| Segments
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Performance Coatings | Transportation Coatings | Total | |||||||
At December 31, 2016 | $ | 886.5 | $ | 74.5 | $ | 961.0 | |||
Goodwill from acquisitions | 33.2 | — | 33.2 | ||||||
Foreign currency translation | 20.5 | 1.4 | 21.9 | ||||||
At March 31, 2017 | $ | 940.2 | $ | 75.9 | $ | 1,016.1 |
March 31, 2017 | Gross Carrying Amount | Accumulated Amortization | Net Book Value | Weighted average amortization periods (years) | ||||||
Technology | $ | 428.5 | $ | (166.7 | ) | $ | 261.8 | 10.1 | ||
Trademarks - indefinite-lived | 278.5 | — | 278.5 | Indefinite | ||||||
Trademarks - definite-lived | 56.9 | (12.6 | ) | 44.3 | 14.2 | |||||
Customer relationships | 700.8 | (135.9 | ) | 564.9 | 18.4 | |||||
Non-compete agreements and other | 2.5 | (0.5 | ) | 2.0 | 4.3 | |||||
Total | $ | 1,467.2 | $ | (315.7 | ) | $ | 1,151.5 |
December 31, 2016 | Gross Carrying Amount | Accumulated Amortization | Net Book Value | Weighted average amortization periods (years) | ||||||
Technology | $ | 417.1 | $ | (153.6 | ) | $ | 263.5 | 10.2 | ||
Trademarks - indefinite-lived | 273.2 | — | 273.2 | Indefinite | ||||||
Trademarks - definite-lived | 55.0 | (11.4 | ) | 43.6 | 14.8 | |||||
Customer relationships | 672.6 | (123.3 | ) | 549.3 | 18.7 | |||||
Non-compete agreements and other | 2.4 | (1.7 | ) | 0.7 | 4.6 | |||||
Total | $ | 1,420.3 | $ | (290.0 | ) | $ | 1,130.3 |
Remainder of 2017 | $ | 65.6 | |
2018 | $ | 87.2 | |
2019 | $ | 86.1 | |
2020 | $ | 84.7 | |
2021 | $ | 83.8 | |
2022 | $ | 77.3 |
|
2017 Activity | |||
Balance at December 31, 2016 | $ | 66.1 | |
Expense recorded | 1.0 | ||
Payments made | (7.6 | ) | |
Foreign currency translations | 1.8 | ||
Balance at March 31, 2017 | $ | 61.3 |
|
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Three Months Ended March 31, | ||||||
2017 | 2016 | |||||
Components of net periodic benefit cost: | ||||||
Net periodic benefit cost: | ||||||
Service cost | $ | 2.1 | $ | 2.5 | ||
Interest cost | 3.4 | 3.9 | ||||
Expected return on plan assets | (3.5 | ) | (3.2 | ) | ||
Amortization of actuarial (gain) loss, net | 0.5 | (0.1 | ) | |||
Net periodic benefit cost | $ | 2.5 | $ | 3.1 |
|
Stock Options | Awards/Units (in millions) | Weighted- Average Exercise Price | Aggregate Intrinsic Value (in millions) | Weighted Average Remaining Contractual Life (years) | |||||
Outstanding at January 1, 2017 | 9.6 | $ | 14.40 | ||||||
Granted | 0.9 | $ | 29.48 | ||||||
Exercised | (0.9 | ) | $ | 10.09 | |||||
Forfeited | (0.1 | ) | $ | 23.38 | |||||
Outstanding at March 31, 2017 | 9.5 | $ | 16.08 | ||||||
Vested and expected to vest at March 31, 2017 | 9.5 | $ | 16.08 | $ | 153.7 | 7.12 | |||
Exercisable at March 31, 2017 | 7.2 | $ | 12.21 | $ | 144.8 | 6.53 |
Restricted Stock Awards and Restricted Stock Units | Awards (millions) | Weighted-Average Fair Value | |||
Outstanding at January 1, 2017 | 2.3 | $ | 29.18 | ||
Granted | 0.6 | 29.48 | |||
Vested | (0.3 | ) | 23.36 | ||
Forfeited | — | — | |||
Outstanding at March 31, 2017 | 2.6 | $ | 29.86 |
Performance Stock Awards and Performance Share Units | Awards (millions) | Weighted-Average Fair Value | |||
Outstanding at January 1, 2017 | 0.3 | $ | 27.74 | ||
Granted | 0.3 | 38.11 | |||
Vested | — | — | |||
