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| EX-99.1 - EXHIBIT 99.1 - Axalta Coating Systems Ltd. | a20166308-kxexhibit991.htm |
| 8-K - 8-K - Axalta Coating Systems Ltd. | a20166308-k.htm |
A X A L T A C O A T I N G S Y S T E M S
Q2 2016 FINANCIAL RESULTS
July 26, 2016
Exhibit 99.2
AXALTA COATING SYSTEMS
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, including those relating to 2016 financial projections, including execution on our 2016 goals as well as 2016 net sales, Adjusted
EBITDA, Adjusted EBITDA margin, interest expense, income tax rate, as adjusted, diluted shares, capital expenditures, depreciation and amortization, working
capital, cost savings and related assumptions. 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, which speak only
as of the date hereof. 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 constant currency net sales, EBITDA, Adjusted EBITDA, Free Cash Flow, and Net Debt.
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-operating income or expense, (ii) the impact of certain non-cash,
nonrecurring or other items that are included in net income and EBITDA that we do not consider indicative of our ongoing performance and (iii) certain unusual
or nonrecurring items impacting results in a particular period. 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. Our use of the terms constant currency net sales, EBITDA,
Adjusted EBITDA, Free Cash Flow, and Net Debt may differ from that of others in our industry. Constant currency net sales, EBITDA, Adjusted EBITDA and
Free Cash Flow should not be considered as alternatives to net income, 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. Constant currency net sales, EBITDA, Adjusted EBITDA, Free
Cash Flow and Net Debt 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. The company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis where it is unable to
provide a meaningful or accurate calculation or estimate of reconciling items and the information is not available without reasonable effort.
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.
Defined Terms
All capitalized terms contained within this presentation have been previously defined in our filings with the United States Securities and Exchange Commission.
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Legal Notices
AXALTA COATING SYSTEMS
Q2 2016 Highlights
Solid Q2 financial results
Solid net sales of $1,065.1 million – volume and price up 4.2% YoY, offset by foreign currency
translation impact
Net income attributable to Axalta of $48.5 million (Q2 2015 loss of $25.1 million); Adjusted
EBITDA of $252.6 million versus $255.5 million in Q2 2015
Operating progress highlights
Operations moving forward under new leadership; launched initiative to improve product
throughput in Montbrison, France powder facility
Productivity improvement initiatives on track for full year target of $60 million
Balance sheet & cash flow on track
Cash from operations of $197.3 million versus $103.7 million last year
$100 million debt pre-payment made in April; over $800 million in liquidity available
M&A Activity
Announced three tuck-in deals; strong anticipated returns on investment expected
Results on track to meet our projections
No change to guidance metrics for full year
Continued Industrial market outperformance expected; also share gains in Refinish and Light
Vehicle expected to drive volume growth in 2H 2016
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AXALTA COATING SYSTEMS
Q2 Consolidated Results
Financial Performance Commentary
Net Sales Variance
+2.8% +1.4% (6.9%) (2.7%)
$1,065
$1,094
Q2 2016 FX Volume Price Q2 2015
4
Strong net sales performance
Continued net sales growth in North
America and EMEA, while emerging
market economies remain challenged
Volume growth across all regions in
Performance Coatings; Transportation
Coatings driven largely by North America
and EMEA
Positive pricing contribution from both
segments, led by North America and Latin
America
6.9% unfavorable currency impact largely
from Latin America
($ in millions) 2016 2015 Incl. F/X Excl. F/X
Performance 632 639 (1.0%) 7.8%
Transportation 433 455 (4.9%) (0.7%)
Net Sales 1,065 1,094 (2.7%) 4.2%
Net Income(1) 49 (25)
Adjusted EBITDA 253 256 (1.1%)
(1) Represents Net Income attributable to Axalta
Q2 % Change
AXALTA COATING SYSTEMS
