Attached files
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| EX-99.1 - EXHIBIT 99.1 - Axalta Coating Systems Ltd. | a201612318-kxexhibit991.htm |
| 8-K - 8-K - Axalta Coating Systems Ltd. | a201612318-k.htm |
A X A L T A C O A T I N G S Y S T E M S
Q4 & FULL YEAR 2016 FINANCIAL RESULTS
February 8th, 2017
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 2017 financial projections, including execution on our 2017 goals as well as 2017 net sales, net sales excluding FX, Adjusted EBITDA, interest expense,
tax rate, as adjusted, free cash flow, capital expenditures, working capital, depreciation and amortization, diluted shares outstanding, cost savings, contributions from acquisitions, 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 including, but not limited to, the risks and uncertainties described in "Non-GAAP Financial Measures," and "Forward-Looking Statements" as well as "Risk
Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016 and
September 30, 2016.
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 net sales excluding FX, EBITDA, Adjusted EBITDA, Free Cash Flow, tax rate, as adjusted, 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 net sales excluding FX,
EBITDA, Adjusted EBITDA, Free Cash Flow, tax rate, as adjusted, and Net Debt may differ from that of others in our industry. Net sales excluding FX, 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. Net sales excluding FX, EBITDA, Adjusted EBITDA, Free Cash Flow, tax rate, as adjusted, 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. Axalta does not provide a reconciliation for non-GAAP
estimates for net sales excluding FX, EBITDA, Adjusted EBITDA, Free Cash Flow or tax rate, as adjusted, 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 those 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 Axalta’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.
2
Legal Notices
AXALTA COATING SYSTEMS
Q4 & Full Year 2016 Highlights
Q4 financial results
Net sales of $1,029.4 million – volume and price up 5.6% YoY, offset by 3.0% negative FX translation impact
Net loss attributable to Axalta of $36.5 million; Adjusted net income attributable to Axalta of $68.6 million
Adjusted EBITDA of $226.5 million increased from $212.8 million in Q4 2015
FY 2016 financial results
Net sales of $4,073.5 million – volume and price up 4.3% YoY, offset by 4.6% negative FX translation impact
Net income attributable to Axalta of $41.8 million; Adjusted net income attributable to Axalta of $269.4 million
Adjusted EBITDA of $907.1 million increased from $867.2 million in 2015
Operating & innovation progress highlights
New products including Nap-Guard for pipe coating and Voltaprem impregnating resins for EIS
Productivity improvement initiatives on track as planned
Balance sheet & cash flow progress
2016 cash from operations of $559.3 million versus $409.8 million in 2015
Refinancing transactions in 2H 2016 significantly improved our capital structure
$150 million U.S. Term Loan pre-payment made in October
Net debt to Adjusted EBITDA at 3.0x
M&A activity
Closed on six acquisitions in 2016
Ellis Paints and Century Industrial Coatings purchased in January 2017 enhance North America Industrial and
Refinish portfolio
3
AXALTA COATING SYSTEMS 4
Key Goals & Priorities For 2017
Outgrow our End-markets
Drive Superior Customer Service &
Innovation
Maintain Active Operating Cost
Discipline
Execute on Structural Savings with
Productivity Programs
• New product introductions, broader global market penetration,
benefit from consolidation in key end-markets and regions
• Begin rollout of global operating model, complexity reduction,
active cyclical cost discipline, and footprint optimization
• Complete our programs for $200 million total savings (run-
