Segments (Tables)

9 Months Ended

Sep. 30, 2014

	Successor
	Three months ended September 30, 2014						Nine months ended September 30, 2014
	Performance Coatings		Transportation Coatings		Total		Performance Coatings		Transportation Coatings		Total
Net sales⁽¹⁾	$	663.5	$	445.4	$	1,108.9	$	1,944.6	$	1,338.3	$	3,282.9
Equity in earnings in unconsolidated affiliates		0.4		0.1		0.5		0.9		0.4		1.3
Adjusted EBITDA⁽²⁾		148.5		79.5		228.0		409.7		226.1		635.8
Investment in unconsolidated affiliates		8.3		7.6		15.9		8.3		7.6		15.9


	Successor
	Three months ended September 30, 2013						Nine months ended September 30, 2013
	Performance Coatings		Transportation Coatings		Total		Performance Coatings		Transportation Coatings		Total
Net sales⁽¹⁾	$	643.7	$	430.9	$	1,074.6	$	1,680.1	$	1,178.1	$	2,858.2
Equity in earnings in unconsolidated affiliates		0.2		—		0.2		1.5		0.1		1.6
Adjusted EBITDA⁽²⁾		147.3		46.8		194.1		360.2		141.4		501.6
Investment in unconsolidated affiliates		7.5		8.2		15.7		7.5		8.2		15.7


	Predecessor
	January 1, through January 31, 2013
	Performance Coatings		Transportation Coatings			Total
Net sales⁽¹⁾	$	186.8	$	139.4		$	326.2
Equity in earnings (losses) in unconsolidated affiliates		—		(0.3	)		(0.3	)
Adjusted EBITDA⁽²⁾		15.0		17.7			32.7
Investment in unconsolidated affiliates		2.0		6.7			8.7

⁽¹⁾	The Company has no intrasegment sales.

⁽²⁾

The primary measure of segment operating performance is Adjusted EBITDA, which is defined as net income (loss) before interest, taxes, depreciation and amortization and other unusual items impacting operating results. Adjusted EBITDA is a key metric that is used by management to evaluate business performance in comparison to budgets, forecasts, and prior year financial results, providing a measure that management believes reflects the Company’s core operating performance.

Reconciliation of Adjusted EBITDA to Income (Loss) Before Income Taxes

Reconciliation of Adjusted EBITDA to income (loss) before income taxes follows:


	Successor						Successor						Predecessor
	Three Months Ended September 30,						Nine Months Ended September 30,						January 1 through January 31,
	2014			2013			2014			2013			2013
Adjusted EBITDA	$	228.0		$	194.1		$	635.8		$	501.6		$	32.7
Inventory step-up(a)		—			—			—			103.7			—
Merger and acquisition related costs(b)		—			—			—			28.1			—
Financing fees and extinguishment(c)		3.0			—			6.1			25.0			—
Foreign exchange remeasurement (gains) losses(d)		59.6			(9.7	)		45.1			49.9			4.5
Long-term employee benefit plan adjustments(e)		(4.7	)		1.8			(0.2	)		4.8			2.3
Termination benefits and other employee related costs(f)		3.2			47.6			9.1			64.8			0.3
Consulting and advisory fees(g)		8.8			11.3			29.5			33.2			—
Transition-related costs(h)		36.7			8.8			84.2			16.2			—
Other adjustments(i)		2.6			3.2			13.6			2.9			0.1
Dividends in respect of noncontrolling interest(j)		—			—			(1.6	)		(4.1	)		—
Management fee expense(k)		0.8			0.9			2.4			2.2			—

EBITDA		118.0			130.2			447.6			174.9			25.5
Interest expense, net		52.6			62.7			166.5			153.2			—
Depreciation and amortization		76.2			87.4			229.1			228.0			9.9

Income (loss) before income taxes	$	(10.8	)	$	(19.9	)	$	52.0		$	(206.3	)	$	15.6

(a)	During the Successor Nine Months Ended September 30, 2013, we recorded a non-cash fair value adjustment associated with our acquisition accounting for inventories. These amounts increased cost of goods sold by $103.7 million.