Forfeited | — | — | |||
Outstanding at March 31, 2017 | 0.6 | $ | 31.08 |
|
Three Months Ended March 31, | ||||||
2017 | 2016 | |||||
Foreign exchange (gains) losses, net | $ | (1.2 | ) | $ | 7.5 | |
Other miscellaneous expense (income), net | (0.4 | ) | 0.5 | |||
Total | $ | (1.6 | ) | $ | 8.0 |
|
Three Months Ended March 31, | ||||
2017 | 2016 | |||
Effective Tax Rate | 13.1 | % | 29.6 | % |
|
March 31, 2017 | December 31, 2016 | |||||
Accounts receivable—trade, net | $ | 735.2 | $ | 640.4 | ||
Notes receivable | 48.4 | 68.7 | ||||
Other | 88.6 | 92.8 | ||||
Total | $ | 872.2 | $ | 801.9 |
|
March 31, 2017 | December 31, 2016 | |||||
Finished products | $ | 326.2 | $ | 315.2 | ||
Semi-finished products | 93.6 | 87.5 | ||||
Raw materials and supplies | 139.3 | 127.0 | ||||
Total | $ | 559.1 | $ | 529.7 |
|
March 31, 2017 | December 31, 2016 | |||||
Property, plant and equipment | $ | 2,005.1 | $ | 1,933.0 | ||
Accumulated depreciation | (670.7 | ) | (617.3 | ) | ||
Property, plant and equipment, net | $ | 1,334.4 | $ | 1,315.7 |
|
March 31, 2017 | December 31, 2016 | |||||
2023 Dollar Term Loans | $ | 1,541.1 | $ | 1,545.0 | ||
2023 Euro Term Loans | 428.3 | 417.6 | ||||
2024 Dollar Senior Notes | 500.0 | 500.0 | ||||
2024 Euro Senior Notes | 359.6 | 349.7 | ||||
2025 Euro Senior Notes | 483.0 | 469.8 | ||||
Short-term and other borrowings | 51.3 | 39.8 | ||||
Unamortized original issue discount | (9.3 | ) | (10.0 | ) | ||
Unamortized deferred financing costs | (46.7 | ) | (48.0 | ) | ||
$ | 3,307.3 | $ | 3,263.9 | |||
Less: | ||||||
Short term borrowings | $ | 9.2 | $ | 8.3 | ||
Current portion of long-term borrowings | 19.8 | 19.6 | ||||
Long-term debt | $ | 3,278.3 | $ | 3,236.0 |
Period | 2024 Dollar Senior Notes Percentage | |
2019 | 103.656 | % |
2020 | 102.438 | % |
2021 | 101.219 | % |
2022 and thereafter | 100.000 | % |
Period | 2024 Euro Senior Notes Percentage | |
2019 | 103.188 | % |
2020 | 102.125 | % |
2021 | 101.063 | % |
2022 and thereafter | 100.000 | % |
Period | 2025 Euro Senior Notes Percentage | |
2019 | 102.813 | % |
2020 | 101.875 | % |
2021 | 100.938 | % |
2022 and thereafter | 100.000 | % |
Remainder of 2017 | $ | 24.2 | |
2018 | 21.4 | ||
2019 | 20.6 | ||
2020 | 20.5 | ||
2021 | 20.4 | ||
Thereafter | 3,227.8 | ||
$ | 3,334.9 |
|
|
March 31, 2017 | December 31, 2016 | |||||
Prepaid and other assets: | ||||||
Interest rate swaps | $ | 0.7 | $ | 0.1 | ||
Total assets | $ | 0.7 | $ | 0.1 | ||
Other accrued liabilities: | ||||||
Interest rate swaps | $ | 0.4 | $ | 0.8 | ||
Interest rate caps | $ | 1.5 | $ | — | ||
Other liabilities | ||||||
Interest rate caps | $ | 0.5 | $ | — | ||
Total liabilities | $ | 2.4 | $ | 0.8 |
Derivatives in Cash Flow Hedging Relationships for the three months ended March 31, 2017: | Net Amount of (Gain) Loss Recognized in OCI on Derivatives (Effective Portion) | Location of (Gain) Loss Reclassified from Accumulated OCI into Income (Effective Portion) | Amount of (Gain) Loss Reclassified from Accumulated OCI to Income (Effective Portion) | Location of (Gains) Losses Recognized in Income on Derivatives (Ineffective Portion) | Amount of (Gain) Loss Recognized in Income on Derivatives (Ineffective Portion) | ||||||
Interest rate contracts | $ | (0.6 | ) | Interest expense, net | $ | 0.5 | Interest expense, net | $ | 1.6 |
