| Segments
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June 1, 2017 (As Initially Reported) | Measurement Period Adjustments | June 1, 2017 (As Adjusted) | |||||||
Accounts and notes receivable—trade | $ | 23.3 | $ | 0.1 | $ | 23.4 | |||
Inventories | 24.9 | (0.2 | ) | 24.7 | |||||
Prepaid expenses and other | 0.2 | — | 0.2 | ||||||
Property, plant and equipment | 23.0 | — | 23.0 | ||||||
Identifiable intangibles | 254.2 | 3.9 | 258.1 | ||||||
Accounts payable | (22.4 | ) | 0.2 | (22.2 | ) | ||||
Other accrued liabilities | (5.1 | ) | (0.2 | ) | (5.3 | ) | |||
Net assets acquired before goodwill on acquisition | 298.1 | 3.8 | 301.9 | ||||||
Goodwill on acquisition | 132.6 | (4.0 | ) | 128.6 | |||||
Net assets acquired | $ | 430.7 | $ | (0.2 | ) | $ | 430.5 |
For the nine months ended | ||||||
(in millions, except per share data) | September 30, 2017 | September 30, 2016 | ||||
Net sales | $ | 3,289.4 | $ | 3,205.9 | ||
Net income | $ | 108.8 | $ | 78.4 | ||
Net income attributable to controlling interests | $ | 103.7 | $ | 74.7 | ||
Net income per share (Basic) | $ | 0.43 | $ | 0.31 | ||
Net income per share (Diluted) | $ | 0.42 | $ | 0.31 |
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Performance Coatings | Transportation Coatings | Total | |||||||
December 31, 2016 | $ | 889.4 | $ | 74.7 | $ | 964.1 | |||
Goodwill from acquisitions | 204.1 | — | 204.1 | ||||||
Purchase accounting adjustments | (10.8 | ) | — | (10.8 | ) | ||||
Foreign currency translation | 94.2 | 6.7 | 100.9 | ||||||
September 30, 2017 | $ | 1,176.9 | $ | 81.4 | $ | 1,258.3 |
September 30, 2017 | Gross Carrying Amount | Accumulated Amortization | Net Book Value | Weighted average amortization periods (years) | ||||||
Technology | $ | 494.7 | $ | (200.1 | ) | $ | 294.6 | 10.5 | ||
Trademarks - indefinite-lived | 297.4 | — | 297.4 | Indefinite | ||||||
Trademarks - definite-lived | 77.1 | (15.9 | ) | 61.2 | 14.7 | |||||
Customer relationships | 941.8 | (164.0 | ) | 777.8 | 19.0 | |||||
Other | 16.6 | (1.7 | ) | 14.9 | 4.4 | |||||
Total | $ | 1,827.6 | $ | (381.7 | ) | $ | 1,445.9 |
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 | |||||
Other | 2.4 | (1.7 | ) | 0.7 | 4.6 | |||||
Total | $ | 1,420.3 | $ | (290.0 | ) | $ | 1,130.3 |
Remainder of 2017 | $ | 27.9 | |
2018 | $ | 108.1 | |
2019 | $ | 107.8 | |
2020 | $ | 107.3 | |
2021 | $ | 105.4 | |
2022 | $ | 76.1 |
|
2017 Activity | |||
Balance at December 31, 2016 | $ | 66.1 | |
Expense recorded | 7.6 | ||
Payments made | (24.2 | ) | |
Foreign currency impacts | 6.2 | ||
Venezuela deconsolidation impact | (1.5 | ) | |
Balance at September 30, 2017 | $ | 54.2 |
|
Sale-leaseback obligations | |||
Remainder of 2017 | $ | 1.3 | |
2018 | 5.4 | ||
2019 | 5.5 | ||
2020 | 5.6 | ||
2021 | 5.6 | ||
Thereafter | 91.9 | ||
Total minimum payments | $ | 115.3 |
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Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Components of net periodic benefit cost: | ||||||||||||
Net periodic benefit cost: | ||||||||||||
Service cost | $ | 2.2 | $ | 2.4 | $ | 6.4 | $ | 7.5 | ||||
Interest cost | 3.3 | 3.7 | 10.0 | 11.5 | ||||||||
Expected return on plan assets | (3.7 | ) | (3.0 | ) | (10.7 | ) | (9.6 | ) | ||||
Amortization of actuarial loss, net | 0.3 | 0.1 | 1.1 | 0.2 | ||||||||
Net periodic benefit cost | $ | 2.1 | $ | 3.2 | $ | 6.8 | $ | 9.6 |
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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 | $ | 29.56 | ||||||
Exercised | (1.9 | ) | $ | 10.76 | |||||
Forfeited | (0.1 | ) | $ | 25.61 | |||||
Outstanding at September 30, 2017 | 8.5 | $ | 16.58 | ||||||
Vested and expected to vest at September 30, 2017 | 8.5 | $ | 16.58 | $ | 108.9 | 6.77 | |||
Exercisable at September 30, 2017 | 6.6 | $ | 13.33 | $ | 105.1 | 6.23 |
Restricted Stock Awards and Restricted Stock Units | Awards (millions) | Weighted-Average Fair Value | |||