(b)	In connection with the Acquisition, we incurred $28.1 million of merger and acquisition costs during the Successor Nine Months Ended September 30, 2013. These costs consisted primarily of investment banking, legal and other professional advisory services costs.

(c)

On August 30, 2012, we signed a debt commitment letter which included the Bridge Facility. Upon the issuance of the Senior Notes and the entry into the Senior Secured Credit Facilities, the commitments under the Bridge Facility terminated. Commitment fees related to the Bridge Facility of $21.0 million and associated fees of $4.0 million were expensed upon payment and the termination of the Bridge Facility. In connection with the refinancing of the Senior Secured Credit Facilities in February 2014 (discussed further in Note 18), we recognized $3.1 million of costs. At September 30, 2014, we prepaid $100.0 million of the outstanding New Dollar Term Loan and recorded a pre-tax loss on extinguishment of $3.0 million.

(d)	Eliminates foreign exchange gains and losses resulting from the remeasurement of assets and liabilities denominated in foreign currencies, including a $19.4 million loss related to the acquisition date settlement of a foreign currency contract used to hedge the variability of Euro-based financing.

(e)

For the Successor periods ended September 30, 2014 and 2013, eliminates the non-service cost components of employee benefit costs. Additionally, we deducted a pension curtailment gain of $6.6 million recorded during the three months ended September 30, 2014. For the Predecessor period January 1, 2013 through January 31, 2013, eliminates (1) all U.S. pension and other long-term employee benefit costs that were not assumed as part of the Acquisition and (2) the non-service cost component of the pension and other long-term employee benefit costs.

(f)

Represents expenses primarily related to employee termination benefits, including our initiative to improve the overall cost structure within the European region, and other employee-related costs. Termination benefits include the costs associated with our headcount initiatives for establishment of new roles and elimination of old roles and other costs associated with cost saving opportunities that were related to our transition to a standalone entity.

(g)	Represents fees paid to consultants, advisors, and other third-party professional organizations for professional services rendered in conjunction with the transition from DuPont to a standalone entity.

(h)	Represents charges associated with the transition from DuPont to a standalone entity, including branding and marketing, information technology related costs, and facility transition costs, as well as costs associated with the IPO.

(i)

Represents costs for certain unusual or non-operational losses and the non-cash impact of natural gas and currency hedge losses allocated to DPC by DuPont, stock-based compensation, asset impairments, equity investee dividends, indemnity income associated with the Transaction, and loss (gain) on sale and disposal of property, plant and equipment.

(j)	Represents the payment of dividends to our joint venture partners by our consolidated entities that are not wholly owned.

(k)

Pursuant to Axalta’s management agreement with Carlyle Investment Management, L.L.C., an affiliate of Carlyle, for management and financial advisory services and oversight provided to Axalta and its subsidiaries, Axalta is required to pay an annual management fee of $3.0 million and out-of-pocket expenses. This agreement was terminated upon consummation of the IPO.

Schedule of Net Sales by Segments

Our business serves four end-markets globally as follows:


	Successor								Predecessor
	Three Months Ended September 30,				Nine Months Ended September 30,				January 1 through January 31,
	2014		2013		2014		2013		2013
Performance Coatings
Refinish	$	478.1	$	462.4	$	1,384.4	$	1,203.1	$	129.4
Industrial		185.4		181.3		560.2		477.0		57.4

Total Net sales Performance Coatings		663.5		643.7		1,944.6		1,680.1		186.8

Transportation Coatings
Light Vehicle		342.5		339.8		1,045.5		938.6		111.6
Commercial Vehicle		102.9		91.1		292.8		239.5		27.8

Total Net sales Transportation Coatings		445.4		430.9		1,338.3		1,178.1		139.4

Total Net sales	$	1,108.9	$	1,074.6	$	3,282.9	$	2,858.2	$	326.2

- Definition

Tabular disclosure of the profit or loss and total assets for each reportable segment. An entity discloses certain information on each reportable segment if the amounts (a) are included in the measure of segment profit or loss reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss.

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