UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     .
Commission File Number: 001-36733
 
AXALTA COATING SYSTEMS LTD.
(Exact name of registrant as specified in its charter)
 
Bermuda
 
2851
 
98-1073028
(State or other jurisdiction of
incorporation or organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer
Identification No.)
Two Commerce Square
2001 Market Street
Suite 3600
Philadelphia, Pennsylvania 19103
(855) 547-1461
(Address, including zip code, and telephone number, including area code, of the registrant’s principal executive offices)
 
Securities registered pursuant to Section 12(b) of the Act:
Common Shares, $1.00 par value
 
 
 
New York Stock Exchange
(title of class)
 
 
 
(Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes  ý    No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act Yes  ¨    No  ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this From 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the Company is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ý Non-accelerated filer ¨ Accelerated filer ¨ Small reporting company ¨
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
As of June 30, 2015, the last day of the registrant's most recently completed second fiscal quarter, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was approximately $5.2 billion (based on the closing sale price of the common stock on that date on the New York Stock Exchange).
As of February 15, 2016, there were 238,295,641 shares of the registrant’s common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the registrant's Proxy Statement for the 2016 Annual Meeting of the Shareholders. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the close of the registrant's fiscal year ended December 31, 2015.
 
 
 
 
 


Table of Contents

Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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PART I
ITEM 1. BUSINESS
Axalta Coating Systems Ltd. ("Axalta," the "Company," "we," "our" and "us"), a Bermuda exempted company formed at the direction of an affiliate of The Carlyle Group L.P. ("Carlyle"), was incorporated on August 24, 2012 for the purpose of consummating the acquisition of DuPont Performance Coatings ("DPC"), a business formerly owned by E. I. du Pont de Nemours and Company ("DuPont"), including certain assets of DPC and all of the capital stock and other equity interests of certain entities engaged in the DPC business (the "Acquisition"). Axalta, through its wholly-owned indirect subsidiaries, acquired DPC on February 1, 2013.
We are a leading global manufacturer, marketer and distributor of high performance coatings systems. Based on market information from 2014, we generate approximately 90% of our revenue in markets where we hold the #1 or #2 global market position, including the #1 position in our core automotive refinish end-market with approximately a 25% global market share. We have a 150-year heritage in the coatings industry and are known for manufacturing high-quality products with well-recognized brands supported by market-leading technology and customer service. Over the course of our history we have remained at the forefront of our industry by continually developing innovative coatings technologies designed to enhance the performance and appearance of our customers' products, while improving their productivity and profitability.
Our diverse global footprint of 36 manufacturing facilities, four technology centers, 46 customer training centers and more than 12,800 employees allows us to meet the needs of customers in over 130 countries. We serve our customer base through an extensive sales force and technical support organization, as well as through over 4,000 independent, locally-based distributors. Our scale and strong local presence are critical to our success, allowing us to leverage our technology portfolio and customer relationships globally while meeting customer demands locally.
Our business is organized into two segments, Performance Coatings and Transportation Coatings, serving four end-markets globally as highlighted below. See further discussion in Note 25 to our consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K.
Table above reflects numbers for the year ended December 31, 2015.

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Net sales for our four end-markets and four regions for the year ended December 31, 2015 are highlighted below:
Note: Latin America includes Mexico
SEGMENT OVERVIEW
Performance Coatings
Through our Performance Coatings segment we provide high-quality liquid and powder coatings solutions to a fragmented and local customer base. We are one of only a few suppliers with the technology to provide precise color matching and highly durable coatings systems. The end-markets within this segment are refinish and industrial.
Note: Latin America includes Mexico
Performance Coatings End-Markets
Refinish
Sales in the refinish end-market are driven by the number of vehicle collisions and owners’ propensity to repair their vehicles. Although refinish coatings typically represent only a small portion of the overall vehicle repair cost, they are critical to the vehicle owner’s satisfaction given their impact on appearance. As a result, body shop operators are most focused on coatings brands with a strong track record of performance and reliability. Body shops look for suppliers and brands with productivity enhancements, regulatory compliance, consistent quality, the presence of ongoing technical support and exact color match technologies. Color matching is a critical component of coatings supplier selection, since inexact matching adversely impacts vehicle appearance and can significantly impact the speed and volume of repairs at a given shop.

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We develop, market and supply a complete portfolio of innovative coatings systems and color matching technologies to facilitate faster automotive collision repairs relative to competing technologies. Our color matching technology provides Axalta-specific formulations that enable body shops to accurately match thousands of vehicle colors, regardless of vehicle brand, color, age or supplier of the original paint during production. It would be time consuming and costly for a new entrant to create such an extensive color inventory.
Industrial
The industrial end-market is comprised of liquid and powder coatings used in a broad array of end-market applications. Within the industrial end-market, we focus on the following:
General Industrial: coatings for a wide and diverse array of applications, including HVAC, shelving, appliances and electrical storage components, as well as specialized coatings used for coating the interior of metal drums and packaging.
Electrical Insulation: coatings to insulate copper wire used in motors and transformers and coatings to insulate sheets forming magnetic circuits of motors and transformers.
Architectural: exterior powder coatings typically used in the construction of commercial structures, residential windows and doors, as well as liquid interior and exterior house paint.
Transportation: coatings for vehicle components, chassis and wheels to protect against corrosion, provide increased durability and impart appropriate aesthetics.
Oil & Gas: powder products to coat tanks, pipelines, valves and fittings protecting against chemicals, corrosion and extreme temperatures in the oil & gas industry.
Demand in this end-market is driven by a wide variety of macroeconomic factors, such as growth in GDP and industrial production. There has also been an increase in demand for products that enhance environmental sustainability, corrosion resistance and productivity. These global trends are bolstered by regional and industry specific trends. Customers select industrial coatings based on protection, durability and appearance.
Performance Coatings Products and Brands
We offer a comprehensive range of specially-formulated waterborne and solventborne products and systems used by the global automotive repair industry to refinish damaged vehicles. Our refinish products and systems include a range of coatings layers required to match the vehicle’s color and appearance, producing an indistinguishable repair.
We provide a system that allows body shops to match more than 180,000 active color variations, using over four million formulations, in the global market. Our color science is manifested in our tints, one of the most technologically advanced parts of the refinish coatings system, which makes up the majority of our products in a body shop. We have a large color library and a number of well-known, long-standing brands, including Cromax, Standox and Spies Hecker.
Our color matching and retrieval systems allow customers to quickly match any color, preventing body shop technicians from having to repeat the color matching process multiple times, saving time and materials. The color matching process begins with a technician scanning a damaged vehicle with one of our advanced color matching tools, such as our AcquireRx hand-held spectrophotometer. AcquireRx will determine the unique flake and color characteristics for the specific vehicle. These characteristics may vary significantly, even for vehicles of the same make, model and original color, based on a variety of factors, including a vehicle’s age, plant at which it was assembled, weather conditions and operating history. AcquireRx electronically connects with our ColorNet database, which indicates to the technician the precise mix of tints and colors needed to recreate that specific color instance. In addition to AcquireRx, we offer our customers several other color matching tools, including our VINdicator database, which identifies vehicle color based on its vehicle identification number, and traditional color matching wheels.
We are also a leading global developer, manufacturer and supplier of functional and decorative liquid and powder coatings for a large number of diversified applications in the industrial end-market. We provide a full portfolio of products for applications including architectural cladding and fittings, automotive coatings, general industrial, job coaters, electrical insulation coatings, HVAC, appliances, rebar and oil & gas pipelines. Our liquid systems are used to provide insulation and corrosion protection for electrical conductors and components, provide chemical resistance for the interiors of metal packaging drums, protect automotive parts and serve as basecoats for alloy and steel wheels. Powder coatings products are often an environmentally responsible, lower cost alternative to liquid coatings. These coatings are typically electrostatically sprayed using a specialized spray gun and cured to create a uniform, high-quality finish. In the oil & gas industry our powder products are used to protect components from corrosion and severe conditions such as extreme temperatures.
Our industrial brands include Voltatex, AquaEC, Chemophan, Lutophen, Stollaquid and Syntopal for liquid coatings and Alesta, Nap-Gard and Abcite for powder.

