Axalta Coating Systems Ltd. has announced its financial results for the first quarter ended March 31, 2017.

“Axalta’s financial and operating performance has started the year well on plan, with top-line growth at the high end of our expectations and continued success in our operating, productivity and acquisition initiatives,” said Charles W. Shaver, Axalta’s Chairman and Chief Executive Officer. “We are thrilled by our agreement to purchase the industrial wood coatings business from Valspar and by the opportunity that this deal and others we have recently closed give us to further extend our growth and competitive position in Performance Coatings.”

First quarter net sales of $1,007.8 million were driven by volume growth of 8.9%, offset partly by 1.2% lower average selling prices and by a 2.2% negative foreign currency translation impact. Constant currency net sales increased 7.7% compared to the year-ago quarter, driven by volume growth. Acquisitions added 4.5% of the volume growth in the quarter. Net sales growth in the first quarter was positive in all regions and included volume growth in all regions and end-markets.

We reported net income attributable to Axalta of $64.1 million for the first quarter of 2017 compared with net income attributable to Axalta of $30.9 million in Q1 2016. Adjusted net income attributable to Axalta of $63.1 million for the first quarter of 2017 increased 46.7% compared to $43.0 million in Q1 2016. Both net income attributable to Axalta and adjusted net income attributable to Axalta for Q1 2017 and Q1 2016 include benefits for excess tax benefits relating to share-based compensation of $5.8 million and $1.2 million, respectively. The retrospective adoption of ASU 2016-09 relating to share-based compensation is discussed below.

Adjusted EBITDA of $203.1 million for the first quarter increased 4.3% versus $194.8 million in Q1 2016. This result benefited from higher volumes, contribution from acquisitions, lower variable costs, and incremental savings from our productivity initiatives. These factors were partially offset by lower average selling prices, negative foreign currency translation, and incremental operational expenditures to support planned growth.

Performance Coatings net sales were $586.4 million in Q1 2017, an increase of 8.0% year-over-year including a 3.0% unfavorable foreign currency translation impact. Constant currency net sales increased 11.0%, driven by strong volumes in the period. Acquisitions added 6.7% to volume growth in the quarter. Refinish end-market net sales increased 2.6% to $388.6 million in Q1 2017 (increased 5.7% excluding foreign currency translation), while our Industrial end-market net sales increased 20.4% to $197.8 million (increased 23.3% excluding foreign currency translation).

The Performance Coatings segment generated Adjusted EBITDA of $116.9 million in the first quarter, a 6.2% year-over-year increase. Contribution from acquisitions, organic volume growth and modest variable cost savings were partially offset by negative foreign currency translation and incremental operating expense to support growth initiatives. First quarter segment Adjusted EBITDA margin of 19.9% was largely consistent with 20.3% in the same quarter last year.

Transportation Coatings net sales were $421.4 million in Q1 2017, an increase of 2.1% year-over-year including a 1.1% unfavorable foreign currency translation impact. Constant currency net sales increased 3.2% versus Q1 2016, driven largely by 6.1% volume growth, partially offset by a 2.9% negative price impact. Acquisitions added 1.5% to volume growth in the period.

Light Vehicle net sales increased 3.2% to $340.0 million year-over-year (increased 4.0% excluding foreign currency translation), driven principally by growth in Latin America. Commercial Vehicle net sales decreased 2.2% to $81.4 million versus last year (flat excluding foreign currency translation), as overall demand for both truck and non-truck end customers stabilized in North America and Latin America after a year of lower volumes.

Transportation Coatings generated Adjusted EBITDA of $86.2 million in Q1 2017, an increase of 1.8% versus Q1 2016, with positive volume and variable cost contributions largely offset by lower average pricing and ongoing operating expense increases to support planned growth. Segment Adjusted EBITDA margin of 20.5% in Q1 was consistent with the prior year’s first quarter.

We ended the quarter with cash and cash equivalents of $439.1 million. Our debt, net of cash, was $2,868.2 million as of March 31, 2017, compared to $2,728.5 million at December 31, 2016. Cash use in the quarter included normal seasonal working capital outflows as well as the funding of $56.9 million for two acquisitions completed in January. Axalta made no open market purchases of its common stock in the first quarter.

First quarter operating cash flow was a use of $6.5 million versus a use of $13.3 million in the corresponding quarter of 2016, reflecting a stable seasonal operating result from both an operational and working capital perspective. Free cash flow, calculated as operating cash flow less capital expenditures, totaled a use of $38.8 million after capital expenditures of $32.3 million compared to a use of $53.6 million in the first quarter of 2016.

“Our first quarter financial performance was solid and puts us on track to achieve our full year guidance,” said Robert W. Bryant, Axalta’s Executive Vice President and Chief Financial Officer. “We are pleased that in the first quarter we posted solid sales growth inclusive of expected price reductions in certain areas, while closing on two incremental acquisitions in January as well as entering into the Valspar North American wood coatings purchase agreement which was signed subsequent to the quarter end. We also announced the authorization of our first share buyback program, which reflects our confidence in the cash generation of the business to fund operations, strategic growth initiatives and return for our shareholders.”

During the three months ended December 31, 2016, Axalta early adopted ASU 2016-09, which addresses, among other items, the accounting for income taxes, calculations on diluted weighted average shares outstanding, and cash flow presentation relating to share-based compensation. The early adoption resulted in the recasting of previously issued quarterly financial statements, including an increase to net income attributable to Axalta by $1.2 million for the three months ended March 31, 2016. The impact of early adoption also increased Axalta's dilutive shares by 1.8 million shares for the three months ended March 31, 2016. Axalta will provide more detailed information regarding the impact of the early adoption and recasting of previously issued financial information in its quarterly report on Form 10-Q for the quarter ended March 31, 2017.