Axalta Coating Systems Ltd. (AXTA) Q1 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to Axalta Coating Systems First Quarter 2015 Earnings Conference Call. Presenting today will be Charlie Shaver, Chairman and Chief Executive Officer; and Robert Bryant, Executive Vice President and Chief Financial Officer. [Operator Instructions] Today's call is being recorded. Replays of this conference call will be available through May 20, 2015. Those listening after May 6, 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 will turn the call over to Chris Mecray, Vice President, Investor Relations for Axalta Coating Systems for a few brief legal notices. Please go ahead, sir.

Thank you, Melissa, and good morning, everyone. This is Chris Mecray, Axalta’s VP of Investor Relations. We appreciate your interest in Axalta and welcome you to our first quarter 2015 financial results conference call. Joining us today are Charlie Shaver, our Chairman and CEO; and Robert Bryant, EVP and CFO. This morning we announced our Q1 ’15 financial results and posted a slide presentation in the Investor Relations section of website at axaltacs.com, which we will be referencing during this call. Both the prepared remarks and discussion during this 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 certain non-GAAP financial measures. The appendix to the presentation which again is available on our website 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. Okay. I’d like to now turn the call over to Charlie.

Great. Thanks, Chris, and good morning and thanks to all of you for joining us today. As we mentioned, we are pleased to be sharing our first quarter 2015 results and I would like to begin today’s call by providing some highlights from the quarter, maybe a brief update on our strategic focus and progress today. I will then turn the call over to Robert who will provide little more detail on our results and full year outlook. We will then open up the lines for your questions. So if you would refer to slide three in our presentation and since this is only our third call as a public company and because we have got a series of new investors, as part we are taking a moment to just highlight our business composition. As you aware, Axalta is a leading global manufacturer, marketer and distributor of high performance coatings. Roughly 90% of our revenue comes in markets where we hold the number one or number two share position and we believe we are the leader in the global automotive refinish market with about 25% global market share. Since our formation in 2013, we have organized our business along two distinct segments, Performance Coatings and Transportation Coatings. Performance represents about 60% of our net sales, including our refinish and industrial end markets. We serve both the high diverse global customer base through direct and indirect sales channels. Our Transportation segment are about 40% of our net sales. We serve the light vehicle automotive OEMs, as well as the commercial side of the business OEM, which includes truck, bus, rail, agriculture and construction end markets. So if you turn to slide four, a little bit about our highlights. I am pleased to report solid results for our first quarter 2015. Our first quarter net sales increased by 5% over last year’s quarter, which as we highlighted previously was a very strong quarter for us. Now this includes negative foreign currency translation impacts of roughly 11%. The first quarter saw volume growth overall nearly 5% coming from both segments and that demonstrated sequential acceleration from the fourth quarter even though we have got difficult year-over-year comparison and certain seasonal impacts that we highlighted as factors on last call. As we continue our core strategy of refocusing Axalta profitable growth, I am very pleased with the progress we have shown today and we certainly demonstrate an ability to grow our core end markets, we will focus on the customer and expansion of our technology end market that were not previously considered core. Since become a standalone company in 2013, we run business in a number of new and existing OEM facilities around the world. We continue to make growth prospect on our global refinish markets, including the growing MSO segment, not only in the U.S. but another parts of the world and we are also working diligently to expand our presence in both core and adjacent industrial coatings end markets. Our progress and focus continues to be recognized and rewarded by our customers. At the time, we will continue to focus on controlling our cost structure, which continues to be reflected in our profit growth. As a note, our first quarter adjusted EBITDA of $182 million exceeded our target for the quarter, driven by both volume growth and continued progress in operating productivity and cost reductions. Adjusted EBITDA margin expanded by over 60 points to 18.4% from 17.8% last year and through our adjusted EBITDA, it also reflects considerable, and although, it reflect considerable adverse translation impact foreign currency, I am very pleased with the progress we are making in those areas within our control. And I believe we have got substantial opportunity, continue to reflect positive change in that regard, even though we have already made some significant strides in reducing costs since our inception. We are today reiterating our guidance for 2015, unchanged after our first quarter results. As we think about our guidance for 2015, many of the factors we have mentioned and discussed back in early March remained constant today. We continue to see headwinds and translation impacts of foreign currency, and although, it’s encouraging to see stabilization in several of those countries that we witness in our basket since our last call. It’s enabled us to reiterate our guidance based on our static step and assumptions made from March. From a general demand standpoint, we continue to see favorable and supportive backdrop in each one of our segments in end markets. And although, it’s normal these areas that we continue to monitor closely, including the challenging South American demand environment, the ongoing cause in the market associate with economies, associated with energy and the political destabilization going on in Russia. In the last quarter, our capital projects and various organic investments have continued on track. As we highlighted this morning, our Jiading facility, waterborne facility continues to ramp up with new OEM customer demand in China and remains a key element of our growth plan. We are also on track to complete expansions in our Mexico and in Germany later this year to support growth in those regions. Last week we also announced a significant new Asia-Pacific R&D center that we built in Shanghai which will have over 500 Axalta personal that we currently have engaged in R&D, product development and technology support in the regions. This center is going to feature product development and application labs, as well as tech support capabilities that will serve the company’s light vehicle OEM, commercial vehicle, refinish and industrial customers. This new facility which will open up in the second quarter 2016 will also have our global refinish color development center and a new training center for the company’s refinish customers. The facility will streamline our ability to rapidly develop world-class products. We’ve long been a pioneer in the coating industry and I think this Shanghai center will help keep us in the lead from product innovation and development. As you also aware, in April we work with Carlyle, completed a follow-on public offering of 46 million shares. This was followed immediately by private placement from Carlyle of additional 20 million shares to Berkshire Hathaway, resulting in over 66 million shares being transferred in the quarter from Carlyle to non-controlling investors. We are pleased to report now that our free float is over 55% of approximately $7 billion market cap and we are very pleased to have a high-quality investor base, including the addition of Berkshire Hathaway and look forward to continue to increase that float overtime. So turning to slide five, a little bit about delivering on our goals, as we consider the progress that we have made year-to-date relative these goals that we set out. I am pleased to report that 2015 is another transformational year for us with strong expected gains on a multitude fronts. We are excited about the overall level for the business. We continue to execute on our plan to strengthen our competitive position and create shareholder value. In terms of revenue we have seen volume growth as previously noted and I expect this to continue driven 2015 principally by the ramp up of the OEM plans tied to our previously announced Transportation Coating OEM wins. This process has enabled us to grow and grow market share from a relatively smaller base in emerging markets as evidence by the over 20% growth that we saw in light vehicle volumes in Asia-Pacific in the first quarter year-over-year. From a growth perspective, our businesses are projecting solid demand and we continue to see significant growth opportunities against all of our end markets. In refinish, we’ll continue to grow our presence in emerging markets. We’ll continue to expand our robust share of the MSO customer segment in body shop consolidations as that continues in North America, also continuing to focus and grow with many of the large dealer groups in China as well. In industrial, we are focused on growing the business with existing channels with a new sense of greater leadership, continuing to add to that the personnel as we go through the year. And we’ll extend our market presence in new niches with multiple product launches scheduled throughout this year. In light vehicle, our current focus is just on executing on all the new model and plant wins that we booked and continued to deepen our engagement with the customers in differentiating our quality and service. On the commercial side of the business, we continue to target growth in markets and geographies for our companies underrepresented in sharing our technology and service can be differentiated in areas such like China where we announced in the first quarter our joint venture with Kinlita is enabling us to touch new customers with new technology. Our two principal initiatives for productivity and growth are going to continue to show progress. Fit-For-Growth which is our European initiative remains well on track to generate $100 million in run rate savings by the end of 2017. And we also made solid progress in scoping and defining our Axalta Way initiative which is really our continuous improvement operating model focused on business process, in global cost, and productivity. We have a high degree of confidence in our target for $100 million in incremental adjusted EBITDA by the end of 2017 on that program. And it will begin to generate modest savings during the second half of 2015. Although we continue to be intent on unlocking the growth potential of Axalta and to make an associated investment, it really remains the top priority for us to maintain a strong and flexible balance sheet. So then in Q1, our net debt-to-adjusted EBITDA was 4.1, that was a slight uptick from the fourth quarter, really driven it by budgeted factors which included a seasonal working capital bill as we come into traditionally a strong second and third quarter of the year. For the balance of 2015, we expect to make continued progress in debt reduction. At the same time, we’ll continue to balance our deleveraging goals with a focus on disciplined application of capital in the high return projects. Near term, we are focused on the completion of the ongoing plant expansions, which will significantly boost our waterborne’s tonnage capacity in Europe and North America. And in addition, if opportunity is presented, we’ll continue to look at smaller bolt-on acquisitions as well as partnership arrangements in our core markets. In M&A, we’ll remain focused on companies close to our core business that offer immediate and beneficial returns to the company both in market access and technology without impacting our financial leverage. So with that, I would like to now turn the call over to Robert who will walk us through the financial results in little more detail, as well as a couple of highlights on our 2015 guidance. Robert?

