PHILADELPHIA, May 01, 2024 (GLOBE NEWSWIRE) -- Axalta Coating Systems Ltd. (NYSE:AXTA) ("Axalta"), a leading global coatings company, announced its financial results for the first quarter ended March 31, 2024. First Quarter 2024 Highlights: Net sales increased 0.8% year-over-year to $1.3 billion Announced 2024 Transformation Initiative with an estimated annual $75 million run-rate savings expected in 2026 Net income declined $22 million year-over-year to $39 million primarily due to $55 million of restructuring charges Adjusted EBITDA increased $46 million year-over-year to $259 million with Adjusted EBITDA margin improving 340 basis points year-over-year to 20.0% Diluted EPS declined by $0.09 year-over-year, or 33% to $0.18 and Adjusted Diluted EPS increased $0.13 year-over-year, or 37%, to $0.48 Total net leverage ratio of 2.8x and paid down $75 million of principal on term loan Board approved $700 million share repurchase authorization in April 2024 Increased full year 2024 earnings and free cash flow outlook First Quarter 2024 Consolidated Financial Results First quarter 2024 net sales increased 0.8% year-over-year to $1.3 billion. Growth within the company's end-markets was driven by a 4% improvement in both Refinish and Light Vehicle, offset partially by lower net sales in Industrial and Commercial Vehicle. Net income decreased by $22 million year-over-year to $39 million, mainly as a result of $55 million of pre-tax charges incurred in the first quarter of 2024 as part of the previously announced 2024 Transformation Initiative. Adjusted net income improved by $27 million year-over-year to $106 million with contributions from both segments driven by variable cost deflation that more than offset higher fixed operating expense. Adjusted EBITDA of $259 million was a first quarter record, compared to $213 million in the prior year period. Adjusted EBITDA margin increased by 340 basis points to 20.0%. Diluted earnings per share decreased to $0.18 compared to $0.27 in the prior year period, driven primarily by higher restructuring expense. Adjusted diluted earnings per share improved by 37% to $0.48 following the increase in earnings excluding impacts of restructuring charges, which more than offset modest headwinds from a higher effective tax rate and interest expense. First quarter 2024 cash provided by operating activities was $34 million versus cash used for operating activities of $52 million in the prior year period with free cash flow totaling $15 million compared to free cash flow cash use of $88 million in the same period last year. The year-over-year increases in cash provided by operating activities and free cash flow were driven primarily by improvements in working capital. Cash and cash equivalents at quarter end were $624 million and total liquidity was over $1.1 billion. Our net debt to trailing twelve month ("LTM") Adjusted EBITDA ratio (total net leverage ratio) was 2.8x at quarter-end versus 3.7x as of March 31, 2023. The company paid down an additional $75 million of term loan principal in the quarter. In April 2024, the company's Board of Directors approved a $700 million share repurchase program, which replaces the prior share repurchase program.   Discussion of Segment Results Performance Coatings first quarter 2024 net sales were $848 million, flat relative to the prior year period. Refinish net sales grew 4% year-over-year driven by positive price-mix and a strong contribution from the André Koch acquisition that closed in the fourth quarter 2023. Industrial net sales decreased year-over-year due to softer market activity and the prioritization of higher margin business. Performance Coatings generated a first quarter record Adjusted EBITDA of $196 million in the current period compared to $169 million in the prior year period, with associated margins of 23.1% and 20.0%, respectively. The increases in segment Adjusted EBITDA and Adjusted EBITDA margin were driven by variable cost deflation and Refinish net sales growth. Mobility Coatings first quarter 2024 net sales were $446 million, up 2% from the prior year period. Light Vehicle net sales improved by 4% year-over-year, driven by strong volume growth in China. Price and product mix was roughly flat in Light Vehicle despite modest headwinds from raw material indexed contracts. Commercial Vehicle net sales decreased by 4% year-over-year driven by lower Class 8 production, which was down 12% across North America and Latin America year-over-year. The Mobility Coatings segment generated Adjusted EBITDA of $63 million in the first quarter compared to $44 million in the prior year period, with associated margins of 14.2% and 10.1%, respectively. The increases in segment Adjusted EBITDA and Adjusted EBITDA margin were driven by raw material deflation and solid sales growth in Light Vehicle. "This was another strong quarter for Axalta," said Chris Villavarayan, Axalta's CEO and President. "We are executing well and I am confident in our trajectory this year as we target record earnings for the second consecutive year. We also remain focused on driving strategic actions intended to accelerate long-term value creation and unlock earnings power. As a result, we are raising our full year 2024 Adjusted EBITDA, Adjusted EPS, and Free Cash Flow guidance." Second Quarter And Full Year 2024 Outlook (in millions, except %'s and per share data)   Projection         Item   Q2 2024 FY 2024         Net Sales YoY%   3% - 5% +LSD Adjusted EBITDA   ~$275 $1,050 - $1,080 Adjusted Diluted EPS   ~$0.50 $1.90 - $2.00 Free Cash Flow     $425 - $475 D&A (step-up D&A)     ~$280 ($50) Tax Rate, As Adjusted     ~25% Diluted Shares Outstanding     ~222 Interest Expense     ~$210 Capex     ~$165 LSD= low single digit Axalta does not provide a reconciliation for non-GAAP estimates for Adjusted EBITDA, Adjusted Diluted EPS, Free Cash Flow or tax rate, as adjusted, 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 first quarter 2024 financial results on Wednesday, May 1, 2024 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 May 1, 2025. The dial-in phone number for the conference call is 412-317-5195. For those unable to participate, a replay will be available through May 8, 2024. The replay dial-in number is +1-412-317-6671. The replay passcode is 10187710. 