Segments (Tables)

12 Months Ended

Dec. 31, 2015

Reconciliation of Revenue from Segments to Consolidated

Our business serves four end-markets globally as follows:



	Successor						Predecessor
	Year Ended December 31,						Period from January 1 through January 31,
	2015		2014		2013		2013
Performance Coatings
Refinish	$	1,702.0	$	1,850.8	$	1,670.0	$	129.4
Industrial	683.1		734.2		655.3		57.4
Total Net sales Performance Coatings	2,385.1		2,585.0		2,325.3		186.8
Transportation Coatings
Light Vehicle	1,310.6		1,384.5		1,291.5		111.6
Commercial Vehicle	391.5		392.2		334.3		27.8
Total Net sales Transportation Coatings	1,702.1		1,776.7		1,625.8		139.4
Total Net sales	$	4,087.2	$	4,361.7	$	3,951.1	$	326.2

Schedule of Segment Reporting Information, by Segment



	Successor
	Performance Coatings		Transportation Coatings		Total
For the Year ended December 31, 2015
Net sales ⁽¹⁾	$	2,385.1	$	1,702.1	$	4,087.2
Equity in earnings in unconsolidated affiliates	0.6		0.6		1.2
Adjusted EBITDA ⁽²⁾	539.1		328.1		867.2
Investment in unconsolidated affiliates	4.0		8.4		12.4



	Successor
	Performance Coatings			Transportation Coatings			Total
For the Year ended December 31, 2014
Net sales ⁽¹⁾	$	2,585.0		$	1,776.7		$	4,361.7
Equity in losses in unconsolidated affiliates	(1.2		)	(0.2		)	(1.4		)
Adjusted EBITDA ⁽²⁾	547.6			292.9			840.5
Investment in unconsolidated affiliates	7.2			7.1			14.3



	Successor
	Performance Coatings		Transportation Coatings		Total
For the Year ended December 31, 2013
Net sales ⁽¹⁾	$	2,325.3	$	1,625.8	$	3,951.1
Equity in earnings in unconsolidated affiliates	1.8		0.3		2.1
Adjusted EBITDA ⁽²⁾	500.2		198.8		699.0
Investment in unconsolidated affiliates	7.7		8.1		15.8



	Predecessor
	Performance Coatings		Transportation Coatings			Total
For the Period from January 1 through January 31, 2013
Net sales ⁽¹⁾	$	186.8	$	139.4		$	326.2
Equity in 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 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 Adjusted EBITDA to income (loss) before income taxes follows:

Reconciliation of Operating Profit (Loss) from Segments to Consolidated

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



	Successor									Predecessor
	Year Ended December 31,									Period from January 1 through January 31,
	2015			2014			2013			2013
Income (loss) before income taxes	$	161.2		$	36.8		$	(263.7	)	$	15.6
Interest expense, net	196.5			217.7			215.1			—
Depreciation and amortization	307.7			308.7			300.7			9.9
EBITDA	665.4			563.2			252.1			25.5
Inventory step up ^(a)	1.2			—			103.7			—
Merger and acquisition related costs ^(b)	—			—			28.1			—
Financing fees and debt extinguishment ^(c)	2.5			6.1			25.0			—
Foreign exchange remeasurement losses ^(d)	93.7			81.2			48.9			4.5
Long-term employee benefit plan adjustments^(e)	(0.3		)	(0.6		)	9.5			2.3
Termination benefits and other employee related costs ^(f)	36.6			18.4			147.5			0.3
Consulting and advisory fees ^(g)	24.7			36.3			54.7			—
Transition-related costs ^(h)	(3.4		)	101.8			29.3			—
Offering related costs⁽ⁱ⁾	3.1			22.3			—			—
Stock-based compensation ^(j)	30.2			8.0			7.4			0.1
Other adjustments^(k)	(12.4		)	2.8			(5.1		)	—
Dividends in respect of noncontrolling interest ^(l)	(4.7		)	(2.2		)	(5.2		)	—
Management fee expense^(m)	—			3.2			3.1			—
Asset impairment ⁽ⁿ⁾	30.6			—			—			—
Adjusted EBITDA	$	867.2		$	840.5		$	699.0		$	32.7


(a)	During the Successor years ended December 31, 2015 and 2013, we recorded non-cash fair value inventory adjustments associated with our acquisitions. These adjustments increased cost of goods sold by $1.2 million and $103.7 million, respectively.


