Ladies and gentlemen, thank you for standing by. Welcome to Axalta Coating Systems fourth quarter and full year 2014 earnings conference call. Presenting today will be Charlie Shaver, Chairman and Chief Executive Officer and Robert Bryant, Executive Vice President and Chief Financial Officer. At this time all participants are in a listen-only mode. [Operator Instructions] Today's call is being recorded. Replays of this conference call will be available through March 25, 2015. Those listening after March 11, 2015 should please note that the information provided in this recording will not be updated and it is possible that the information will no longer be current. At this time I would turn the call over to Michael Finn, Senior Vice President & General Counsel of Axalta Coating Systems for a brief legal notice.

Thank you, operator. Good morning everyone. I think you know that after the market closed yesterday. We released our earnings press release and this morning we posted a slide presentation to the investor relations section of our Web site at www.axaltacs.com. We will be referencing the slide presentation during this call. Both the prepared remarks and discussion during the call may contain forward looking statements reflecting the company's current view of future events and the potential effect on Axalta's operating and financial performance. These statements involve uncertainties and risks which may cause actual results to differ. The company is under no obligation to provide subsequent updates to these forward-looking statements. The presentation also contains non-GAAP financial measures. The appendix to the presentation which is available on our Web site contains reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information regarding forward-looking statements and non-GAAP financial measures, please refer to our filings with the SEC. I would now like to turn the call over to Charlie.

Thanks, Michael and good morning and thanks to all of you for joining us and today we are pleased to be sharing our fourth quarter and our full year 2014 results. As you know this marks our first year end as a public company and our second earnings call following our IPO in November on New York Stock Exchange. We would like to begin today's call by providing a brief overview of Axalta for anyone new to the company and then some highlights from the fourth quarter and the full year. I will then turn the call over to Robert who will give a little more detail on our results, walk you through our 2015 guidance with some of the underlying assumptions. After that we will open up the lines to take your questions. So if you would refer to Slide 3 of our earnings presentation. It's probably worth taking a few minutes, hit some of the key points about our business for those of you who might be new to the call or to the investment. As stated, we are a leading global manufacturer marketer and distributor of high performance coatings. We generate approximately 90% of our revenue in markets. We hold the number one or number two position in the market including number one position in our core automotive refinish business with approximately 25% of the global market share. Our business is organized into two distinct segments. Performance coatings and transportation coatings. Performance coatings is our largest segment, accounts for nearly 60% of our overall net sales. We do serve both the refinish and industrial end markets through this segment. On the transportation coatings segment side, it's about 41% of our net sales and in this segment we serve the light vehicle OEM end market as well as…

Thanks, Charlie and good morning everyone. I would like to ask you to please turn to Slide 5 of our earnings presentation where you will find our Q4 consolidated results. Excluding the 6% negative impact of foreign currency translation mainly from the devaluation of the euro and certain Latin America jurisdictions, our fourth quarter net sales increased 5% over the comparable period based on 3% volume growth and 2% higher average selling prices. We generated strong volume growth in Asia-Pacific, North America and Latin America, while EMEA volumes were slightly down primarily due to the weakness in Russia and Eastern Europe. We benefited from modest price increases in both of our segments. Adjusted EBITDA increased 3.7% year-over-year to $205 million from $197 million, driven primarily by higher volumes and improved mix as well as lower fixed manufacturing cost from our productivity improvement efforts. Raw material benefits were minimal as the timing of lower oil prices did not have a significant impact on our profitability. Adjusted EBITDA margin expended by approximately 90 basis points to 19%, primarily as a result of solid operational effectiveness on our cost productivity initiatives and the modest price increases I mentioned previously. Moving on to our Q4 2014 performance coatings segment results. Excluding the negative impact of foreign currency, net sales in our performance coatings segment increased 6.3% over the comparable prior period. Net sales excluding the negative impact of foreign currency were higher across North America, Asia Pacific and Latin America. Volumes were up 4.8% for the quarter and up in all regions with the exception of EMEA. Average selling prices were 1.5% higher as prices were selectively increased, especially in jurisdictions with material inflation. The volume and price increases were offset by 7% unfavorable currency exchange translation, again primarily driven by the euro and…