Outstanding at January 1, 2017 | 2.3 | $ | 29.18 | ||
Granted | 0.7 | $ | 30.21 | ||
Vested | (0.9 | ) | $ | 30.05 | |
Forfeited | (0.1 | ) | $ | 26.77 | |
Outstanding at September 30, 2017 | 2.0 | $ | 29.27 |
Performance Stock Awards and Performance Share Units | Awards (millions) | Weighted-Average Fair Value | |||
Outstanding at January 1, 2017 | 0.3 | $ | 24.74 | ||
Granted | 0.3 | $ | 38.11 | ||
Vested | — | $ | — | ||
Forfeited | — | $ | — | ||
Outstanding at September 30, 2017 | 0.6 | $ | 31.16 |
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Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Foreign exchange losses, net | $ | 3.5 | $ | 4.5 | $ | 8.3 | $ | 30.0 | ||||
Impairments of property | 4.4 | — | 7.6 | 10.5 | ||||||||
Debt extinguishment and refinancing related costs | 0.6 | 81.9 | 13.0 | 84.2 | ||||||||
Other miscellaneous (income) expense, net | (0.6 | ) | 1.0 | (1.4 | ) | 3.5 | ||||||
Total | $ | 7.9 | $ | 87.4 | $ | 27.5 | $ | 128.2 |
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Nine Months Ended September 30, | ||||
2017 | 2016 | |||
Effective Tax Rate | 17.2 | % | 22.5 | % |
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September 30, 2017 | December 31, 2016 | |||||
Accounts receivable - trade, net | $ | 766.6 | $ | 640.4 | ||
Notes receivable | 26.6 | 68.7 | ||||
Other | 95.8 | 92.8 | ||||
Total | $ | 889.0 | $ | 801.9 |
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September 30, 2017 | December 31, 2016 | |||||
Finished products | $ | 360.7 | $ | 315.2 | ||
Semi-finished products | 97.4 | 87.5 | ||||
Raw materials and supplies | 166.3 | 127.0 | ||||
Total | $ | 624.4 | $ | 529.7 |
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September 30, 2017 | December 31, 2016 | |||||
Property, plant and equipment | $ | 2,147.9 | $ | 1,933.0 | ||
Accumulated depreciation | (761.8 | ) | (617.3 | ) | ||
Property, plant and equipment, net | $ | 1,386.1 | $ | 1,315.7 |
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September 30, 2017 | December 31, 2016 | |||||
2024 Dollar Term Loans | $ | 1,995.0 | $ | — | ||
2023 Dollar Term Loans | — | 1,545.0 | ||||
2023 Euro Term Loans | 467.1 | 417.6 | ||||
2024 Dollar Senior Notes | 500.0 | 500.0 | ||||
2024 Euro Senior Notes | 394.2 | 349.7 | ||||
2025 Euro Senior Notes | 529.5 | 469.8 | ||||
Short-term and other borrowings | 67.2 | 39.8 | ||||
Unamortized original issue discount | (9.6 | ) | (10.0 | ) | ||
Unamortized deferred financing costs | (40.4 | ) | (48.0 | ) | ||
$ | 3,903.0 | $ | 3,263.9 | |||
Less: | ||||||
Short term borrowings | $ | 13.1 | $ | 8.3 | ||
Current portion of long-term borrowings | 24.7 | 19.6 | ||||
Long-term debt | $ | 3,865.2 | $ | 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 | $ | 19.3 | |
2018 | 28.9 | ||
2019 | 25.5 | ||
2020 | 25.4 | ||
2021 | 25.4 | ||
Thereafter | 3,814.3 | ||
$ | 3,938.8 |
|
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September 30, 2017 | December 31, 2016 | |||||
Prepaid and other assets: | ||||||
Interest rate swaps | $ | — | $ | 0.1 | ||
Total assets | $ | — | $ | 0.1 | ||
Other accrued liabilities: | ||||||
Interest rate swaps | $ | — | $ | 0.8 | ||
Interest rate caps | $ | 3.0 | $ | — | ||
Other liabilities | ||||||
Interest rate caps | $ | 1.1 | $ | — | ||
Total liabilities | $ | 4.1 | $ | 0.8 |
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) | ||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | ||||||||||||||
Interest rate contracts | $ | — | $ | (1.7 | ) | Interest expense, net | $ | (0.5 | ) | $ | 1.7 | Interest expense, net | $ | 0.4 | $ | (2.0 | ) |
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) | ||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | ||||||||||||||
Interest rate contracts | $ | 3.7 | $ | — | Interest expense, net | $ | 0.2 | $ | 4.9 | Interest expense, net | $ | 2.4 | $ | 1.3 |