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, statements regarding the 2024 Transformation Initiative and our outlook and or guidance, which includes net sales growth, Adjusted EBITDA, Adjusted Diluted EPS, Free Cash Flow, depreciation and amortization ("D&A"), step up D&A, tax rate, as adjusted, diluted shares outstanding, interest expense, and capital expenditures, and the timing or amount of any future share repurchases. Axalta has identified some of these forward looking statements with words such as "outlook," "projection," "target," "intended," "expected," "trajectory," "estimates," "estimated," and "guidance," 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 risks related to the execution of the 2024 Transformation Initiative, 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, Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, total net leverage ratio, adjusted net income and Adjusted Diluted EPS. 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 common shareholders 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, Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, total net leverage ratio, adjusted net income and Adjusted Diluted EPS may differ from that of others in our industry. Adjusted EBIT, Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, total net leverage ratio, adjusted net income and Adjusted Diluted EPS 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 operating cash flows or as measures of liquidity. Adjusted EBIT, Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, total net leverage ratio, adjusted net income and Adjusted Diluted EPS 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 EBITDA, Adjusted Diluted EPS, tax rate, as adjusted, or Free Cash Flow 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. Segment Financial Measures The primary measure of segment operating performance is Adjusted EBITDA, which is a key metric that is used by management to evaluate business performance in comparison to budgets, forecasts and prior year financial results, providing a measure that management believes reflects Axalta's core operating performance. As we do not measure segment operating performance based on net income, a reconciliation of this non-GAAP financial measure with the most directly comparable financial measure calculated in accordance with GAAP is not available. Beginning with the fourth quarter of 2023, we replaced Adjusted EBIT with Adjusted EBITDA as the primary measure of segment operating performance. As previously disclosed, we will continue publishing segment Adjusted EBIT through 2024 to allow for historical trend analyses. 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 March 31,       2024       2023 Net sales   $ 1,294     $ 1,284 Cost of goods sold     865       902 Selling, general and administrative expenses     207       206 Other operating charges     61       7 Research and development expenses     18       19 Amortization of acquired intangibles     22       25 Income from operations     121       125 Interest expense, net     54       48 Other expense, net     8       1 Income before income taxes     59       76 Provision for income taxes     20       15 Net income     39       61 Less: Net loss attributable to noncontrolling interests     (2 )     — Net income attributable to common shareholders   $ 41     $ 61 Basic net income per share   $ 0.18     $ 0.27 Diluted net income per share   $ 0.18     $ 0.27 Basic weighted average shares outstanding     220.3       221.2 Diluted weighted average shares outstanding     221.3       222.1   AXALTA COATING SYSTEMS LTD. Condensed Consolidated Balance Sheets (Unaudited) (In millions, except per share data)     March 31, 2024   December 31, 2023 Assets         Current assets:         Cash and cash equivalents   $ 624     $ 700   Restricted cash     3       3   Accounts and notes receivable, net     1,242       1,260   Inventories     751       741   Prepaid expenses and other current assets     140       117   Total current assets     2,760       2,821   Property, plant and equipment, net     1,174       1,204   Goodwill     1,554       1,591   Identifiable intangibles, net     1,087       1,130   Other assets     514       526   Total assets   $ 7,089     $ 7,272   Liabilities, Shareholders' Equity         Current liabilities:         Accounts payable   $ 721     $ 725   Current portion of borrowings     20       26   Other accrued liabilities     591       677   Total current liabilities     1,332       1,428   Long-term borrowings     3,407       3,478   Accrued pensions     241       252   Deferred income taxes     155       162   Other liabilities     179       179   Total liabilities     5,314       5,499