Yes. Thanks, Robert. As the numbers show as well as the progress we have made on a multitude of fronts, 2014 year was an extremely successful year for us and we think 2015 will be another transformational year for the company. So if you turn to Slide 12, in summary, we will continue to focus on opportunities to maximize the long-term shareholder return. From a market perspective, our end market industries and general economies remain solid. From a commercially standpoint we see significant growth opportunities across all of our end markets in 2015. Our R&D pipeline in particular is extremely full. We continue to bring out advanced products both in the waterborne and solvent borne space. In our refinish, our ever important core refinish end market, we will continue to expand in emerging markets as well as expand our main stream offerings. We're going to continue to focus on our mature markets and surely maintain solid positions including maintaining our appropriate share of the critical markets such as multi-shop operator, which is a consolidation of body shops in North America and other countries. We believe that will continue to have a meaningful impact on certain regions throughout the year. In industrial end market, we will have several new product launches in both liquid and powder coatings throughout the year. In light vehicle, our focus for 2015 will be on numerous plant launches in all regions and we will continue to deepen our engagement with customers through differentiated quality and service. And lastly in commercial vehicle, our end markets that we have we will continue to look for opportunities to expand our business, focus on under-serving markets as evidenced by our recent joint venture announcement with Kinlita in China. From an operational standpoint, our focus will be on the start up at Jiading and the completion of our previously mentioned capacity expansions. In addition, as Robert mentioned, we are going to be ramping up our global commercial and comprehensive cost improvement initiative, the Axalta Way and continued to execute on our fit for growth program in Europe. We will continue to have more details on this as we move through 2015. And finally, our financial situation is solid. We have a significant amount of flexibility. Our 2015 focus will continue to be reducing indebtedness and maintain a strong liquidity while investing in high RoR projects. In addition, as the opportunities present themselves, we're going to look at small or bolt-on acquisitions as we have previously highlighted, as well as partnership arrangements in our core end markets. So with that, I guess I will ask the operator to open up the line for questions.

(Operator Instructions) Our first question comes from the line of John McNulty with Credit Suisse. Please proceed with your question.

With regard to the performance coatings segment, you had indicated that there was cost of investment for growth and that may have nicked the margin a little bit in the quarter. I guess can you articulate what some of those investments are and how then we should be thinking about when maybe be some of the heavy lifting will be done there, or is it more just a function of you'll reach a revenue tipping point and then it will be insignificant at that point?

In that case, John, basically what we see is that in the area of refinish we continue to build out our sales force in some of the markets where we were underserved previously around the world. And then in addition in the industrial end market that was largely a business that under our previous owner was not organized as a business and required certain infrastructure from a managerial and from a sales force perspective in order to position that business for growth. And we actually believe that's one of our highest potential end markets within our current scope of businesses. So we continue to build out the management and the sales force infrastructure for that business. I think we would expect to see the majority of the buildup of resources to grow that business for this initial phase of growth to be completed by the end of this year.

Okay, great. And then just as a follow-up question. You saw some decent pricing across a number of your businesses, it looks like in the fourth quarter. I guess in this type of a raw material environment, do you see that becoming a more difficult burden going forward or is it more a function of you've got a lot of new products coming out and new services and that's maybe the bigger driver for that? How should we be thinking about that in 2015?

John, this is Charlie. I think we continue to believe we will be able to achieve pricing. Clearly, as we go through the year depending on raw material effects, in some regions we may moderate that some but overall when you look at the products we have coming out, the newer products, the more productive products that are priced more on a value proposition and less around just strictly a price per unit, especially as you get into waterborne and more exotic colors, more exotic monomers being used, I think our view is that we will continue to get price.

Our next question comes from the line of Ramanan Sivalingam with Deutsche Bank. Please proceed with your question.

Just a quick question on transportation coatings. You mentioned some outages amongst North American OEMs. Any way to quantify that and are you going to see a catch up in Q1 as those guys come back online?

Yes, what we saw at the beginning of Q1 was we actually had a couple of OEMs that because the West Coast port strike couldn't get parts and actually slowed down, and then we also had two OEMs that started off the year about a week later than we would have thought. In all cases in dialogue with those customers they believe they will catch up. As you know North America demand especially the people we're aligned with remain strong this year. If you look at [indiscernible] 16 million-16.5 million car sales this year, I think their view is they will play catch up a little bit.

Got it. That's very helpful. And then as you think about the full year, obviously you guys are clear that Q1 is going to be a little bit light versus the back part of the year. But the growth split between transportation coatings and performance coatings, how are you thinking about that just because you guys are coming off a very strong year in transportation.

Yes, into 2015, Ram, given -- this is Robert -- just given the amount of business that we've won over the last 21 months in the OEM space, we would expect to see top line sales growth both with and without currency in the transportation segment to exceed that of the performance segment.