September 30, 2017 | December 31, 2016 | |||||
Prepaid and other assets: | ||||||
Foreign currency contracts | $ | — | $ | 0.1 | ||
Other assets | ||||||
Interest rate caps | $ | 0.1 | $ | — | ||
Total assets | $ | 0.1 | $ | 0.1 | ||
Other accrued liabilities: | ||||||
Foreign currency contracts | $ | — | $ | 0.5 | ||
Total liabilities | $ | — | $ | 0.5 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
Derivatives Not Designated as Hedging Instruments under ASC 815 | Location of (Gain) Loss Recognized in Income on Derivatives | 2017 | 2016 | 2017 | 2016 | ||||||||
Interest rate caps | Interest expense | $ | 0.2 | $ | — | $ | 0.6 | $ | — | ||||
Foreign currency forward contracts | Other expense, net | $ | 2.5 | $ | 0.4 | $ | 9.7 | $ | 4.4 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Performance Coatings | ||||||||||||
Refinish | $ | 395.3 | $ | 431.7 | $ | 1,205.1 | $ | 1,259.3 | ||||
Industrial | 298.2 | 184.8 | 737.7 | 532.4 | ||||||||
Total Net sales Performance Coatings | 693.5 | 616.5 | 1,942.8 | 1,791.7 | ||||||||
Transportation Coatings | ||||||||||||
Light Vehicle | 309.7 | 321.1 | 984.0 | 994.9 | ||||||||
Commercial Vehicle | 88.6 | 83.0 | 261.3 | 254.8 | ||||||||
Total Net sales Transportation Coatings | 398.3 | 404.1 | 1,245.3 | 1,249.7 | ||||||||
Total Net sales | $ | 1,091.8 | $ | 1,020.6 | $ | 3,188.1 | $ | 3,041.4 |
Three Months Ended September 30, | ||||||||||||||||||
2017 | 2016 | |||||||||||||||||
Performance Coatings | Transportation Coatings | Total | Performance Coatings | Transportation Coatings | Total | |||||||||||||
Net sales (1) | $ | 693.5 | $ | 398.3 | $ | 1,091.8 | $ | 616.5 | $ | 404.1 | $ | 1,020.6 | ||||||
Equity in earnings (losses) in unconsolidated affiliates | — | 0.1 | 0.1 | (0.4 | ) | 0.1 | (0.3 | ) | ||||||||||
Adjusted EBITDA (2) | 135.1 | 74.4 | 209.5 | 145.7 | 84.7 | 230.4 | ||||||||||||
Investment in unconsolidated affiliates | 3.1 | 12.3 | 15.4 | 3.3 | 11.5 | 14.8 |
Nine Months Ended September 30, | ||||||||||||||||||
2017 | 2016 | |||||||||||||||||
Performance Coatings | Transportation Coatings | Total | Performance Coatings | Transportation Coatings | Total | |||||||||||||
Net sales (1) | $ | 1,942.8 | $ | 1,245.3 | $ | 3,188.1 | $ | 1,791.7 | $ | 1,249.7 | $ | 3,041.4 | ||||||
Equity in earnings (losses) in unconsolidated affiliates | 0.2 | 0.3 | 0.5 | (0.2 | ) | 0.2 | — | |||||||||||
Adjusted EBITDA (2) | 398.8 | 241.0 | 639.8 | 413.2 | 264.7 | 677.9 | ||||||||||||
Investment in unconsolidated affiliates | 3.1 | 12.3 | 15.4 | 3.3 | 11.5 | 14.8 |
(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 September 30, | Nine Months Ended September 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Income (loss) before income taxes | $ | 58.4 | $ | (12.9 | ) | $ | 124.8 | $ | 102.8 | |||
Interest expense, net | 37.7 | 42.9 | 109.1 | 140.8 | ||||||||
Depreciation and amortization | 88.6 | 81.2 | 255.9 | 235.8 | ||||||||
EBITDA | 184.7 | 111.2 | 489.8 | 479.4 | ||||||||
Debt extinguishment and refinancing related costs (a) | 0.6 | 81.9 | 13.0 | 84.2 | ||||||||
Foreign exchange remeasurement losses (b) | 3.5 | 4.5 | 8.3 | 30.0 | ||||||||
Long-term employee benefit plan adjustments (c) | (0.1 | ) | 0.8 | 0.4 | 2.1 | |||||||
Termination benefits and other employee related costs (d) | 5.8 | 16.3 | 6.6 | 25.2 | ||||||||
Consulting and advisory fees (e) | — | 2.7 | (0.1 | ) | 8.3 | |||||||
Transition-related costs (f) | 1.9 | — | 5.8 | — | ||||||||
Offering and transactional costs (g) | 0.5 | 3.0 | 6.1 | 4.4 | ||||||||
Stock-based compensation (h) | 9.2 | 10.0 | 30.5 | 31.6 | ||||||||
Other adjustments (i) | 0.8 | 1.5 | 3.6 | 5.2 | ||||||||
Dividends in respect of noncontrolling interest (j) | (1.8 | ) | (1.5 | ) | (2.7 | ) | (3.0 | ) | ||||
Deconsolidation impacts and impairments (k) | 4.4 | — | 78.5 | 10.5 | ||||||||
Adjusted EBITDA | $ | 209.5 | $ | 230.4 | $ | 639.8 | $ | 677.9 |