Derivatives in Cash Flow Hedging Relationships for the three months ended March 31, 2016: | Net Amount of (Gain) Loss Recognized in OCI on Derivatives (Effective Portion) | Location of (Gain) Loss Reclassified from Accumulated OCI into Income (Effective Portion) | Amount of (Gain) Loss Reclassified from Accumulated OCI to Income (Effective Portion) | Location of (Gains) Losses Recognized in Income on Derivatives (Ineffective Portion) | Amount of (Gain) Loss Recognized in Income on Derivatives (Ineffective Portion) | ||||||
Interest rate contracts | $ | 2.2 | Interest expense, net | $ | 1.6 | Interest expense, net | $ | 2.4 |
March 31, 2017 | December 31, 2016 | |||||
Prepaid and other assets: | ||||||
Foreign currency contracts | $ | 0.7 | $ | 0.1 | ||
Other assets | ||||||
Interest rate caps | $ | 0.3 | $ | — | ||
Total assets | $ | 1.0 | $ | 0.1 | ||
Other accrued liabilities: | ||||||
Foreign currency contracts | $ | — | $ | 0.5 | ||
Total liabilities | $ | — | $ | 0.5 |
Three Months Ended March 31, | |||||||
Derivatives Not Designated as Hedging Instruments under ASC 815 | Location of (Gain) Loss Recognized in Income on Derivatives | 2017 | 2016 | ||||
Interest rate caps | Interest expense | $ | 0.3 | $ | — | ||
Foreign currency forward contracts | Other (income) expense, net | $ | 0.1 | $ | 2.4 |
|
Three Months Ended March 31, | ||||||
2017 | 2016 | |||||
Performance Coatings | ||||||
Refinish | $ | 388.6 | $ | 378.7 | ||
Industrial | 197.8 | 164.3 | ||||
Total Net sales Performance Coatings | 586.4 | 543.0 | ||||
Transportation Coatings | ||||||
Light Vehicle | 340.0 | 329.4 | ||||
Commercial Vehicle | 81.4 | 83.2 | ||||
Total Net sales Transportation Coatings | 421.4 | 412.6 | ||||
Total Net sales | $ | 1,007.8 | $ | 955.6 |
Performance Coatings | Transportation Coatings | Total | |||||||
For the Three Months Ended March 31, 2017 | |||||||||
Net sales (1) | $ | 586.4 | $ | 421.4 | $ | 1,007.8 | |||
Equity in earnings in unconsolidated affiliates | 0.1 | 0.1 | 0.2 | ||||||
Adjusted EBITDA (2) | 116.9 | 86.2 | 203.1 | ||||||
Investment in unconsolidated affiliates | 2.9 | 11.3 | 14.2 |
Performance Coatings | Transportation Coatings | Total | |||||||
For the Three Months Ended March 31, 2016 | |||||||||
Net sales (1) | $ | 543.0 | $ | 412.6 | $ | 955.6 | |||
Equity in earnings in unconsolidated affiliates | 0.1 | 0.1 | 0.2 | ||||||
Adjusted EBITDA (2) | 110.1 | 84.7 | 194.8 | ||||||
Investment in unconsolidated affiliates | 4.1 | 11.5 | 15.6 |
(1) | The Company has no intercompany sales between segments. |
(2) | The primary measure of segment operating performance is Adjusted EBITDA, which is defined as net income before interest, taxes, depreciation and amortization and select other items impacting operating results. These other items impacting operating results are items that management has concluded are (1) non-cash items included within net income, (2) items the Company does not believe are indicative of ongoing operating performance or (3) non-recurring, unusual or infrequent items that the Company believes are not reasonably likely to recur within the next two years. Adjusted EBITDA 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, which represents EBITDA adjusted for the select items referred to above. Reconciliation of Adjusted EBITDA to income before income taxes follows: |