Our next question comes from the line of P.J. Juvekar with Citi. Please proceed with your question.

It's Dan Jester on for P.J. In commercial vehicle this is I guess the second quarter in a row of quite strong performance. So are you gaining share in this market and how should we be thinking about this? Is this sustainable in 2015?

Yes. So I think there's two things going on there. One, in commercial we had some customers that we believe are gaining share so we're growing along with them. In addition, we also have begun to grow our business in Asia Pacific where we had very little presence.

Okay, great. And then for your outlook for 2015. Maybe can you just give a little bit more color on what you're thinking for your raw material basket and what's embedded in your guidance for your oil based raw materials and TiO2? Thank you.

Yes, first of all on the TiO2 market, I'll take your second one first. TiO2 we believe stayed relatively flat this year. If you'll remember, our TiO2 spend is not -- in this type of coatings, our total TiO2 spend is only around $70 million a year. So it's not a really big purchase for us. And again when we look at our contracts we believe that will be flat to slightly down. On the balance of the raw material basket which includes everything from resins to monomers to isocyanates to pigments, we think that basket will be down over the year. As you would guess, we are engaged in discussions with those suppliers right now. Our caution, and I think probably not unlike some of our competitors, has been some of those in the pigments area and in the isocyanates area because we use specialties. Those are products that are in relatively tight supply demand so we don't expect a large downward movement in there. Over in some of the solvents and resins area, clearly if oil continues to stay down over the next couple of quarters we think we will see some benefit. I don't think -- right now we are not giving a particular percent guidance because we just don't know yet.

Our next question comes from the line of Ghansham Panjabi with Robert W. Baird. Please proceed with your question.

What do you estimate the market for automotive refinish grew in the fourth quarter in North America and Europe, and how should we kind of think about that for 2015?

So I think -- this is Charlie -- on the automotive refinish in North America, we think that’s a market that last year grew at about 2%. And in Europe we think the market was relatively flat. So as we move into 2015 if you look at the overall North America collision market, we think that that will grow about 1% to 2% this year. And again, that's the overall cost of the market, the total marketplace, around $40 billion this year growing slightly. And some of that is miles driven, we think will be up slightly. The cost of repairs are up, offset, and again continued strong new car sales. In Europe we think the market will be maybe 1% up this year.

Okay. And just as my second question. As regards to your EBITDA guidance for '15 and in particular the range of 860 to 900. Can you just sort of give us a sense as to how much of that range is based on variables outside of your control? So foreign exchange, organic growth versus variability on the internal initiatives such as cost cutting. Thanks so much.

On that, it's actually a combination of both. I mean certainly this is a year a little different from 2014 in which there are a lot of macro variables out there. So I think if you look at it, I think to try and break it up it's probably a combination of 50:50. I think if we see the kind of growth that we're projecting, we should be able to deliver on those results from a market perspective and then the rest is just internal execution.

Our next question comes from the line of Duffy Fisher with Barclays. Please proceed with your question.

You talked about kind of the 30 plant wins last year. I was wondering if you could just talk about, is that an extraordinary year in the number of, say, bids that came up for you guys or the win rate that you would expect, or is that kind of the cadence that we should expect over the next couple of years?

Yes, Duffy, this is Charlie. I think that when we look at '14 and '15 and into '16, we believe there was clearly above market growth there for us. I would think as you get out past that, you would assume more of a balanced market share approach. Now I think that wasn’t because we made a concerted effort to go out there and take share like that. I think that some of it was a function of just, some of the people we are growing with have been growing faster than the market overall. We were able to anticipate that. And in some cases it was just several specific RFQs that came up that we happened to have the right product at the right place. So I think it's above market, as we go in to this year and into '16 but then I think our projections would fall back to our appropriate market share after that.

Okay. And then on the Axalta Way program. Should we expect some meaningful cash spend on that this year or will that be more into next year?

Duffy, this is Robert. I think what we would expect to see this year is some amount of spend and expense primarily, not as much in capital, in order to be able to achieve some of the savings that we are trying to get this year. And then as we move out into late 2015 and 2016, there may be more wider structural changes according with that program.

Our next question comes from the line of [Jeff Sequascos] with J.P. Morgan. Please proceed with your question.

Good morning. It's Silke Kueck in for Jeff. The first question is on the transportation segment. So for the year, the sales were about flat and the EBITDA is up $74 million. So I guess the first question is, like how exactly do you get there? And given that your volume growth target for next year is relatively healthier or all things equally expecting more volume growth in '15 then what you achieved in '14 and you think that the margin expansion potential is probably still there, right? So in light of that, I wonder whether you view your own earnings guidance as, do you think it's like a reasonable one, a conservative one or do you think you're aggressive? That's my first question.

