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| EX-99.1 - EX-99.1 - Axalta Coating Systems Ltd. | d829514dex991.htm |
| 8-K - FORM 8-K - Axalta Coating Systems Ltd. | d829514d8k.htm |
 December 4, 2014
Axalta Coating Systems Ltd.
Q3 2014 Conference Call
Exhibit 99.2 |
 Notice
Regarding Forward Looking Statements, Non-GAAP Financial Measures and
Defined Terms Forward-Looking Statements
This
presentation
and
the
oral
remarks
made
in
connection
herewith
may
contain
“forward-looking
statements”
within
the
meaning
of
the
U.S.
Private
Securities
Litigation
Reform
Act
of
1995.
Any
forward-looking
statements
involve
risks,
uncertainties
and
assumptions.
These
statements
often include words such as “believe,”
“expect,”
“anticipate,”
“intend,”
“plan,”
“estimate,”
“target,”
“project,”
“forecast,”
“seek,”
“will,”
“may,”
“should,”
“could,”
“would,”
or similar expressions. These statements are based on certain assumptions that we
have made in light of our experience in the industry
and
our
perceptions
of
historical
trends,
current
conditions,
expected
future
developments
and
other
factors
we
believe
are
appropriate
under
the
circumstances
as
of
the
date
hereof.
Although
we
believe
that
the
assumptions
and
analysis
underlying
these
statements
are
reasonable
as
of
the
date
hereof,
investors
are
cautioned
not
to
place
undue
reliance
on
these
statements.
We
do
not
have
any
obligation
to
and
do
not
intend
to update any forward-looking statements included herein. You should understand
that these statements are not guarantees of future performance or
results. Actual results could differ materially from those described in any forward-looking statements contained herein or the oral remarks made
in connection herewith as a result of a variety of factors, including known and
unknown risks and uncertainties, many of which are beyond our control.
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
EBITDA and Adjusted EBITDA. 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 EBITDA and Adjusted EBITDA may differ from
that of others in our industry. EBITDA and Adjusted EBITDA should not
be
considered
as
alternatives
to
net
income
(loss),
operating
income
or
any
other
performance
measures
derived
in
accordance
with
GAAP
as
measures
of
operating
performance
or
operating
cash
flows
or
as
measures
of
liquidity.
EBITDA
and
Adjusted
EBITDA
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. Defined Terms
All capitalized terms contained within this presentation have been previously
defined in our filings with the United States Securities and Exchange
Commission.
2
Axalta
Coating
Systems
Ltd. |
 Axalta Coating
Systems Ltd.
3
Axalta –
A Leader in Coatings
Segments
Performance Coatings
59% of Sales
Transportation Coatings
41% of Sales
End-
Markets
Focus
Areas
Body Shops
Electrical
Insulation,
Architectural,
Oil and Gas,
General
Industrial
Net Sales
1
$4,376 million
Adjusted EBITDA
1,2
$833 million
Adjusted
EBITDA
Margin
3
19.0%
Light Vehicle /
Automotive
OEMs
Heavy Duty
Truck, Bus,
Rail,
Agriculture &
Construction
OEMs
(42% of Sales)
(17% of Sales)
(32% of Sales)
(9% of Sales)
Refinish
Industrial
Light
Vehicle
Commercial
Vehicle
1.
Financials as of LTM 9/30/2014.
2.
Adjusted EBITDA reconciliation can be found on pages 12-14 of this presentation.
3.
Adjusted EBITDA Margin is defined as Adjusted EBITDA as a percentage of LTM net sales.