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Performance Coatings Sales, Marketing and Distribution
We leverage a large global refinish sales and technical support team to effectively serve our broad refinish customer base of approximately 80,000 body shops. The majority of our products are supplied by our network of over 4,000 independent local distributors. In select regions, such as in parts of Europe, we also sell directly to customers. Distributors maintain an inventory of our products to fill orders from body shops in their market and assume credit risk and responsibility for logistics, delivery and billing. In certain countries, we utilize importers that buy directly from us and actively market our products to body shops. Our relationships with our top ten distributors are longstanding and continue to contribute to our success in the global refinish market.
Our large sales force manages relationships directly with our customers to drive demand for our products, which in turn are purchased through our distributor network. Due to the local nature of the refinish industry, our sales force operates on a regional/country basis to provide clients with responsive customer service and local insight. As part of their coverage efforts, salespeople introduce new products to body shops and provide technical support and ongoing training. We have established 46 customer training centers, which helps to deepen our customer relationships.
Our sales force also helps to drive shop productivity improvements and to install or upgrade body shop color matching and mixing equipment to improve shop profitability. Once a coating and color system is installed, a body shop almost exclusively uses its specific supplier’s products. The proprietary nature of a coatings supplier’s color systems, the substantial inventory needed to support a body shop and the body shop’s familiarity with an established brand lead to high levels of customer retention. Our customer retention rate levels have been and continue to be strong.
To effectively reach our customers in the industrial end-market we generally ship directly and leverage a dedicated sales force and technical service team that operates on a regional basis. We are one of only three truly global powder coatings producers that can satisfy the needs and specifications of a customer in multiple regions of the world, while maximizing productivity from the broad scale and scope of our operations.
Performance Coatings Customers
Within our Performance Coatings segment, we sell coatings to customers in more than 130 countries. No single customer represented more than 6% of our Performance Coatings net sales and our top ten customers accounted for less than 16% of our Performance Coatings net sales during the year ended December 31, 2015.
We serve a broad, fragmented customer base of approximately 80,000 body shops, including:
Independent Body Shops: Single location body shops that utilize premium, mainstream or economy brands based on the local market.
Multi-Shop Operators ("MSOs"): Body shops with more than one location focused on providing premium paint jobs with industry leading efficiency. MSOs use premium/mainstream coatings and state-of-the-art painting technology to increase shop productivity, allowing them to repair more vehicles faster.
Original Equipment Manufacturer ("OEM") Dealership Body Shops: High-productivity body shops, located in OEM car dealerships, that operate like MSOs and provide premium services to customers using premium/mainstream coatings.
Performance Coatings Competition
Our primary competitors in the refinish end-market include PPG, BASF and Akzo Nobel, but we also compete against regional players in local markets. Similarly, in industrial coatings, we compete against multi-national suppliers, such as Akzo Nobel, PPG, Valspar and BASF, and regional players in local markets. We are one of the few performance coatings companies that can provide the customer service, technology, color design capability and product performance necessary to deliver exceptional value to our customers.

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Transportation Coatings
Through our Transportation Coatings segment, we provide advanced coating technologies to OEMs of light and commercial vehicles. These increasingly global customers require a high level of technical support coupled with cost-effective, environmentally responsible coatings systems that can be applied with a high degree of precision, consistency and speed.
Note: Latin America includes Mexico
Transportation Coatings End-Markets
Light Vehicle
Demand for light vehicle products is driven by the production of light vehicles in a particular region. Light vehicle OEMs select coatings providers on the basis of their global ability to deliver advanced technological solutions that improve exterior appearance and durability and provide long-term corrosion protection. Customers also look for suppliers that can enhance process efficiency to reduce overall manufacturing costs and provide on-site technical support. Rigorous environmental and durability testing as well as obtaining engineering approvals are also key criteria used by global light vehicle OEMs when selecting coatings providers. Globally integrated suppliers are important because they offer products with consistent standards across regions and are able to deliver high-quality products in sufficient quantity while meeting OEM service requirements. Our global scale, differentiated technology platform and customer focus, including on-site support, position us to be a global partner and solutions provider to the most discerning and demanding light vehicle OEMs. We are one of the few coatings producers that can provide OEMs with global product specifications, standardized color development, compatibility with an ever-increasing number of substrates, increasingly complex colors and environmentally responsible coatings while continuing to simplify and reduce steps in the coatings application process.
Commercial Vehicle
Sales in the commercial vehicle end-market are generated from a variety of applications including non-automotive transportation (e.g., heavy-duty truck ("HDT"), bus and rail) and agricultural construction equipment ("ACE"), as well as related markets such as trailers, recreational vehicles and personal sport vehicles. This end-market is primarily driven by global commercial vehicle production, which is influenced by overall economic activity, government infrastructure spending, equipment replacement cycles and evolving environmental standards.
Commercial vehicle OEMs select coatings providers on the basis of their ability to consistently deliver advanced technological solutions that improve exterior appearance, protection and durability and provide extensive color libraries and matching capabilities at the lowest total cost-in-use, while meeting stringent environmental requirements. Particularly for HDT applications, truck owners demand a greater variety of custom colors and advanced product technologies to enable custom designs. Our strong market position and growth are driven by our ability to provide customers with our market-leading brand, Imron, as well as leveraging our global product lines, regional knowledge and service. Additionally, to capture further growth we are launching a new suite of products to meet our customers’ evolving needs.
Transportation Coatings Products and Brands
We develop and supply a complete coatings product line for light vehicle OEMs for the original coating of new vehicles. Products are designed to enhance the styling and appearance of a vehicle’s exterior while providing protection from the elements, extending the life of the vehicle. Widely recognized in the industry for our advanced and patented technologies, our products not only increase productivity and profitability for OEMs but also produce attractive and durable finishes. Our light vehicle coatings portfolio is one of the broadest in the industry.