Three Months Ended March 31, | ||||||
2017 | 2016 | |||||
Income before income taxes | $ | 75.8 | $ | 45.2 | ||
Interest expense, net | 35.8 | 50.1 | ||||
Depreciation and amortization | 82.4 | 76.0 | ||||
EBITDA | 194.0 | 171.3 | ||||
Foreign exchange remeasurement (gains) losses (a) | (1.2 | ) | 7.5 | |||
Long-term employee benefit plan adjustments (b) | 0.4 | 0.6 | ||||
Termination benefits and other employee related costs (c) | 0.8 | 1.9 | ||||
Consulting and advisory fees (d) | (0.1 | ) | 3.0 | |||
Transactional costs (gains) (e) | (1.0 | ) | — | |||
Stock-based compensation (f) | 10.4 | 10.2 | ||||
Other adjustments (g) | 0.2 | 1.8 | ||||
Dividends in respect of noncontrolling interest (h) | (0.4 | ) | (1.5 | ) | ||
Adjusted EBITDA | $ | 203.1 | $ | 194.8 |
(a) | Eliminates foreign exchange (gains) 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. |
(b) | Eliminates the non-cash non-service cost components of long-term employee benefit costs. |
(c) | 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. |
(d) | Represents fees paid to consultants, and associated true-ups to estimates, for professional services primarily related to our Axalta Way initiatives, which are not considered indicative of our ongoing operating performance. |
(e) | Represents acquisition-related expenses, including changes in the fair value of contingent consideration, which are not considered indicative of our ongoing operating performance. |
(f) | Represents non-cash costs associated with stock-based compensation. |
(g) | Represents 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 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. |
(h) | Represents the payment of dividends to our joint venture partners by our consolidated entities that are not wholly owned, which are reflected to show the cash operating performance of these entities on Axalta's financial statements. |
|
Unrealized Currency Translation Adjustments | Pension Adjustments | Unrealized Gain on Securities | Unrealized Gain (Loss) on Derivatives | Accumulated Other Comprehensive Loss | |||||||||||
Balance at December 31, 2016 | $ | (292.2 | ) | $ | (56.6 | ) | $ | 0.4 | $ | (2.0 | ) | $ | (350.4 | ) | |
Current year deferrals to AOCI | 39.7 | — | — | (0.8 | ) | 38.9 | |||||||||
Reclassifications from AOCI to Net income | — | 0.6 | — | 1.1 | 1.7 | ||||||||||
Net Change | 39.7 | 0.6 | — | 0.3 | 40.6 | ||||||||||
Balance at March 31, 2017 | $ | (252.5 | ) | $ | (56.0 | ) | $ | 0.4 | $ | (1.7 | ) | $ | (309.8 | ) |
Unrealized Currency Translation Adjustments | Pension Adjustments | Unrealized Gain (Loss) on Securities | Unrealized Gain (Loss) on Derivatives | Accumulated Other Comprehensive Income (Loss) | |||||||||||
Balance at December 31, 2015 | $ | (232.8 | ) | $ | (33.4 | ) | $ | 0.1 | $ | (3.2 | ) | $ | (269.3 | ) | |
Current year deferrals to AOCI | 15.7 | — | (0.4 | ) | (2.4 | ) | 12.9 | ||||||||
Reclassifications from AOCI to Net income | — | (0.1 | ) | — | 1.0 | 0.9 | |||||||||
Net Change | 15.7 | (0.1 | ) | (0.4 | ) | (1.4 | ) | 13.8 | |||||||
Balance at March 31, 2016 | $ | (217.1 | ) | $ | (33.5 | ) | $ | (0.3 | ) | $ | (4.6 | ) | $ | (255.5 | ) |
