Segments (Tables)

9 Months Ended

Sep. 30, 2017

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,
	2017		2016		2017		2016
Performance Coatings
Refinish	$	395.3	$	431.7	$	1,205.1	$	1,259.3
Industrial	298.2		184.8		737.7		532.4
Total Net sales Performance Coatings	693.5		616.5		1,942.8		1,791.7
Transportation Coatings
Light Vehicle	309.7		321.1		984.0		994.9
Commercial Vehicle	88.6		83.0		261.3		254.8
Total Net sales Transportation Coatings	398.3		404.1		1,245.3		1,249.7
Total Net sales	$	1,091.8	$	1,020.6	$	3,188.1	$	3,041.4

Schedule of Segment Reporting Information, by Segment



	Three Months Ended September 30,
	2017						2016
	Performance Coatings		Transportation Coatings		Total		Performance Coatings			Transportation Coatings		Total
Net sales ⁽¹⁾	$	693.5	$	398.3	$	1,091.8	$	616.5		$	404.1	$	1,020.6
Equity in earnings (losses) in unconsolidated affiliates	—		0.1		0.1		(0.4		)	0.1		(0.3		)
Adjusted EBITDA ⁽²⁾	135.1		74.4		209.5		145.7			84.7		230.4
Investment in unconsolidated affiliates	3.1		12.3		15.4		3.3			11.5		14.8



	Nine Months Ended September 30,
	2017						2016
	Performance Coatings		Transportation Coatings		Total		Performance Coatings			Transportation Coatings		Total
Net sales ⁽¹⁾	$	1,942.8	$	1,245.3	$	3,188.1	$	1,791.7		$	1,249.7	$	3,041.4
Equity in earnings (losses) in unconsolidated affiliates	0.2		0.3		0.5		(0.2		)	0.2		—
Adjusted EBITDA ⁽²⁾	398.8		241.0		639.8		413.2			264.7		677.9
Investment in unconsolidated affiliates	3.1		12.3		15.4		3.3			11.5		14.8


(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 before interest, taxes, depreciation and amortization and select other items impacting operating results. These other items impacting operating results are items that management has concluded are (1) non-cash items included within net income, (2) items the Company does not believe are indicative of ongoing operating performance or (3) non-recurring, unusual or infrequent items that the Company believes are not reasonably likely to recur within the next two years. 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, which represents EBITDA adjusted for the select items referred to above. Reconciliation of Adjusted EBITDA to income before income taxes follows:

Reconciliation of Operating Profit (Loss) from Segments to Consolidated

Reconciliation of Adjusted EBITDA to income before income taxes follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Income (loss) before income taxes	$	58.4		$	(12.9	)	$	124.8		$	102.8
Interest expense, net	37.7			42.9			109.1			140.8
Depreciation and amortization	88.6			81.2			255.9			235.8
EBITDA	184.7			111.2			489.8			479.4
Debt extinguishment and refinancing related costs (a)	0.6			81.9			13.0			84.2
Foreign exchange remeasurement losses (b)	3.5			4.5			8.3			30.0
Long-term employee benefit plan adjustments (c)	(0.1		)	0.8			0.4			2.1
Termination benefits and other employee related costs (d)	5.8			16.3			6.6			25.2
Consulting and advisory fees (e)	—			2.7			(0.1		)	8.3
Transition-related costs (f)	1.9			—			5.8			—
Offering and transactional costs (g)	0.5			3.0			6.1			4.4
Stock-based compensation (h)	9.2			10.0			30.5			31.6
Other adjustments (i)	0.8			1.5			3.6			5.2
Dividends in respect of noncontrolling interest (j)	(1.8		)	(1.5		)	(2.7		)	(3.0		)
Deconsolidation impacts and impairments (k)	4.4			—			78.5			10.5
Adjusted EBITDA	$	209.5		$	230.4		$	639.8		$	677.9

(a)

During the three and nine months ended September 30, 2016, we prepaid outstanding principal on our term loans, resulting in non-cash pre-tax losses on extinguishment of $4.3 million and $6.6 million, respectively. In addition, during the three and nine months ended September 30, 2016, we amended our Credit Agreement and refinanced our indebtedness, resulting in additional losses of $77.6 million. In connection with the refinancing of our Dollar Term Loans during the nine months ended September 30, 2017, we recorded losses of $13.0 million, including changes to estimates of $0.6 million for the three months ended September 30, 2017. We do not consider these to be indicative of our ongoing operating performance.

(b)

Eliminates foreign exchange gains and losses resulting from the remeasurement of assets and liabilities denominated in foreign currencies, net of impacts associated with our foreign currency instruments used to hedge our balance sheet exposures. Exchange effects attributable to the remeasurement of our Venezuelan subsidiary represented losses of $1.8 million for the nine months ended September 30, 2017 and losses of $1.2 million and $23.9 million for the three and nine months ended September 30, 2016, respectively.


(c)	Eliminates the non-cash, non-service cost components of long-term employee benefits.


(d)	Represents expenses primarily related to employee termination benefits and other employee-related costs associated with our Axalta Way initiatives, which are not considered indicative of our ongoing operating performance.


(e)	Represents fees paid to consultants for professional services primarily related to our Axalta Way initiatives, which are not considered indicative of our ongoing operating performance.


(f)	Represents integration costs related to the acquisition of the Industrial Wood business that was a carve-out business from Valspar. These amounts are not considered indicative of our ongoing operating performance.


(g)	Represents acquisition-related expenses, including changes in the fair value of contingent consideration, as well as costs associated with the 2016 secondary offerings of our common shares by Carlyle, both of which are not considered indicative of our ongoing operating performance.


(h)	Represents non-cash costs associated with stock-based compensation.

(i)

Represents costs for certain non-operational or non-cash (gains) and losses unrelated to our core business and which we do not consider indicative of ongoing operations, including equity investee dividends, indemnity losses (gains) associated with the Acquisition, losses (gains) on sale and disposal of property, plant and equipment, losses (gains) on the remaining foreign currency derivative instruments and non-cash fair value inventory adjustments associated with our business combinations.


(j)	Represents the payment of dividends to our joint venture partners by our consolidated entities that are not 100% owned, which are reflected to show the cash operating performance of the entities on Axalta's financial statements.

(k)

During the nine months ended September 30, 2017 and 2016, we recorded a loss in conjunction with the deconsolidation of our Venezuelan subsidiary and a non-cash impairment charge related to a real estate investment of $70.9 million and $10.5 million, respectively. During the three and nine months ended September 30, 2017, we recorded non-cash impairment charges related to certain manufacturing facilities previously announced for closure of $4.4 million and $7.6 million, respectively. We do not consider these to be indicative of our ongoing operating performance.