year 2017 financial results on Tuesday,
February 6th, at 8:00 a.m. ET. 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 www.axalta.com/investorcall.
For those unable to participate in the conference call, a replay will be
available through February 13, 2018. 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 13675328.
Cautionary Statement Concerning Forward-Looking Statements
This release may contain certain forward-looking statements regarding
Axalta and its subsidiaries including those relating to the impact of
external factors including market conditions, raw material price
inflation and U.S. tax reform, and the impact of our pricing, cost
structure and productivity initiatives, as well as our full year 2018
outlook, including net sales growth, Adjusted EBITDA, interest expense,
income tax rate, as adjusted, free cash flow, capital expenditures,
depreciation and amortization, and diluted shares outstanding. 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. More
information on potential factors that could affect Axalta's financial
results is available in the "Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" section
within Axalta's most recent annual report on Form 10-K, and in other
documents that we have filed with, or furnished to, the U.S. Securities
and Exchange Commission. 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, unusual or
infrequent items that the Company have not occurred within the last two
years or we believe 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 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 constant currency net sales growth, Adjusted
EBITDA, income tax rate, as adjusted, or free cash flow 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.
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 13,100 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 December 31,
|
|
|
Years Ended December 31,
|
|
|
|
|
2017
|
|
2016
|
|
|
2017
|
|
2016
|
Net sales
|
|
|
|
$
|
1,164.8
|
|
|
$
|
1,027.4
|
|
|
|
$
|
4,352.9
|
|
|
$
|
4,068.8
|
Other revenue
|
|
|
|
7.6
|
|
|
5.2
|
|
|
|
24.1
|
|
|
23.9
|
Total revenue
|
|
|
|
1,172.4
|
|
|
1,032.6
|
|
|
|
4,377.0
|
|
|
4,092.7
|
Cost of goods sold
|
|
|
|
746.0
|
|
|
641.8
|
|
|
|
2,779.6
|
|
|
2,527.6
|
Selling, general and administrative expenses
|
|
|
|
279.9
|
|
|
263.4
|
|
|
|
997.7
|
|
|
962.5
|
Venezuela asset impairment and deconsolidation charge
|
|
|
|
—
|
|
|
57.9
|
|
|
|
70.9
|
|
|
57.9
|
Research and development expenses
|
|
|
|
16.7
|
|
|
16.1
|
|
|
|
65.3
|
|
|
57.7
|
Amortization of acquired intangibles
|
|
|
|
28.9
|
|
|
21.6
|
|
|
|
101.2
|
|
|
83.4
|
Income from operations
|
|
|
|
100.9
|
|
|
31.8
|
|
|
|
362.3
|
|
|
403.6
|
Interest expense, net
|
|
|
|
37.9
|
|
|
37.4
|
|
|
|
147.0
|
|
|
178.2
|
Other (income) expense, net
|
|
|
|
(1.8
|
)
|
|
14.5
|
|
|
|
25.7
|
|
|
142.7
|
Income (loss) before income taxes
|
|
|
|
64.8
|
|
|
(20.1
|
)
|
|
|
189.6
|
|
|
82.7
|
Provision for income taxes
|
|
|
|
120.4
|
|
|
15.0
|
|
|
|
141.9
|
|
|
38.1
|
Net income (loss)
|
|
|
|
(55.6
|
)
|
|
(35.1
|
)
|
|
|
47.7
|
|
|
44.6
|
Less: Net income attributable to noncontrolling interests
|
|
|
|
5.9
|
|
|
2.1
|
|
|
|
11.0
|
|
|
5.8
|
Net income (loss) attributable to controlling interests
|
|
|
|
$
|
(61.5
|
)
|
|
$
|
(37.2
|
)
|
|
|
$
|
36.7
|
|
|
$
|
38.8
|
Basic net income (loss) per share
|
|
|
|
$
|
(0.26
|
)
|
|
$
|
(0.16
|
)
|
|
|
$
|
0.15
|
|
|
$
|
0.16
|
Diluted net income (loss) per share
|
|
|
|
$
|
(0.26
|
)
|
|
$
|
(0.16
|
)
|
|
|
$
|
0.15
|
|
|
$
|
0.16
|
Basic weighted average shares outstanding
|
|
|
|
240.3
|
|
|
239.3
|
|
|
|
240.4
|
|
|
238.1
|
Diluted weighted average shares outstanding
|
|
|
|
240.3
|
|
|
239.3
|
|
|
|
246.1
|
|
|
244.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXALTA COATING SYSTEMS LTD.
