Axalta Coating Systems Ltd. (NYSE:AXTA) (“Axalta”), a leading
global coatings company, announced its financial results for the
third quarter ended September 30, 2023.
Third
Quarter 2023
Highlights:
- Net
sales increased 5.7% year-over-year to $1.3 billion
-
Income from operations increased $40 million year-over-year to
$163 million and Adjusted EBIT increased $40 million
year-over-year to $188 million
-
Operating margins increased 250 bps year-over-year and Adjusted
EBIT margin improved 240 bps year-over-year
-
Cash provided by operating activities of $210 million and Free Cash
Flow of $182 million
-
Repurchased $50 million of common shares; repriced term loan and
improved pricing by 50 bps
-
Increased full year 2023 earnings outlook
Third Quarter
2023 Consolidated Financial
Results
Third quarter 2023 net sales increased 5.7%
year-over-year (3.5% excluding foreign currency translation) to
$1.3 billion. The increase in net sales was driven primarily by
6.3% higher average price-mix and a modest foreign currency
translation benefit of 2.2%. Volumes declined by 2.8% as strong
growth in Mobility Coatings was more than offset by declines in
Performance Coatings.
Income from operations increased by 32%
year-over-year in the third quarter of 2023 to $163 million versus
$124 million in the prior year period. The increase in income from
operations was driven primarily by strong price-mix and improved
variable costs offset partially by higher labor expense and costs
related to productivity investments. Operating margin of 12.5%
improved by 250 bps compared to the prior year period. Adjusted
EBIT improved to $188 million from $148 million in the third
quarter of 2023. Adjusted EBIT margin of 14.3% improved by 240 bps
compared to the same period last year.
Net income attributable to controlling interests in
the third quarter of 2023 was $73 million, or $0.33 per diluted
share, compared to $62 million, or $0.28 per diluted share, in the
same period last year. Adjusted net income in the third quarter of
2023 was $99 million, or $0.45 per diluted share, compared to $86
million, or $0.39 per diluted share, in the same period last year.
The increase is primarily driven by higher income from operations,
partially offset by the increase in interest expense.
Third quarter 2023 cash provided by operating
activities was $210 million versus $80 million in the prior year
period led by earnings growth and improvements in working capital.
Free cash flow totaled $182 million compared to $51 million in the
same period last year.
Axalta ended the third quarter with cash and cash
equivalents of $606 million and total liquidity of
$1.1 billion. Net debt to trailing twelve month ("LTM")
Adjusted EBITDA ratio (total net leverage ratio) was 3.2x at
quarter-end versus 3.6x as of June 30, 2023. Axalta repurchased
approximately 1.8 million common shares during the third quarter
for a total consideration of $50.0 million at an average price of
$27.79 per share. Subsequent to quarter close, Axalta acquired
André Koch AG, a long-term Refinish distribution partner in
Switzerland.
Discussion of Segment Results:
Performance Coatings third quarter 2023 net sales
were $856 million, up 2.2% from the prior year period. The
increase in net sales was driven primarily by 6.3% better price-mix
and foreign currency translation benefit of 2.5% with a 6.6% offset
from lower volumes. Refinish volumes were modestly lower
year-over-year, as stability in our premium segment was more than
offset by the deprioritization of certain low-margin products.
Industrial volumes declined by high single digits year-over-year,
largely attributable to softer macroeconomic conditions and
continued de-stocking principally in North America building
products.
The Performance Coatings segment generated Adjusted
EBIT of $135 million in the third quarter compared to $122 million
in the same period last year, with associated margins of 15.8% and
14.5%, respectively. The increase in segment Adjusted EBIT and
margin were driven by strong pricing and variable cost deflation,
which more than offset higher labor expense.
Mobility Coatings third quarter 2023 net sales were
$453 million, up 13.0% from the same period a year ago. The
increase in net sales was driven primarily by price-mix growth of
6.2% and volume improvement of 5.1%. Volume improvement was led
mainly by above market growth in Greater China. Global demand
continued to be robust for Light Vehicle and Commercial Vehicle as
reflected in improved 2023 auto production forecasts.
The Mobility Coatings segment generated Adjusted
EBIT of $40 million in the third quarter compared to $4 million in
the prior year period, with associated margins of 8.8% and 0.9%,
respectively. The increase in segment Adjusted EBIT and margin was
driven by strong pricing, variable cost deflation and volume
improvement. Third quarter 2023 marked the seventh consecutive
quarter of sequential earnings improvement for Mobility
Coatings.
“This was a solid quarter for Axalta,” said Chris
Villavarayan, Axalta’s CEO and President. “We came together as one
global team and executed very well. I am extremely proud of the
team’s efforts and earnings results for the quarter, but I want to
reiterate that Axalta’s transformation journey is just beginning.
We have made investments into the business this year, which will
begin to unlock the earnings power of the enterprise.”