Thanks, Charlie and good morning everybody. Please turn to slide six of our earnings presentation where you will find our Q1 consolidated results. Excluding the 10.8% negative impact of foreign currency translation mainly from the devaluation of the euro and currencies in certain Latin American jurisdictions, our first quarter net sales increased 5.2% over the prior year driven principally by volume growth and selected price increases. On a consolidated basis, our sales volumes grew 4.8% over what was a strong Q1 in 2014. In North America, volumes were up 9% with strength across all end markets. In Asia-Pacific, volumes were up 15%, driven primarily by the strong performance of light vehicle and industrial end markets. In Latin America, volumes increased 6% due to a rebound in refinish and commercial vehicle end markets. Lastly, in EMEA, we saw volumes contract 2% explained by demand weakness across almost all end markets, primarily due to weakness in Russia and Eastern Europe. Its overall strong volume results were not achieved by lowering price but rather by volumes coming from new business wins, strong growth from our existing customers, growth of existing products in underserved markets and our increased focus on commercial execution as part of the Axalta Way. We also benefitted from modest price increases in both of our segments. Adjusted EBITDA declined 2.5% year-over-year to $182 million from $187 million, driven primarily by the impact of foreign currency, offset partly by higher volumes with improved mix as well as lower fixed manufacturing cost from productivity improvements. Raw material benefits were not significant although we did start to see some modest benefit during the quarter in select inputs. Adjusted EBITDA margin expanded by approximately 60 basis points from last year to 18.4% primarily driven by cost improvements and productivity enhancements as well as some volume benefit. Moving onto our Q1 2015 Performance Coatings results on slide seven, again excluding the negative impact of foreign currency translations, net sales in our Performance Coating segment increased 2.5% year-over-year, driven by growth in North America, Asia Pacific and Latin America. Volumes were up 1.9% for the quarter and up in all regions except EMEA which saw some impact from weaker Russian and Eastern European markets as I previously mentioned. Average selling prices were up 0.6% as selective increases were applied in certain regions. The volume and price increases were offset by 12.1% unfavorable currency exchange translation primarily driven by the euro and currencies in Latin America. Net sales in our refinish end market grew by 2.7% year-over-year, excluding the negative impact of foreign currency translation, thanks to Axalta’s continued penetration of the multi-side operator or MSO segment in our continued growth in Latin America. Net sales in our industrial end market increased 1.9% year-over-year, excluding foreign currency translation driven by growth in cover sales in North America as well as ongoing expansion of our product base in other geographies. Performance Coatings has generated adjusted EBITDA of $107 million for the first quarter. Adjusted EBITDA margin decreased 100 basis points from the prior year due to higher operating expenses to support our growth initiatives and a dividend paid to a Chinese joint venture partner. If we switch now to our first quarter 2015 Transportation Coatings results on slide eight, the foreign currency translation impacts net sales in our Transportation Coatings segment increased 9.1% over the comparable period prior year. Net sales on a constant currency basis were led by volume growth in North America, Latin America and Asia-Pacific from new business and growth in car builds as well as continued robust commercial vehicle volumes. We continue to expect global volume growth in the segments to build along with vehicle production by our customers on lines where we have secured new coatings positions. Net sales in our light vehicle end market will robust in Asia-Pacific and North America and rose 7.4% excluding the foreign currency translation. In Asia-Pacific, in particular, our light vehicle coatings sales increased by 22% in the quarter compared to the same quarter prior year. Net sales in our commercial vehicle end market increased by a strong 15.4%, excluding foreign currency translation due to strong demand in nearly all regions and by new customer wins in bus and rail markets. The Transportation Coatings segment generated adjusted EBITDA of $75 million in the first quarter, an increase of 20.4%, driven by higher net sales and lower fixed manufacturing cost, partially resulting from our operational improvement initiatives. This result came despite a moderate drag from the startup expenses associated with our new Jiading, China waterborne facility. With the benefit of this volume growth and reduced operating costs, our Transportation Coating segment EBITDA margin grew by 290 basis points to 17.3%. Moving onto our cost optimization initiative slide on slide 9. We are pleased to report that our progress on both of our cost reduction and productivity initiatives remains on track. We expect to continue to achieve combined run rate savings of $200 million by the end of 2017 between the programs Fit-For Growth, which is our European focused initiative and The Axalta Way, which is our new global business process that we’ve rolled out in the first quarter of this year, which will also house ongoing cost and productivity initiatives going forward. Fit-For Growth, which we began to implement in 2014 continued to show solid and methodical process and we are confident in our forecast of relatively linear saving to be accomplished over the next several years after generating $37 million of the $100 million in total savings in 2014. Having already adjusted our labor cost structure to a competitive standard and right size the regions substantially in the last year, our improvements continue into 2015 and are being carefully tracked. At the same time, our substantial investment in our capacity and infrastructure in Europe remains on track for completion and is expected to form the basis of competitive market participation for some years to come. This investment includes expanded capacity for waterborne coatings in Europe, as well as consolidation in both manufacturing and distribution infrastructure to enhance productivity. The Axalta Way, our new business process is a comprehensive and long-term initiative focused on creating a best-of-class organization in all aspects and