(b)	In connection with the Acquisition, we incurred $28.1 million of merger and acquisition costs during the Successor year ended December 31, 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 (as defined herein). 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 the termination of the Bridge Facility. In connection with the amendment to the Senior Secured Credit Facilities in February 2014, we recognized $3.1 million of costs. In addition to the credit facility amendment, we also incurred $2.5 million and $3.0 million of losses on extinguishment of debt during the Successor years ended December 31, 2015 and 2014, respectively, which resulted directly from the pro-rata write offs of unamortized deferred financing costs and original issue discounts associated with the pay-downs of $100.0 million of principal on the New Dollar Term Loan in each year (discussed further at Note 22).


(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 years ended December 31, 2015, 2014 and 2013, eliminates the non-service cost components of employee benefit costs. Additionally, we deducted a pension curtailment gain of $7.3 million recorded during the Successor year ended December 31, 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 and other employee-related costs, including our initiative to improve the overall cost structure within the European region. 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-savings opportunities that were related to our transition to a standalone entity in 2013 and 2014 and our Axalta Way cost-savings initiatives in 2015.


(g)	Represents fees paid to consultants, advisors and other third-party professional organizations for professional services. Amounts incurred during 2015 primarily relate to our Axalta Way cost-savings initiatives. Amounts incurred during 2013 and 2014 relate to services rendered in conjunction with our 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.


(i)	Represents costs associated with the offering of our common shares in the Carlyle Offerings during 2015 and costs associated with the IPO, including a $13.4 million pre-tax charge associated with the termination of the management agreement with Carlyle Investment Management, L.L.C., an affiliate of Carlyle, upon the completion of the IPO during 2014. See note (m) below.


(j)	Represents costs associated with stock-based compensation, including $8.2 million of expense during 2015 attributable to the accelerated vesting of all issued and outstanding stock options issued under the 2013 Plan as a result of the Liquidity Event.

(k)

Represents costs for certain unusual or non-operational (gains) and losses, including a $5.4 million gain resulting from the acquisition of a controlling interest in our previously held equity method investee during 2015, equity investee dividends, indemnity losses (gains) associated with the Acquisition, losses (gains) on sale and disposal of property, plant and equipment, and losses (gains) on foreign currency derivative instruments.


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


(m)	Pursuant to Axalta’s management agreement with Carlyle Investment Management, L.L.C., 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.


(n)	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 2015 (discussed further at Note 27).

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas

Net sales by region were as follows:



	Successor						Predecessor
	Year Ended December 31,						Period from January 1 through January 31,
	2015		2014		2013		2013
North America	$	1,371.9	$	1,307.8	$	1,165.4	$	81.6
EMEA	1,425.3		1,672.0		1,540.4		141.0
Asia Pacific	717.4		715.0		593.7		51.7
Latin America	572.6		666.9		651.6		51.9
Total ^(a)	$	4,087.2	$	4,361.7	$	3,951.1	$	326.2

Net long-lived assets by region were as follows:



	Successor
	December 31, 2015		December 31, 2014
North America	$	449.1	$	481.4
EMEA	493.2		542.0
Asia Pacific	234.5		234.3
Latin America	206.1		256.4
Total^(b)	$	1,382.9	$	1,514.1

(a)

Net Sales are attributed to countries based on location of the customer. Sales to external customers in China represented approximately 13%, 11% and 10% of the total for the Successor years ended December 31, 2015, 2014, and 2013 respectively, as well as 11% for the Predecessor period ended January 31, 2013. Sales to external customers in Germany represented approximately 9%, 10% and 10% of the total for the Successor years ended December 31, 2015, 2014 and 2013, respectively, as well as 11% for the Predecessor period ended January 31, 2013. Canada, which is included in the North America region, represents approximately 3% of total net sales in all periods.

(b)

Long-lived assets consist of property, plant and equipment, net.
Germany long-lived assets amounted to approximately $280.4 million and $302.8 million in the Successor years ended December 31, 2015 and 2014, respectively. China long-lived assets amounted to $194.7 million and $189.4 million in the Successor years ended December 31, 2015 and 2014, respectively. Canada long-lived assets, which are included in the North America region, amounted to approximately $20.7 million and $20.9 million in the Successor years ended December 31, 2015 and 2014, respectively.