Financial Guidance
Q4 & FY2023 Outlook:
($ in millions) |
Q4 2023 |
FY 2023 |
|
|
|
Net Sales YoY % |
+LSD |
+MSD |
Adjusted EBIT |
~$180 |
~$670 |
Adjusted EBITDA |
~$250 |
~$950 |
FY2023 Modeling Assumptions:
(in millions, except % and per share data) |
Projection |
|
|
D&A (step-up D&A) |
~$280 ($55) |
Tax Rate, As Adjusted |
~24% |
Diluted Shares Outstanding |
~222 |
Interest Expense |
~$212 |
Capex |
~$155 |
Free Cash Flow |
~$400 |
Adjusted Diluted EPS |
~$1.60 |
Axalta does not provide a reconciliation for
non-GAAP estimates for Adjusted EBIT, Adjusted EBITDA, tax rate, as
adjusted, free cash flow, or Adjusted Diluted EPS 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. See “Non-GAAP
Financial Measures” for more information.
Conference Call Information
Axalta will hold a conference call to discuss its
third quarter 2023 financial results on Wednesday, November 1, 2023
at 8:00 a.m. ET. A live webcast of the conference call will be
available online at www.axalta.com/investorcall. A replay of the
webcast will be posted shortly after the call and will remain
accessible through November 1, 2024. The dial-in phone number for
the conference call is +1-201-689-8560. For those unable to
participate, a replay will be available through November 8, 2023.
The replay dial-in number is +1-412-317-6671. The replay passcode
is 13741705.
Public Dissemination of Certain
InformationWe intend to use our investor relations page at
ir.axalta.com as a means of disclosing material information to the
public in a broad, non-exclusionary manner for purposes of the U.S.
Securities and Exchange Commission’s (the “SEC”) Regulation Fair
Disclosure (or Reg. FD). Investors should routinely monitor that
site, in addition to our press releases, SEC filings and public
conference calls and webcasts, as information posted on that page
could be deemed to be material information.
Cautionary Statement Concerning
Forward-Looking Statements
This release may contain certain forward-looking
statements within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995 regarding Axalta and its subsidiaries
including, but not limited to, our outlook/assumptions, which
includes net sales growth, Adjusted EBIT, Adjusted EBITDA,
depreciation & amortization, step up depreciation &
amortization, tax rate, as adjusted, diluted shares outstanding,
interest expense, capital expenditures, free cash flow and Adjusted
Diluted EPS. Axalta has identified some of these forward looking
statements with words such as “assumptions,” “outlook,” “believe,”
“estimates,” “will,” “guidance,” and “projection,” and the negative
of these words or other comparable or similar terminology. 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, as well as impacts from
operational disruptions related to our ERP system implementation,
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 “Forward Looking Statements,” “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” within Axalta’s most recent Annual Report on
Form 10-K and Quarterly Report on Form 10-Q, and in other documents
that we have filed with, or furnished to, the SEC. 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 release includes financial information that is not presented
in accordance with generally accepted accounting principles in the
United States (“GAAP”), including Adjusted EBIT, EBITDA, Adjusted
EBITDA, Adjusted EBIT margin, free cash flow, adjusted net income,
Adjusted Diluted EPS, and total net leverage ratio. 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, Adjusted EBIT
and Adjusted diluted EPS consist of EBITDA, EBIT and Diluted EPS,
respectively, adjusted for (i) certain non-cash items included
within net income, (ii) certain items Axalta does not believe are
indicative of ongoing operating performance or (iii) certain
nonrecurring, unusual or infrequent items that have not otherwise
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 (loss) 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 Adjusted EBIT, EBITDA,
Adjusted EBITDA, Adjusted EBIT margin, free cash flow, adjusted net
income, Adjusted Diluted EPS, and total net leverage ratio may
differ from that of others in our industry. Adjusted EBIT, EBITDA,
Adjusted EBITDA, Adjusted EBIT margin, free cash flow, adjusted net
income, Adjusted Diluted EPS, and total net leverage ratio should
not be considered as alternatives to net sales, net income (loss),
income (loss) from operations or any other performance measures
derived in accordance with GAAP as measures of operating
performance or net cash provided by operating activities or as
measures of liquidity. Adjusted EBIT, EBITDA, Adjusted EBITDA,
Adjusted EBIT margin, free cash flow, adjusted net income, Adjusted
Diluted EPS, and total net leverage ratio 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 release 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
Adjusted EBIT, Adjusted EBITDA, tax rate, as adjusted, free cash
flow or Adjusted Diluted EPS 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
GAAP results.
Organic Sales
Organic sales are calculated by excluding the
impact of the change in average exchange rates between the current
and comparable period by currency denomination exposure of the
comparable period amount and the impact of recent acquisitions and
divestitures.
Segment Financial Measures
The primary measure of segment operating
performance is Adjusted EBIT, 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.
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 global team at Axalta continues to find ways to serve
our more than 100,000 customers in over 140 countries better every
day with the finest coatings, application systems and technology.