rate by end of 2017)
Disciplined Capital Allocation
• Target bolt-on M&A deals for $100+ million in cumulative
incremental sales
Continue Free Cash Flow and Balance
Sheet Focus
• Focus on FCF and effective capital allocation while
maintaining our balance sheet discipline
Stated Objective Results Expected
• Maintain focus on customer productivity; offer a broad and
deep product selection as differentiator
AXALTA COATING SYSTEMS
Q4 Consolidated Results
Financial Performance Commentary
Net Sales Variance
$1,029 $1,004
FX Q4 2015 Q4 2016 Price Volume
5
Net sales growth drivers
Solid growth from North America
Refinish, Asia Pacific region, and
Light Vehicle in most regions; partially
offset by Latin America downturn and
Commercial Vehicle
Acquisitions contributed 3.1% to
volume growth
Positive pricing contribution from
Performance Coatings, notably from
North America and Latin America
Refinish
3.0% unfavorable currency impact
shows moderating impact versus prior
quarters
+3.4% +2.2% (3.0%) +2.6%
($ in millions) 2016 2015 Incl. F/X Excl. F/X
Performance 609 589 3.4% 7.7%
Transportation 421 415 1.3% 2.7%
Net Sales 1,029 1,004 2.6% 5.6%
Net Income (Loss) (1) (37) 39
Adjusted EBITDA 227 213 6.4%
(1) Represents Net Income (Loss) attributable to Axalta
Q4 % Change
AXALTA COATING SYSTEMS
Q4 Performance Coatings Results
Financial Performance Commentary
Net Sales Variance
6
Net sales led by Industrial, including
acquisition contribution
Volume growth includes 4.3% from
acquisitions
Pricing led by Refinish primarily in
North America and Latin America
4.3% unfavorable currency impact,
principally from Latin America and
Europe
Adjusted EBITDA margin up 50 bps
Adjusted EBITDA margin of 22.7%
remains strong, benefiting from
favorable price realization, some
ongoing variable margin benefits
$589
Price Q4 2016 Q4 2015 Volume
$609
FX
+2.5% +5.2% (4.3%) +3.4%
($ in millions) 2016 2015 Incl. F/X Excl. F/X
Refinish 422 422 0.1% 4.9%
Industrial 186 167 11.8% 14.8%
Net Sales 609 589 3.4% 7.7%
Adjusted EBITDA 139 131 5.8%
% margin 22.7% 22.2%
% ChangeQ4
AXALTA COATING SYSTEMS
Q4 Transportation Coatings Results
Financial Performance Commentary
Net Sales Variance
7
Net sales driven by Light Vehicle
Solid volume growth in Light Vehicle
led by Asia Pacific, North America,
and Latin America; partly offset by
Commercial Vehicle
Acquisitions contributed 1.5% to
volume growth
1.4% unfavorable currency impact
largely from emerging markets and
Europe
Adjusted EBITDA margin up 120 bps
Adjusted EBITDA margin of 20.9%
benefited from moderate additional
variable cost savings
FX Price Q4 2015
$421
Volume Q4 2016
$415
+4.7% (2.0%) (1.4%) +1.3%
($ in millions) 2016 2015 Incl. F/X Excl. F/X
Light Vehicle 343 327 5.0% 6.6%
Commercial Vehicle 78 89 (12.2%) (11.5%)
Net Sales 421 415 1.3% 2.7%
Adjusted EBITDA 88 82 7.4%
% margin 20.9% 19.7%
Q4 % Change
AXALTA COATING SYSTEMS
FY Consolidated Results
Financial Performance Commentary
Net Sales Variance
8
Solid net sales growth excluding
currency
Strong net sales growth in Industrial
driven by North America, EMEA, and
Asia Pacific; Refinish benefited from
improved pricing
Solid volume growth in Light Vehicle
led by North America and Asia
Pacific; offset by lower volumes in
Commercial Vehicle
Acquisitions contributed 2.2% to
volumes
4.6% unfavorable currency impact
largely from emerging markets
Adjusted EBITDA margin up 110 bps
Adjusted EBITDA margin benefited
from pricing, variable cost savings,
offset partly by operating investments
to support growth
2016 2015
$4,074 $4,087
Price Volume FX
+1.7% +2.6% (4.6%) (0.3%)
($ in millions) 2016 2015 Incl. F/X Excl. F/X
Performance 2,403 2,385 0.8% 6.6%
Transportation 1,670 1,702 (1.9%) 1.1%
Net Sales 4,074 4,087 (0.3%) 4.3%
Net Income (Loss) (1) 42 94
Adjusted EBITDA 907 867 4.6%