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The coatings operation is a critical component of the vehicle assembly process, requiring a high degree of precision and speed. The paint shop process typically includes a dip process, three application zones and three high-temperature ovens that cure each coating layer at temperatures ranging from 320°F to 400°F (i.e., "high bake"). Our key products consist of the four main coatings layers: electrocoat, primer, basecoat and clearcoat.
The coatings process accounts for a majority of the total energy consumed during the vehicle manufacturing process. As a result, we have developed Harmonized Coating TechnologiesTM, including 3-Wet, Eco-Concept and 2-Wet Monocoat, that help our OEM customers lower costs by reducing energy consumption while increasing productivity.
OEMs are also increasingly looking to reduce the weight of vehicles in response to increasing vehicle emissions and fuel consumption regulations. As a result, OEMs are constructing vehicle platforms using a variety of new materials in addition to steel and plastic, including aluminum, carbon fiber and other substrates, each of which requires specialized coatings formulations to create a uniform color and finish. We continue to innovate with our OEM customers in driving this trend, as evidenced by use of our coatings on their flagship vehicle platforms.
We also develop and supply a wide array of coatings systems for a broad range of commercial applications including HDT, bus, rail and ACE. These products simultaneously enhance aesthetic appearance and provide protection from the elements. We meet the demands of commercial vehicle customers with our extensive offering of over 70,000 different colors. In the HDT market, because the metal and composite components are painted simultaneously in an automatic process, most truck OEMs use low bake coatings to ensure that the plastic composite parts on a truck’s exterior do not deform during the process. Truck owners demand a wide variety of custom colors that are formulated using a combination of on-site mixing machines at the OEM or direct shipments of premixed high volume colors from us. Our commercial vehicle brands include Imron, Imron ExcelPro, Imron Elite, Centari, Rival, Corlar epoxy undercoats and AquaEC.
Transportation Coatings Sales, Marketing and Distribution
We have full-time technical representatives stationed at OEM facilities around the world. These on-site representatives provide customer support, monitor the painting process and track paint demand at each assembly plant. Monitoring OEM line performance in real-time allows our technical support teams to help improve paint department operating efficiency and provide performance feedback to our formulating chemists and paint manufacturing teams. Our customer technical support representatives also help OEMs manage their physical inventory by forecasting facility coatings demand based on the customer’s build schedule.
We sell and ship products directly to light vehicle OEM customers in each of our four regions coordinated via a global point of contact for each customer and assist OEMs with on-site customer support. Located in 13 countries, our manufacturing facilities provide a local presence that enables us to cultivate strong relationships, gain intimate customer knowledge, provide superior technical support to our key customers and maintain "just-in-time" product delivery capabilities critical to OEMs. Our local presence also allows us to quickly react to changing local dynamics, offer high-quality products and provide excellent customer service.
In the commercial vehicle end-market, we employ a dedicated sales and technical service team to support our diverse customer base, including a direct sales force supporting the HDT market. We ship our coatings directly to commercial vehicle OEMs and provide on-site technical service representatives that play an important role by helping optimize the painting process and by providing responsive customer support.
Transportation Coatings Customers
We provide our products to light and commercial vehicle customers at over 200 assembly plants worldwide, including nine of the top ten global automotive manufacturers. We have a stable customer base with several relationships dating back approximately 90 years and believe we are well positioned with the fastest growing OEMs in both the developed and emerging markets.
Transportation Coatings Competition
We primarily compete against large multi-national suppliers such as PPG and BASF in the light and commercial vehicle end-markets. Additionally, we compete against certain regional players in Asia Pacific. With our state-of-the-art coatings solutions and local presence in key OEM markets, we are one of the few competitors in the industry that offers global manufacturers the combination of high-quality products, personalized, top-rate technical service and short lead-times for product delivery.
KEY RAW MATERIALS
We use thousands of different raw materials, which fall into six broad categories: resins, pigments, solvents, monomers, isocyanates and additives. Our total raw material spend represents between 45% and 55% of our cost of sales. We purchase raw materials from a diverse group of suppliers, with our top ten suppliers representing approximately 33% of our 2015 spending on raw materials.

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Approximately 70% of the raw materials we procure are derived from crude oil and natural gas. While prices for these raw materials fluctuate with energy prices, such fluctuations are mitigated by the fact that the majority of our raw materials are fourth to sixth generation derivatives of crude oil and natural gas. As a result, changes in the prices of our raw materials typically lag behind fluctuations in crude oil prices. Moreover, the dynamics of supply and demand play as important a role in our cost of raw materials as does the price of crude oil. Finally, non-petrochemical based inputs such as minerals that are used to manufacture coating pigments are not significantly affected by volatility in crude oil prices.
Historically, to manage raw material volatility, we have used a combination of price increases to customers and, in limited circumstances, contractual raw material recovery mechanisms. Since 2001, our and our legacy company’s variable cost of sales have remained stable between 37% and 42% of net sales.
RESEARCH AND DEVELOPMENT
Our focus on technology has allowed us to proactively provide customers with next-generation offerings that enhance productivity and satisfy increasingly strict environmental regulations. Since our entry into the coatings industry 150 years ago, we believe we have consistently been at the forefront of coatings technology innovation. These innovations have played a fundamental role in our ability to maintain and grow our global market share as well as deliver substantial financial returns.
We believe that we are a technology leader well positioned to benefit from a continued industry shift to more productive, environmentally responsible products. Our technology development is led by a highly experienced and educated workforce that is focused on new product development, color development, technical customer support and improving our manufacturing processes. As such, our technology development covers two critical interrelated aspects for us, Research & Development as well as Technical Support & Development. In total, as of December 31, 2015, we have approximately 1,300 employees dedicated to technology development. For the years ended December 31, 2015 and 2014, our research and development expenses were $51.6 million and $49.5 million, respectively. We operate four technology centers throughout the world where we develop and align our technology investments with regional business needs.
PATENTS, LICENSES AND TRADEMARKS
As of December 31, 2015, we had a portfolio of 613 issued patents and more than 280 trademarks. We actively apply for and obtain U.S. and foreign patents and trademarks on new products and process innovations and as of December 31, 2015, 246 patent applications were pending throughout the world.
Our primary purpose in obtaining patents is to protect the results of our research for use in operations and licensing. We are also party to a substantial number of patent licenses and other technology agreements. We have a substantial number of trademarks and trademark registrations in the United States and in other countries, as described below.
We own or otherwise have rights to the trademarks, service marks, copyrights and trade names used in conjunction with the marketing and sale of our products and services. These trademarks include Abcite®, Alesta®, AquaEC®, AudurraTM, Centari®, ChallengerTM, ChemophanTM, Colornet®, Corlar®, Cromax®, Cromax Mosaic®, DuxoneTM, Harmonized Coating TechnologiesTM, Imron®, Imron EliteTM, Imron ExcelProTM, LutophenTM, Nap-Gard®, Nason®, Rival®, Spies Hecker®, Standox®, StollaquidTM, SyntopalTM, SyroxTM, Vermeera™ and Voltatex®, which are protected under applicable intellectual property laws and are the property of us and our subsidiaries.
Although we consider that our patents, licenses and trademarks in the aggregate constitute a valuable asset, we do not regard our business as being materially dependent on any single or group of related patents, licenses or trademarks.
JOINT VENTURES
We are party to 11 joint ventures, five of which are focused on the industrial end-market. We are the majority shareholder, exercise control and fully consolidate all but three of our joint ventures. Our fully consolidated joint venture-related net sales were $204.5 million and $218.4 million for the years ended December 31, 2015 and 2014, respectively. See Part I, Item 1A, "Risk Factors—Risks Related to our Business—Risks Related to Other Aspects of our Business—Our joint ventures may not operate according to our business strategy if our joint venture partners fail to fulfill their obligations."
EMPLOYEES
As of December 31, 2015, we had approximately 12,800 employees located throughout the world consisting of sales, technical, manufacturing operations, supply chain and customer service personnel. This figure does not include joint venture employees and contractors.
As of December 31, 2015, approximately 64% of our employees globally were covered by organized labor agreements, including works councils, with fewer than 50 employees in the United States covered by organized labor agreements. We consider our employee relations to be excellent.