(a) | During the three and nine months ended September 30, 2016, we prepaid outstanding principal on our term loans, resulting in non-cash pre-tax losses on extinguishment of $4.3 million and $6.6 million, respectively. In addition, during the three and nine months ended September 30, 2016, we amended our Credit Agreement and refinanced our indebtedness, resulting in additional losses of $77.6 million. In connection with the refinancing of our Dollar Term Loans during the nine months ended September 30, 2017, we recorded losses of $13.0 million, including changes to estimates of $0.6 million for the three months ended September 30, 2017. We do not consider these to be indicative of our ongoing operating performance. |
(b) | Eliminates foreign exchange gains and losses resulting from the remeasurement of assets and liabilities denominated in foreign currencies, net of impacts associated with our foreign currency instruments used to hedge our balance sheet exposures. Exchange effects attributable to the remeasurement of our Venezuelan subsidiary represented losses of $1.8 million for the nine months ended September 30, 2017 and losses of $1.2 million and $23.9 million for the three and nine months ended September 30, 2016, respectively. |
(c) | Eliminates the non-cash, non-service cost components of long-term employee benefits. |
(d) | Represents expenses primarily related to employee termination benefits and other employee-related 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 integration costs related to the acquisition of the Industrial Wood business that was a carve-out business from Valspar. These amounts are not considered indicative of our ongoing operating performance. |
(g) | Represents acquisition-related expenses, including changes in the fair value of contingent consideration, as well as costs associated with the 2016 secondary offerings of our common shares by Carlyle, both of which are not considered indicative of our ongoing operating performance. |
(h) | Represents non-cash costs associated with stock-based compensation. |
(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 100% owned, which are reflected to show the cash operating performance of the entities on Axalta's financial statements. |
(k) | During the nine months ended September 30, 2017 and 2016, we recorded a loss in conjunction with the deconsolidation of our Venezuelan subsidiary and a non-cash impairment charge related to a real estate investment of $70.9 million and $10.5 million, respectively. During the three and nine months ended September 30, 2017, we recorded non-cash impairment charges related to certain manufacturing facilities previously announced for closure of $4.4 million and $7.6 million, respectively. We do not consider these to be indicative of our ongoing operating performance. |
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Unrealized Currency Translation Adjustments | Pension Adjustments | Unrealized Gain (Loss) on Securities | Unrealized Gain (Losses) on Derivatives | Accumulated Other Comprehensive Income (Loss) | |||||||||||
December 31, 2016 | $ | (292.2 | ) | $ | (56.6 | ) | $ | 0.4 | $ | (2.0 | ) | $ | (350.4 | ) | |
Current year deferrals to AOCI | 88.3 | (0.3 | ) | (0.1 | ) | 1.7 | 89.6 | ||||||||
Reclassifications from AOCI to Net income | — | 6.2 | — | (1.7 | ) | 4.5 | |||||||||
Net Change | 88.3 | 5.9 | (0.1 | ) | — | 94.1 | |||||||||
September 30, 2017 | $ | (203.9 | ) | $ | (50.7 | ) | $ | 0.3 | $ | (2.0 | ) | $ | (256.3 | ) |
Unrealized Currency Translation Adjustments | Pension Adjustments | Unrealized Gain (Loss) on Securities | Unrealized Gain (Loss) on Derivatives | Accumulated Other Comprehensive Income (Loss) | |||||||||||
December 31, 2015 | $ | (232.8 | ) | $ | (33.4 | ) | $ | 0.1 | $ | (3.2 | ) | $ | (269.3 | ) | |
Current year deferrals to AOCI | 15.9 | — | 0.3 | (3.1 | ) | 13.1 | |||||||||