|
Condensed Consolidated Balance Sheets (Unaudited)
|
(In millions, except per share data)
|
|
|
|
|
December 31, 2017
|
|
|
December 31, 2016
|
Assets
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
769.8
|
|
|
|
$
|
535.4
|
|
Restricted cash
|
|
|
|
3.1
|
|
|
|
2.7
|
|
Accounts and notes receivable, net
|
|
|
|
870.2
|
|
|
|
801.9
|
|
Inventories
|
|
|
|
608.6
|
|
|
|
529.7
|
|
Prepaid expenses and other
|
|
|
|
63.9
|
|
|
|
50.3
|
|
Total current assets
|
|
|
|
2,315.6
|
|
|
|
1,920.0
|
|
Property, plant and equipment, net
|
|
|
|
1,388.6
|
|
|
|
1,315.7
|
|
Goodwill
|
|
|
|
1,271.2
|
|
|
|
964.1
|
|
Identifiable intangibles, net
|
|
|
|
1,428.2
|
|
|
|
1,130.3
|
|
Other assets
|
|
|
|
428.6
|
|
|
|
536.1
|
|
Total assets
|
|
|
|
$
|
6,832.2
|
|
|
|
$
|
5,866.2
|
|
Liabilities, Shareholders’ Equity
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
554.9
|
|
|
|
$
|
474.2
|
|
Current portion of borrowings
|
|
|
|
37.7
|
|
|
|
27.9
|
|
Other accrued liabilities
|
|
|
|
489.6
|
|
|
|
440.0
|
|
Total current liabilities
|
|
|
|
1,082.2
|
|
|
|
942.1
|
|
Long-term borrowings
|
|
|
|
3,877.9
|
|
|
|
3,236.0
|
|
Accrued pensions
|
|
|
|
279.1
|
|
|
|
249.1
|
|
Deferred income taxes
|
|
|
|
152.9
|
|
|
|
160.2
|
|
Other liabilities
|
|
|
|
32.3
|
|
|
|
32.2
|
|
Total liabilities
|
|
|
|
5,424.4
|
|
|
|
4,619.6
|
|
Commitments and contingent liabilities
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
Common shares, $1.00 par, 1,000.0 shares authorized, 243.9 and 240.5
shares issued and outstanding at December 31, 2017 and 2016,
respectively
|
|
|
|
242.4
|
|
|
|
239.3
|
|
Capital in excess of par
|
|
|
|
1,354.5
|
|
|
|
1,294.3
|
|
Accumulated deficit
|
|
|
|
(21.4
|
)
|
|
|
(58.1
|
)
|
Treasury shares, at cost
|
|
|
|
(58.4
|
)
|
|
|
—
|
|
Accumulated other comprehensive loss
|
|
|
|
(241.0
|
)
|
|
|
(350.4
|
)
|
Total Axalta shareholders’ equity
|
|
|
|
1,276.1
|
|
|
|
1,125.1
|
|
Noncontrolling interests
|
|
|
|
131.7
|
|
|
|
121.5
|
|
Total shareholders’ equity
|
|
|
|
1,407.8
|
|
|
|
1,246.6
|
|
Total liabilities and shareholders’ equity
|
|
|
|
$
|
6,832.2
|
|
|
|
$
|
5,866.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXALTA COATING SYSTEMS LTD.