For more information visit axalta.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, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net sales |
|
$ |
1,309.0 |
|
|
$ |
1,238.7 |
|
|
$ |
3,886.8 |
|
|
$ |
3,647.7 |
|
Cost of goods sold |
|
|
885.5 |
|
|
|
876.6 |
|
|
|
2,691.8 |
|
|
|
2,600.4 |
|
Selling, general and administrative expenses |
|
|
209.0 |
|
|
|
186.4 |
|
|
|
625.2 |
|
|
|
571.6 |
|
Other operating charges |
|
|
11.7 |
|
|
|
5.3 |
|
|
|
20.9 |
|
|
|
17.8 |
|
Research and development expenses |
|
|
18.5 |
|
|
|
16.5 |
|
|
|
56.2 |
|
|
|
49.6 |
|
Amortization of acquired intangibles |
|
|
20.9 |
|
|
|
30.4 |
|
|
|
66.4 |
|
|
|
94.9 |
|
Income from operations |
|
|
163.4 |
|
|
|
123.5 |
|
|
|
426.3 |
|
|
|
313.4 |
|
Interest expense, net |
|
|
55.1 |
|
|
|
35.0 |
|
|
|
157.9 |
|
|
|
101.1 |
|
Other expense, net |
|
|
5.7 |
|
|
|
3.4 |
|
|
|
15.5 |
|
|
|
12.4 |
|
Income before income taxes |
|
|
102.6 |
|
|
|
85.1 |
|
|
|
252.9 |
|
|
|
199.9 |
|
Provision for income taxes |
|
|
29.3 |
|
|
|
21.8 |
|
|
|
58.0 |
|
|
|
51.6 |
|
Net income |
|
|
73.3 |
|
|
|
63.3 |
|
|
|
194.9 |
|
|
|
148.3 |
|
Less: Net income attributable to noncontrolling interests |
|
|
0.4 |
|
|
|
0.9 |
|
|
|
0.6 |
|
|
|
0.3 |
|
Net income attributable to controlling interests |
|
$ |
72.9 |
|
|
$ |
62.4 |
|
|
$ |
194.3 |
|
|
$ |
148.0 |
|
Basic net income per share |
|
$ |
0.33 |
|
|
$ |
0.28 |
|
|
$ |
0.88 |
|
|
$ |
0.67 |
|
Diluted net income per share |
|
$ |
0.33 |
|
|
$ |
0.28 |
|
|
$ |
0.87 |
|
|
$ |
0.66 |
|
Basic weighted average shares outstanding |
|
|
221.0 |
|
|
|
220.6 |
|
|
|
221.3 |
|
|
|
222.0 |
|
Diluted weighted average shares outstanding |
|
|
221.9 |
|
|
|
221.2 |
|
|
|
222.1 |
|
|
|
222.6 |
|
AXALTA COATING SYSTEMS LTD. |
Condensed Consolidated Balance Sheets (Unaudited) |
(In millions, except per share data) |
|
|
September 30, 2023 |
|
December 31, 2022 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
605.8 |
|
|
$ |
645.2 |
|
Restricted cash |
|
|
2.3 |
|
|
|
9.7 |
|
Accounts and notes receivable, net |
|
|
1,301.1 |
|
|
|
1,067.4 |
|
Inventories |
|
|
750.0 |
|
|
|
829.6 |
|
Prepaid expenses and other current assets |
|
|
126.6 |
|
|
|
140.8 |
|
Total current assets |
|
|
2,785.8 |
|
|
|
2,692.7 |
|
Property, plant and equipment, net |
|
|
1,169.3 |
|
|
|
1,190.2 |
|
Goodwill |
|
|
1,484.0 |
|
|
|
1,498.0 |
|
Identifiable intangibles, net |
|
|
1,036.6 |
|
|
|
1,112.3 |
|
Other assets |
|
|
520.3 |
|
|
|
566.0 |
|
Total assets |
|
$ |
6,996.0 |
|
|
$ |
7,059.2 |
|
Liabilities, Shareholders’ Equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
709.9 |
|
|
$ |
733.5 |
|
Current portion of borrowings |
|
|
32.0 |
|
|
|
31.0 |
|
Other accrued liabilities |
|
|
616.4 |
|
|
|
620.2 |
|
Total current liabilities |
|
|
1,358.3 |
|
|
|
1,384.7 |
|
Long-term borrowings |
|
|
3,510.6 |
|
|
|
3,673.3 |
|
Accrued pensions |
|
|
201.3 |
|
|
|
205.1 |
|
Deferred income taxes |
|
|
145.4 |
|
|
|
162.1 |
|
Other liabilities |
|
|
131.8 |
|
|
|
134.5 |
|
Total liabilities |
|
|
5,347.4 |
|
|
|
5,559.7 |
|
Shareholders’ equity: |
|
|
|
|
Common shares, $1.00 par, 1,000.0 shares authorized, 253.7 and
252.4 shares issued at September 30, 2023 and
December 31, 2022, respectively |
|
|
253.7 |
|
|
|
252.4 |
|
Capital in excess of par |
|
|
1,561.2 |
|
|
|
1,536.5 |
|
Retained earnings |
|
|
1,213.1 |
|
|
|
1,018.8 |
|
Treasury shares, at cost, 33.6 and 31.8 shares at
September 30, 2023 and December 31, 2022 |
|
|
(937.3 |
) |
|
|
(887.3 |
) |
Accumulated other comprehensive loss |
|
|
(486.6 |
) |
|
|
(466.9 |
) |
Total Axalta shareholders’ equity |
|
|
1,604.1 |
|
|
|
1,453.5 |
|
Noncontrolling interests |
|
|
44.5 |
|
|
|
46.0 |
|
Total shareholders’ equity |
|
|
1,648.6 |
|
|
|
1,499.5 |
|
Total liabilities and shareholders’ equity |
|
$ |
6,996.0 |
|
|
$ |
7,059.2 |
|
AXALTA COATING SYSTEMS LTD. |
Condensed Consolidated Statements of Cash Flows (Unaudited) |