Q2 Performance Coatings Results
Financial Performance Commentary
Net Sales Variance
+5.9% +1.9% (8.8%) (1.0%)
$632 $639
Price Q2 2016 FX Q2 2015 Volume
5
Solid net sales led by Refinish
volumes
Strong volume growth in Refinish across all
regions; Industrial growth driven by EMEA
and Asia Pacific
Price increases in Refinish in most regions
8.8% unfavorable currency impact
principally from Latin America
Adjusted EBITDA margin remains
very strong
Adjusted EBITDA margin slightly below Q2
2015 but remains strong, benefiting from
increased volumes, favorable price
realization, and some ongoing variable
margin benefits, offset by currency
translation impact and increased operating
expense to support growth
Q2
($ in millions) 2016 2015 Incl. F/X Excl. F/X
Refinish 449 460 (2.5%) 9.3%
Industrial 183 179 2.6% 3.7%
Net Sales 632 639 (1.0%) 7.8%
Adjusted EBITDA 157 162 (3.0%)
% margin 24.9% 25.4%
% Change
AXALTA COATING SYSTEMS
Q2 Transportation Coatings Results
Financial Performance Commentary
Net Sales Variance
(1.5%) +0.8% (4.9%)
$433
$455
Q2 2015 Q2 2016 Price FX Volume
6
Net sales pressured by Commercial
volumes
Strong volume growth in North America
and EMEA Light Vehicle, offset largely by
lower volumes in Latin America and Asia
Pacific
Lower volumes in Commercial Vehicle
driven by heavy truck and other vehicle
markets
Modest increase in price for the segment
4.2% unfavorable currency translation
largely from emerging market exposures
Adjusted EBITDA margin up 150 bps
Adjusted EBITDA margin benefited from
price improvement and some additional
variable cost savings
(4.2%)
($ in millions) 2016 2015 Incl. F/X Excl. F/X
Light Vehicle 344 347 (0.8%) 1.5%
Commercial Vehicle 89 108 (18.0%) (8.3%)
Net Sales 433 455 (4.9%) (0.7%)
Adjusted EBITDA 95 93 2.0%
% margin 22.0% 20.5%
Q2 % Change
AXALTA COATING SYSTEMS
Debt and Liquidity Summary
Capitalization
7
Net Leverage
(1) Assumes exchange rate of $1.11 USD/Euro
(2) Indebtedness per balance sheet less cash & cash equivalents divided by LTM Q2 2016 Adjusted EBITDA
($ in millions) @ 6/30/2016 Maturity
Cash and Cash Equivalents $480
Debt:
Revolver ($400 million capacity) - 2018
First Lien Term Loan (USD) 1,890 2020
First Lien Term Loan (EUR) (1) 420 2020
Senior Secured Notes (EUR) (1) 271 2021
Total Senior Secured Debt $2,581
Senior Unsecured Notes (USD) 737 2021
Other Borrowings 36
Total Debt $3,353
Total Net Debt $2,873
LTM Adjusted EBITDA $877
Credit Statistics:
Total Net Leverage (2) 3.3x
5.6x
5.1x
5.0x
4.6x
4.5x
4.3x
4.1x
3.8x
4.0x
3.7x 3.7x
3.4x
3.5x
3.3x
At
LBO
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013 2014 2015 2016
AXALTA COATING SYSTEMS
Full Year 2016 Guidance
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2016 Benefits from Ongoing Growth and Maturity of Productivity Programs
Net sales expected to be essentially flat as-
reported based on anticipated currency
headwinds; constant currency net sales
expected to benefit from volume growth
and positive pricing
Margin expansion expected to continue,
driven by volume, price, and cost reduction
Tailwinds from volume growth, ongoing
productivity and variable cost savings
Tax rate, as adjusted, expected to come
down in 2016 from specific actions taken
Working capital stable in 2016, with free
cash flow expected to rise
Capex is consistent; includes large
discretionary component
($ millions) 2015A 2016E
Net Sales (Excl.-FX) +5% +4-6%
Working Capital / Sales 12% 11-13%
Tax Rate, As Adjusted 30% 25-27%
Diluted Shares (millions) 240 242-245
Comments on Drivers
Capital Expenditures $138 ~$150
Interest Expense $197 $180-190
Adjusted EBITDA $867 $900-940
D&A $310 $320
Net Sales -6% @ 0%
Appendix
AXALTA COATING SYSTEMS
Key Goals For 2016
Stated Objective Comments
Grow the Business
Productivity Initiatives to Improve
Cost Structure
Focus on Operating Improvement
Extend Core Strengths & Globalize
• Flat net sales; growth of 4-6% ex-currency
• Expect to outgrow our end-markets
• $60 million in combined 2016 cost savings
• Axalta Way expected to ramp up in 2016
• New capacity ramps continue, opportunity to
refine our operating strengths
• Strong global foundation, see opportunity to
extend further
Continue High IRR Investment
Projects
• Expansion projects largely completed
• Productivity & growth capex remain in high gear