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HEALTH, SAFETY AND ENVIRONMENTAL
We are subject to various laws and regulations around the world governing the protection of the environment and health and safety, including the discharge of pollutants to air and water and the management and disposal of hazardous substances. We have an excellent safety record. Our enhanced focus on health, safety and environmental improvements has resulted in a 68% reduction in our Total Recordable Safety Incident rate from year-end 2003 to year-end 2015, which is nine times better than the 2014 U.S. chemical manufacturing industry average (0.25 versus the 2014 U.S. chemical manufacturing industry average of 2.3), according to the US Bureau of Labor Statistics.
We believe that all of our manufacturing and distribution facilities are operated in compliance in all material respects, with existing environmental requirements, including the operating permits required thereunder at our facilities. Our global manufacturing facilities have an established management system for environmental stewardship and certified under ISO14001.
In addition, many of our manufacturing sites have a long history of industrial operations and cleanup is or may be required at a number of these locations. Although we are indemnified by DuPont for certain environmental liabilities and we do not expect outstanding cleanup obligations to have a material impact on our financial position, the ultimate cost of cleanup is subject to a number of variables and difficult to accurately predict. We may also incur significant additional costs as a result of contamination that is discovered and/or cleanup obligations that are imposed at these or other properties in the future.
WHERE YOU CAN FIND MORE INFORMATION
Our website address is www.axaltacs.com. We post, and shareholders may access without charge, our recent filings and any amendments thereto of our annual reports on Form 10-K, quarterly reports on Form 10-Q and proxy statements as soon as reasonably practicable after such reports are filed with the Securities and Exchange Commission ("SEC"). We also post all financial press releases, including earnings releases, to our website. All other reports filed or furnished to the SEC on the SEC’s website, www.sec.gov, including current reports on Form 8-K, are available via direct link on our website. Reference to our and the SEC’s websites herein do not incorporate by reference any information contained on those websites and such information should not be considered part of this Form 10-K.

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ITEM 1A. RISK FACTORS
As a global manufacturer, marketer and distributor of high performance coatings systems, we operate in a business environment that includes risks. These risks are not unlike the risks we have faced in the recent past nor are they unlike risks faced by our competitors. If any of the events contemplated by the following discussion of risks should occur, our business, results of operations, financial condition and cash flows could suffer significantly. While the factors listed here are considered to be the more significant factors, they should not be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles which may adversely affect our businesses and our results of operations.
Risks Related to our Business
Risks Related to Execution of our Strategic and Operating Plans
Our business performance is impacted by economic conditions and, particularly, by conditions in the light and commercial vehicle end-markets. Adverse developments in the global economy, in regional economies or in the light and commercial vehicle end-markets could adversely affect our business, financial condition and results of operations.
The growth of our business and demand for our products is affected by changes in the health of the overall global economy, regional economies and, in particular, the light and commercial vehicle end-markets. Our business is adversely affected by decreases in the general level of global economic activity, such as decreases in business and consumer spending, construction activity and industrial manufacturing. Economic developments affect businesses such as ours in a number of ways. For example, a tightening of credit in financial markets could adversely affect the ability of our customers and suppliers to obtain financing for significant purchases and operations, could result in a decrease in or cancellation of orders for our products and services and could impact the ability of our customers to make payments owed to us. Similarly, a tightening of credit in financial markets could adversely affect our supplier base and increase the potential for one or more of our suppliers to experience financial distress or bankruptcy.
Our financial position, results of operations and cash flows could be materially adversely affected by difficult economic conditions and/or significant volatility in the capital, credit and commodities markets.
Several of the end-markets we serve are cyclical, and macroeconomic and other factors beyond our control could reduce demand from these end-markets for our products, materially adversely affecting our business, financial condition and results of operations. Weak economic conditions could depress new car sales and/or production, reducing demand for our light vehicle OEM coatings and limit the growth of the car parc. These factors could, in turn, cause a related decline in demand for our automotive refinish coatings because, as the age of a vehicle increases, the propensity of car owners to pay for cosmetic repairs generally decreases. Also, during difficult economic times, car owners may refrain from seeking repairs for their damaged vehicles. Similarly, periods of reduced global economic activity could hinder global industrial output, which could decrease demand for our industrial and commercial coating products.
Our global business is adversely affected by decreases in the general level of economic activity, such as decreases in business and consumer spending, construction activity and industrial manufacturing. Disruptions in the United States, Europe or other economies, or weakening of emerging markets, such as Brazil or Venezuela, could adversely affect our sales, profitability and/or liquidity.
We may be unable to successfully execute on our growth initiatives, business strategies or operating plans.
We are executing on a number of growth initiatives, strategies and operating plans designed to enhance our business. For example, we are undertaking certain operational improvement initiatives with respect to realigning our manufacturing facilities in Europe and are growing our sales force in emerging markets and end-markets where we are underrepresented. The anticipated benefits from these efforts are based on several assumptions that may prove to be inaccurate. Moreover, we may not be able to successfully complete these growth initiatives, strategies and operating plans and realize all of the benefits, including growth targets and cost savings, we expect to achieve or it may be more costly to do so than we anticipate. A variety of risks could cause us not to realize some or all of the expected benefits. These risks include, among others, delays in the anticipated timing of activities related to such growth initiatives, strategies and operating plans; increased difficulty and cost in implementing these efforts; and the incurrence of other unexpected costs associated with operating the business. Further, our continued implementation of these programs may disrupt our operations and performance. As a result, we cannot assure you that we will realize these benefits. If, for any reason, the benefits we realize are less than our estimates or the implementation of these growth initiatives, strategies and operating plans adversely affect our operations or cost more or take longer to effectuate than we expect, or if our assumptions prove inaccurate, our results of operations may be materially adversely affected.