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Performance Coatings | Transportation Coatings | Total | |||||||
At December 31, 2016 | $ | 886.5 | $ | 74.5 | $ | 961.0 | |||
Goodwill from acquisitions | 33.2 | — | 33.2 | ||||||
Foreign currency translation | 20.5 | 1.4 | 21.9 | ||||||
At March 31, 2017 | $ | 940.2 | $ | 75.9 | $ | 1,016.1 |
March 31, 2017 | Gross Carrying Amount | Accumulated Amortization | Net Book Value | Weighted average amortization periods (years) | ||||||
Technology | $ | 428.5 | $ | (166.7 | ) | $ | 261.8 | 10.1 | ||
Trademarks - indefinite-lived | 278.5 | — | 278.5 | Indefinite | ||||||
Trademarks - definite-lived | 56.9 | (12.6 | ) | 44.3 | 14.2 | |||||
Customer relationships | 700.8 | (135.9 | ) | 564.9 | 18.4 | |||||
Non-compete agreements and other | 2.5 | (0.5 | ) | 2.0 | 4.3 | |||||
Total | $ | 1,467.2 | $ | (315.7 | ) | $ | 1,151.5 |
December 31, 2016 | Gross Carrying Amount | Accumulated Amortization | Net Book Value | Weighted average amortization periods (years) | ||||||
Technology | $ | 417.1 | $ | (153.6 | ) | $ | 263.5 | 10.2 | ||
Trademarks - indefinite-lived | 273.2 | — | 273.2 | Indefinite | ||||||
Trademarks - definite-lived | 55.0 | (11.4 | ) | 43.6 | 14.8 | |||||
Customer relationships | 672.6 | (123.3 | ) | 549.3 | 18.7 | |||||
Non-compete agreements and other | 2.4 | (1.7 | ) | 0.7 | 4.6 | |||||
Total | $ | 1,420.3 | $ | (290.0 | ) | $ | 1,130.3 |
Remainder of 2017 | $ | 65.6 | |
2018 | $ | 87.2 | |
2019 | $ | 86.1 | |
2020 | $ | 84.7 | |
2021 | $ | 83.8 | |
2022 | $ | 77.3 |
|
2017 Activity | |||
Balance at December 31, 2016 | $ | 66.1 | |
Expense recorded | 1.0 | ||
Payments made | (7.6 | ) | |
Foreign currency translations | 1.8 | ||
Balance at March 31, 2017 | $ | 61.3 |
|
Three Months Ended March 31, | ||||||
2017 | 2016 | |||||
Components of net periodic benefit cost: | ||||||
Net periodic benefit cost: | ||||||
Service cost | $ | 2.1 | $ | 2.5 | ||
Interest cost | 3.4 | 3.9 | ||||
Expected return on plan assets | (3.5 | ) | (3.2 | ) | ||
Amortization of actuarial (gain) loss, net | 0.5 | (0.1 | ) | |||
Net periodic benefit cost | $ | 2.5 | $ | 3.1 |
|
Stock Options | Awards/Units (in millions) | Weighted- Average Exercise Price | Aggregate Intrinsic Value (in millions) | Weighted Average Remaining Contractual Life (years) | |||||
Outstanding at January 1, 2017 | 9.6 | $ | 14.40 | ||||||
Granted | 0.9 | $ | 29.48 | ||||||
Exercised | (0.9 | ) | $ | 10.09 | |||||
Forfeited | (0.1 | ) | $ | 23.38 | |||||
Outstanding at March 31, 2017 | 9.5 | $ | 16.08 | ||||||
Vested and expected to vest at March 31, 2017 | 9.5 | $ | 16.08 | $ | 153.7 | 7.12 | |||
Exercisable at March 31, 2017 | 7.2 | $ | 12.21 | $ | 144.8 | 6.53 |
Restricted Stock Awards and Restricted Stock Units | Awards (millions) | Weighted-Average Fair Value | |||
Outstanding at January 1, 2017 | 2.3 | $ | 29.18 | ||
Granted | 0.6 | 29.48 | |||
Vested | (0.3 | ) | 23.36 | ||
Forfeited | — | — | |||
Outstanding at March 31, 2017 | 2.6 | $ | 29.86 |
Performance Stock Awards and Performance Share Units | Awards (millions) | Weighted-Average Fair Value | |||
Outstanding at January 1, 2017 | 0.3 | $ | 27.74 | ||
Granted | 0.3 | 38.11 | |||
Vested | — | — | |||
Forfeited | — | — | |||
Outstanding at March 31, 2017 | 0.6 | $ | 31.08 |
|