(1) Represents Net Income (Loss) attributable to Axalta
FY % Change
AXALTA COATING SYSTEMS
Debt and Liquidity Summary
Capitalization
9
Net Leverage
(1) Assumes exchange rate of $1.04 USD/Euro
(2) Total Net Debt = Total Debt minus Cash and Cash Equivalents
(3) Indebtedness per balance sheet less cash & cash equivalents divided by FY 2016 Adjusted EBITDA
4.0x
3.7x 3.7x
3.4x
3.5x
3.3x 3.3x
3.0x
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016
($ in millions) @ 12/31/2016 Maturity
Cash and Cash Equivalents $535
Debt:
Revolver ($400 million capacity) - 2021
First Lien Term Loan (USD) 1,517 2023
First Lien Term Loan (EUR) (1) 414 2023
Total Senior Secured Debt $1,931
Senior Unsecured Notes (USD) 489 2024
Senior Unsecured Notes (EUR) (1) 343 2024
Senior Unsecured Notes (EUR) (1) 461 2025
Other Borrowings 40
Total Debt $3,264
Total Net Debt (2) $2,729
FY 2016 Adjusted EBITDA $907
Total Net Leverage (3) 3.0x
AXALTA COATING SYSTEMS
Full Year 2017 Guidance
Net sales growth includes incremental M&A
contribution of 2-3% from completed
transactions
Margin expansion driven by volume, price,
and ongoing cost reduction initiatives
Headwinds to margins from moderate input
cost inflation, modest sales mix changes,
and foreign currency
Tax rate, as adjusted, benefits from full year
effect of actions completed in 2016
Free cash flow expansion from Adjusted
EBITDA growth and lower interest expense;
slightly offset by employee separation
payments
($ millions) 2016A 2017E
Net Sales, ex FX +4.3% 4-6%
Tax Rate, As Adjusted 24% 22-24%
Free Cash Flow $423 $440-480
Cash flow from operations less capex
Comments on Drivers
Interest Expense $178 ~$150
Adjusted EBITDA $907 $930-980
Net Sales (0.3%) 1-3%
Capex $136 ~$160
10
Diluted Shares (millions)(1) 244 246-249
D&A $322 $335
(1) Reflects adoption of ASU 2016-09, which contributed 1.7 million shares of dilution
Appendix
AXALTA COATING SYSTEMS
Full Year 2017 Assumptions
Global GDP growth of
approximately 2.8%
Global industrial production
growth of approximately 2.4%
Global auto build growth of
approximately 1.6%
Modest headwinds from
higher oil prices given the
extended supply chain in key
raw materials and category-
specific supply and demand
dynamics
Currency
2016
% Axalta
Net Sales
2016 Average
Rate
2017 Average
Rate
Assumption
% Change
in F/X Rate
US$ per Euro ~28% 1.11 1.05 (5.1%)
Chinese Yuan per
US$
~13% 6.65 6.80 (2.3%)
Brazilian Real per
US$
~3% 3.49 3.80 (8.3%)
Mexican Peso per
US$
~2% 18.68 20.00 (6.6%)
US$ per British
Pound
~2% 1.36 1.28 (5.6%)
Venezuelan
Bolivar per US$
~1% 493.57 1,262.00 (60.9%)
Russian Ruble per
US$
~1% 67.03 65.00 3.1%
Currency Assumptions Macroeconomic Assumptions
12
AXALTA COATING SYSTEMS
Capitalization Summary
13
Capitalization
Extended term loan maturities to 2023
Improved spreads and reduced interest rate floor on both loans
Allocated higher balance to EUR denominated term loan
(1) Reflects gross principal outstanding
(2) Assumes exchange rate of $1.04 USD/Euro
@ 9/30/2016 @ 12/31/2016
($ in millions)
Interest
Rate Maturity USD
Interest
Rate Maturity USD
Revolver ($400mm Capacity) L + 225 8/1/2021 - L + 225 8/1/2021 -
First Lien Term Loan - USD (1) L + 275 2/1/2020 1,925 L + 250 2/1/2023 1,545
First Lien Term Loan - EUR (1)(2) E + 300 2/1/2020 210 E + 225 2/1/2023 418
Total Senior Secured Debt $2,135 $1,963
Senior Unsecured Notes - USD (1) 4.875% 8/15/2024 500 4.875% 8/15/2024 500
Senior Unsecured Notes - EUR (1)(2) 4.250% 8/15/2024 376 4.250% 8/15/2024 350
Senior Unsecured Notes - EUR (1)(2) 3.750% 1/15/2025 505 3.750% 1/15/2025 470
Notes Payable and Other Borrowings 37 40
Deferred Financing & OID (70) (59)
Total Debt $3,482 $3,264
AXALTA COATING SYSTEMS
Adjusted EBITDA Reconciliation
Note: Numbers might not foot due to rounding.
