Axalta Coating Systems Ltd. has announced its financial results for the quarter ended September 30, 2014. The results contained in this earnings release reflect the results previously filed in Form 10-Q on November 14, 2014.
Key highlights: Third quarter net sales of $1.1 billion, an increase of 3.2% versus prior year Third quarter Adjusted EBITDA of $228 million, an increase of 17.5% year-over-year Continued progress on previously announced capital expansions with initial commissioning at Jiading waterborne expansion and ground breaking at Wuppertal waterborne facility “We are pleased to report solid results for the third quarter driven by year-over-year net sales growth in both our Performance Coatings and Transportation Coatings segments as a result of favorable volume and pricing trends. We also continued to expand our Adjusted EBITDA margins compared to the third quarter last year. We remain focused on executing our revenue, cost, and efficiency initiatives and are encouraged with the progress during the quarter towards our longer term growth plans,” said Charles W. Shaver, Axalta’s Chairman and Chief Executive Officer. “We are excited about our recent IPO which we believe provides Axalta with increased visibility and is an important milestone for the Company.”
Consolidated Financial Results
Net sales were $1.1 billion for the third quarter of 2014, an increase of 3.2% compared to the third quarter of 2013. Net sales growth was primarily driven by volume increases, which contributed 2.8% in net sales growth, as North America and Asia volume increases were slightly offset by volume declines in the other regions, particularly Latin America where the economic environment remains weak. Higher average selling prices contributed 1.9% in net sales growth. Growth from volume and pricing was partially offset by unfavorable currency translation, which reduced net sales by 1.5%.
Adjusted EBITDA was $228 million for the third quarter of 2014, an increase of 17.5% compared to the third quarter of 2013. Adjusted EBITDA growth was driven by higher sales, improved product mix, lower raw material costs and benefits from operational improvement initiatives. As a percentage of net sales, Adjusted EBITDA expanded by 250 basis points to 20.6%.
Performance Coatings Results
The Performance Coatings segment generated net sales of $663.5 million during the third quarter of 2014, an increase of 3.1% compared to the third quarter of 2013. Increased volumes contributed 3.3% in net sales growth and higher average selling prices contributed 1.5% in net sales growth. These factors were partially offset by unfavorable currency translation, which reduced net sales by 1.7%. Net sales from refinish and industrial end markets grew by 3.4% and 2.3%, respectively, compared to the third quarter of 2013.
Performance Coatings generated Adjusted EBITDA of $148.5 million, an increase of 0.8% compared to the third quarter of 2013. Performance Coatings Adjusted EBITDA growth was primarily driven by higher net sales, partially offset by higher operating expenses from investments in growth initiatives. As a result, Performance Coatings Adjusted EBITDA margin of 22.4% contracted 50 basis points compared to the third quarter of 2013.
Transportation Coatings Results
The Transportation Coatings segment generated net sales of $445.4 million, an increase of 3.4% compared to the third quarter of 2013. Higher average selling prices contributed to 2.5% net sales growth and increased volumes contributed to 2.1% net sales growth. These factors were partially offset by unfavorable currency translation, which reduced net sales by 1.2% compared to the prior year. Net sales from light vehicle and commercial vehicle end markets grew by 0.8% and 13.0%, respectively, compared to the third quarter of 2013. Light vehicle production increases in Asia Pacific and increased commercial truck volumes in North America were largely offset by significantly lower light vehicle volumes in Latin America.
Transportation Coatings generated Adjusted EBITDA of $79.5 million, an increase of 69.9% compared to the third quarter of 2013. Transportation Coatings Adjusted EBITDA growth was driven by increased sales and lower fixed manufacturing costs, partially resulting from operational improvement initiatives. Transportation Coatings generated an Adjusted EBITDA margin of 17.8%, representing approximately a 700 basis point increase compared to the third quarter of 2013.
Balance Sheet Highlights
We ended the quarter with cash and cash equivalents of $233.3 million. Net debt was $3,499 million as of September 30, 2014 which results in a net debt to LTM Adjusted EBITDA ratio of 4.2 times.
“Our balance sheet, cash flow generation, and borrowing capacity provide us with the flexibility to fund our business and invest for growth,” said Robert W. Bryant, Axalta’s Executive Vice President and Chief Financial Officer. “Additionally, we lowered our cash interest expense compared to same period in 2013 which was a result of the refinancing of our Senior Secured Credit facilities which we completed in February 2014 and an additional step-down in interest rates in the third quarter 2014 on our term loans as a result of our improved net leverage metrics.”