ultimately driving enhanced and sustainable returns on investment for our shareholders. As such, it is focused as much on driving positive employee, cultural and behavioral change as it is on driving our costs. So the latter is clearly where we are focused in our investor communication today. To achieve our $100 million cost out targets for The Axalta Way, we are focused on completing definitional and scoping processes during Q1 and began more detailed planning and initially execution in recent weeks. We see a clear opportunity to reduce costs across almost areas of the company, including, among others, procurement, operations, commercial practices and many components of SG&A. Some of our early work has been focused on commercial practices in North America, where we have identified significant opportunities to eliminate inconsistencies from a married of efforts to measure and streamline our commercial terms across an organization that formally managed on a more decentralized on regional basis with few metrics applied across these managerial boundaries. Our procurement organization also continued to pursue opportunities to progress its business on a global basis, including substantial opportunities to reduce spend in both direct and indirect categories. Over time, we also expect to achieve significant savings from addressing our supply chain operations on a global basis and migrating the best practices among the regions. Other opportunities exists overall longer timeframe to reduce the SKUs across our operations, which span a 130 countries. We continued to add granularity to our process. We anticipate sharing specific 2015 targets for both savings and associated spend and expect to be able to share some of this in our next quarterly call. For now, we will simply reiterate that we are confident that we can identify and eliminate costs across our organization by $200 million on a run rate basis by the end of 2017. And expect to be able to carry these savings down to the EBITDA line, as well based on our existing business plan. Last quarter, we referenced the existence of fixed cost inflation, which of course is the feature of any global manufacturing organization. Although very real, we do expect that our regular course of business growth and productivity should be able to separately overcome this inflation, enabling our cost-saving programs to flow entirely to the bottom line. We continue to point out that the visibility of savings with no negative cost offsets become hazier with time. But we do expect to be able to continue our productivity drive over time to continuously offset such inflationary elements in the business and maintain or grow our margins, assuming overall stability in the business environment. Regarding our one-time costs and the EBITDA to EBITDA bridge provided in our release and on slide nine, we would like to highlight that the magnitude of one-time costs related to transition has been significantly reduced after 2014. As we expected, we will no longer incur any transition-related expenses. This past quarter, we identified a few items that are one-time in nature and are primarily tied to ongoing consulting fees related to our cost initiatives and termination benefits, primarily tied to our European Fit-For-Growth programs. We also had some expenses related to our follow-on equity offering. We now look at some of the key balance sheet items on slide 10. As of March, cash and equivalents totaled $223 million while gross debt was $3.6 billion, resulting in a net debt balance of $3.4 billion. Our net debt to adjusted EBITDA ratio was now 4.1 times. The figure on the right illustrates our deleveraging trend over the past eight quarters, which was interrupted only slightly this past quarter, did wne uptick in working capital as seasonally expected and was budgeted. Our expectation continues to be for solid free cash flow in 2015 and we have reiterated our annual working capital assumptions set out in March on our last call. Regarding our leverage targets, we continued to focus the majority of our free cash and debt paydown and intent to reduce our leverage ratio to 2.5 to 3 times in time, assuming a fairly consistent macroeconomic and interest rate backdrop. We would look to update that target in time based on fundamentals, strategic opportunities and feedback from our shareholders. In the meantime, we also have significant organic investment opportunities with quite strong IRRs that we continue to prioritize. As reflected in our CapEx guidance that implies around $19 million of such spend per annum. This amount could be increased depending upon any incremental capital availability. So notably, there is a gating factor on such internal projects related to management bandwidth as well as capital availability. Finally, as we turn to slide 11, as we noted on our March call, we intend to provide annual guidance and an update on a quarterly basis. With our guidance set out only two months ago, although the first quarter exceeded our expectations, we are maintaining our existing annual guidance that we provided on our Q4 earnings call with no changes. Again, excluding foreign currency impact, 2015 net sales are expected to grow 5% to 7% over last year. This growth is expected in all regions and all end markets, driven by volume growth in commercial initiatives that we launched in 2014 and selective price increases across our businesses. Transportation Coatings is expected to benefit in volume growth from the new vehicle coatings positions previously announced and a relatively stable outlook for global light vehicle and commercial vehicle end markets. In spite of certain country specific demand reductions such as in Brazil, we expect to generate adjusted EBITDA between $860 million and $900 million, with a corresponding adjusted EBITDA margin of approximately 20%. We expect our normalized effective tax rate to be between 27% and 29% of pretax earnings. Capital expenditures to be approximately $150 million and net working capital excluding previously expensed transition-related items mentioned on our last call to fall in the range of 13% to 15% of net sales. Again from a cash perspective, we had $95 million in transition-related severance and one-time IT related expenses from 2014 that we expect to pay in 2015. The largest of which is approximately $50 million in remaining severance payments. This was also noted on our last call. This concludes our prepared remarks. And with that, we would be pleased to answer any questions you may have. Operator, could you please open up the lines for Q&A. Thank you.