Three Months Ended March 31, | ||||||
2017 | 2016 | |||||
Foreign exchange (gains) losses, net | $ | (1.2 | ) | $ | 7.5 | |
Other miscellaneous expense (income), net | (0.4 | ) | 0.5 | |||
Total | $ | (1.6 | ) | $ | 8.0 |
|
Three Months Ended March 31, | ||||
2017 | 2016 | |||
Effective Tax Rate | 13.1 | % | 29.6 | % |
|
March 31, 2017 | December 31, 2016 | |||||
Accounts receivable—trade, net | $ | 735.2 | $ | 640.4 | ||
Notes receivable | 48.4 | 68.7 | ||||
Other | 88.6 | 92.8 | ||||
Total | $ | 872.2 | $ | 801.9 |
|
March 31, 2017 | December 31, 2016 | |||||
Finished products | $ | 326.2 | $ | 315.2 | ||
Semi-finished products | 93.6 | 87.5 | ||||
Raw materials and supplies | 139.3 | 127.0 | ||||
Total | $ | 559.1 | $ | 529.7 |
|
March 31, 2017 | December 31, 2016 | |||||
Property, plant and equipment | $ | 2,005.1 | $ | 1,933.0 | ||
Accumulated depreciation | (670.7 | ) | (617.3 | ) | ||
Property, plant and equipment, net | $ | 1,334.4 | $ | 1,315.7 |
|
March 31, 2017 | December 31, 2016 | |||||
2023 Dollar Term Loans | $ | 1,541.1 | $ | 1,545.0 | ||
2023 Euro Term Loans | 428.3 | 417.6 | ||||
2024 Dollar Senior Notes | 500.0 | 500.0 | ||||
2024 Euro Senior Notes | 359.6 | 349.7 | ||||
2025 Euro Senior Notes | 483.0 | 469.8 | ||||
Short-term and other borrowings | 51.3 | 39.8 | ||||
Unamortized original issue discount | (9.3 | ) | (10.0 | ) | ||
Unamortized deferred financing costs | (46.7 | ) | (48.0 | ) | ||
$ | 3,307.3 | $ | 3,263.9 | |||
Less: | ||||||
Short term borrowings | $ | 9.2 | $ | 8.3 | ||
Current portion of long-term borrowings | 19.8 | 19.6 | ||||
Long-term debt | $ | 3,278.3 | $ | 3,236.0 |
Remainder of 2017 | $ | 24.2 | |
2018 | 21.4 | ||
2019 | 20.6 | ||
2020 | 20.5 | ||
2021 | 20.4 | ||
Thereafter | 3,227.8 | ||
$ | 3,334.9 |
Period | 2024 Dollar Senior Notes Percentage | |
2019 | 103.656 | % |
2020 | 102.438 | % |
2021 | 101.219 | % |
2022 and thereafter | 100.000 | % |
Period | 2024 Euro Senior Notes Percentage | |
2019 | 103.188 | % |
2020 | 102.125 | % |
2021 | 101.063 | % |
2022 and thereafter | 100.000 | % |
Period | 2025 Euro Senior Notes Percentage | |
2019 | 102.813 | % |
2020 | 101.875 | % |
2021 | 100.938 | % |
2022 and thereafter | 100.000 | % |
|
Derivatives in Cash Flow Hedging Relationships for the three months ended March 31, 2017: | Net Amount of (Gain) Loss Recognized in OCI on Derivatives (Effective Portion) | Location of (Gain) Loss Reclassified from Accumulated OCI into Income (Effective Portion) | Amount of (Gain) Loss Reclassified from Accumulated OCI to Income (Effective Portion) | Location of (Gains) Losses Recognized in Income on Derivatives (Ineffective Portion) | Amount of (Gain) Loss Recognized in Income on Derivatives (Ineffective Portion) | ||||||
Interest rate contracts | $ | (0.6 | ) | Interest expense, net | $ | 0.5 | Interest expense, net | $ | 1.6 |
Derivatives in Cash Flow Hedging Relationships for the three months ended March 31, 2016: | Net Amount of (Gain) Loss Recognized in OCI on Derivatives (Effective Portion) | Location of (Gain) Loss Reclassified from Accumulated OCI into Income (Effective Portion) | Amount of (Gain) Loss Reclassified from Accumulated OCI to Income (Effective Portion) | Location of (Gains) Losses Recognized in Income on Derivatives (Ineffective Portion) | Amount of (Gain) Loss Recognized in Income on Derivatives (Ineffective Portion) | ||||||