|
 Q3
2014 Highlights •
Initial Public Offering on November 12, 2014 represents an important milestone for
Axalta
–
Listed on New York Stock Exchange under ticker symbol AXTA
–
All-secondary public offering raised approximately $1.1 billion
•
Net sales growth and earnings momentum
–
Q3 2014 net sales and Adjusted EBITDA up 3.2% and 17.5%, respectively, versus Q3
2013 –
Business performed well across both segments (Performance Coatings and
Transportation Coatings)
despite
continued
pressure
from
economic
conditions
in
Latin
America
–
Sixth straight quarter of year-over-year net sales and Adjusted EBITDA
growth •
Maintaining A Strong Balance Sheet
–
Voluntarily prepaid $100 million of New Dollar Term Loan during Q3 2014
–
Net leverage reduction from 5.6x at February 1, 2013 (the “Acquisition”)
to 4.2x at September 30, 2014
•
Continued Execution on Previously Announced Waterborne Expansions
–
Initial commissioning at Jiading, China and broke ground for Wuppertal, Germany on
planned waterborne initiatives
4
Axalta
Coating
Systems
Ltd. |
 Q3
2014 Financial Summary 5
Financial Performance
Adjusted EBITDA
Net Sales
Net sales growth of 3.2% year-over-
year
•
Adjusted EBITDA growth of 17.5%
year-over-year
•
•
Commentary
($ in millions, except per share data)
18.1%
20.6%
% margin
$194
$228
Q3 2013
Q3 2014
$1,075
$1,109
Q3 2013
Q3 2014
Volume growth across all end-markets
(+2.8%), moderate price increases (+1.9%)
offset by currency headwinds in Latin
America (-1.5%)
Higher sales with higher average selling
prices
Lower fixed manufacturing costs from
productivity improvements
Axalta
Coating
Systems
Ltd. |
 Adjusted EBITDA Progression
6
* Amounts include pro forma stand-alone costs, net, for Predecessor corporate
allocations of $92 million, $84 million and $6 million for 2011, 2012 and 2013, respectively.
See Appendix for additional details.
Consistent Adjusted EBITDA growth with six straight quarters of
year-over-year increases
starting
with
the
first
full
quarter
since
the
closing
of
the
Acquisition
($ in millions)
$570
$662
$738
$784
$799
$833
2011 *
2012 *
2013 *
LTM 03/31/14
LTM 06/30/14
LTM 09/30/14
Axalta
Coating
Systems
Ltd. |
 Axalta Coating Systems
Ltd.
Performance Coatings –
Summary
7
Financial Performance
Commentary
($ in millions)
Adjusted EBITDA
Net Sales
3.1%
Note:
Numbers might not foot due to rounding.
22.9%
22.4%
% margin
$462
$478
$181
$185
$644
$664
Q3 2013
Q3 2014
Refinish
Industrial
$147
$149
Q3 2013
Q3 2014
•
Adjusted EBITDA growth attributable to
increased net sales offset by higher operating
expenses to support growth initiatives
Slight increase in Adjusted EBITDA
•
Growth in both Refinish and Industrial end-
markets
•
Volume growth (+3.3%) as well as higher
average selling prices (+1.5%) contributed to
higher net sales offset by unfavorable
impacts of currency (-1.7%)
Sales growth across all regions despite
currency headwinds |
 Transportation Coatings –
Summary
8
Financial Performance
Commentary
($ in millions)
Commercial Vehicle end-market
primarily drove 3Q 2014 sales growth
Significant increase in Adjusted EBITDA
3.4%
10.9%
17.8%
Net Sales
% margin
Adjusted EBITDA
$431
$445
$91
$103
$340
$343
Q3 2013
Q3 2014
Light Vechicle
Commercial Vechicle
Q3 2013
Q3 2014
$47
$80
Note:
Numbers might not foot due to rounding.
Axalta
Coating
Systems
Ltd.
Higher average selling prices (+2.5%) and
increased volumes (+2.1%) offset by
unfavorable currency exchange rates (-1.2%)
•
Growth driven by increased net sales along
with lower fixed manufacturing costs, partially
resulting from our operational improvement
initiatives
• |
 Update
on Transition-Related Costs •
Incurred certain transition-related costs as we have separated from our
Predecessor parent company
•
Majority of transition-related costs in Q3 2014 related to the completion of our
Information Technology transition activities
•
Transition-related costs will be complete by December 31, 2014
9
Impact on Statement of Operations
($ in millions)
Q1 2014
Q2 2014
Q3 2014
YTD 2014
Termination benefits and other
employee-related costs
$3
$3
$3
$9
Consulting and advisory fees
13
8
9
30
Transition-related costs
14
33
34
81
IPO Related Expenses
-
-
3
3
Total Expense
$30
$44
$49
$123
Axalta
Coating
Systems
Ltd. |
 Debt
and Liquidity Summary 10
Net Leverage
Capitalization
5.6x
5.1x
5.0x
4.7x
4.6x
4.4x
4.2x
At LBO
Q2 '13
Q3 '13
Q4 '13
Q1 '14
Q2 '14
Q3 '14
($ in millions)
9/30/2014
Maturity
Cash and Cash Equivalents
$233
Debt:
Revolving Credit Facility ($400 million capacity)
--
2018
First Lien Term Loan (USD), net
2,154
2020
First Lien Term Loan (EUR), net
501
2020
Senior Secured Notes (EUR)
319
2021
Total Senior Secured Debt, net
$2,974
Senior Unsecured Notes (USD)
$750
2021
Other
8
Total Debt
$3,732
Total Net Debt
$3,499
Adjusted EBITDA
$833
PF
Credit Statistics:
At LBO
9/30/2014
Total Leverage
5.9x
4.5x
Total Net Leverage
5.6x
4.2x
Axalta
Coating
Systems
Ltd. |
 Appendix |
 Axalta Coating Systems
Ltd.
