Segments (Tables)

3 Months Ended

Mar. 31, 2018

Reconciliation of Revenue from Segments to Consolidated

Our business serves four end-markets globally as follows:



	Three Months Ended March 31,
	2018		2017
Performance Coatings
Refinish	$	412.6	$	388.6
Industrial	316.1		197.8
Total Net sales Performance Coatings	728.7		586.4
Transportation Coatings
Light Vehicle	349.5		340.0
Commercial Vehicle	87.6		81.4
Total Net sales Transportation Coatings	437.1		421.4
Total Net sales	$	1,165.8	$	1,007.8

Schedule of Segment Reporting Information, by Segment



	Performance Coatings		Transportation Coatings			Total
For the Three Months Ended March 31, 2018
Net sales ⁽¹⁾	$	728.7	$	437.1		$	1,165.8
Equity in earnings in unconsolidated affiliates	0.1		(0.1		)	—
Adjusted EBITDA ⁽²⁾	143.2		76.8			220.0
Investment in unconsolidated affiliates	3.3		12.7			16.0



	Performance Coatings		Transportation Coatings		Total
For the Three Months Ended March 31, 2017
Net sales⁽¹⁾	$	586.4	$	421.4	$	1,007.8
Equity in earnings in unconsolidated affiliates	0.1		0.1		0.2
Adjusted EBITDA ⁽²⁾	116.9		86.2		203.1
Investment in unconsolidated affiliates	2.9		11.3		14.2


(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 have not occurred within the last two years or we believe 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 March 31,
	2018			2017
Income before income taxes	$	82.8		$	75.8
Interest expense, net	39.4			35.8
Depreciation and amortization	91.9			82.4
EBITDA	214.1			194.0
Foreign exchange remeasurement gains ^(a)	—			(1.2		)
Long-term employee benefit plan adjustments^(b)	(0.5		)	0.4
Termination benefits and other employee related costs ^(c)	(1.3		)	0.8
Consulting and advisory fees ^(d)	—			(0.1		)
Transition-related costs ^(e)	(0.2		)	—
Offering and transactional costs^(f)	0.2			(1.0		)
Stock-based compensation ^(g)	8.4			10.4
Other adjustments^(h)	0.3			0.2
Dividends in respect of noncontrolling interest ⁽ⁱ⁾	(1.0		)	(0.4		)
Adjusted EBITDA	$	220.0		$	203.1


(a)	Eliminates foreign exchange gains resulting from the remeasurement of assets and liabilities denominated in foreign currencies, net of the impacts of our foreign currency instruments used to hedge our balance sheet exposures.


(b)	Eliminates the non-cash, non-service cost components of long-term employee benefit costs.


(c)	Represents expenses and associated adjustments to estimates 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.


(d)	Represents expenses and associated adjustments to estimates for professional services primarily related to our Axalta Way initiatives, which are not considered indicative of our ongoing operating performance.


(e)	Represents integration costs and associated adjustments to estimates related to the 2017 acquisition of the Industrial Wood business that was a carve-out business from Valspar. We do not consider these items to be indicative of our ongoing operating performance.


(f)	Represents acquisition-related expenses, including changes in the fair value of contingent consideration, which are not considered indicative of our ongoing operating performance.


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


(h)	Represents 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 gains and losses from the sale and disposal of property, plant and equipment, from the remaining foreign currency derivative instruments and from non-cash fair value inventory adjustments associated with business combinations.


(i)	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 these entities on Axalta's financial statements.