|
Condensed Consolidated Statements of Cash Flows (Unaudited)
|
(In millions)
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
2017
|
|
|
2016
|
Operating activities:
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
47.7
|
|
|
|
$
|
44.6
|
|
Adjustment to reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
347.5
|
|
|
|
322.1
|
|
Amortization of financing costs and original issue discount
|
|
|
|
8.0
|
|
|
|
17.8
|
|
Debt extinguishment and refinancing related costs
|
|
|
|
13.4
|
|
|
|
97.6
|
|
Deferred income taxes
|
|
|
|
91.7
|
|
|
|
(15.9
|
)
|
Realized and unrealized foreign exchange (gains) losses, net
|
|
|
|
(3.6
|
)
|
|
|
35.5
|
|
Stock-based compensation
|
|
|
|
38.5
|
|
|
|
41.1
|
|
Asset impairments
|
|
|
|
7.6
|
|
|
|
68.4
|
|
Venezuela deconsolidation charge
|
|
|
|
70.9
|
|
|
|
—
|
|
Other non-cash, net
|
|
|
|
4.4
|
|
|
|
(1.9
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Trade accounts and notes receivable
|
|
|
|
(15.2
|
)
|
|
|
(67.8
|
)
|
Inventories
|
|
|
|
(19.9
|
)
|
|
|
(1.7
|
)
|
Prepaid expenses and other
|
|
|
|
(84.9
|
)
|
|
|
(64.5
|
)
|
Accounts payable
|
|
|
|
39.8
|
|
|
|
32.3
|
|
Other accrued liabilities
|
|
|
|
6.7
|
|
|
|
58.7
|
|
Other liabilities
|
|
|
|
(12.6
|
)
|
|
|
(7.0
|
)
|
Cash provided by operating activities
|
|
|
|
540.0
|
|
|
|
559.3
|
|
Investing activities:
|
|
|
|
|
|
|
|
Business acquisitions (net of cash acquired)
|
|
|
|
(564.4
|
)
|
|
|
(114.8
|
)
|
Purchase of property, plant and equipment
|
|
|
|
(125.0
|
)
|
|
|
(136.2
|
)
|
Reduction of cash due to Venezuela deconsolidation
|
|
|
|
(4.3
|
)
|
|
|
—
|
|
Other investing activities, net
|
|
|
|
4.1
|
|
|
|
(6.0
|
)
|
Cash used for investing activities
|
|
|
|
(689.6
|
)
|
|
|
(257.0
|
)
|
Financing activities:
|
|
|
|
|
|
|
|
Proceeds from short-term borrowings
|
|
|
|
—
|
|
|
|
0.2
|
|
Proceeds from long-term borrowings
|
|
|
|
483.6
|
|
|
|
1,604.3
|
|
Payments on short-term borrowings
|
|
|
|
(14.1
|
)
|
|
|
(8.6
|
)
|
Payments on long-term borrowings
|
|
|
|
(50.0
|
)
|
|
|
(1,755.7
|
)
|
Financing-related costs
|
|
|
|
(10.4
|
)
|
|
|
(86.3
|
)
|
Dividends paid to noncontrolling interests
|
|
|
|
(3.0
|
)
|
|
|
(3.0
|
)
|
Purchase of treasury stock
|
|
|
|
(58.4
|
)
|
|
|
—
|
|
Proceeds from option exercises
|
|
|
|
24.8
|
|
|
|
16.7
|
|
Deferred acquisition-related consideration
|
|
|
|
(5.2
|
)
|
|
|
—
|
|
Other financing activities
|
|
|
|
—
|
|
|
|
(0.2
|
)
|
Cash provided by (used for) financing activities
|
|
|
|
367.3
|
|
|
|
(232.6
|
)
|
Increase in cash and cash equivalents
|
|
|
|
217.7
|
|
|
|
69.7
|
|
Effect of exchange rate changes on cash