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Increased competition may adversely affect our business, financial condition and results of operations.
We face substantial competition from many international, national, regional and local competitors of various sizes in the manufacturing, distribution and sale of our coatings and related products. Some of our competitors are larger than us and have greater financial resources than we do. Other competitors are smaller and may be able to offer more specialized products. We believe that technology, product quality, product innovation, breadth of product line, technical expertise, distribution, service, local presence and price are the key competitive factors for our business. Competition in any of these areas may reduce our net sales and adversely affect our earnings or cash flow by resulting in decreased sales volumes, reduced prices and increased costs of manufacturing, distributing and selling our products.
Weather conditions may reduce the demand for some of our products and could have a negative effect on our business, financial condition and results of operations.
From time to time, weather conditions have an adverse effect on our sales of coatings and related products. For example, unusually mild weather during winter months may lead to fewer vehicle collisions, reducing market demand for our refinish coatings. Conversely, harsh weather conditions can force our customers to reduce or suspend operations, thereby reducing the amount of products they purchase from us. Any such reductions in customer purchases could have a material adverse effect on our business, financial condition and results of operations.
Improved safety features on vehicles and insurance company influence may reduce the demand for some of our products and could have a negative effect on our business, financial condition and results of operations.
Vehicle manufacturers continue to develop new safety features such as collision avoidance technology and self-driving vehicles that may reduce vehicle collisions in the future, potentially negatively impacting demand for our refinish coatings. In addition, insurance companies may influence vehicle owners to use body shops that do not use our products, which could also potentially negatively impact demand for our refinish coatings. Any resulting reduction in demand for our refinish coatings could have a material adverse effect on our business, financial condition and results of operations.
The loss of any of our largest customers or the consolidation of MSOs, distributors and/or body shops could adversely affect our business, financial condition and results of operations.
We have some customers that purchase a large amount of products from us and we are also reliant on distributors to assist us in selling our products. Our largest single customer accounted for approximately 7.6% of our 2015 net sales and our largest distributor accounted for approximately 3.3% of our 2015 net sales. Consolidation of any of our customers, including MSOs, distributors and body shops, could decrease our customer base and impact our results of operations if the resulting business chooses to use one of our competitors for the consolidated business. The loss of any of our large customers or distributors, as a result of changes in business conditions, product requirements, consolidation or otherwise, could have a material adverse effect on our business, financial condition and results of operations.
We rely on our distributor network and third-party delivery services for the distribution and export of certain of our products. A significant disruption in these services or significant increases in prices for those services may disrupt our ability to export material or increase our costs.
We ship a significant portion of our products to our customers through our distributor network as well as independent third-party delivery companies. If any of our key distributors or third-party delivery providers experiences a significant disruption such that our products cannot be delivered in a timely fashion or such that we incur additional shipping costs that we could not pass on to our customers, our costs may increase and our relationships with certain of our customers may be adversely affected. In addition, if our distributors or third-party delivery providers increase prices and we are not able to pass along these increases to customers, find comparable alternatives or adjust our delivery network, our business, financial condition and results of operations could be adversely affected.
We take on credit risk exposure from our customers in the ordinary course of our business.
We routinely offer customers pre-bates, loans and other financial incentives to purchase our products. These arrangements generally obligate the customer to purchase products from us and/or repay us for products over time. In the event that a customer is unwilling or unable to fulfill its obligations under these arrangements, we may incur a financial loss. In addition, in the ordinary course of our business, we guarantee certain of our customers’ obligations to third parties. Any default by our customers on their obligations could force us to make payments to the applicable creditor. It is possible that customer defaults on obligations owed to us and on third-party obligations that we have guaranteed could be significant, which could have a material adverse effect on our business, financial condition and results of operations.

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Price increases or interruptions in the supply of raw materials could have a significant impact on our ability to grow or sustain earnings.
Our manufacturing processes consume significant amounts of raw materials, the costs of which are subject to worldwide supply and demand as well as other factors beyond our control. We use a significant amount of raw materials derived from crude oil and natural gas. As a result, volatile oil and gas prices can cause significant variations in our raw materials costs, affecting our operating results. In rising raw material price environments, we may be unable to pass along these increased costs to our customers. In declining raw material price environments, customers may seek price concessions from us greater than any raw material cost savings we realize. If we are not able to fully offset the effects of higher raw materials costs, or if customers demand greater raw material price concessions than we obtain in low raw cost environments, our financial results could deteriorate. In addition to the risks associated with raw materials prices, supplier capacity constraints, supplier production disruptions or the unavailability of certain raw materials could result in supply imbalances that may have a material adverse effect on our business, financial condition and results of operations.
Failure to develop and market new products and manage product life cycles could impact our competitive position and have a material adverse effect on our business, financial condition and results of operations.
Our operating results are largely dependent on our development and management of our portfolio of current, new and developing products and services as well as our ability to bring those products and services to market. We plan to grow our business by focusing on developing and marketing our solutions to meet increasing demand for productivity. Our ability to execute this strategy and our other growth plans successfully could be adversely affected by difficulties or delays in product development, such as the inability to identify viable new products, successfully complete research and development, obtain relevant regulatory approvals, effectively manage our manufacturing process or costs, obtain intellectual property protection, or gain market acceptance of new products and services. Because of the lengthy and costly development process, technological challenges and intense competition, we cannot assure you that any of the products we are currently developing, or that we may develop in the future, will achieve substantial commercial success. For example, in addition to developing technologically advanced products, commercial success of those products will depend on customer acceptance and implementation of those products. A failure to develop commercially successful products or to develop additional uses for existing products could materially adversely affect our business, financial results or results of operations. Further, sales of our new products could replace sales of some of our current products, offsetting the benefit of even a successful product introduction.
Our business, financial condition and results of operations could be adversely impacted by business disruptions, security threats and security breaches.
Business disruptions, including supply disruptions, increasing costs for energy, temporary plant and/or power outages and information technology system and network disruptions, could harm our operations as well as the operations of our customers, distributors or suppliers. We face security threats and risks of security breaches to our facilities, data and information technology infrastructure. Although it is impossible to predict the occurrence or consequences of business disruptions, security threats or security breaches, they could harm our reputation, subject us to material liabilities, result in reduced demand for our products, make it difficult or impossible for us to deliver products to our customers or distributors or to receive raw materials from suppliers and create delays and inefficiencies in our supply chain. Further, while we have designed and implemented controls to restrict access to our data and information technology infrastructure, it is still vulnerable to unauthorized access through cyber-attacks, theft and other security breaches.
Our efforts to minimize business disruptions and security breaches may fail. Such business disruptions and security breaches could significantly increase our cost of doing business, damage our reputation and/or have a material adverse effect on our business, financial condition and results of operations.
Our ability to conduct our business might be negatively impacted if we experience difficulties with outsourcing and similar third-party relationships.
We outsource certain business and administrative functions and rely on third parties to perform certain services on our behalf. We may do so increasingly in the future. If we fail to develop and implement our outsourcing strategies, such strategies prove to be ineffective or fail to provide expected cost savings, or our third party providers fail to perform as anticipated, we may experience operational difficulties, increased costs, reputational damage and a loss of business that may have a material adverse effect on our business, financial condition and results of operations. By utilizing third parties to perform certain business and administrative functions, we may be exposed to greater risk of data security breaches. Any breach of data security could damage our reputation and/or result in monetary damages, which, in turn could have a material adverse effect on our business, financial condition and results of operations.