Reclassifications from AOCI to Net income | — | 0.2 | — | 3.1 | 3.3 | ||||||||||
Net Change | 15.9 | 0.2 | 0.3 | — | 16.4 | ||||||||||
September 30, 2016 | $ | (216.9 | ) | $ | (33.2 | ) | $ | 0.4 | $ | (3.2 | ) | $ | (252.9 | ) |
|
|
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June 1, 2017 (As Initially Reported) | Measurement Period Adjustments | June 1, 2017 (As Adjusted) | |||||||
Accounts and notes receivable—trade | $ | 23.3 | $ | 0.1 | $ | 23.4 | |||
Inventories | 24.9 | (0.2 | ) | 24.7 | |||||
Prepaid expenses and other | 0.2 | — | 0.2 | ||||||
Property, plant and equipment | 23.0 | — | 23.0 | ||||||
Identifiable intangibles | 254.2 | 3.9 | 258.1 | ||||||
Accounts payable | (22.4 | ) | 0.2 | (22.2 | ) | ||||
Other accrued liabilities | (5.1 | ) | (0.2 | ) | (5.3 | ) | |||
Net assets acquired before goodwill on acquisition | 298.1 | 3.8 | 301.9 | ||||||
Goodwill on acquisition | 132.6 | (4.0 | ) | 128.6 | |||||
Net assets acquired | $ | 430.7 | $ | (0.2 | ) | $ | 430.5 |
For the nine months ended | ||||||
(in millions, except per share data) | September 30, 2017 | September 30, 2016 | ||||
Net sales | $ | 3,289.4 | $ | 3,205.9 | ||
Net income | $ | 108.8 | $ | 78.4 | ||
Net income attributable to controlling interests | $ | 103.7 | $ | 74.7 | ||
Net income per share (Basic) | $ | 0.43 | $ | 0.31 | ||
Net income per share (Diluted) | $ | 0.42 | $ | 0.31 |
|
Performance Coatings | Transportation Coatings | Total | |||||||
December 31, 2016 | $ | 889.4 | $ | 74.7 | $ | 964.1 | |||
Goodwill from acquisitions | 204.1 | — | 204.1 | ||||||
Purchase accounting adjustments | (10.8 | ) | — | (10.8 | ) | ||||
Foreign currency translation | 94.2 | 6.7 | 100.9 | ||||||
September 30, 2017 | $ | 1,176.9 | $ | 81.4 | $ | 1,258.3 |
September 30, 2017 | Gross Carrying Amount | Accumulated Amortization | Net Book Value | Weighted average amortization periods (years) | ||||||
Technology | $ | 494.7 | $ | (200.1 | ) | $ | 294.6 | 10.5 | ||
Trademarks - indefinite-lived | 297.4 | — | 297.4 | Indefinite | ||||||
Trademarks - definite-lived | 77.1 | (15.9 | ) | 61.2 | 14.7 | |||||
Customer relationships | 941.8 | (164.0 | ) | 777.8 | 19.0 | |||||
Other | 16.6 | (1.7 | ) | 14.9 | 4.4 | |||||
Total | $ | 1,827.6 | $ | (381.7 | ) | $ | 1,445.9 |
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 | |||||
Other | 2.4 | (1.7 | ) | 0.7 | 4.6 | |||||
Total | $ | 1,420.3 | $ | (290.0 | ) | $ | 1,130.3 |
Remainder of 2017 | $ | 27.9 | |
2018 | $ | 108.1 | |
2019 | $ | 107.8 | |
2020 | $ | 107.3 | |
2021 | $ | 105.4 | |
2022 | $ | 76.1 |
|
2017 Activity | |||
Balance at December 31, 2016 | $ | 66.1 | |
Expense recorded | 7.6 | ||
Payments made | (24.2 | ) | |
Foreign currency impacts | 6.2 | ||
Venezuela deconsolidation impact | (1.5 | ) | |
Balance at September 30, 2017 | $ | 54.2 |
|
Sale-leaseback obligations | |||
Remainder of 2017 | $ | 1.3 | |
2018 | 5.4 | ||
2019 | 5.5 | ||
2020 | 5.6 | ||
2021 | 5.6 | ||
Thereafter | 91.9 | ||
Total minimum payments | $ | 115.3 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Components of net periodic benefit cost: | ||||||||||||
Net periodic benefit cost: | ||||||||||||
Service cost | $ | 2.2 | $ | 2.4 | $ | 6.4 | $ | 7.5 | ||||
Interest cost | 3.3 | 3.7 | 10.0 | 11.5 | ||||||||
Expected return on plan assets | (3.7 | ) | (3.0 | ) | (10.7 | ) | (9.6 | ) | ||||
Amortization of actuarial loss, net | 0.3 | 0.1 | 1.1 | 0.2 | ||||||||
Net periodic benefit cost | $ | 2.1 | $ | 3.2 | $ | 6.8 | $ | 9.6 |
|
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 | $ | 29.56 | ||||||
Exercised | (1.9 | ) | $ | 10.76 | |||||
Forfeited | (0.1 | ) | $ | 25.61 | |||||
Outstanding at September 30, 2017 | 8.5 | $ | 16.58 | ||||||
Vested and expected to vest at September 30, 2017 | 8.5 | $ | 16.58 | $ | 108.9 | 6.77 | |||
Exercisable at September 30, 2017 | 6.6 | $ | 13.33 | $ | 105.1 | 6.23 |