Silke, yes. This is Robert. So I think there is two questions there. The first one on OEM margin. We had certainly a number of opportunities in our transportation segment in order to, with a number of items there that we were able to address in the first couple of years from an inherent cost structure and from a mix perspective. And then in addition our fit for growth program in Europe. There are specific plants where we have undertaken the most efforts, have been the plants where we produce more of our transportations coatings products. And as a result there are more fit for growth savings that are accrued and allocated to the transportation coatings segment. So that’s one of the reasons why you see such a large increase in margin for the OEM business. And then on your second question, in terms of, given that we are expecting volumes to be up in 2015 and the opportunities that that creates for margin expansion and how we think about that in terms of our EBITDA guidance. I think we feel confident in the range that we are providing of $860 million to $900 million, provided that the macroeconomic assumptions that we have laid out are more or less in line as well as the currency assumptions that we have provided are more or less in line.

If I can ask one follow-up. Is there any way to quantify what amount of savings you may have achieved in '14 and what you plan to achieve from '15? In either form, whether you want to do it by the fourth quarter or how much for the year, or whether you want to do it by transportation or performance coatings? However much detail you want to give would be helpful.

So with regard to our savings in 2014. I think as we highlighted in our comments, we achieved approximately $37 million of savings from our European fit for growth program. We did achieve certain other savings in the area of manufacturing productivity in other parts of the world. Most of those savings and then the other benefits went to offset fixed cost inflation that we incurred during the year. So we look at that $37 million as fairly incremental. As we go through 2015 and look at the ramp up to $100 million on our European fit for growth initiatives, I think at this point we anticipate that that ramp will be roughly linear. And then with regard to the Axalta Way program, as we are still working through some of the planning and set up of that initiative, we will be providing more precise potential savings targets in the future.

Our next question comes from the line of Kevin McCarthy with Bank of America Merrill Lynch. Please proceed with your question.

My question relates to working capital. On Slide no. 11 you indicate an expectation of net working capital of 13% to 15% of net sales. I assume you're calculating that as trade working capital. If I look at '14, you were running a little shy of 20%, I think high 19% range. And so running the math on that, am I correct in understanding that you aim to extract $200 million to $300 million from working capital, and if that is correct perhaps you can provide a little color on how you aim to accomplish that?

Kevin, this is Robert. So the definition that we are using for working capital is accounts receivable, inventory, accounts payable and accrued liabilities. And within that in 2014, given the number of onetime expenses that we had, you have to back those out. So I think for 2014, we were just around that 13% mark in terms of working capital as a percentage of net sales. So again, it's a little bit skewed in 2014 given the number of onetime costs that actually flow through the financial statements. But on a go forward basis, excluding those costs, we expect to be in the 13% to 15% range.

I see. So relatively stable then. That's helpful. I did not have accrued liabilities or the onetime items in there. Thanks for that color. And then as a second question, recognizing that the calendar is reflecting March already, just wondering if you could comment on the volumes that you're seeing in January and February for the company relative to the 3% growth that you posted in the fourth quarter and what some of the meaningful variances might be.

As we look at Q1 of this year, March is typically a pretty high month for us in terms of sales. So March will be fairly determinant in terms of the quarter. I would say that excluding FX and taking into account the few one impacts that we mentioned in our prepared remarks, we expect Q1 to be in line with our internal expectations.

Our next question comes from the line of Tom Roberts with UBS. Please proceed with your question.

You said you're hedged in Brazil and you only gave the current sensitivity around the euro. So is the euro more than 50% of the 2015 earnings, a headwind from currency. If we focus on the euro, do we get the majority of the risk around currency?

The euro would represent from the total currency basket a fairly significant portion of the overall basket.

Okay. You won't say whether it's more than half or...?

No, not at this stage.

Okay. And then since we're largely through the first quarter, is pricing stable sequentially in the first quarter or are you seeing any pressure on pricing sequentially because of raw material issues?

Yes, this is Charlie, Tom. I would say pricing is stable and we are not seeing any pressure right now on raw materials.

Our next question comes from the line of Laurence Alexander with Jefferies. Please proceed with your question.

Just a couple of quick ones. How much of an EBITDA margin drag is the FX translation impact for 2015? And as you look at the share gain, you spoke about them in terms of plant wins, but as we think about it as a tail wind to sales is it fair to benchmark it as 1% to 2% of sales in '15, '16 and '17? Or is there going to be a little bit more of a tail wind in '15 or can you help us think through the actual sales bridge? Just from your own share gains not your customers' share gains in the market.

