PHILADELPHIA--(BUSINESS WIRE)--Axalta Coating Systems Ltd. (NYSE:AXTA), a leading global coatings company, announced its financial results for the second quarter ended June 30, 2016.

“Our strong second quarter results demonstrated solid execution and ongoing fundamental strength in our key end-markets in the face of ongoing demand challenges in certain emerging economies,” said Charles W. Shaver, Axalta’s Chairman and Chief Executive Officer. “We met or exceeded expectations for growth and profitability across each of our end-markets.” Mr. Shaver added, “We have been pleased to announce three bolt-on acquisitions in the last month, including the largest private coil coatings company in North America, one of the major automotive interiors coatings businesses in North America, and a strong refinish and industrial player in Southeast Asia. All three of these acquisitions have attractive expected return profiles based on clearly identified synergies.”

Second Quarter Consolidated Financial Results

Net sales of $1,065.1 million for the second quarter of 2016 benefited from volume and pricing growth, but decreased 2.7% year-over-year as a result of 6.9% negative impact from foreign currency translation. Constant currency net sales increased 4.2% compared to the year-ago quarter, driven by 2.8% volume increases, augmented by 1.4% higher average selling prices. Similar to the first quarter, the strongest contributors to net sales were the EMEA and North America regions, offset by challenging conditions in South America.

Net income attributable to Axalta was $48.5 million for the second quarter of 2016 compared with a net loss attributable to Axalta of $25.1 million in Q2 2015. The increase in net income was primarily driven by a reduction in non-operating losses from our Latin America region. Adjusted net income of $81.5 million for the second quarter of 2016 decreased $0.4 million from $81.9 million in Q2 2015.

Adjusted EBITDA of $252.6 million for the second quarter compared with $255.5 million in Q2 2015. This result benefitted from volume and pricing contributions, as well as lower variable costs and savings from our operating improvement initiatives. These factors were slightly offset by negative foreign currency translation and moderate ongoing operational expenditures for planned growth initiatives.

Performance Coatings Results

Performance Coatings net sales were $632.1 million in Q2 2016, a decrease of 1.0% year-over-year as a result of an 8.8% unfavorable foreign currency translation impact. Constant currency net sales increased 7.8%, driven by a 5.9% increase in volumes and higher average selling prices of 1.9% in the period. Refinish end-market net sales decreased 2.5% in Q2 2016 (increased 9.3% excluding foreign currency translation), while our Industrial end-market increased 2.6% (increased 3.7% excluding foreign currency translation).

The Performance Coatings segment generated Adjusted EBITDA of $157.3 million in the second quarter, a 3.0% year-over-year decrease. Positive volume and pricing contributions, coupled with variable cost savings, were more than offset by negative foreign currency translation and incremental operating expense to support growth initiatives. Segment Adjusted EBITDA margin of 24.9% in Q2 2016 reflected a 50 basis point decrease compared to the corresponding prior year quarter.

Transportation Coatings Results

The Transportation Coatings segment produced net sales of $433.0 million in the second quarter, a decrease of 4.9% versus second quarter 2015, largely driven by negative currency translation. Constant currency net sales decreased by 0.7%, including a 1.5% decrease in volume offset partially by 0.8% positive contribution from price. Unfavorable foreign currency translation impacted net sales by 4.2% in the quarter. Transportation Coatings Q2 net sales included lower growth Light Vehicle performance coupled with an ongoing pullback in Commercial Vehicle in North and South America. Light Vehicle net sales decreased 0.8% year-over-year (increased 1.5% excluding foreign currency translation), with ongoing growth in North America and EMEA offset largely by weaker volumes in Latin America and Asia Pacific. Commercial Vehicle net sales decreased 18.0% versus last year (decreased 8.3% excluding foreign currency translation), driven by a combination of slower heavy truck production as well as weaker demand from some non-truck product types served.

The Transportation Coatings segment generated Adjusted EBITDA of $95.3 million in Q2 2016, an increase of 2.0% compared to the second quarter of 2015, with positive price and variable cost contributions partially offset by unfavorable foreign currency translation, lower volume effects, and moderate ongoing operating expense increases to support planned growth. Segment Adjusted EBITDA margin of 22.0% in Q2 2016 represented a 150 basis point increase from 20.5% in the prior year quarter.

Balance Sheet and Cash Flow Highlights

We ended the quarter with cash and cash equivalents of $480.1 million which reflects $100 million usage for debt prepayment in the quarter. Our net debt was $2.9 billion as of June 30, 2016. This compared to $3.3 billion as of the same quarter 2015.

Second quarter operating cash flow was $197.3 million versus $103.7 million in the corresponding quarter of 2015, reflecting lower working capital use. Free cash flow, calculated as operating cash flow less capital expenditures, totaled $172.8 million based on capital expenditures of $24.5 million.

“We are pleased that our balance sheet and cash flow metrics continued to improve, including significantly increased free cash flow in the second quarter versus last year,” said Robert W. Bryant, Axalta’s Executive Vice President and Chief Financial Officer. “We are also pleased that we have been able to identify additional tuck-in acquisitions which we expect to generate returns well above our cost of capital. We will continue to pursue similar transactions, while planning to apply excess cash flow after capital expenditures and acquisitions to further debt reduction.”

2016 Guidance Update

We are reiterating our outlook for the full year 2016 as follows:

• Largely flat net sales, up 4-6% on a constant currency basis
• Adjusted EBITDA of $900-940 million
• Interest expense of $180-190 million
• Income tax rate, as adjusted, of 25-27%
• Diluted shares of 242-245 million
• Working capital as a percentage of net sales of 11-13%
• Capital expenditures of ~$150 million
• Depreciation and amortization of ~$320 million

About Axalta Coating Systems – Celebrating 150 Years in the Coatings Industry

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 12,800 people of Axalta continue to find ways to serve our more than 100,000 customers in 130 countries better every day with the finest coatings, application systems and technology. For more information visit axaltacoatingsystems.com and follow us @axalta on Twitter.