[Operator Instructions] Our first question comes from the line of Ghansham Panjabi with Robert W. Baird. Please proceed with your question.

Hey, guys. Good morning.

Good morning.

Good morning.

Hey, just on the auto OEM side, just European auto sales have been pretty strong so far in '15. Just curious as to what your customers are telling in terms of production expectations for the year? I know you cited weakness in Russia and Eastern Europe, but what about the western portion of the continent?

Yes. As far as the European OEMs, certainly the western side, if you look the first quarter, some of the bigger players like Mercedes, BMW, nice uptick in sales, lot of that’s export. We heard from the analyst pretty steady demand through the year. I think that they are enabled by the euro being a little more competitive right now. So I think they think their export demand certainly on the higher end vehicles will be a little better. I think there is a couple of other OEMs that we deal with that are kind of looking at things being flat through the year, but a couple the higher end ones certainly see an uptick this year. So I think in the western, the western part we expect the activity to be pretty sound through the year.

And then on the same vein in terms of auto OEM in North America, was that in line with the expectations for the quarter in terms of sales growth? Did that end market benefit from some of the issues that you may have seen in the fourth quarter, such as the West Coast port strike? Thanks.

I think first quarter for us in North America was pretty consistent with expectations. And I would comment of course the other region I think people will ask about is China. I would go ahead and proactively comment that right now we deal with the OEMs that were aligned with fathers, certainly a lot of noise around China. They talk a lot about the 7% growth we’re seeing coming through the first quarter is pretty much as predicted demand. I think if we see anything as we go through this year, we will have to watch some of the newer facilities and how fast they ramp up. And I think that will be second, third quarter what we see would China really slow down to more digits OEM growth which is expected this year. So far for us, China has been about consistent with expectations.