So with regard to FX, we're not providing information on the relative impact of FX at the EBITDA level but we will say that it's significantly lower than the impact at the sales level.

So your margins are going up with the FX headwind?

If we execute on our plans from the EBITDA margin percentage that we see, we continue to believe that we have the opportunity to grow that over time.

Now the second question, do you want to repeat that just to make sure we're clear on what you were looking for on the sales bridge?

So just as you were looking at the comments around the plant wins and your own share gains as opposed to your customers' winning share in the market. There's always a lag effect between a plant win and actually getting it flowing through the sales line. So is it fair to benchmark your share gain tailwinds as, say, 1% to 2% of sales in '15, '16 and '17? Or do you see more of a surge in '15 or how are you thinking about just the surge that you're getting from your own share gains and wins that you've seen so far?

Yes. A little hard to answer that, just as we are thinking about the timing of every one of those, but clearly it's second half of '15 and '16.

Our next question comes from the line of Aleksey Yefremov with Nomura. Please proceed with your question.

I have a follow-up question on the cost savings program. Will you expect the $100 million in cost savings from fiscal growth and another $100 million from Axalta Way to be incremental net savings to your EBITDA or would you expect some offset in the form of fixed cost inflation? And also just to clarify, your comment about linear ramp in fit for growth in 2015. Does it mean we can expect about $40 million of savings this year?

Sure. So with regard to your first question on how the gross versus the net savings play out. Our expectation would be that, if we look forward to 2017, that we would have an incremental $200 million in EBITDA gross against which we would need to net the fixed cost inflation that we would have at that point in time. Currently our annual fixed cost inflation is 70% to 75% a year. As we lower our fixed cost base over time we expect that number to go down. So for a net number for 2017, as far as run rate savings at the end of the year, we would net against that 200 approximately whatever that year's expected fixed cost inflation was. And then in terms of the ramp, I think what we said about being linear in terms of where we are in the remainder of the savings for the EMEA fit for growth program, I think the way that we have described it is our best estimate as of this point in time. Obviously there are fair number of moving pieces and some of the projects that we have in the first phase, particularly those that were related to severance, are fairly clear in terms of timing because they are kind of one for one. Whereas some of the other items that we have now that may require supply chain reconfiguration as some of those other items, we will make those savings a little bit more chunky. So I think of linear from an estimating perspective as probably the best way to go. But it could be a little bit more than that or a little bit less than that. So it's hard to come down with an exact number for 2015.

Thank you. And as a follow-up. Could you talk about the status of your backlog in light vehicle OEM business over the next two years? I think in the past, your backlog may have suggested high single-digit sales growth excluding FX. Is this still a good target for you based on what you currently have in the books? Thanks a lot.

Yes. This is Charlie. Yes, I think our visibility goes through '16 and I think we still see a good strong backlog just on wins we already have and the timing of those wins. You know a lot of this is around new facility starting up and conversions. I think the one thing that we will just have to watch as we go into '17 is, you certainly see things like China accelerating this focus on conversion for solvent borne to waterborne. That’s favorable to us in a couple of our competitors. So I think that that will provide us a lot of opportunities as we go in into '17. But I think our backlog till '16, still high single digits, is an appropriate way to think about it. Again, a lot of that is based on the base business continuing to perform at the current SAR rates around the world. And we do believe at this point that when you look at new car production in the last couple of years, while the world economies aren't necessarily really strong and robust, the growth of the car park is expected to continue at a fairly good clip on into '17.

Thank you. We have reached the end of the question-and-answer session. I would now like to turn the floor back over to management for closing comments.

All right. Thanks. We will wrap it up then operator. Appreciate the good questions. We look forward to dialoging over the next day or two on any call or questions you have. Again, a great year for us in 2014. Getting our transition completed. A great year operationally. You know 2015 I would characterize as all about execution now whether it's Axalta Way, whether it's our OEM wins, the growth initiatives we have in refinish around the world, both in our premium and mainstream products. I think we have a full plate in front of us. We like everyone else will continue to navigate through all the currency translation. We do think over time it's a plus for us when we look at Europe, our strong manufacturing base in Europe. And the net effect of that while not immediate, is over time we think a positive for us. So a good strong year for us in '14. One we are looking forward to in '15 as we navigate through next steps of execution. So thanks for your investment and your time and look forward to the next quarter.

Ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.