|
|
|
|
17.1
|
|
|
|
(19.3
|
)
|
Cash at beginning of period
|
|
|
|
538.1
|
|
|
|
487.7
|
|
Cash at end of period
|
|
|
|
$
|
772.9
|
|
|
|
$
|
538.1
|
|
|
|
|
|
|
|
|
|
Cash at end of period reconciliation:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
769.8
|
|
|
|
$
|
535.4
|
|
Restricted cash
|
|
|
|
3.1
|
|
|
|
2.7
|
|
Cash at end of period
|
|
|
|
$
|
772.9
|
|
|
|
$
|
538.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles net income (loss) to EBITDA and Adjusted
EBITDA for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
Years Ended December 31,
|
|
|
|
|
2017
|
|
2016
|
|
|
2017
|
|
2016
|
Net income (loss)
|
|
|
|
$
|
(55.6
|
)
|
|
$
|
(35.1
|
)
|
|
|
$
|
47.7
|
|
|
$
|
44.6
|
|
Interest expense, net
|
|
|
|
37.9
|
|
|
37.4
|
|
|
|
147.0
|
|
|
178.2
|
|
Provision for income taxes
|
|
|
|
120.4
|
|
|
15.0
|
|
|
|
141.9
|
|
|
38.1
|
|
Depreciation and amortization
|
|
|
|
91.6
|
|
|
86.3
|
|
|
|
347.5
|
|
|
322.1
|
|
EBITDA
|
|
|
|
194.3
|
|
|
103.6
|
|
|
|
684.1
|
|
|
583.0
|
|
Debt extinguishment and refinancing related costs (a)
|
|
|
|
0.4
|
|
|
13.4
|
|
|
|
13.4
|
|
|
97.6
|
|
Foreign exchange remeasurement losses (gains) (b)
|
|
|
|
(0.9
|
)
|
|
0.6
|
|
|
|
7.4
|
|
|
30.6
|
|
Long-term employee benefit plan adjustments (c)
|
|
|
|
1.0
|
|
|
(0.6
|
)
|
|
|
1.4
|
|
|
1.5
|
|
Termination benefits and other employee related costs (d)
|
|
|
|
28.7
|
|
|
36.6
|
|
|
|
35.3
|
|
|
61.8
|
|
Consulting and advisory fees (e)
|
|
|
|
—
|
|
|
2.1
|
|
|
|
(0.1
|
)
|
|
10.4
|
|
Transition-related costs (f)
|
|
|
|
1.9
|
|
|
—
|
|
|
|
7.7
|
|
|
—
|
|
Offering and transactional costs (g)
|
|
|
|
12.3
|
|
|
1.6
|
|
|
|
18.4
|
|
|
6.0
|
|
Stock-based compensation (h)
|
|
|
|
8.0
|
|
|
9.5
|
|
|
|
38.5
|
|
|
41.1
|
|
Other adjustments (i)
|
|
|
|
—
|
|
|
(0.2
|
)
|
|
|
3.6
|
|
|
5.0
|
|
Dividends in respect of noncontrolling interest (j)
|
|
|
|
(0.3
|
)
|
|
—
|
|
|
|
(3.0
|
)
|
|
(3.0
|
)
|
Deconsolidation impacts and impairments (k)
|
|
|
|
—
|
|
|
57.9
|
|
|
|
78.5
|
|
|
68.4
|
|
Adjusted EBITDA
|
|
|
|
$
|
245.4
|
|
|
$
|
224.5
|
|
|
|
$
|
885.2
|
|
|
$
|
902.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
During the year ended December 31, 2017 and the three months and
year ended December 31, 2016 we refinanced our indebtedness,
resulting in losses of $13.0 million, $10.4 million and $88.0
million, respectively. During the three months and years ended
December 31, 2017 and 2016 we prepaid outstanding principal on our
term loans, resulting in non-cash extinguishment losses of $0.4
million, $0.4 million, $3.0 million and $9.6 million, respectively.