Okay. Thanks so much, guys.

Thank you. Our next question comes from Ramanan Sivalingam with Deutsche Bank. Please proceed with your question.

Hey, guys, good morning. Just quickly I think you mentioned you’re starting to see the benefits of low raw materials in certain parts of the supply chain, Q1. Can you jus opine about what you guys expect Q2 through Q4 2015?

Ram, this is Robert. On that point, I think we have seen some modest release in some categories of raw materials from a pricing perspective, which has yet to flow through our financial statements given obviously the drop in the price of oil over the last two quarters. I think as we move forward, of course oil has moved the backup. So it will be interesting to see as we go through Q3 and Q4 what actually happens to pricing across kind of our commodity basket. In terms of how we thought about our guidance, again our guidance was originally put together with a relatively conservative assumption around how much raw material benefit we will receive in 2015.

Got you. That’s very helpful. And ten on the commercial side of t things seems to be pretty strong globally. Just curious how are guys are thinking about Asia, because I think the ACT is forecasting a low-double digit decline in commercial vehicle production. Are you guys getting share there or are you expecting that general market to grow pretty helpfully through the rest of the year?

Yes. This is Charlie. A couple of things there. One is we have highlighted previously our commercial share in China was pretty -- was fairly low when you talk about heavy duty truck and bus. And so for us, we are growing -- I would tell you so for us this share, I think we can comment with those forecasts to say you probably continues the truck demand, overall large truck demand in China decrease year-over-year somewhat mid-single digits. But I think that we’re seeing the demand for our products some of this through Kinlita joint venture and just some of it through other existing accounts has been renewed interest. And as you are probably aware, they put a solvent tax, 4% solvent tax for manufacturers this past quarter in China to encourage manufacturers and through their customers to move to higher solid, lower VOC and ultimately in many cases the waterborne. So our demand actually has been generated and again some of it is share growth by customers wanting to move to lower solvents from an environmental standpoint and in some cases waterborne. So we actually think our business will continue to grow nicely year-over-year and certainly as to go into 2016 and that will be expense of some of the manufacturers who were just pure solvent bond, some of them Chinese national company.

This is Robert. I would just add to what Charlie said that in addition to heavy duty truck, of course we have our other lines of business in that end market. And with China, we are seeing significant amount of growth in the rail sector. The government funding continues to some larger north, south rail projects and in places like India we are seeing continued significant growth in the bus business. So just not pleased everyone with the impression that it’s just heavy duty truck.

Yes. Thank you very much.

Thank you. Our next question comes from the line of PJ Juvekar with Citi. Please proceed with your question.

Yes. Hi, good morning.

Good morning, PJ.

You talked about growth in MSOs. Could you talk about what kind of share do you have with MSOs and just give us what’s going on with the competition and the competitive landscape in that area?

Yes. I think we will comment on the share that we have. But I think I would just highlight that MSOs certainly, every region is a little bit being led North America. There are several -- there are as well know, they are well four or five large national players. Behind there is a host menu dealers and also regional players. We continue to see them grow relative rapidly. I mean, there is quite a bit of data out there about the overall MSOs growth in the collision industry approaching over the next 5 years 25% of that total market. With four of them, with 4 players representing upwards of % in that marketplaces. So I think we think that that trend will continue. I mean that’s the deals of our productivity as they are unable to acquire shops, also larger shops wanted to get out of business and private equity, but also public funding and private funding is continuing the view of that. So I think we will continue to see that. Well that approach 10 million -- 14million of the total collision market in North America, I certainly l believe. So we do not see that slowing down. I there is a lot of questions around, has some of these guys get really, really big or they slowed down just like an rollup management challenge, integrations challenges. productivity challenges, but we haven’t seen that yet. I think we are aligned with the couple of the years what are growing rapidly. but I would also caution there its; the regional players how are well capitalized and are gong to grow as well. We don’t see that trend, that part of MSOs limited activity in Europe around that. In China, you have large buying group which comprised maybe half of the marketplace there to we deal time and we think that those will continue to get stronger as these continues to continue to grow and form there. But in North America, we think the trend will continue how fast they continuous items care to guess. But it’s certainly feeling our growth as we’re aligned with several of the players who are growing nicely.

And Charlie, your industrial growth was a bit slow. Can you talk about geographically where do you see slow growth and where are the bright spots? Thank you.

I think our -- I mean, I think our growth is primarily going to be North America and emerging markets. I don’t know Robert you want to -- any comments on that.

No. I mean, I think in terms of the overall industrial growth, we did see a nice pickup in the first quarter of this year compared to the first quarter of last year. And I think again as we talked about, we’ve made fairly substantial investment both in terms of the management team and the commercial infrastructure in that business to begin to grow it and I think we’re starting to see the produce of that labor.

And I think we see that both on the liquids and the powder side where we had really good products and we’re moving into new regions and a lot of those initiatives are starting to take price as we go to 2015.

Thank you.

Thank you. Our next question comes from the line of Jeff Zekauskas with JPMorgan. Please proceed with your question.

Good morning. This is Silke Kueck for Jeff. How are you?

Good morning. How are you?

Good. Thank you. Can you quantify what the dividend payment was to the joint venture partner in the industrial segment?

Yes. The dividend payment was $3.5 million.