Restricted Stock Awards and Restricted Stock Units | Awards (millions) | Weighted-Average Fair Value | |||
Outstanding at January 1, 2017 | 2.3 | $ | 29.18 | ||
Granted | 0.7 | $ | 30.21 | ||
Vested | (0.9 | ) | $ | 30.05 | |
Forfeited | (0.1 | ) | $ | 26.77 | |
Outstanding at September 30, 2017 | 2.0 | $ | 29.27 |
Performance Stock Awards and Performance Share Units | Awards (millions) | Weighted-Average Fair Value | |||
Outstanding at January 1, 2017 | 0.3 | $ | 24.74 | ||
Granted | 0.3 | $ | 38.11 | ||
Vested | — | $ | — | ||
Forfeited | — | $ | — | ||
Outstanding at September 30, 2017 | 0.6 | $ | 31.16 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Foreign exchange losses, net | $ | 3.5 | $ | 4.5 | $ | 8.3 | $ | 30.0 | ||||
Impairments of property | 4.4 | — | 7.6 | 10.5 | ||||||||
Debt extinguishment and refinancing related costs | 0.6 | 81.9 | 13.0 | 84.2 | ||||||||
Other miscellaneous (income) expense, net | (0.6 | ) | 1.0 | (1.4 | ) | 3.5 | ||||||
Total | $ | 7.9 | $ | 87.4 | $ | 27.5 | $ | 128.2 |
|
Nine Months Ended September 30, | ||||
2017 | 2016 | |||
Effective Tax Rate | 17.2 | % | 22.5 | % |
|
September 30, 2017 | December 31, 2016 | |||||
Accounts receivable - trade, net | $ | 766.6 | $ | 640.4 | ||
Notes receivable | 26.6 | 68.7 | ||||
Other | 95.8 | 92.8 | ||||
Total | $ | 889.0 | $ | 801.9 |
|
September 30, 2017 | December 31, 2016 | |||||
Finished products | $ | 360.7 | $ | 315.2 | ||
Semi-finished products | 97.4 | 87.5 | ||||
Raw materials and supplies | 166.3 | 127.0 | ||||
Total | $ | 624.4 | $ | 529.7 |
|
September 30, 2017 | December 31, 2016 | |||||
Property, plant and equipment | $ | 2,147.9 | $ | 1,933.0 | ||
Accumulated depreciation | (761.8 | ) | (617.3 | ) | ||
Property, plant and equipment, net | $ | 1,386.1 | $ | 1,315.7 |
|
September 30, 2017 | December 31, 2016 | |||||
2024 Dollar Term Loans | $ | 1,995.0 | $ | — | ||
2023 Dollar Term Loans | — | 1,545.0 | ||||
2023 Euro Term Loans | 467.1 | 417.6 | ||||
2024 Dollar Senior Notes | 500.0 | 500.0 | ||||
2024 Euro Senior Notes | 394.2 | 349.7 | ||||
2025 Euro Senior Notes | 529.5 | 469.8 | ||||
Short-term and other borrowings | 67.2 | 39.8 | ||||
Unamortized original issue discount | (9.6 | ) | (10.0 | ) | ||
Unamortized deferred financing costs | (40.4 | ) | (48.0 | ) | ||
$ | 3,903.0 | $ | 3,263.9 | |||
Less: | ||||||
Short term borrowings | $ | 13.1 | $ | 8.3 | ||
Current portion of long-term borrowings | 24.7 | 19.6 | ||||
Long-term debt | $ | 3,865.2 | $ | 3,236.0 |
Remainder of 2017 | $ | 19.3 | |
2018 | 28.9 | ||
2019 | 25.5 | ||
2020 | 25.4 | ||
2021 | 25.4 | ||
Thereafter | 3,814.3 | ||
$ | 3,938.8 |
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 | % |
|
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) | ||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | ||||||||||||||
Interest rate contracts | $ | — | $ | (1.7 | ) | Interest expense, net | $ | (0.5 | ) | $ | 1.7 | Interest expense, net | $ | 0.4 | $ | (2.0 | ) |
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) | ||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | ||||||||||||||
Interest rate contracts | $ | 3.7 | $ | — | Interest expense, net | $ | 0.2 | $ | 4.9 | Interest expense, net | $ | 2.4 | $ | 1.3 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
Derivatives Not Designated as Hedging Instruments under ASC 815 | Location of (Gain) Loss Recognized in Income on Derivatives | 2017 | 2016 | 2017 | 2016 | ||||||||
Interest rate caps | Interest expense | $ | 0.2 | $ | — | $ | 0.6 | $ | — | ||||
Foreign currency forward contracts | Other expense, net | $ | 2.5 | $ | 0.4 | $ | 9.7 | $ | 4.4 |
September 30, 2017 | December 31, 2016 | |||||
Prepaid and other assets: | ||||||
Interest rate swaps | $ | — | $ | 0.1 | ||
Total assets | $ | — | $ | 0.1 | ||
Other accrued liabilities: | ||||||
Interest rate swaps | $ | — | $ | 0.8 | ||