We do not consider these items to be indicative of our ongoing
operating performance.
|
(b)
|
|
|
Eliminates foreign exchange gains and 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 zero and $1.8 million for the three months and
year ended December 31, 2017, respectively, and gains of $0.4
million and losses of $23.5 million for the three months and year
ended December 31, 2016, respectively.
|
(c)
|
|
|
Eliminates the non-cash, non-service components of long-term
employee benefit costs.
|
(d)
|
|
|
Represents expenses primarily related to employee termination
benefits and other employee-related costs associated with our Axalta
Way initiatives, which are not considered indicative of our ongoing
operating performance.
|
(e)
|
|
|
Represents fees paid to consultants, and associated true-ups to
estimates, for professional services primarily related to our Axalta
Way initiatives, which are not considered indicative of our ongoing
operating performance.
|
(f)
|
|
|
Represents integration costs related to the 2017 acquisition of the
Industrial Wood business that was a carve-out business from Valspar,
which are not considered indicative of our ongoing operating
performance.
|
(g)
|
|
|
Represents acquisition-related expenses, including changes in the
fair value of contingent consideration, as well as $10.0 million of
costs associated with contemplated merger activities during the
three months ended December 31, 2017 and costs associated with the
2016 secondary offerings of our common shares by Carlyle, all of
which are not considered indicative of our ongoing operating
performance.
|
(h)
|
|
|
Represents non-cash costs associated with stock-based compensation.
|
(i)
|
|
|
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 our 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.
|
(j)
|
|
|
Represents the payment of dividends to our joint venture partners by
our consolidated entities that are not 100% owned, which are
reflected to show the cash operating performance of these entities
on Axalta's financial statements.
|
(k)
|
|
|
During the year ended December 31, 2017, we recorded a loss in
conjunction with the deconsolidation of our Venezuelan subsidiary of
$70.9 million. During the three months and year ended December 31,
2016, we recorded non-cash impairments at our Venezuela subsidiary
of $57.9 million and $68.4 million, respectively, associated with
our operational long-lived assets and a real estate investment.
Additionally, during the year ended December 31, 2017, we recorded
non-cash impairment charges related to certain manufacturing
facilities previously announced for closure of $7.6 million. We do
not consider these 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 December 31,
|
|
|
Years Ended December 31,
|
|
|
|
|
2017
|
|
2016
|
|
|
2017
|
|
2016
|
Net income (loss)
|
|
|
|
$
|
(55.6
|
)
|
|
$
|
(35.1
|
)
|
|
|
$
|
47.7
|
|
|
$
|
44.6
|
Less: Net income attributable to noncontrolling interests
|
|
|
|
5.9
|
|
|
2.1
|
|
|
|
11.0
|
|
|
5.8
|
Net income (loss) attributable to controlling interests
|
|
|
|
(61.5
|
)
|
|
(37.2
|
)
|
|
|
36.7
|
|
|
38.8
|
Debt extinguishment and refinancing related costs (a)
|
|
|
|
0.4
|
|
|
13.4
|
|
|
|
13.4
|
|
|
97.6
|
Foreign exchange remeasurement losses (gains) (b)
|
|
|
|
(0.9
|
)
|
|
0.6
|
|
|
|
7.4
|
|
|
30.6
|
Termination benefits and other employee related costs (c)
|
|
|
|
28.7
|
|
|
36.6
|
|
|
|
35.3
|
|
|
61.8
|
Consulting and advisory fees (d)
|
|
|
|
—
|
|
|
2.1
|
|
|
|
(0.1
|
)
|
|
10.4
|
Transition-related costs (e)
|
|
|
|
1.9
|
|
|
—
|
|
|
|
7.7
|
|
|
—
|
Offering and transactional costs (f)
|
|
|
|
12.3
|
|
|
1.6
|
|
|
|
18.4
|
|
|
6.0
|
Deconsolidation impacts and impairments (g)
|
|
|
|
1.2
|
|
|
57.9
|
|
|
|
84.5
|
|
|
68.4
|
Other (h)
|
|
|
|
0.2
|
|
|
—
|
|
|
|
4.0
|
|
|
0.8
|
Total adjustments
|
|
|
|
43.8
|
|
|
112.2
|
|
|
|
170.6
|
|
|
275.6
|
Income tax (benefit) provision impacts (i)
|
|
|
|
(107.9
|
)
|
|
4.5
|
|
|
|
(86.4
|
)
|
|
34.6
|
Adjusted net income
|
|
|
|
$
|
90.2
|
|
|
$
|
70.5
|
|
|
|
$
|
293.7
|
|
|
$
|
279.8
|
Diluted adjusted net income per share
|
|
|
|
$
|
0.37
|
|
|
$
|
0.29
|
|
|
|
$
|
1.19
|
|
|
$
|
1.14
|
Diluted weighted average shares outstanding (1)
|
|
|
|
245.5
|
|
|
245.0
|
|
|
|
246.1
|
|
|
244.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
For the three months ended December 31, 2017 and 2016, represents
what diluted shares would have been compared to the 240.3 million
and 239.3 million diluted shares, respectively, as reported, if the
period had been in a net income position versus the reported loss.