(In millions) |
|
|
Nine Months Ended September
30, |
|
|
|
2023 |
|
|
|
2022 |
|
Operating activities: |
|
|
|
|
Net income |
|
$ |
194.9 |
|
|
$ |
148.3 |
|
Adjustment to reconcile net income to cash provided by operating
activities: |
|
|
|
|
Depreciation and amortization |
|
|
206.9 |
|
|
|
229.5 |
|
Amortization of deferred financing costs and original issue
discount |
|
|
6.5 |
|
|
|
7.2 |
|
Debt extinguishment and refinancing related costs |
|
|
7.0 |
|
|
|
(0.6 |
) |
Deferred income taxes |
|
|
(8.1 |
) |
|
|
2.8 |
|
Realized and unrealized foreign exchange losses, net |
|
|
21.3 |
|
|
|
5.5 |
|
Stock-based compensation |
|
|
19.3 |
|
|
|
14.0 |
|
Divestiture and impairment charges |
|
|
15.3 |
|
|
|
0.7 |
|
Interest income on swaps designated as net investment hedges |
|
|
(9.1 |
) |
|
|
(16.1 |
) |
Commercial agreement restructuring charge |
|
|
— |
|
|
|
25.0 |
|
Other non-cash, net |
|
|
25.0 |
|
|
|
(1.6 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
Trade accounts and notes receivable |
|
|
(212.9 |
) |
|
|
(242.4 |
) |
Inventories |
|
|
65.8 |
|
|
|
(220.8 |
) |
Prepaid expenses and other assets |
|
|
(68.3 |
) |
|
|
(78.9 |
) |
Accounts payable |
|
|
17.3 |
|
|
|
189.7 |
|
Other accrued liabilities |
|
|
8.8 |
|
|
|
(2.5 |
) |
Other liabilities |
|
|
(0.4 |
) |
|
|
(11.6 |
) |
Cash provided by operating activities |
|
|
289.3 |
|
|
|
48.2 |
|
Investing activities: |
|
|
|
|
Purchase of property, plant and equipment |
|
|
(105.3 |
) |
|
|
(107.5 |
) |
Interest proceeds on swaps designated as net investment hedges |
|
|
9.1 |
|
|
|
16.1 |
|
Settlement proceeds on swaps designated as net investment
hedges |
|
|
29.4 |
|
|
|
25.0 |
|
Other investing activities, net |
|
|
2.3 |
|
|
|
(1.5 |
) |
Cash used for investing activities |
|
|
(64.5 |
) |
|
|
(67.9 |
) |
Financing activities: |
|
|
|
|
Proceeds from short-term borrowings |
|
|
8.8 |
|
|
|
— |
|
Proceeds from long-term borrowings |
|
|
197.4 |
|
|
|
— |
|
Payments on short-term borrowings |
|
|
(39.8 |
) |
|
|
(52.3 |
) |
Payments on long-term borrowings |
|
|
(359.5 |
) |
|
|
(20.5 |
) |
Financing-related costs |
|
|
(8.5 |
) |
|
|
(0.1 |
) |
Purchases of common stock |
|
|
(50.0 |
) |
|
|
(200.1 |
) |
Net cash flows associated with stock-based awards |
|
|
6.7 |
|
|
|
(1.7 |
) |
Deferred acquisition-related consideration |
|
|
(7.7 |
) |
|
|
— |
|
Other financing activities, net |
|
|
(0.1 |
) |
|
|
(0.2 |
) |
Cash used for financing activities |
|
|
(252.7 |
) |
|
|
(274.9 |
) |
Decrease in cash |
|
|
(27.9 |
) |
|
|
(294.6 |
) |
Effect of exchange rate changes on cash |
|
|
(18.9 |
) |
|
|
(29.9 |
) |
Cash at beginning of period |
|
|
654.9 |
|
|
|
851.2 |
|
Cash at end of period |
|
$ |
608.1 |
|
|
$ |
526.7 |
|
|
|
|
|
|
Cash at end of period reconciliation: |
|
|
|
|
Cash and cash equivalents |
|
$ |
605.8 |
|
|
$ |
517.4 |
|
Restricted cash |
|
|
2.3 |
|
|
|
9.3 |
|
Cash at end of period |
|
$ |
608.1 |
|
|
$ |
526.7 |
|
The following table reconciles income from
operations to adjusted EBIT and segment adjusted EBIT for the
periods presented (in millions):
|
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Income from operations |
|
$ |
163.4 |
|
|
$ |
123.5 |
|
|
$ |
426.3 |
|
|
$ |
313.4 |
|
Other expense, net |
|
|
5.7 |
|
|
|
3.4 |
|
|
|
15.5 |
|
|
|
12.4 |
|
Total |
|
|
157.7 |
|
|
|
120.1 |
|
|
|
410.8 |
|
|
|
301.0 |
|
Debt extinguishment and refinancing-related costs (benefits)
(a) |
|
|
4.0 |
|
|
|
(0.4 |
) |
|
|
7.0 |
|
|
|
(0.6 |
) |
Termination benefits and other employee-related costs (b) |
|
|
11.5 |
|
|
|
5.0 |
|
|
|
13.6 |
|
|
|
10.1 |
|
Acquisition and divestiture-related costs (c) |
|
|
0.4 |
|
|
|
0.2 |
|
|
|
0.8 |
|
|
|
2.8 |
|
Impairment (benefits) charges (d) |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
15.3 |
|
|
|
(0.4 |
) |
Accelerated depreciation and site closure costs (e) |
|
|
2.1 |
|
|
|
1.1 |
|
|
|
4.0 |
|
|
|
4.2 |
|
Russia sanction-related impacts (f) |