Adjusted EBITDA Reconciliation
12
* Reflects the combination of the Predecessor period from January 1 through January
31, 2013 and Successor year ending December 31, 2013. ($ in millions)
FY 2011
FY 2012
FY 2013*
LTM
03/31/14
LTM
06/30/14
LTM
09/30/14
Q3 2013
Q3 2014
Net Income (Loss)
$181
$248
($210)
($66)
$12
($13)
$6
($18)
Interest Expense
-
-
215
236
239
228
63
52
Provision (Benefit) from Income Taxes
121
145
(38)
(18)
(26)
8
(26)
8
Depreciation & Amortization
109
111
311
327
313
302
87
76
Reported EBITDA
$411
$504
$278
$479
$538
$525
$130
$118
A
Inventory Step Up
-
-
104
31
-
-
-
-
B
Merger & Acquisition Related Costs
-
-
28
-
-
-
-
-
C
Financing Costs
-
-
25
3
3
6
-
3
D
Foreign exchange remeasurement (gains) losses
23
18
53
5
(25)
44
(10)
60
E
Long-term employee benefit plan adjustments
33
37
12
11
11
5
2
(5)
F
Termination benefits and other employee related costs
(3)
9
148
148
136
92
48
3
G
Consulting and advisory fees
-
-
55
59
53
51
11
9
H
Transition-related costs
-
-
29
42
69
97
9
37
I
Other Adjustments
15
12
2
5
14
13
3
3
J
Dividends in respect of noncontrolling interest
(1)
(2)
(5)
(2)
(3)
(3)
-
-
K
Management fee expense
-
-
3
3
3
3
1
1
L
Allocated corporate costs and standalone costs, net
92
84
6
-
-
-
-
-
Total Adjustments
$159
$158
$460
$305
$261
$308
$64
$110
Adjusted EBITDA
$570
$662
$738
$784
$799
$833
$194
$228
Note:
Numbers might not foot due to rounding. |
 Adjusted EBITDA Reconciliation (cont’d)
13
Axalta
Coating
Systems
Ltd.
A.
During the Successor nine months ended September 30, 2013, we recorded a non-cash fair value
adjustment associated with our acquisition accounting for inventories. These amounts
increased cost of goods sold by $103.7 million.
B.
In connection with the Acquisition, we incurred $28.1 million of merger and acquisition costs during
the Successor nine months ended September 30, 2013. These costs consisted primarily of
investment banking, legal and other professional advisory services costs.
C.
On August 30, 2012, we signed a debt commitment letter which included the Bridge Facility. Upon the
issuance of the Senior Notes and the entry into the Senior Secured Credit Facilities, the
commitments under the Bridge Facility terminated. Commitment fees related to the Bridge
Facility of $21.0 million and associated fees of $4.0 million were expensed upon the termination of
the Bridge Facility. In connection with the refinancing of the Senior Secured Credit
Facilities in February 2014, we recognized $3.1 million of costs. In addition to the refinancing, we
also incurred a $3.0 million loss on extinguishment of debt recognized during the three months ended
September 30, 2014, which resulted directly from the pro-rata write off of
unamortized deferred financing costs and original issue discounts associated with the prepayment of
$100.0 million of principal on the New Dollar Term Loan. D.