Interest rate caps | $ | 3.0 | $ | — | ||
Other liabilities | ||||||
Interest rate caps | $ | 1.1 | $ | — | ||
Total liabilities | $ | 4.1 | $ | 0.8 |
September 30, 2017 | December 31, 2016 | |||||
Prepaid and other assets: | ||||||
Foreign currency contracts | $ | — | $ | 0.1 | ||
Other assets | ||||||
Interest rate caps | $ | 0.1 | $ | — | ||
Total assets | $ | 0.1 | $ | 0.1 | ||
Other accrued liabilities: | ||||||
Foreign currency contracts | $ | — | $ | 0.5 | ||
Total liabilities | $ | — | $ | 0.5 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Performance Coatings | ||||||||||||
Refinish | $ | 395.3 | $ | 431.7 | $ | 1,205.1 | $ | 1,259.3 | ||||
Industrial | 298.2 | 184.8 | 737.7 | 532.4 | ||||||||
Total Net sales Performance Coatings | 693.5 | 616.5 | 1,942.8 | 1,791.7 | ||||||||
Transportation Coatings | ||||||||||||
Light Vehicle | 309.7 | 321.1 | 984.0 | 994.9 | ||||||||
Commercial Vehicle | 88.6 | 83.0 | 261.3 | 254.8 | ||||||||
Total Net sales Transportation Coatings | 398.3 | 404.1 | 1,245.3 | 1,249.7 | ||||||||
Total Net sales | $ | 1,091.8 | $ | 1,020.6 | $ | 3,188.1 | $ | 3,041.4 |
Three Months Ended September 30, | ||||||||||||||||||
2017 | 2016 | |||||||||||||||||
Performance Coatings | Transportation Coatings | Total | Performance Coatings | Transportation Coatings | Total | |||||||||||||
Net sales (1) | $ | 693.5 | $ | 398.3 | $ | 1,091.8 | $ | 616.5 | $ | 404.1 | $ | 1,020.6 | ||||||
Equity in earnings (losses) in unconsolidated affiliates | — | 0.1 | 0.1 | (0.4 | ) | 0.1 | (0.3 | ) | ||||||||||
Adjusted EBITDA (2) | 135.1 | 74.4 | 209.5 | 145.7 | 84.7 | 230.4 | ||||||||||||
Investment in unconsolidated affiliates | 3.1 | 12.3 | 15.4 | 3.3 | 11.5 | 14.8 |
Nine Months Ended September 30, | ||||||||||||||||||
2017 | 2016 | |||||||||||||||||
Performance Coatings | Transportation Coatings | Total | Performance Coatings | Transportation Coatings | Total | |||||||||||||
Net sales (1) | $ | 1,942.8 | $ | 1,245.3 | $ | 3,188.1 | $ | 1,791.7 | $ | 1,249.7 | $ | 3,041.4 | ||||||
Equity in earnings (losses) in unconsolidated affiliates | 0.2 | 0.3 | 0.5 | (0.2 | ) | 0.2 | — | |||||||||||
Adjusted EBITDA (2) | 398.8 | 241.0 | 639.8 | 413.2 | 264.7 | 677.9 | ||||||||||||
Investment in unconsolidated affiliates | 3.1 | 12.3 | 15.4 | 3.3 | 11.5 | 14.8 |
(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 September 30, | Nine Months Ended September 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Income (loss) before income taxes | $ | 58.4 | $ | (12.9 | ) | $ | 124.8 | $ | 102.8 | |||
Interest expense, net | 37.7 | 42.9 | 109.1 | 140.8 | ||||||||
Depreciation and amortization | 88.6 | 81.2 | 255.9 | 235.8 | ||||||||
EBITDA | 184.7 | 111.2 | 489.8 | 479.4 | ||||||||
Debt extinguishment and refinancing related costs (a) | 0.6 | 81.9 | 13.0 | 84.2 | ||||||||
Foreign exchange remeasurement losses (b) | 3.5 | 4.5 | 8.3 | 30.0 | ||||||||
Long-term employee benefit plan adjustments (c) | (0.1 | ) | 0.8 | 0.4 | 2.1 | |||||||
Termination benefits and other employee related costs (d) | 5.8 | 16.3 | 6.6 | 25.2 | ||||||||
Consulting and advisory fees (e) | — | 2.7 | (0.1 | ) | 8.3 | |||||||
Transition-related costs (f) | 1.9 | — | 5.8 | — | ||||||||
Offering and transactional costs (g) | 0.5 | 3.0 | 6.1 | 4.4 | ||||||||
Stock-based compensation (h) | 9.2 | 10.0 | 30.5 | 31.6 | ||||||||
Other adjustments (i) | 0.8 | 1.5 | 3.6 | 5.2 | ||||||||
Dividends in respect of noncontrolling interest (j) | (1.8 | ) | (1.5 | ) | (2.7 | ) | (3.0 | ) | ||||
Deconsolidation impacts and impairments (k) | 4.4 | — | 78.5 | 10.5 | ||||||||
Adjusted EBITDA | $ | 209.5 | $ | 230.4 | $ | 639.8 | $ | 677.9 |