$3.5 million. If you strip that out really the EBITDA margin and performance coating would have been much more comparable to what report in the first quarter last year, right?

That’s correct, that’s correct. In the interest of conservatism and to adhere to the process and the standard that we use to calculate adjusted EBITDA, we didn’t want to alter the definition that we had used historically.

Do you expect to make -- their additional payments that you have to make for the remainder of the year or this is sort of like one-time in nature for the year?

Yes. Typically, it’s a one-time -- it’s a one time payment each year and the payment for this year has already occurred, therefore we would not be expecting any future payment this year.

And secondly, you indicated that your light vehicle growth or volume growth light vehicles was up, I don’t know 7% in the quarter and was up 22% in Asia Pacific. How much of that is due to like the new business wins and like the expansion in China?

So in terms of the overall -- when you look at it from an overall perspective, we had a very strong performance by OEM in North America and also in Asia Pacific. The business that we won, I think we mentioned on last call about 32 OEM close the beginning of 2013. A number of those plans are starting to come online and actually moved into production. And we actually have revenue been generated at about 50% of the plans that we’re awarded since 2013, so the plans are starting to come online and they’re also starting to ramp up. Additionally, our customer base has done quite well versus the market and then within that customer base this specific models on which we’ve unfortunate enough to supply certain layers or certain colors have also done we believe better than the overall market. Since if we have a little bit of a multiplicative benefit in that respect.

And my last question is in terms of cost savings. I think your goal is to get $60 million cumulative savings by the end of '15 from the fixed or growth strategy. And my guess is that the run rate savings are probably higher than that. And so as what your run rate savings maybe by the end of the year? And bring on in the first quarter.

So what I say that in the first quarter in terms of our fit for growth program, it exceeded our expectations in terms of what we had internally budgeted for the quarter. So I think that’s the good indication as the potential trajectory of the year. We also have fairly good insight into the nature of those cost savings. And from the $37 million that we saved in 2014 -- for 2015, 2016 and 2017 I think as we have mentioned in our comments, we expect the remainder of the savings to be surely linear in nature.

Thank you. Our next question comes from the line of John McNulty with Credit Suisse. Please proceed with your question.

Yes. Good morning. Thanks for taking my questions. So looking at your -- some of the guidance numbers, the adjusted EBITDA and the CapEx and kind of even making some assumptions for interest expenses and taxes. It looks like you should generate some significant free cash in the year but can you give us some of the puts and takes around any charges that we should be thinking about around some of the restructuring programs in the cost cists so we can maybe fine tune the cash flow numbers a little bit better?

Yes. Great question. I think in terms of one-time cost, John, as we look at it for the remainder of the year, we’re not expecting any more transition related one-time cost that is the separation from DuPont. We are through those. The cash from this will finish rolling out in Q2. And with that, we’re done at this stage with what was the huge milestone that we reached in 2014. Now we do expect to have non-recurring cost in 2015 related to fit for growth and the Axalta way. And certainly there will be some CapEx investments that will be required in order to achieve some of the savings in the medium and longer term. I think as we look out over the next 12 months, the aspects in which we have the visibility at the moment, there probably be 3 categories. We will have some severance related cost to the ongoing execution fit for growth and also potentially some severance cost associated with the Axalta Way. Our consulting fees that we incurred in Q1 of approximately $4 million, we would expect to incur consulting fees as that rate approximately through the rest of the year. And then we may in Q2 or Q3 incur a one time charge related to a broader Axalta Way restructuring.

Okay. And any ballpark on the sizes of those charges around the severance and the one-time charge?

Yeah. We’re still working through that. I think on the expense side, as I’d mentioned, the expenses we’ve got pretty good line of side on related to the consulting services supporting us on that project. And on our next earnings call we should be able to provide a little bit more color around some of these other numbers.

Okay. Great. And then just a question on the refinish business, I mean, it’s still showing some decent growth, but it certainly is decelerated from the last couple of quarters. So, I guess, I’m wondering what maybe driving that? Is it just a difficult comp or are there some other fundamental things that we should be thinking about?

Yeah. I think as we’ve mentioned in our 8-K that we issued back in March and also on the last earnings call. Q1 2014 was an unusually strong quarter, not only in refinish but of course in other businesses as well. And what we did see was lower refinish product demand in the first quarter that we attribute, primarily to the relatively mild winter that we experienced in North America and Europe, and just a slower start. That being said, we did see in January and February some slowness and then quite a bit of pickup in March.

Great. Thanks very much for the color.

Thank you. Our next question comes from the line of Bob Koort with Goldman Sachs. Please proceed with your question.

Thank. Good morning, guys.

Good morning, Bob.

Good morning, Bob.

Couple of quick ones, I know you guys gave the 5% to 7% guidance in sales growth for the year, which is consistent with the first quarter, would you expect the relative growth rates Performance and Transportation to remain in 2% to 3% in Performance and much stronger than that in Transportation?

As we look across the full year, Bob. This is Robert. I think as we highlighted before just given the share amount of business that we’ve won in Transportation Coatings both in light vehicle, as well as commercial vehicle. That will drive a higher growth rate on the Transportation side of the business compared to the Performance side of the business. That being said, we are expecting attractive growth in the Performance Coatings side of the business.