|
|
(0.2 |
) |
|
|
(1.3 |
) |
|
|
(1.5 |
) |
|
|
4.8 |
|
Commercial agreement restructuring impacts (g) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
25.0 |
|
Other adjustments (h) |
|
|
(0.6 |
) |
|
|
0.8 |
|
|
|
(0.9 |
) |
|
|
1.1 |
|
Step-up depreciation and amortization (i) |
|
|
13.0 |
|
|
|
22.6 |
|
|
|
42.5 |
|
|
|
70.1 |
|
Adjusted EBIT |
|
$ |
187.8 |
|
|
$ |
148.0 |
|
|
$ |
491.6 |
|
|
$ |
418.1 |
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,309.0 |
|
|
$ |
1,238.7 |
|
|
$ |
3,886.8 |
|
|
$ |
3,647.7 |
|
Adjusted EBIT margin |
|
|
14.3 |
% |
|
|
11.9 |
% |
|
|
12.6 |
% |
|
|
11.5 |
% |
|
|
|
|
|
|
|
|
|
Segment Adjusted EBIT: |
|
|
|
|
|
|
|
|
Performance Coatings |
|
$ |
135.0 |
|
|
$ |
121.8 |
|
|
$ |
362.1 |
|
|
$ |
341.6 |
|
Mobility Coatings |
|
|
39.8 |
|
|
|
3.6 |
|
|
|
87.0 |
|
|
|
6.4 |
|
Total |
|
|
174.8 |
|
|
|
125.4 |
|
|
|
449.1 |
|
|
|
348.0 |
|
Step-up depreciation and amortization (i) |
|
|
13.0 |
|
|
|
22.6 |
|
|
|
42.5 |
|
|
|
70.1 |
|
Adjusted EBIT |
|
$ |
187.8 |
|
|
$ |
148.0 |
|
|
$ |
491.6 |
|
|
$ |
418.1 |
|
(a) |
|
Represents expenses and associated changes to estimates related to
the prepayment, restructuring, and refinancing of our indebtedness,
which are not considered indicative of our ongoing operating
performance. |
|
|
|
(b) |
|
Represents expenses and associated changes to estimates related to
employee termination benefits, consulting, legal and other
employee-related costs associated with restructuring programs and
other employee-related costs. These amounts are not considered
indicative of our ongoing operating performance. |
|
|
|
(c) |
|
Represents acquisition and divestiture-related expenses and
integration activities associated with our business combinations,
all of which are not considered indicative of our ongoing operating
performance. The amount for the nine months ended
September 30, 2023 and 2022 includes $0.2 million and
$1.9 million, respectively, of due diligence and other related
costs associated with unconsummated merger and acquisition
transactions. |
|
|
|
(d) |
|
Represents impairment charges and benefits, which are not
considered indicative of our ongoing operating performance. The
losses recorded during the nine months ended September 30, 2023
were primarily due to the decision to demolish assets at a
previously closed manufacturing site during the three months ended
June 30, 2023 and the then anticipated exit of a non-core business
category in the Mobility Coatings segment during the three months
ended March 31, 2023. The amounts recorded during the three and
nine months ended September 30, 2022 relate primarily to insurance
recoveries on assets impaired in a prior year. |
|
|
|
(e) |
|
Represents incremental depreciation expense resulting from
truncated useful lives of the assets impacted by our manufacturing
footprint assessments and costs related to the closure of certain
manufacturing sites, which we do not consider indicative of our
ongoing operating performance. |
|
|
|
(f) |
|
Represents expenses and associated changes to estimates related to
sanctions imposed on Russia in response to the conflict with
Ukraine for incremental reserves on accounts receivable and
inventory, which we do not consider indicative of our ongoing
operating performance. The benefits recorded during the three and
nine months ended September 30, 2023 are related to changes in
estimated inventory obsolescence and uncollectible accounts
receivables. The benefits recorded during the three months ended
September 30, 2022 are related to changes in estimated inventory
obsolescence. |
|
|
|
(g) |
|
Represents a non-cash charge associated with the forgiveness of a
portion of up-front customer incentives with repayment features
which was done along with our customer completing a
recapitalization and restructuring of its indebtedness and the
execution of a new long-term exclusive sales agreement with us.