(a) | During the three and nine months ended September 30, 2016, we prepaid outstanding principal on our term loans, resulting in non-cash pre-tax losses on extinguishment of $4.3 million and $6.6 million, respectively. In addition, during the three and nine months ended September 30, 2016, we amended our Credit Agreement and refinanced our indebtedness, resulting in additional losses of $77.6 million. In connection with the refinancing of our Dollar Term Loans during the nine months ended September 30, 2017, we recorded losses of $13.0 million, including changes to estimates of $0.6 million for the three months ended September 30, 2017. We do not consider these to be indicative of our ongoing operating performance. |
(b) | Eliminates foreign exchange gains and losses resulting from the remeasurement of assets and liabilities denominated in foreign currencies, net of impacts associated with our foreign currency instruments used to hedge our balance sheet exposures. Exchange effects attributable to the remeasurement of our Venezuelan subsidiary represented losses of $1.8 million for the nine months ended September 30, 2017 and losses of $1.2 million and $23.9 million for the three and nine months ended September 30, 2016, respectively. |
(c) | Eliminates the non-cash, non-service cost components of long-term employee benefits. |
(d) | Represents expenses primarily related to employee termination benefits and other employee-related 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 integration costs related to the acquisition of the Industrial Wood business that was a carve-out business from Valspar. These amounts are not considered indicative of our ongoing operating performance. |
(g) | Represents acquisition-related expenses, including changes in the fair value of contingent consideration, as well as costs associated with the 2016 secondary offerings of our common shares by Carlyle, both of which are not considered indicative of our ongoing operating performance. |
(h) | Represents non-cash costs associated with stock-based compensation. |
(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 100% owned, which are reflected to show the cash operating performance of the entities on Axalta's financial statements. |
(k) | During the nine months ended September 30, 2017 and 2016, we recorded a loss in conjunction with the deconsolidation of our Venezuelan subsidiary and a non-cash impairment charge related to a real estate investment of $70.9 million and $10.5 million, respectively. During the three and nine months ended September 30, 2017, we recorded non-cash impairment charges related to certain manufacturing facilities previously announced for closure of $4.4 million and $7.6 million, respectively. We do not consider these to be indicative of our ongoing operating performance. |
|
Unrealized Currency Translation Adjustments | Pension Adjustments | Unrealized Gain (Loss) on Securities | Unrealized Gain (Losses) on Derivatives | Accumulated Other Comprehensive Income (Loss) | |||||||||||
December 31, 2016 | $ | (292.2 | ) | $ | (56.6 | ) | $ | 0.4 | $ | (2.0 | ) | $ | (350.4 | ) | |
Current year deferrals to AOCI | 88.3 | (0.3 | ) | (0.1 | ) | 1.7 | 89.6 | ||||||||
Reclassifications from AOCI to Net income | — | 6.2 | — | (1.7 | ) | 4.5 | |||||||||
Net Change | 88.3 | 5.9 | (0.1 | ) | — | 94.1 | |||||||||
September 30, 2017 | $ | (203.9 | ) | $ | (50.7 | ) | $ | 0.3 | $ | (2.0 | ) | $ | (256.3 | ) |
Unrealized Currency Translation Adjustments | Pension Adjustments | Unrealized Gain (Loss) on Securities | Unrealized Gain (Loss) on Derivatives | Accumulated Other Comprehensive Income (Loss) | |||||||||||
December 31, 2015 | $ | (232.8 | ) | $ | (33.4 | ) | $ | 0.1 | $ | (3.2 | ) | $ | (269.3 | ) | |
Current year deferrals to AOCI | 15.9 | — | 0.3 | (3.1 | ) | 13.1 | |||||||||
Reclassifications from AOCI to Net income | — | 0.2 | — | 3.1 | 3.3 | ||||||||||
Net Change | 15.9 | 0.2 | 0.3 | — | 16.4 | ||||||||||
September 30, 2016 | $ | (216.9 | ) | $ | (33.2 | ) | $ | 0.4 | $ | (3.2 | ) | $ | (252.9 | ) |
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