Interest rate contracts | $ | 2.2 | Interest expense, net | $ | 1.6 | Interest expense, net | $ | 2.4 |
Three Months Ended March 31, | |||||||
Derivatives Not Designated as Hedging Instruments under ASC 815 | Location of (Gain) Loss Recognized in Income on Derivatives | 2017 | 2016 | ||||
Interest rate caps | Interest expense | $ | 0.3 | $ | — | ||
Foreign currency forward contracts | Other (income) expense, net | $ | 0.1 | $ | 2.4 |
March 31, 2017 | December 31, 2016 | |||||
Prepaid and other assets: | ||||||
Interest rate swaps | $ | 0.7 | $ | 0.1 | ||
Total assets | $ | 0.7 | $ | 0.1 | ||
Other accrued liabilities: | ||||||
Interest rate swaps | $ | 0.4 | $ | 0.8 | ||
Interest rate caps | $ | 1.5 | $ | — | ||
Other liabilities | ||||||
Interest rate caps | $ | 0.5 | $ | — | ||
Total liabilities | $ | 2.4 | $ | 0.8 |
March 31, 2017 | December 31, 2016 | |||||
Prepaid and other assets: | ||||||
Foreign currency contracts | $ | 0.7 | $ | 0.1 | ||
Other assets | ||||||
Interest rate caps | $ | 0.3 | $ | — | ||
Total assets | $ | 1.0 | $ | 0.1 | ||
Other accrued liabilities: | ||||||
Foreign currency contracts | $ | — | $ | 0.5 | ||
Total liabilities | $ | — | $ | 0.5 |
|
Three Months Ended March 31, | ||||||
2017 | 2016 | |||||
Performance Coatings | ||||||
Refinish | $ | 388.6 | $ | 378.7 | ||
Industrial | 197.8 | 164.3 | ||||
Total Net sales Performance Coatings | 586.4 | 543.0 | ||||
Transportation Coatings | ||||||
Light Vehicle | 340.0 | 329.4 | ||||
Commercial Vehicle | 81.4 | 83.2 | ||||
Total Net sales Transportation Coatings | 421.4 | 412.6 | ||||
Total Net sales | $ | 1,007.8 | $ | 955.6 |
Performance Coatings | Transportation Coatings | Total | |||||||
For the Three Months Ended March 31, 2017 | |||||||||
Net sales (1) | $ | 586.4 | $ | 421.4 | $ | 1,007.8 | |||
Equity in earnings in unconsolidated affiliates | 0.1 | 0.1 | 0.2 | ||||||
Adjusted EBITDA (2) | 116.9 | 86.2 | 203.1 | ||||||
Investment in unconsolidated affiliates | 2.9 | 11.3 | 14.2 |
Performance Coatings | Transportation Coatings | Total | |||||||
For the Three Months Ended March 31, 2016 | |||||||||
Net sales (1) | $ | 543.0 | $ | 412.6 | $ | 955.6 | |||
Equity in earnings in unconsolidated affiliates | 0.1 | 0.1 | 0.2 | ||||||
Adjusted EBITDA (2) | 110.1 | 84.7 | 194.8 | ||||||
Investment in unconsolidated affiliates | 4.1 | 11.5 | 15.6 |
(1) | The Company has no intercompany sales between segments. |
(2) | The primary measure of segment operating performance is Adjusted EBITDA, which is defined as net income before interest, taxes, depreciation and amortization and select other items impacting operating results. These other items impacting operating results are items that management has concluded are (1) non-cash items included within net income, (2) items the Company does not believe are indicative of ongoing operating performance or (3) non-recurring, unusual or infrequent items that the Company believes are not reasonably likely to recur within the next two years. Adjusted EBITDA 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, which represents EBITDA adjusted for the select items referred to above. Reconciliation of Adjusted EBITDA to income before income taxes follows: |