Eliminates foreign exchange gains and losses resulting from the remeasurement of assets and
liabilities denominated in foreign currencies, including a $19.4 million loss related to
the Acquisition date settlement of a foreign currency contract used to hedge the variability of Euro-
based financing.
E.
For the Successor periods ended September 30, 2014 and 2013, eliminates the non-service cost
components of employee benefit costs. Additionally, we deducted a pension curtailment
gain of $6.6 million recorded during the three months ended September 30, 2014. For the
Predecessor period January 1, 2013 through January 31, 2013, eliminates (1) all U.S. pension and other
long-term employee benefit costs that were not assumed as part of the Acquisition and
(2) the non-service cost component of the pension and other long-term employee benefit
costs.
F.
Represents expenses primarily related to employee termination benefits, including our initiative to
improve the overall cost structure within the European region, and other
employee-related costs. Termination benefits include the costs associated with out headcount initiatives for
establishment of new roles and elimination of old roles and other costs associated with cost saving
opportunities that were related to our transition to a standalone entity. G.
Represents fees paid to consultants, advisors, and other third-party professional organizations
for professional services rendered in conjunction with the transition from DuPont to a
standalone entity. H.
Represents charges associated with the transition from DuPont to a standalone entity, including
branding and marketing, information technology related costs, and facility transition
costs, as well as costs associated with the IPO.
For definitions of defined terms used herein, refer to our quarterly report on Form
10-Q for the quarterly period ended September 30, 2014 filed with the
SEC. |
 Adjusted EBITDA Reconciliation (cont’d)
14
I.
Represents costs for certain unusual or non-operational (gains) and losses and
the non-cash impact of natural gas and currency hedge losses allocated
to DPC by DuPont, stock-based compensation, asset impairments, equity investee dividends, indemnity (income) losses
associated
with
the
Acquisition,
gains
resulting
from
amendments
to
long-term
benefit
plans
and
loss
(gain)
on
sale
and
disposal
of
property,
plant and equipment.
J.
Represents the payment of dividends to our joint venture partners by our
consolidated entities that are not wholly owned. K.
Pursuant to Axalta’s management agreement with Carlyle Investment Management,
L.L.C., an affiliate of Carlyle, for management and financial
advisory
services
and
oversight
provided
to
Axalta
and
its
subsidiaries,
Axalta
was
required
to
pay
an
annual
management
fee
of
$3.0
million
and
out-of-pocket
expenses.
This
agreement
was
terminated
upon
consummation
of
the
IPO.
L.
Represents (1) the add-back of corporate allocations from DuPont to DPC for the
usage of DuPont’s facilities, functions and services; costs for
administrative
functions
and
services
performed
on
behalf
of
DPC
by
centralized
staff
groups
within
DuPont;
a
portion
of
DuPont’s
general
corporate expenses; and certain pension and other long-term employee benefit
costs, in each case because we believe these costs are not indicative of
costs we would have incurred as a standalone company net, of (2) estimated standalone costs based on a corporate function
resource analysis that included a standalone executive office, the costs associated
with supporting a standalone information technology infrastructure,
corporate functions such as legal, finance, treasury, procurement and human resources and certain costs related to facilities
management. This resource analysis included anticipated headcount and the
associated overhead costs of running these functions effectively as a
standalone company of our size and complexity. This estimate is provided for additional information and analysis only, as we believe that
it facilitates enhanced comparability between Predecessor and Successor periods. It
represents the difference between the costs that were allocated
to
our
predecessor
by
its
parent
and
the
costs
that
we
believe
would
be
incurred
if
it
operated
as
a
standalone
entity.
This
estimate
is not intended to represent a pro forma adjustment presented within the guidance
of Article 11 of Regulation S-X. Although we believe this estimate is
reasonable, actual results may have differed from this estimate, and any difference may be material. See “Forward-Looking
Statements”
and
“Risk
Factors—Risks
Related
to
our
Business”
within
the
registration
statement
filed
on
Form
S-1.
($ in millions)
Predecessor Year Ended
December 31, 2011
Predecessor Year Ended
December 31, 2012
Predecessor Period from
January 1, 2013 through
January 31, 2013
Allocated corporate costs
$333.5
$333.3
$25.4
Standalone costs
(241.8)
(249.1)
(19.7)
Total
$91.7
$84.2
$5.7
Axalta
Coating
Systems
Ltd. |
 |