|
(a)
|
|
|
During the year ended December 31, 2017 and the three months and
year ended December 31, 2016 we refinanced our indebtedness,
resulting in losses of $13.0 million, $10.4 million and $88.0
million, respectively. During the three months and years ended
December 31, 2017 and 2016 we prepaid outstanding principal on our
term loans, resulting in non-cash extinguishment losses of $0.4
million, $0.4 million, $3.0 million and $9.6 million, respectively.
We do not consider these items to be indicative of our ongoing
operating performance.
|
(b)
|
|
|
Eliminates foreign exchange gains and 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 zero and $1.8 million for the three months and
year ended December 31, 2017, respectively, and gains of $0.4
million and losses of $23.5 million for the three months and year
ended December 31, 2016, respectively.
|
(c)
|
|
|
Represents expenses primarily related to employee termination
benefits and other employee-related costs associated with our Axalta
Way initiatives, which are not considered indicative of our ongoing
operating performance.
|
(d)
|
|
|
Represents fees paid to consultants, and associated true-ups to
estimates, for professional services primarily related to our Axalta
Way initiatives, which are not considered indicative of our ongoing
operating performance.
|
(e)
|
|
|
Represents integration costs related to the 2017 acquisition of the
Industrial Wood business that was a carve-out business from Valspar,
which are not considered indicative of our ongoing operating
performance.
|
(f)
|
|
|
Represents acquisition-related expenses, including changes in the
fair value of contingent consideration, as well as $10.0 million of
costs associated with contemplated merger activities during the
three months ended December 31, 2017 and costs associated with the
2016 secondary offerings of our common shares by Carlyle, all of
which are not considered indicative of our ongoing operating
performance.
|
(g)
|
|
|
During the year ended December 31, 2017, we recorded a loss in
conjunction with the deconsolidation of our Venezuelan subsidiary of
$70.9 million. During the three months and year ended December 31,
2016, we recorded non-cash impairments at our Venezuela subsidiary
of $57.9 million and $68.4 million, respectively, associated with
our operational long-lived assets and a real estate investment.
Additionally, during the three months and year ended December 31,
2017, we recorded non-cash impairment charges related to abandoned
in-process research and development assets and certain manufacturing
facilities previously announced for closure of $1.2 million and $9.3
million, respectively. In connection with the manufacturing
facilities announced for closure, we recorded accelerated
depreciation of $4.3 million for the year ended December 31, 2017.
We do not consider these to be indicative of our ongoing operating
performance.
|
(h)
|
|
|
Represents costs for non-cash fair value inventory adjustments
associated with our business combinations, which we do not consider
indicative of ongoing operations.
|
(i)
|
|
|
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. Net income
(loss) and adjusted net income for the three months and years ended
December 31, 2017 and 2016 includes $1.4 million, $13.1 million,
$2.6 million and $13.4 million, respectively, of tax windfall
benefits related to stock compensation. Additionally, the income tax
impact includes the removal of discrete items for the three months
and year ended December 31, 2017 which were expenses of $108.8
million. Of the $108.8 million of discrete income tax impacts,
$112.5 million is related to the impact of the U.S. Tax Cuts and
Jobs Act legislation. Our income tax expense for the three months
and year ended December 31, 2016 includes the removal of discrete
income tax impacts within our effective tax rate which were expenses
of $7.6 million and $11.8 million, respectively.
|
|
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20180206005302/en/
Source: Axalta Coating Systems