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Risks Related to our Global Operations
As a global business, we are subject to risks associated with our non-U.S. operations that are not present in the United States.
We conduct our business on a global basis, with approximately 70% of our 2015 net sales occurring outside the United States. We anticipate that international sales will continue to represent a substantial portion of our net sales and that our strategy for continued growth and profitability will entail further international expansion, particularly in emerging markets. Changes in local and regional economic conditions could affect product demand in our non-U.S. operations, including our Venezuelan operations. Specifically, our financial results could be affected by changes in trade, monetary and fiscal policies, laws and regulations, or other activities of U.S. and non-U.S. governments, agencies and similar organizations. These conditions include, but are not limited to, changes in a country’s or region’s social, economic or political conditions, trade regulations affecting production, pricing and marketing of products, local labor conditions and regulations, reduced protection of intellectual property rights in some countries, changes in the regulatory or legal environment, restrictions on currency exchange activities, burdensome taxes and tariffs and other trade barriers, as well as the imposition of economic or other trade sanctions, each of which could impact our ability to do business in certain jurisdictions or with certain persons. Our international operations also present risks associated with terrorism, political hostilities, war and other civil disturbances, the occurrence of which could lead to reduced net sales and profitability. Our international sales and operations are also sensitive to changes in foreign national priorities, including government budgets.
Our day-to-day operations outside the United States are subject to cultural and language barriers and the need to adopt different business practices in different geographic areas. In addition, we are required to create compensation programs, employment policies and other administrative programs that comply with the laws of multiple countries. We also must communicate and monitor standards and directives across our global operations. Our failure to successfully manage our geographically diverse operations could impair our ability to react quickly to changing business and market conditions and to enforce compliance with non-U.S. standards and procedures.
Any payment of distributions, loans or advances to and from our subsidiaries could be subject to restrictions on or taxation of, dividends or repatriation of earnings under applicable local law, monetary transfer restrictions, foreign currency exchange regulations in the jurisdictions in which our subsidiaries operate or other restrictions imposed by current or future agreements, including debt instruments, to which our non-U.S. subsidiaries may be a party. In particular, our operations in Brazil, China, India and Venezuela where we maintain local currency cash balances are subject to import authorization or pricing controls.
Our operations in Venezuela continue to be subject to the risks associated with the volatility in economic conditions caused by the weakening of the Venezuelan bolivar and general uncertainty in the political environment. From December 2014 through June 2015, we had utilized Venezuela’s Complementary System of Foreign Currency Administration (“SICAD I”) to translate our Venezuelan subsidiary’s financial statements into U.S. dollars. Because of the continued challenging economic conditions in Venezuela, at June 30, 2015 we re-evaluated the exchange rate used for our Venezuelan subsidiary’s operations, including the impact on our non-U.S. dollar denominated monetary and non-monetary assets and liabilities. As a result, we determined that the equity of our Venezuelan subsidiary would be realized through a dividend utilizing the Marginal Foreign Exchange System (“SIMADI”) exchange mechanism due to the current illiquidity of SICAD I. Accordingly, as of June 30, 2015, we changed our foreign exchange rate to SIMADI and continue to use this foreign exchange rate through December 31, 2015, which currently approximates 199.5 Venezuelan bolivars to 1.0 U.S. dollar. The SIMADI rate compares to the SICAD I rate of 12.0 Venezuelan bolivars to 1.0 U.S. dollar.
Any further volatility in economic conditions in Venezuela caused by general uncertainty in the political environment, change in the currency exchange mechanisms or fluctuation of the SIMADI rate, which may vary in the future, could adversely affect our financial position resulting in a potential impairment or devaluation of our assets and liabilities. These events could result in a material unfavorable impact to our results of operations and financial condition, both for any period in which we determine to remeasure using another rate and on a going forward basis following any such remeasurement. See further discussion in Note 27 to our consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K.
Our results of operations and/or financial condition could be adversely impacted, possibly materially, if we are unable to successfully manage these and other risks of international operations in a volatile environment.

