Segments (Tables)

9 Months Ended

Sep. 30, 2015

Reconciliation of Revenue from Segments to Consolidated

Our business serves four end-markets globally as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Performance Coatings
Refinish	$	426.9	$	478.1	$	1,280.2	$	1,384.4
Industrial	173.7		185.4		516.4		560.2
Total Net sales Performance Coatings	600.6		663.5		1,796.6		1,944.6
Transportation Coatings
Light Vehicle	303.7		342.5		984.1		1,045.5
Commercial Vehicle	96.0		102.9		302.9		292.8
Total Net sales Transportation Coatings	399.7		445.4		1,287.0		1,338.3
Total Net sales	$	1,000.3	$	1,108.9	$	3,083.6	$	3,282.9

Schedule of Segment Reporting Information, by Segment



	Three Months Ended September 30,
	2015						2014
	Performance Coatings		Transportation Coatings		Total		Performance Coatings		Transportation Coatings		Total
Net sales ⁽¹⁾	$	600.6	$	399.7	$	1,000.3	$	663.5	$	445.4	$	1,108.9
Equity in earnings in unconsolidated affiliates	0.1		—		0.1		0.4		0.1		0.5
Adjusted EBITDA ⁽²⁾	139.0		77.9		216.9		148.5		79.5		228.0
Investment in unconsolidated affiliates	5.5		6.8		12.3		8.3		7.6		15.9



	Nine Months Ended September 30,
	2015						2014
	Performance Coatings		Transportation Coatings		Total		Performance Coatings		Transportation Coatings		Total
Net sales ⁽¹⁾	$	1,796.6	$	1,287.0	$	3,083.6	$	1,944.6	$	1,338.3	$	3,282.9
Equity in earnings in unconsolidated affiliates	0.4		0.5		0.9		0.9		0.4		1.3
Adjusted EBITDA ⁽²⁾	408.2		246.2		654.4		409.7		226.1		635.8
Investment in unconsolidated affiliates	5.5		6.8		12.3		8.3		7.6		15.9


(1)	The Company has no intercompany sales between segments.

(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 Operating Profit (Loss) from Segments to Consolidated

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Income (loss) before income taxes	$	54.2		$	(10.8	)	$	107.3		$	52.0
Interest expense, net	50.8			52.6			150.0			166.5
Depreciation and amortization	75.4			76.2			225.5			229.1
EBITDA	180.4			118.0			482.8			447.6
Inventory step-up ^(a)	0.5			—			1.0			—
Financing fees and debt extinguishment ^(b)	—			3.0			—			6.1
Foreign exchange remeasurement losses, net ^(c)	23.7			59.6			90.2			45.1
Long-term employee benefit plan adjustments^(d)	(0.5		)	(4.7		)	(0.1		)	(0.2		)
Termination benefits and other employee related costs ^(e)	0.8			3.2			19.3			9.1
Consulting and advisory fees ^(f)	7.2			8.8			17.1			29.5
Transition related costs ^(g)	—			33.5			—			81.0
Offering related costs^(h)	1.4			3.2			3.1			3.2
Other adjustments⁽ⁱ⁾	3.7			2.6			14.8			13.6
Dividends in respect of noncontrolling interest ^(j)	(0.3		)	—			(4.4		)	(1.6		)
Management fee expense^(k)	—			0.8			—			2.4
Asset impairment ^(l)	—			—			30.6			—
Adjusted EBITDA	$	216.9		$	228.0		$	654.4		$	635.8


(a)	During the nine months ended September 30, 2015, we recorded non-cash fair value inventory adjustments associated with our acquisitions. These amounts increased cost of goods sold by $0.5 million and $1.0 million for the three and nine months ended September 30, 2015, respectively.


(b)	In connection with an amendment to the Senior Secured Credit Facilities in February 2014, we recognized $3.1 million of costs during the nine months ended September 30, 2014. 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.


(c)	Eliminates foreign exchange gains and losses resulting from the remeasurement of assets and liabilities denominated in foreign currencies.


(d)	Eliminates the non-service cost components of long-term employee benefit costs. Additionally, we deducted a pension curtailment gain of $6.6 million recorded during the three and nine months ended September 30, 2014.


(e)	Represents expenses primarily related to employee termination benefits and other employee-related costs. Termination benefits include the costs associated with our headcount initiatives associated with cost saving opportunities that were related to our transition to a standalone entity and our Axalta Way cost savings initiatives in 2015.


(f)	Represents fees paid to consultants, advisors, and other third-party professional organizations for professional services. Amounts incurred for the three and nine months ended September 30, 2015 primarily relate to our Axalta Way cost savings initiatives. Amounts incurred for the three and nine months ended September 30, 2014 relate to our transition from DuPont to a standalone entity.


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


(h)	Represents costs associated with the offering of our common shares in the Carlyle Offerings.

(i)

Represents costs for certain unusual or non-operational (gains) and losses, including a $5.4 million gain recognized during the nine months ended September 30, 2015 resulting from the remeasurement of our previously held interest in an equity method investee upon the acquisition of a controlling interest, stock-based compensation, equity investee dividends, indemnity losses associated with the Acquisition, 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 for management and financial advisory services and oversight provided to Axalta and its subsidiaries, Axalta was required to pay an annual management fee of $3.0 million and out-of-pocket expenses. This agreement terminated upon completion of the IPO in November 2014.


(l)	As a result of the currency devaluation in Venezuela, we evaluated the carrying values of our long-lived assets for impairment and recorded an impairment charge relating to a real estate investment of $30.6 million during the nine months ended September 30, 2015. See Note 9 for more information.