This amount is not considered to be indicative of our ongoing
operating performance. |
|
|
|
(h) |
|
Represents costs for certain non-operational or non-cash (gains)
losses, unrelated to our core business and which we do not consider
indicative of our ongoing operating performance. |
|
|
|
(i) |
|
Represents the incremental step-up depreciation and amortization
expense associated with the acquisition of DuPont Performance
Coatings by Axalta. We believe this will assist investors in
performing meaningful comparisons of past, present and future
operating results and better highlight the results of our ongoing
operating performance. |
The following table reconciles net income to
adjusted net income for the periods presented (in millions, except
per share data):
|
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income |
|
$ |
73.3 |
|
|
$ |
63.3 |
|
|
$ |
194.9 |
|
|
$ |
148.3 |
|
Less: Net income attributable to noncontrolling interests |
|
|
0.4 |
|
|
|
0.9 |
|
|
|
0.6 |
|
|
|
0.3 |
|
Net income attributable to controlling interests |
|
|
72.9 |
|
|
|
62.4 |
|
|
|
194.3 |
|
|
|
148.0 |
|
Debt extinguishment and refinancing-related costs (benefits)
(a) |
|
|
4.0 |
|
|
|
(0.4 |
) |
|
|
7.0 |
|
|
|
(0.6 |
) |
Termination benefits and other employee-related costs (b) |
|
|
11.6 |
|
|
|
4.8 |
|
|
|
13.6 |
|
|
|
9.9 |
|
Acquisition and divestiture-related costs (c) |
|
|
0.4 |
|
|
|
0.2 |
|
|
|
0.8 |
|
|
|
2.8 |
|
Impairment (benefits) charges (d) |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
15.3 |
|
|
|
(0.4 |
) |
Accelerated depreciation and site closure costs (e) |
|
|
2.1 |
|
|
|
1.1 |
|
|
|
4.0 |
|
|
|
4.2 |
|
Russia sanction-related impacts (f) |
|
|
(0.1 |
) |
|
|
(0.5 |
) |
|
|
(1.5 |
) |
|
|
4.7 |
|
Commercial agreement restructuring impacts (g) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
25.0 |
|
Other adjustments (h) |
|
|
(0.6 |
) |
|
|
0.8 |
|
|
|
(0.9 |
) |
|
|
1.1 |
|
Step-up depreciation and amortization (i) |
|
|
13.0 |
|
|
|
22.6 |
|
|
|
42.5 |
|
|
|
70.1 |
|
Total adjustments |
|
|
30.3 |
|
|
|
28.5 |
|
|
|
80.8 |
|
|
|
116.8 |
|
Income tax provision impacts (j) |
|
|
4.4 |
|
|
|
4.9 |
|
|
|
20.9 |
|
|
|
19.4 |
|
Adjusted net income |
|
$ |
98.8 |
|
|
$ |
86.0 |
|
|
$ |
254.2 |
|
|
$ |
245.4 |
|
Adjusted diluted net income per share |
|
$ |
0.45 |
|
|
$ |
0.39 |
|
|
$ |
1.14 |
|
|
$ |
1.10 |
|
Diluted weighted average shares outstanding |
|
|
221.9 |
|
|
|
221.2 |
|
|
|
222.1 |
|
|
|
222.6 |
|
(a) |
|
Represents expenses and associated changes to estimates related to
the prepayment, restructuring, and refinancing of our indebtedness,
which are not considered indicative of our ongoing operating
performance. |
|
|
|
(b) |
|
Represents expenses and associated changes to estimates related to
employee termination benefits, consulting, legal and other
employee-related costs associated with restructuring programs and
other employee-related costs. These amounts are not considered
indicative of our ongoing operating performance. |
|
|
|
(c) |
|
Represents acquisition and divestiture-related expenses and
integration activities associated with our business combinations,
all of which are not considered indicative of our ongoing operating
performance. The amount for the nine months ended
September 30, 2023 and 2022 includes $0.2 million and
$1.9 million, respectively, of due diligence and other related
costs associated with unconsummated merger and acquisition
transactions. |
|
|
|
(d) |
|
Represents impairment charges and benefits, which are not
considered indicative of our ongoing operating performance. The
losses recorded during the nine months ended September 30, 2023
were primarily due to the decision to demolish assets at a
previously closed manufacturing site during the three months ended
June 30, 2023 and the then anticipated exit of a non-core business
category in the Mobility Coatings segment during the three months
ended March 31, 2023. The amounts recorded during the three and
nine months ended September 30, 2022 relate primarily to insurance
recoveries on assets impaired in a prior year. |
|
|
|
(e) |
|
Represents incremental depreciation expense resulting from
truncated useful lives of the assets impacted by our manufacturing
footprint assessments and costs related to the closure of certain
manufacturing sites, which we do not consider indicative of our
ongoing operating performance. |
|
|
|
(f) |
|
Represents expenses and associated changes to estimates related to
sanctions imposed on Russia in response to the conflict with
Ukraine for incremental reserves on accounts receivable and
inventory, which we do not consider indicative of our ongoing
operating performance. The benefits recorded during the three and
nine months ended September 30, 2023 are related to changes in
estimated inventory obsolescence and uncollectible accounts
receivables. The benefits recorded during the three months ended
September 30, 2022 are related to changes in estimated inventory
obsolescence. |
|
|
|
(g) |
|
Represents a non-cash charge associated with the forgiveness of a
portion of up-front customer incentives with repayment features
which was done along with our customer completing a
recapitalization and restructuring of its indebtedness and the
execution of a new long-term exclusive sales agreement with us.