Three Months Ended March 31, | ||||||
2017 | 2016 | |||||
Income before income taxes | $ | 75.8 | $ | 45.2 | ||
Interest expense, net | 35.8 | 50.1 | ||||
Depreciation and amortization | 82.4 | 76.0 | ||||
EBITDA | 194.0 | 171.3 | ||||
Foreign exchange remeasurement (gains) losses (a) | (1.2 | ) | 7.5 | |||
Long-term employee benefit plan adjustments (b) | 0.4 | 0.6 | ||||
Termination benefits and other employee related costs (c) | 0.8 | 1.9 | ||||
Consulting and advisory fees (d) | (0.1 | ) | 3.0 | |||
Transactional costs (gains) (e) | (1.0 | ) | — | |||
Stock-based compensation (f) | 10.4 | 10.2 | ||||
Other adjustments (g) | 0.2 | 1.8 | ||||
Dividends in respect of noncontrolling interest (h) | (0.4 | ) | (1.5 | ) | ||
Adjusted EBITDA | $ | 203.1 | $ | 194.8 |
(a) | Eliminates foreign exchange (gains) 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. |
(b) | Eliminates the non-cash non-service cost components of long-term employee benefit costs. |
(c) | 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. |
(d) | Represents fees paid to consultants, and associated true-ups to estimates, for professional services primarily related to our Axalta Way initiatives, which are not considered indicative of our ongoing operating performance. |
(e) | Represents acquisition-related expenses, including changes in the fair value of contingent consideration, which are not considered indicative of our ongoing operating performance. |
(f) | Represents non-cash costs associated with stock-based compensation. |
(g) | Represents 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 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. |
(h) | Represents the payment of dividends to our joint venture partners by our consolidated entities that are not wholly owned, which are reflected to show the cash operating performance of these entities on Axalta's financial statements. |
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Unrealized Currency Translation Adjustments | Pension Adjustments | Unrealized Gain (Loss) on Securities | Unrealized Gain (Loss) on Derivatives | Accumulated Other Comprehensive Income (Loss) | |||||||||||
Balance at December 31, 2015 | $ | (232.8 | ) | $ | (33.4 | ) | $ | 0.1 | $ | (3.2 | ) | $ | (269.3 | ) | |
Current year deferrals to AOCI | 15.7 | — | (0.4 | ) | (2.4 | ) | 12.9 | ||||||||
Reclassifications from AOCI to Net income | — | (0.1 | ) | — | 1.0 | 0.9 | |||||||||
Net Change | 15.7 | (0.1 | ) | (0.4 | ) | (1.4 | ) | 13.8 | |||||||
Balance at March 31, 2016 | $ | (217.1 | ) | $ | (33.5 | ) | $ | (0.3 | ) | $ | (4.6 | ) | $ | (255.5 | ) |
Unrealized Currency Translation Adjustments | Pension Adjustments | Unrealized Gain on Securities | Unrealized Gain (Loss) on Derivatives | Accumulated Other Comprehensive Loss | |||||||||||
Balance at December 31, 2016 | $ | (292.2 | ) | $ | (56.6 | ) | $ | 0.4 | $ | (2.0 | ) | $ | (350.4 | ) | |
Current year deferrals to AOCI | 39.7 | — | — | (0.8 | ) | 38.9 | |||||||||
Reclassifications from AOCI to Net income | — | 0.6 | — | 1.1 | 1.7 | ||||||||||
Net Change | 39.7 | 0.6 | — | 0.3 | 40.6 | ||||||||||
Balance at March 31, 2017 | $ | (252.5 | ) | $ | (56.0 | ) | $ | 0.4 | $ | (1.7 | ) | $ | (309.8 | ) |
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