Segments (Tables)

9 Months Ended

Sep. 30, 2018

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,
	2018		2017		2018		2017
Performance Coatings
Refinish	$	440.7	$	395.3	$	1,300.4	$	1,205.1
Industrial	314.3		298.2		967.8		737.7
Total Net sales Performance Coatings	755.0		693.5		2,268.2		1,942.8
Transportation Coatings
Light Vehicle	299.2		309.7		978.1		984.0
Commercial Vehicle	85.1		88.6		265.3		261.3
Total Net sales Transportation Coatings	384.3		398.3		1,243.4		1,245.3
Total Net sales	$	1,139.3	$	1,091.8	$	3,511.6	$	3,188.1

Schedule of Segment Reporting Information, by Segment



	Three Months Ended September 30,
	2018						2017
	Performance Coatings		Transportation Coatings		Total		Performance Coatings		Transportation Coatings		Total
Net sales ⁽¹⁾	$	755.0	$	384.3	$	1,139.3	$	693.5	$	398.3	$	1,091.8
Equity in earnings in unconsolidated affiliates	0.2		—		0.2		—		0.1		0.1
Adjusted EBITDA ⁽²⁾	176.4		58.3		234.7		135.1		74.4		209.5
Investment in unconsolidated affiliates	3.4		13.3		16.7		3.1		12.3		15.4



	Nine months ended September 30,
	2018						2017
	Performance Coatings		Transportation Coatings		Total		Performance Coatings		Transportation Coatings		Total
Net sales ⁽¹⁾	$	2,268.2	$	1,243.4	$	3,511.6	$	1,942.8	$	1,245.3	$	3,188.1
Equity in earnings in unconsolidated affiliates	0.3		0.3		0.6		0.2		0.3		0.5
Adjusted EBITDA ⁽²⁾	496.1		206.2		702.3		398.8		241.0		639.8
Investment in unconsolidated affiliates	3.4		13.3		16.7		3.1		12.3		15.4


(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



	Three Months Ended September 30,						Nine months ended September 30,
	2018			2017			2018			2017
Income before income taxes	$	2.5		$	58.4		$	184.4		$	124.8
Interest expense, net	39.8			37.7			118.5			109.1
Depreciation and amortization	92.8			88.6			274.9			255.9
EBITDA	135.1			184.7			577.8			489.8
Debt extinguishment and refinancing related costs (a)	—			0.6			8.4			13.0
Foreign exchange remeasurement losses (b)	7.0			3.5			8.7			8.3
Long-term employee benefit plan adjustments (c)	(0.4		)	(0.1		)	(1.4		)	0.4
Termination benefits and other employee related costs (d)	82.4			5.8			80.2			6.6
Transition-related costs (e)	—			1.9			(0.2		)	5.8
Offering and transactional costs (f)	0.8			0.5			1.1			6.1
Stock-based compensation (g)	9.4			9.2			27.5			30.5
Other adjustments (h)	0.4			0.8			1.2			3.5
Dividends in respect of noncontrolling interest (i)	—			(1.8		)	(1.0		)	(2.7		)
Deconsolidation and site closure related impacts (j)	—			4.4			—			78.5
Adjusted EBITDA	$	234.7		$	209.5		$	702.3		$	639.8


(a)	During the nine months ended September 30, 2018 and September 30, 2017, we refinanced our term loans, which resulted in losses of $8.4 million and $13.0 million, respectively, 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 losses 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.


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


(d)	Represents expenses and associated changes to estimates related to employee termination benefits and other employee-related costs, which includes Axalta CEO recruitment fees. Employee termination benefits are associated with Axalta Way initiatives. These amounts are not considered indicative of our ongoing operating performance.


(e)	Represents integration costs and associated changes to estimates related to the 2017 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.


(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 indemnity losses associated with the acquisition by Axalta of the DuPont Performance Coatings business, gains and losses from the sale and disposal of property, plant and equipment, gains and losses from the remaining foreign currency derivative instruments and from non-cash fair value inventory adjustments associated with our 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.

(j)

During the nine months ended September 30, 2017, 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. 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.