This amount is not considered to be indicative of our ongoing
operating performance. |
|
|
|
(h) |
|
Represents costs for certain non-operational or non-cash (gains)
losses, unrelated to our core business and which we do not consider
indicative of our ongoing operating performance. |
|
|
|
(i) |
|
Represents the incremental step-up depreciation and amortization
expense associated with the acquisition of DuPont Performance
Coatings by Axalta. We believe this will assist investors in
performing meaningful comparisons of past, present and future
operating results and better highlight the results of our ongoing
operating performance. |
|
|
|
(j) |
|
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, the income tax impact includes the removal of
discrete income tax impacts within our effective tax rate which
were expenses of $2.4 million, benefits of $2.2 million, expenses
of $2.0 million and $7.0 million for the three and nine months
ended September 30, 2023 and 2022, respectively. The tax
adjustments for the three and nine months ended September 30, 2023
and 2022 include the deferred tax benefit ratably amortized into
our adjusted income tax rate as the tax attribute related to a
January 1, 2020 intra-entity transfer of certain intellectual
property rights is realized. |
The following table reconciles cash (used for)
provided by operating activities to free cash flow for the periods
presented (in millions):
|
|
Three Months EndedMarch 31, |
|
Three Months EndedJune 30, |
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Cash (used for) provided by operating activities |
|
$ |
(51.8 |
) |
|
$ |
(43.9 |
) |
|
$ |
131.0 |
|
|
$ |
12.2 |
|
|
$ |
210.1 |
|
|
$ |
79.9 |
|
|
$ |
289.3 |
|
|
$ |
48.2 |
|
Purchase of property, plant and equipment |
|
|
(41.4 |
) |
|
|
(42.5 |
) |
|
|
(32.5 |
) |
|
|
(29.5 |
) |
|
|
(31.4 |
) |
|
|
(35.5 |
) |
|
|
(105.3 |
) |
|
|
(107.5 |
) |
Interest proceeds on swaps designated as net investment hedges |
|
|
5.6 |
|
|
|
6.2 |
|
|
|
0.5 |
|
|
|
3.8 |
|
|
|
3.0 |
|
|
|
6.1 |
|
|
|
9.1 |
|
|
|
16.1 |
|
Free cash flow |
|
$ |
(87.6 |
) |
|
$ |
(80.2 |
) |
|
$ |
99.0 |
|
|
$ |
(13.5 |
) |
|
$ |
181.7 |
|
|
$ |
50.5 |
|
|
$ |
193.1 |
|
|
$ |
(43.2 |
) |
The following table reconciles net income to EBITDA
and adjusted EBITDA for the periods presented (in millions):
|
|
Three Months EndedSeptember
30, |
|
TwelveMonthsEndedSeptember 30,2023 |
|
Nine Months EndedSeptember
30, |
|
Year EndedDecember 31,
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
2023 |
|
|
|
2022 |
|
|
Net income |
|
$ |
73.3 |
|
|
$ |
63.3 |
|
|
$ |
238.8 |
|
|
$ |
194.9 |
|
|
$ |
148.3 |
|
|
$ |
192.2 |
|
Interest expense, net |
|
|
55.1 |
|
|
|
35.0 |
|
|
|
196.6 |
|
|
|
157.9 |
|
|
|
101.1 |
|
|
|
139.8 |
|
Provision for income taxes |
|
|
29.3 |
|
|
|
21.8 |
|
|
|
71.5 |
|
|
|
58.0 |
|
|
|
51.6 |
|
|
|
65.1 |
|
Depreciation and amortization |
|
|
71.2 |
|
|
|
74.5 |
|
|
|
280.5 |
|
|
|
206.9 |
|
|
|
229.5 |
|
|
|
303.1 |
|
EBITDA |
|
|
228.9 |
|
|
|
194.6 |
|
|
|
787.4 |
|
|
|
617.7 |
|
|
|
530.5 |
|
|
|
700.2 |
|
Debt extinguishment and refinancing-related costs (benefits)
(a) |
|
|
4.0 |
|
|
|
(0.4 |
) |
|
|
22.3 |
|
|
|
7.0 |
|
|
|
(0.6 |
) |
|
|
14.7 |
|
Termination benefits and other employee-related costs (b) |
|
|
11.5 |
|
|
|
5.0 |
|
|
|
28.4 |
|
|
|
13.6 |
|
|
|
9.6 |
|
|
|
24.4 |
|
Acquisition and divestiture-related costs (c) |
|
|
0.4 |
|
|
|
0.2 |
|
|
|
0.9 |
|
|
|
0.8 |
|
|
|
2.8 |
|
|
|
2.9 |
|
Impairment (benefits) charges (d) |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
15.3 |
|
|
|
15.3 |
|
|
|
(0.4 |
) |
|
|
(0.4 |
) |
Site closure costs (e) |
|
|
2.1 |
|
|
|
0.4 |
|
|
|
4.2 |
|
|
|
4.0 |
|
|
|
2.1 |
|
|
|
2.3 |
|
Foreign exchange remeasurement losses (f) |
|
|
6.7 |
|
|
|
5.8 |
|
|
|
20.5 |
|
|
|
18.6 |
|
|
|
13.3 |
|
|
|
15.2 |
|
Long-term employee benefit plan adjustments (g) |
|
|
2.3 |
|
|
|
0.2 |
|
|
|
6.1 |
|
|
|
6.8 |
|
|
|
0.4 |
|
|
|
(0.3 |
) |
Stock-based compensation (h) |
|
|
5.7 |
|
|
|
5.0 |
|
|
|
27.5 |
|
|
|
19.3 |
|
|
|
14.0 |
|
|
|
22.2 |
|
Russia sanction-related impacts (i) |
|
|
(0.2 |
) |
|
|
(1.3 |
) |
|
|
(1.3 |
) |
|
|
(1.5 |
) |
|
|
4.8 |
|
|
|
5.0 |
|
Commercial agreement restructuring impacts (j) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
25.0 |
|
|
|
25.0 |
|
Other adjustments (k) |
|
|
(0.8 |
) |
|
|
0.9 |
|
|
|
(2.6 |
) |
|
|
(1.1 |
) |
|
|
1.1 |
|
|
|
(0.4 |
) |
Adjusted EBITDA |
|
$ |
260.5 |
|
|
