NOTE 5 - OPERATING SEGMENT INFORMATION

Management has defined Constellium’s operating segments based upon the product lines, markets and industries it serves, and prepares and reports operating segment information to Constellium’s chief operating decision maker (CODM) (see NOTE 2 - Summary of Significant Accounting Policies) on that basis.

Packaging and Automotive Rolled Products (P&ARP)

P&ARP produces thin-gauge rolled products for customers in the beverage and closures, automotive, customized industrial sheet solutions and high-quality bright surface product markets. P&ARP operates four facilities, in three countries and had approximately 4,000 employees at December 31, 2019.

Aerospace and Transportation (A&T)

A&T focuses on thick-gauge rolled high value-added products for customers in the aerospace, defense and mass-transportation markets and engineering industries. A&T operates six facilities in three countries and had approximately 4,000 employees at December 31, 2019.

Automotive Structures and Industry (AS&I)

AS&I focuses on specialty products and supplies a variety of hard and soft alloy extruded products, including a range of technically advanced products, to the automotive, rail, industrial, energy and building industries, and to manufacturers of mass transport vehicles and shipbuilders. AS&I operates eighteen facilities in ten countries and had approximately 4,800 employees at December 31, 2019.

Holdings & Corporate

Holdings & Corporate includes the net cost of Constellium’s head office and corporate support functions (including our technology centers).

Intersegment elimination

Intersegment transactions are conducted on an arm’s length basis and reflects market prices.

The accounting principles used to prepare the Group’s operating segment information are the same as those used to prepare the Group’s Consolidated Financial Statements.

5.1 Segment Revenue



	Year ended December 31, 2019				Year ended December 31, 2018				Year ended December 31, 2017
(in millions of Euros)	Segment revenue	Inter-segment elimination		External revenue	Segment revenue	Inter-segment elimination		External revenue	Segment revenue	Inter-segment elimination		External revenue
P&ARP	3,149	(10	)	3,139	3,059	(9	)	3,050	2,812	(7	)	2,805
A&T	1,462	(42	)	1,420	1,389	(50	)	1,339	1,335	(34	)	1,301
AS&I	1,351	(3	)	1,348	1,290	(3	)	1,287	1,123	(5	)	1,118
Holdings & Corporate (A)	—	—		—	10	—		10	13	—		13
Total	5,962	(55	)	5,907	5,748	(62	)	5,686	5,283	(46	)	5,237


(A)	For the years ended December 31, 2018 and 2017, the Holdings & Corporate segment included revenue from supplying metal to third parties.

5.2 Segment Adjusted EBITDA and reconciliation of Adjusted EBITDA to Net Income



(in millions of Euros)	Notes	Year ended December 31, 2019		Year ended December 31, 2018		Year ended December 31, 2017
P&ARP		273		243		204
A&T		204		152		146
AS&I		106		125		120
Holdings & Corporate		(21	)	(22	)	(22	)
Adjusted EBITDA		562		498		448
Metal price lag (A)		(46	)	—		22
Start-up and development costs (B)		(11	)	(21	)	(17	)
Manufacturing system and process transformation costs		—		—		(2	)
Bowling Green one-time costs related to the acquisition (C)		(5	)	—		—
Share based compensation costs		(16	)	(12	)	(8	)
Gains on pensions plan amendments (D)	25	1		36		20
Depreciation and amortization	17,18	(256	)	(197	)	(171	)
Restructuring costs		(4	)	(1	)	(4	)
Unrealized gains / (losses) on derivatives	9	33		(84	)	57
Unrealized exchange (losses) / gains from the remeasurement of monetary assets and liabilities – net	9	—		—		(4	)
(Losses) / gains on disposals (E)	9	(3	)	186		(3	)
Other (F)		—		(1	)	—
Income from operations		255		404		338
Finance costs - net	11	(175	)	(149	)	(260	)
Share of income / (loss) of joint-ventures	19	2		(33	)	(29	)
Income before income tax		82		222		49
Income tax expense	12	(18	)	(32	)	(80	)
Net income / (loss)		64		190		(31	)

(A)

Metal price lag represents the financial impact of the timing difference between when aluminium prices included within Constellium Revenues are established and when aluminium purchase prices included in Cost of sales are established. The Group accounts for inventory using a weighted average price basis and this adjustment aims to remove the effect of volatility in LME prices. The calculation of the Group metal price lag adjustment is based on an internal standardized methodology calculated at each of Constellium’s manufacturing sites and is primarily calculated as the average value of product recorded in inventory, which approximates the spot price in the market, less the average value transferred out of inventory, which is the weighted average of the metal element of cost of sales, based on the quantity sold in the year.


(B)	For the years ended December 31, 2019, 2018 and 2017, start-up and development costs include €11 million, €21 million and €16 million, respectively, related to new projects in our AS&I operating segment.


(C)	For the year ended December 31, 2019, Bowling Green one-time costs related to the acquisition include the non-cash reversal of the inventory step-up.


(D)	For the year ended December 31, 2018, the Group amended one of its OPEB plans in the U.S., which resulted in a €36 million gain. For the year ended December 31, 2017, amendments to certain Swiss pension plans, U.S. pension plans and OPEB resulted in a €20 million gain.

(E)

In July 2018, Constellium completed the sale of the North Building assets of its Sierre plant in Switzerland to Novelis and contributed the Sierre site shared infrastructure to a joint-venture with Novelis, in exchange for cash consideration of €200 million. This transaction also resulted in the termination of the existing lease agreement for the North Building assets which had been leased and operated by Novelis since 2005. For the year ended December 31, 2018, the transaction generated a €190 million net gain (See NOTE 32 - Subsidiaries and Operating Segments).


(F)	For the year ended December 31, 2017, other includes €3 million of legal fees and lump-sum payments in connection with the renegotiation of a new 5-year collective bargaining agreement offset by accrual reversals of unused provisions related to one-time loss contingencies.

5.3 Segment capital expenditure



(in millions of Euros)	Year ended December 31, 2019		Year ended December 31, 2018		Year ended December 31, 2017
P&ARP	(96	)	(97	)	(115	)
A&T	(72	)	(70	)	(73	)
AS&I	(97	)	(105	)	(83	)
Holdings & Corporate	(6	)	(5	)	(5	)
Capital expenditures	(271	)	(277	)	(276	)

5.4 Segment assets

Segment assets are comprised of total assets of Constellium by segment, less deferred income tax assets, cash and cash equivalents and other financial assets.



(in millions of Euros)	At December 31, 2019	At December 31, 2018
P&ARP	1,951	1,791
A&T	856	831
AS&I	703	544
Holdings & Corporate	276	304
Segment assets	3,786	3,470
Deferred income tax assets	185	163
Cash and cash equivalents	184	164
Other financial assets	29	104
Total Assets	4,184	3,901

5.5 Information about major customers

No single customer contributed 10% or more to the Group's revenue for the year ended December 31, 2019. Revenue in the P&ARP segment from sales to the Group’s largest customer was €812 million for the year ended December 31, 2018. Revenue in the P&ARP segment from sales to the Group’s two largest customers was €1,364 million for the year ended December 31, 2017. No other single customer contributed 10% or more to the Group’s revenue for 2018 and 2017.