And you mentioned the 30 -- the new OEM plants, I am just curious how many plants come up a year or that was over a multiyear period? How would we consider that in terms of share of new plant awards, would it be consistent with your market share, above your market share or below, how should we gage that?

Yeah. Bob, I think that, as we look at over the past year and a half, I think, it was probably, more than our fair share, but I would qualify that by saying, some of that were just -- was the rebalancing we saw, a couple of the OEMs do, some of that was a disproportion amount of, a couple of the OEMs that we are really aligned with growing faster than the general market and then I think you guys kind of know who those are. So as we go forward I think we you look at a world where we really move more towards, but we believe our fair share to be and that will move around a little bit again just depending on, who you think in the OEM world is going to continue to grow faster than the market. So we did tend to be, we look at overall size, we do believe we are aligned with a couple of players, who we think will continue to maybe do better than the overall market, the overall market growth rate. So I think, yes, we think we grew maybe a little more than our fair of share, but I don’t think it was, because we were overly aggressive or anything. I think it was the capacity in China coming online to the products and to a large extent decisions the OEMs we are making. And so I think we feel pretty good about the high growth over this next year, year and a half as these plants start-up. And then after that, I think, the market probably remains fairly balanced this part of share I think moving forward. And that's certainly how we model it as we go into 2017.

Thank you, Charlie. I think that maybe at least my question which is an Asia-Pacific, obviously, a phenomenal year-on-year growth. You started up the Jiading plant? How long can we expect to sustain that kind of growth or what’s the ramp down or more normalized level specifically in Asia-Pacific?

So I think as we think about that, Bob. If we look at the business that we have won in 2013 and 2014, which starts to come online in 2015, 2016 and that sort of hits the full ramp rate in the back half of the year of 2016 and the beginning of 2017. I think the expectation would be at this juncture, in 2015 and 2016 we will continue to see that strong growth in the Asia-Pacific and then in 2017, I think, we would expect that, as Charlie had mentioned, given some of the share rebalancing among some of the coatings players in the market, as well as the amount of business that we’ve won in Asia-Pacific worth it. So that's even out and wouldn’t expect us to continue to be able to grow at these kinds of rates sort of beyond 2017. I think we would expect to growth more in line with market and then potentially above market depending upon how our individual customers perform.

And I think, if you look at car growth in China in ‘17 kind of project -- ‘16, ‘17 dropping back to kind of like mid-single digits, I think that's kind of how we would think of the business as we move into ’17. And again, I think, as Robert highlighted earlier, one of our bigger focus is, some of the in the industrial sectors and including commercial, where again underneath the surface there’s a lot of change going on and the technology being used, the cost of that technology and what some of the customers and the governments expecting there, not just in China but in couple of the other countries.

Great. Thanks again.

Thank you.

Thank you. Our next question comes from the line of Ivan Marcuse with KeyBanc Capital Markets. Please proceed with your question.

Thanks for taking my questions. The first one is, looks like -- if the dividend was $3.5 million, the start-up cost related to China were pretty -- which you gave is sort of roughly $0.5 million and what is your expectations for cost related to that plan going forward?

Yeah. The start-up costs related to that plant in the first quarter were approximately a $1 million and as we moved forward and out of the face of mix of test batch and then also finished goods that’s sold and being consumed by OEMs. If that mix changes and moves forward, then the costs for that will start to become absorbed in less of an issue.

Great. And then on the back of that you have some other investments that are going on -- is there -- what’s sort of your cost expectations for, I guess the Germany expansion and the Mexico expansion as we get in the back half of ’15, going to first half of ’16, would it be similar to China?

I think the Mexico expansion will be negligible and I think I would take -- the Germany is in the range of €1 million to €2 million and that would be just half -- would be just testing cost and product qualification costs.

Okay. Great. And then the last question I have is -- so your quarter -- the first quarter, I guess started off a little bit better than expectations. You maintained the guidance to try and understand but your market seem to be going all right. So what is the world or your markets look like they’ve reached the bottom end of your guidance or what sort of the moving parts that keeps you there?

I think that while we see positive momentum in Europe right now, I think that that's -- Europe is still just kind of watching where the euro goes, what’s going on in Eastern Europe. And then as we go through the second half of the year, the South America markets are the ones that, as we look in our position in Brazil and some of the other countries there, it’s unclear what actions they may take, pretty subdued economic activity down there. And then the third piece is just for us, we still have a lot of start-ups to go this year in China in OEM. And we are following along with the OEMs plans but sometimes as you know, those start ups take a little longer than projected and go a little slower. And I think that the one I would highlight that's a really big positive you have seen that has been, for example here in North America with Ford, where last fall with the F-150 plant in Dearborn and now the one, the second one is being converted, they are taking their time. They are doing it right but those ramp-ups are still going slower than I think as a supplier we would have expected. So, I think, as we kind of think about those three areas, it holds us back, I mean, earlier in the year on being overly optimistic just because the markets are fine, but we are kind of at the wimps of how all that balances up.

Great. And then the last quick question is that how much of a impact to EBITDA was currency this quarter?

At the sales level, we disclosed that number, Ivan at the EBITDA level. Since we are naturally hedged to a great extent across the organization, the impact to EBITDA is much, much less than the impact to sales.

Thanks.