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Currency risk may adversely affect our financial condition and cash flows.
We derive a significant portion of our net sales from outside the United States and conduct our business and incur costs in the local currency of most countries in which we operate. Because our financial statements are presented in U.S. dollars, we must translate our financial results as well as assets and liabilities into U.S. dollars for financial statement reporting purposes at exchange rates in effect during or at the end of each reporting period, as applicable. Therefore, increases or decreases in the value of the U.S. dollar against other currencies in countries where we operate will affect our results of operations and the value of balance sheet items denominated in foreign currencies. In particular, we are exposed to the Euro, the Brazilian real, the Chinese yuan, the Venezuelan bolívar and the Russian ruble. For example, unfavorable movement in the Euro negatively impacted our results of operations in the second half of 2014 and throughout 2015, and the decline of the Euro could affect future periods. Furthermore, many of our local businesses import or buy raw materials in a currency other than their functional currency, which can impact the operating results for these operations if we are unable to mitigate the impact of the currency exchange fluctuations. We cannot accurately predict the effects of exchange rate fluctuations upon our future operating results because of the number of currencies involved, the variability of currency exposures and the potential volatility of currency exchange rates. Accordingly, fluctuations in foreign exchange rates may have an adverse effect on our financial condition and cash flows.
Terrorist acts, conflicts, wars and natural disasters may materially adversely affect our business, financial condition and results of operations.
As a multinational company with a large international footprint, we are subject to increased risk of damage or disruption to us, our employees, facilities, partners, suppliers, distributors, resellers or customers due to terrorist acts, conflicts, wars, adverse weather conditions, natural disasters, power outages, pandemics or other public health crises and environmental incidents, wherever located around the world. The potential for future terrorist attacks and natural disasters, the national and international responses to terrorist attacks and natural disasters or perceived threats to national security and other actual or potential conflicts or wars may create economic and political uncertainties. In addition, as a multinational company with headquarters and significant operations located in the United States, actions against or by the United States could result in a decrease in demand for our products, make it difficult or impossible to deliver products to our customers or to receive components from our suppliers, create delays and inefficiencies in our supply chain and pose risks to our employees, resulting in the need to impose travel restrictions. A catastrophic loss of the use of all or a portion of one of our key manufacturing facilities due to accident, labor issues, weather conditions, acts of war, political unrest, geopolitical risk, terrorist activity, natural disaster or otherwise, whether short- or long-term, and any interruption in production capability could require us to make substantial capital expenditures to remedy the situation, which could negatively affect our business, financial condition and results of operations.
Risks Related to Legal and Regulatory Compliance and Litigation
Our failure to comply with the anti-corruption laws of the United States and various international jurisdictions could negatively impact our reputation and results of operations.
Doing business on a global basis requires us to comply with the laws and regulations of the U.S. government and those of various international and sub-national jurisdictions, and our failure to successfully comply with these rules and regulations may expose us to liabilities. These laws and regulations apply to companies, individual directors, officers, employees and agents, and may restrict our operations, trade practices, investment decisions and partnering activities. In particular, our international operations are subject to U.S. and foreign anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act (the "FCPA"), the United Kingdom Bribery Act 2010 (the "Bribery Act") as well as anti-corruption laws of the various jurisdictions in which we operate. The FCPA, the Bribery Act and other laws prohibit us and our officers, directors, employees and agents acting on our behalf from corruptly offering, promising, authorizing or providing anything of value to foreign officials for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. As part of our business, we deal with state-owned business enterprises, the employees and representatives of which may be considered foreign officials for purposes of the FCPA or the Bribery Act. We are subject to the jurisdiction of various governments and regulatory agencies outside of the United States, which may bring our personnel into contact with foreign officials responsible for issuing or renewing permits, licenses or approvals or for enforcing other governmental regulations. In addition, some of the international locations in which we operate lack a developed legal system and have elevated levels of corruption. Our global operations expose us to the risk of violating, or being accused of violating, the foregoing or other anti-corruption laws. Such violations could be punishable by criminal fines, imprisonment, civil penalties, disgorgement of profits, injunctions and exclusion from government contracts, as well as other remedial measures. Investigations of alleged violations can be very expensive, disruptive and damaging to our reputation. Although we have implemented anti-corruption policies and procedures and introduced training since becoming an independent company, there can be no guarantee that these policies, procedures and training will effectively prevent violations by our employees or representatives in the future. Additionally, we face a risk that our distributors and other business partners may violate the FCPA, the Bribery Act or similar laws or regulations. Such violations could expose us to FCPA and Bribery Act liability and/or our reputation may potentially be harmed by their violations and resulting sanctions and fines.

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Our international operations require us to comply with anti-terrorism laws and regulations and applicable trade embargoes.
We are subject to trade and economic sanctions laws and other restrictions on international trade. The U.S. and other governments and their agencies impose sanctions and embargoes on certain countries, their governments and designated parties. In the United States, the economic and trade sanctions programs are principally administered and enforced by the U.S. Treasury Department’s Office of Foreign Assets Control. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses, which could adversely affect our business, financial condition and results of operations. Although we have implemented trade-related policies and procedures and introduced training since becoming an independent company, we cannot assure you that such policies, procedures and training will effectively prevent violations in the future, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations.
We cannot predict the nature, scope or effect of future regulatory requirements to which our international sales and manufacturing operations might be subject or the manner in which existing laws might be administered or interpreted. Future regulations could limit the countries in which some of our products may be manufactured or sold, or could restrict our access to, or increase the cost of obtaining, products from foreign sources. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.
We are subject to complex and evolving data privacy laws.
Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection and other matters. We could be liable for loss or misuse of our customers’ personal information and/or our employee’s personally-identifiable information if we fail to prevent or mitigate such misuse or breach. Although we have developed systems and processes that are designed to protect customer and employee information and prevent misuse of such information and other security breaches, failure to prevent or mitigate such misuse or breaches may affect our reputation and operating results negatively and may require significant management time and attention.
As a result of our current and past operations and/or products, including operations and/or products related to our businesses prior to the Acquisition, we could incur significant environmental liabilities and costs.
We are subject to various laws and regulations around the world governing the protection of the environment and health and safety, including the discharge of pollutants to air and water and the management and disposal of hazardous substances. These laws and regulations not only govern our current operations and products, but also impose potential liability on us for our or our predecessors’ past operations. We could incur fines, penalties and other sanctions as a result of violations of such laws and regulations. In addition, as a result of our operations and/or products, including our past operations and/or products related to our businesses prior to the Acquisition, we could incur substantial costs, including costs relating to remediation and restoration activities and third-party claims for property damage or personal injury. The ultimate costs under environmental laws and the timing of these costs are difficult to accurately predict. Our accruals for costs and liabilities at sites where contamination is being investigated or remediated may not be adequate because the estimates on which the accruals are based depend on a number of factors including the nature of the matter, the complexity of the site, site geology, the nature and extent of contamination, the type of remedy, the outcome of discussions with regulatory agencies and, at multi-party sites, other Potentially Responsible Parties ("PRPs") and the number and financial viability of other PRPs. Additional contamination may also be identified, and/or additional cleanup obligations may be incurred, at these or other sites in the future. For example, periodic monitoring or investigation activities are ongoing at a number of our sites where contaminants have been detected or are suspected, and we may incur additional costs if more active or extensive remediation is required. In addition, in connection with the Acquisition, DuPont has, subject to certain exceptions and exclusions, agreed to indemnify us for certain liabilities relating to environmental remediation obligations and certain claims relating to the exposure to hazardous substances and products manufactured prior to our separation from DuPont. We could incur material additional costs if DuPont fails to meet its obligations, if the indemnification proves insufficient or if we otherwise are unable to recover costs associated with such liabilities. The costs of our current operations complying with complex environmental laws and regulations, as well as internal voluntary programs, are significant and will continue to be so for the foreseeable future as environmental regulations become more stringent. These laws and regulations also change frequently, and we may incur additional costs complying with stricter environmental requirements that are promulgated in the future. Concerns over global climate change as well as more frequent and severe weather events have also promoted a number of legal and regulatory measures as well as social initiatives intended to reduce greenhouse gas and other carbon emissions. We cannot predict the impact that changing climate conditions or more frequent and severe weather events, if any, will have on our business, results of operations or financial condition. Moreover, we cannot predict how legal, regulatory and social responses to concerns about global climate change will impact our business.