14
($ in millions) FY 2016 FY 2015 Q4 2016 Q4 2015
Net Income (Loss) $48 $98 (34) $39
Interest Expense 178 197 37 47
Provision for Income Taxes 40 63 16 15
Depreciation & Amortization 322 308 86 82
Reported EBITDA $588 $665 $106 $183
A Debt extinguishment and refinancing related costs 98 3 13 3
B Foreign exchange remeasurement losses 31 94 1 4
C Long-term employee benefit plan adjustments 2 - (1) -
D Termination benefits and other employee related costs 62 36 37 17
E Consulting and advisory fees 10 24 2 7
F Transition-related costs - (3) - (3)
G Offering and transactional costs 6 (2) 2 -
H Stock-based compensation 41 30 10 8
I Other adjustments 5 (6) - (5)
J Dividends in respect of noncontrolling interest (3) (5) - -
K Asset impairment 68 31 58 -
Total Adjustments $319 $202 $121 $30
Adjusted EBITDA $907 $867 $227 $213
AXALTA COATING SYSTEMS
Adjusted EBITDA Reconciliation (cont’d)
A. During the three months and years ended December 31, 2016 and 2015 we prepaid principal on our term loans, resulting in non-cash extinguishment losses
of $3 million, $10 million, $3 million and $3 million, respectively. During the three months and year ended December 31, 2016, we amended our Credit
Agreement and refinanced our indebtedness, resulting in additional losses of $10 million and $88 million, respectively. 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 gains of $1 million and losses of $24 million for the three months and year ended December 31, 2016, respectively, and gains of $1 million and
losses of $52 million for three months and year ended December 31, 2015.
C. Eliminates the non-cash, non-service cost (gain) 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 a change in estimate associated with the transition costs from DuPont to a standalone entity, including certain indemnities. We do not consider
these items to be indicative of our ongoing operating performance.
G. Represents costs associated with the secondary offerings of our common shares by Carlyle and acquisition-related expenses, including changes in the fair
value of contingent consideration, all of which are not considered indicative of our ongoing operating performance.
H. Represents non-cash costs associated with stock-based compensation, including $8 million of expense during the year ended December 31, 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 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.
J. Represents the payment of dividends to our joint venture partners by our consolidated entities that are not wholly owned, which are reflected to show cash
operating performance of these entities on Axalta’s financial statements.
K. As a result of currency devaluations in Venezuela, we recorded non-cash impairment charges relating to a real estate investment of $11 million and $31
million during the years ended December 31, 2016 and 2015, respectively. Additionally, during the year ended December 31, 2016, we recorded a $58
million non-cash impairment on long-lived assets associated with our Venezuela operations. We do not consider these impairments to be indicative of our
ongoing operating performance.
15
Thank you
Investor Relations Contact:
Chris Mecray
Christopher.Mecray@axaltacs.com
215-255-7970