$ |
210.3 |
|
|
$ |
908.7 |
|
|
$ |
700.5 |
|
|
$ |
602.6 |
|
|
$ |
810.8 |
|
(a) |
|
Represents expenses and associated changes to estimates related to
the prepayment, restructuring, and refinancing of our indebtedness,
which are not considered indicative of our ongoing operating
performance. |
|
|
|
(b) |
|
Represents expenses and associated changes to estimates related to
employee termination benefits, consulting, legal and other
employee-related costs associated with restructuring programs and
other employee-related costs. These amounts are not considered
indicative of our ongoing operating performance. |
|
|
|
(c) |
|
Represents acquisition and divestiture-related expenses and
integration activities associated with our business combinations,
all of which are not considered indicative of our ongoing operating
performance. The amount for the nine months ended
September 30, 2023 and year ended December 31, 2022 include
$0.2 million and $1.9 million, respectively, of due diligence
and other related costs associated with unconsummated merger and
acquisition transactions. |
|
|
|
(d) |
|
Represents impairment charges and benefits, which are not
considered indicative of our ongoing operating performance. The
losses recorded during the nine months ended September 30, 2023
were primarily due to the decision to demolish assets at a
previously closed manufacturing site during the three months ended
June 30, 2023 and the then anticipated exit of a non-core business
category in the Mobility Coatings segment during the three months
ended March 31, 2023. The amounts recorded during the three and
nine months ended September 30, 2022 and year ended December 31,
2022 relate primarily to insurance recoveries on assets impaired in
a prior year. |
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(e) |
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Represents costs related to the closure of certain manufacturing
sites, which we do not consider indicative of our ongoing operating
performance. |
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(f) |
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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. |
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(g) |
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Eliminates the non-cash, non-service cost components of long-term
employee benefit costs. |
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(h) |
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Represents non-cash impacts associated with stock-based
compensation. |
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(i) |
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Represents expenses and associated changes to estimates related to
sanctions imposed on Russia in response to the conflict with
Ukraine for incremental reserves on accounts receivable and
inventory, which we do not consider indicative of our ongoing
operating performance. The benefits recorded during the three and
nine months ended September 30, 2023 are related to changes in
estimated inventory obsolescence and uncollectible accounts
receivables. The benefits recorded during the three months ended
September 30, 2022 are related to changes in estimated inventory
obsolescence. |
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(j) |
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Represents a non-cash charge associated with the forgiveness of a
portion of up-front customer incentives with repayment features
which was done along with our customer completing a
recapitalization and restructuring of its indebtedness and the
execution of a new long-term exclusive sales agreement with us.
This amount is not considered to be indicative of our ongoing
operating performance. |
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(k) |
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Represents costs for certain non-operational or non-cash (gains)
losses, unrelated to our core business and which we do not consider
indicative of our ongoing operating performance. |
Investor ContactChristopher EvansD +1 484 724
4099Christopher.Evans@axalta.com
Media ContactRobert DonohoeD +1
267-756-3803Robert.Donohoe@axalta.com
Axalta Coating Systems (NYSE:AXTA)
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From Apr 2024 to May 2024
Axalta Coating Systems (NYSE:AXTA)
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From May 2023 to May 2024