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M&A Interest Increasing • Continue to participate in attractive bolt-on M&A
FCF & Debt Paydown Still A
Priority
• Expect solid progress in reducing our leverage
ratios
AXALTA COATING SYSTEMS
Full Year 2016 Assumptions
Global GDP growth of
approximately 2.5%
Global industrial production
growth of approximately
1.1%
Global auto build growth of
approximately 3.2%
Modest benefit from lower oil
prices given the extended
supply chain in key raw
materials and category-
specific supply and demand
dynamics
Currency
2016
% Axalta
Net Sales
Rates Used in
Initial 2016
Guidance
Rates Used in
Current 2016
Guidance
% Change
in F/X Rate
US$ per Euro ~27% 1.05 1.11 5.7%
Chinese Yuan per
US$
~13% 6.60 6.57 0.5%
Mexican Peso per
US$
~2% 17.00 18.23 (6.7%)
Brazilian Real per
US$
~3% 4.30 3.60 19.4%
Venezuelan
Bolivar per US$
~3% 237.50 619.71 (61.7%)
Russian Ruble per
US$
~1% 70.00 68.47 2.2%
Currency Assumptions Macroeconomic Assumptions
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AXALTA COATING SYSTEMS
Adjusted EBITDA Reconciliation
Note: Numbers might not foot due to rounding.
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LTM
($ in millions) FY 2015 Q1 2015 Q2 2015 Q1 2016 Q2 2016 6/30/2016
Net Income (Loss) $98 $47 (24) $31 $50 $156
Interest Expense 197 50 49 50 48 196
Provision for Income Taxes 63 1 30 15 20 67
Depreciation & Amortization 308 73 78 76 79 312
Reported EBITDA $665 $171 $132 $171 $197 $730
A Debt extinguishment 3 - - - 2 5
B Foreign exchange remeasurement losses 94 9 58 8 18 53
C Long-term employee benefit plan adjustments - - - 1 1 2
D Termination benefits and other employee related costs 36 4 15 2 7 26
E Consulting and advisory fees 24 3 7 3 3 20
F Transition-related costs (3) - - - - (3)
G Offering and transactional costs (1) (4) - - 1 4
H Stock-based compensation 30 2 12 10 11 37
I Other adjustments (6) 1 2 2 2 (5)
J Dividends in respect of noncontrolling interest (5) (4) (1) (2) - (2)
K Asset impairment 31 - 31 - 11 11
Total Adjustments $202 $11 $124 $24 $56 $147
Adjusted EBITDA $867 $182 $256 $195 $253 $877
AXALTA COATING SYSTEMS
Adjusted EBITDA Reconciliation (cont’d)
A. In FY 2015 and 2Q 2016, we prepaid $100.0 million of the outstanding principal on the New Dollar Term Loan and recorded non-cash pre-tax
losses on extinguishment of $3 million and $2 million, respectively.
B. Eliminates foreign exchange gains and losses resulting from the remeasurement of assets and liabilities denominated in foreign currencies,
net of gains associated with our foreign currency instruments used to hedge our balance sheet exposures. Venezuela represented a gain of
$1 million, and losses of $56 million, $7 million and $16 million for the periods 1Q 2015, 2Q 2015, 1Q 2016, and 2Q 2016.
C. Eliminates the non-cash, non-service cost components of long-term employee benefit costs.
D. Represents expenses primarily related to employee termination benefits and other employee-related costs including our initiative to improve
overall cost structure within the European region as well as costs associated with our Axalta Way initiatives, 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 non-recurring charges associated with the transition from DuPont to a standalone entity, including branding and marketing costs,
information technology related costs and facility transition costs.
G. Represents costs associated with the secondary offerings of our common shares by Carlyle, acquisition-related costs, including a $5.4 million
gain recognized during 1Q 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.
H. Represents costs associated with stock-based compensation, including $8 million of expense during 2Q 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.
I. Represents costs for certain unusual or non-operational (gains) and losses, 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 2015 acquisitions.
J. Represents the payment of dividends to our joint venture partners by our consolidated entities that are not wholly owned, which are not
considered indicative of our ongoing operating performance.
K. As a result of currency devaluations in Venezuela, we recorded non-cash impairment charges relating to a real estate investment of $31
million and $11 million during Q2 2015 and Q2 2016, respectively.
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Thank you