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

Yes. Good morning. Recognizing that you were not a public company in the second quarter of last year, I was wondering if could comment on which businesses, if any you feel you might have an easier comparison in 2Q ‘15 or more difficult comparison, any that standout for modeling purposes?

No. It’s Charlie. No, I don’t think so. I think second quarter for us, last year and this year, we’ve pretty good line of sight element, I think the business is pretty straight. The fundamentals haven’t really changed.

Okay. And then to follow-up on Performance Coatings margin, if I back out the Chinese dividend payment, it looks like your margins still would have been down 40, 50 bps. You indicated you are investing for growth, obviously in that business so your OpEx was up a bit. Just wondering if could flush out the latter? In other words, if we think about all the different investments for growth, how much might that have increase year-over-year or in another words, what would your segment margins be on an apples-to-apples basis year-over-year?

I think there is two things I would highlight there, Kevin. The first is, I think as we highlighted again, we did see lower refinish product demand in the first quarter, given some of the weather elements that we mentioned in North America and in Europe. At the EBITDA level, currency does impact performance a little more than transportation, due to the mix of the business that we have in EMEA and Latin America in particular. So, you also saw with currency impact at the topline level of about 12% that does impact the performance segment slightly more than the transportations segment.

Okay. Thank you very much.

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

Hi. This is Jeff on for Laurence. You mentioned selective price increases in the quarter. Were these targeted within a particular segment or product lines or really just broad based as contracts rolled over. And I guess how we think about the pricing for the remainder?

Yeah. This is Charlie. In lot of our business, those are already contracted for to be -- the other thing is in our refinish side of the business, those tend to be staged throughout the year. And they go about the brand, and they go about by region. And those two move around some based on what’s going on in any one quarter. And so right now, we’ve got a schedule price increases. Not many of those happen in the first quarter. I would change the timing of some of those, so you don’t see a big difference in price year-over-year in that segment. But right now, I think our schedule price increases were out there. And we talked about on raw materials earlier. When you look at the coatings that we produce, we are not driven by T02, we are not driven by high volume solvents. We tend to have more isocyanates, propylene-based resins. And if you look at lot of those categories, those are not -- some of those rods have not gone down. In fact propylene, in Europe for example, is as high as it has been in last four years and driving price increases. So actually without a lot of our customers, we are heading to highlight that and still go after price. But those are in the refinish and industrial side of the world, tend to be scheduled throughout the year and tend to be schedule by product brand. And right now, we will go out with our normal price increases and we expect to get those.

And then regarding the cost control productivity initiatives that you have ongoing. Can you touch on how these programs may have affected the corporate culture thus far?

Yeah. I think it just -- I think we -- as Robert not highlighted earlier, really working on the corporate culture continuous improvement in productivity. And I would say our combination just some of the individuals we brought it from around the world and corporate culture are very strong operating system. And then also just I desire to continuously have kind of the improvement we talked about in the call with you. I would say it’s a big change for the personnel. And again in coating, that’s a big change for searching for those savings, restructuring organization. I couldn’t be happier with the reception we’ve got from our people, but it is in many cases relatively new for them. And we’re spending a lot of time in the organization. We’re really, really clear on what we want, how we want it, and how you go back continuously reengineering your business. So we are pleased with the response of the people but it’s a very different culture then what we inherited in 2013. But I’m very happy, I mean the people are very receptive to it but just a lot of learning that has to go on, on how you actually do that. And in some cases as Robert highlighted there is investment required and in many cases that the investment in the business would have got in the past. So the ideas are in the organization but you have to bring them forward and you have to understand that we’re willing to invest to get through this productivity. So we’re very happy with the progress I think here by its price indication but it is just a very different work environment stand now what lot of them had been used to.

Great. Thank you.

Thank you. Ladies and gentlemen, we come to the end of allotted time for question. I’ll now turn the floor back to Mr. Shaver for any final remarks.

Yes. Thank you. And again I’d like to thank everybody for your time and your patience this morning in the call. As we highlighted, we’re off to a nice start for the year. I think we all know we’ve talked about the headwinds out there from a currency standpoint. Well, those are mainly translation for us. They want to be continuous. They do challenge us to continue to rethink our business, and customers rethink their business going forward. I do think we will continue to watch raw materials as we go through the next quarter. So as Robert highlighted as we speak this morning brent price is $66, WTI is almost $60. So we are starting to see what may be the bottom of that that cycle as some of this shale ga or shale oil is come off. And we may begin to see some pressure back on us as we go through the second half of the year. So I think we’ve got market that we feel like are fundamentally sound, good macro is out there and look forward to a good year. However, what we’re certainly finding is corner-to-corner of the world has some pretty big changes going on right now. And we continue to navigate those. But again I think, we are off to a good start. We feel good about our people, our products, our organization. Most importantly, the biggest thing we have different year-over-year for us is we all passed as we’ve highlighted on our call, with some of the individual investors, will pass our transaction. So the organization is singly focused on growing the business now. And I think we will continue to see lot of those initiatives. So that could bear fruit as we go through the next couple of quarters. But again we all started, it’s exciting time for us with the new set of the investors and we’ll be spending a lot of time with you in conferences over the next couple quarters and look forward to sharing even more about what we have going on with the business with you. So again, thanks Operator. And we’ll see in the second quarter.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.