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As a producer of coatings, we transport certain materials that are inherently hazardous due to their toxic nature.
In our business, we handle and transport hazardous materials. If mishandled or released into the environment, these materials could cause substantial property damage or personal injuries resulting in significant legal claims against us. In addition, evolving regulations concerning the handling and transportation of certain materials could result in increased future capital or operating costs.
Our results of operations could be adversely affected by litigation.
We face risks arising from various litigation matters that have been asserted against us or that may be asserted against us in the future, including, but not limited to, claims for product liability, patent and trademark infringement, antitrust, warranty, contract and third party property damage or personal injury. For instance, we have noted a nationwide trend in purported class actions against chemical manufacturers generally seeking relief such as medical monitoring, property damages, off-site remediation and punitive damages arising from alleged environmental torts without claiming present personal injuries. We have also noted a trend in public and private nuisance suits being filed on behalf of states, counties, cities and utilities alleging harm to the general public. In addition, various factors or developments can lead to changes in current estimates of liabilities such as a final adverse judgment, significant settlement or changes in applicable law. A future adverse ruling or unfavorable development could result in future charges that could have a material adverse effect on us. An adverse outcome in any one or more of these matters could be material to our business, financial condition and results of operations. In particular, product liability claims, regardless of their merits, could be costly, divert management’s attention and adversely affect our reputation and demand for our products.
Risks Related to Human Resources
We may not be able to recruit and retain the experienced and skilled personnel we need to compete.
Our future success depends on our ability to attract, retain, develop and motivate highly skilled personnel. We must have talented personnel to succeed and competition for senior management in our industry is intense. Our ability to meet our performance goals depends upon the personal efforts and abilities of the principal members of our senior management who provide strategic direction, develop our business, manage our operations and maintain a cohesive and stable work environment. We cannot assure you that we will retain or successfully recruit senior executives, or that their services will remain available to us.
We rely on qualified managers and skilled employees, such as scientists, with technical and manufacturing industry experience in order to operate our business successfully. From time to time, there may be a shortage of skilled labor, which may make it more difficult and expensive for us to attract and retain qualified employees. If we are unable to attract and retain sufficient numbers of qualified individuals or our costs to do so increase significantly, our operations could be materially adversely affected.
If we are required to make unexpected payments to any pension plans applicable to our employees, our financial condition may be adversely affected.
We have defined benefit pension plans in which many of our current and former employees outside the United States participate or have participated. Many of these plans are underfunded or unfunded and the liabilities in relation to these plans will need to be satisfied as they mature from our operating reserves. In jurisdictions where the defined benefit pension plans are intended to be funded with assets in a trust or other funding vehicle, the liabilities exceed the corresponding assets in many of the plans. Various factors, such as changes in actuarial estimates and assumptions (including as to life expectancy, discount rates and rate of return on assets) as well as actual return on assets, can increase the expenses and liabilities of the defined benefit pension plans. The assets and liabilities of the plans must be valued from time to time under applicable funding rules and as a result we may be required to increase the cash payments we make in relation to these defined benefit pension plans.
Our financial condition and results of operations may be adversely affected to the extent that we are required to make any additional payments to any relevant defined benefit pension plans in excess of the amounts assumed in our current projections and assumptions or report higher pension plan expenses under relevant accounting rules.

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We are subject to work stoppages, union negotiations, labor disputes and other matters associated with our labor force, which may adversely impact our operations and cause us to incur incremental costs.
Many of our employees globally are in unions or otherwise covered by labor agreements, including works councils. As of December 31, 2015, approximately 0.5% of our U.S. workforce was unionized and approximately 64% of our workforce outside the United States was unionized or otherwise covered by labor agreements. Consequently, we may be subject to potential union campaigns, work stoppages, union negotiations and other potential labor disputes. Additionally, negotiations with unions or works councils in connection with existing labor agreements may result in significant increases in our cost of labor, divert management’s attention away from operating our business or break down and result in the disruption of our operations. The occurrence of any of the preceding outcomes could impair our ability to manufacture our products and result in increased costs and/or decreased operating results. Further, we may be impacted by work stoppages at our suppliers or customers that are beyond our control.
Risks Related to Intellectual Property
Our inability to protect and enforce our intellectual property rights could adversely affect our financial results.
Intellectual property rights both in the United States and in foreign countries, including patents, trade secrets, confidential information, trademarks and trade names, are important to our business and will be critical to our ability to grow and succeed in the future. We make strategic decisions on whether to apply for intellectual property protection and what kind of protection to pursue based on a cost benefit analysis. While we endeavor to protect our intellectual property rights in certain jurisdictions in which our products are produced or used and in jurisdictions into which our products are imported, the decision to file for intellectual property protection is made on a case-by-case basis. Because of the differences in foreign trademark, patent and other laws concerning proprietary rights, our intellectual property rights may not receive the same degree of protection in foreign countries as they would in the United States. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, financial condition and results of operations.
We have applied for patent protection relating to certain existing and proposed products, processes and services in certain jurisdictions. While we generally consider applying for patents in those countries where we intend to make, have made, use or sell patented products, we may not accurately assess all of the countries where patent protection will ultimately be desirable. If we fail to timely file a patent application in any such country, we may be precluded from doing so at a later date. Furthermore, we cannot assure you that our pending patent applications will not be challenged by third parties or that such applications will eventually be issued by the applicable patent offices as patents. We also cannot assure you that the patents issued as a result of our foreign patent applications will have the same scope of coverage as our U.S. patents. It is possible that only a limited number of the pending patent applications will result in issued patents, which may have a materially adverse effect on our business and results of operations.
The patents we own could be challenged, invalidated or circumvented by others and may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Furthermore, our existing patents are subject to challenges from third parties that may result in invalidations and will all eventually expire, after which we will not be able to prevent our competitors from using our previously patented technologies, which could materially adversely affect our competitive advantage stemming from those products and technologies. We also cannot assure you that competitors will not infringe our patents, or that we will have adequate resources to enforce our patents.
We also rely on unpatented proprietary technology. It is possible that others will independently develop the same or similar technology or otherwise obtain access to our unpatented technology. To protect our trade secrets and other proprietary information, we require certain employees, consultants, advisors and collaborators to enter into confidentiality agreements as we deem appropriate. We cannot assure you that we will be able to enter into these confidentiality agreements or that these agreements will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. If we are unable to maintain the proprietary nature of our technologies, we could be materially adversely affected.
We rely on our trademarks, trade names and brand names to distinguish our products from the products of our competitors, and have registered or applied to register many of these trademarks. We cannot assure you that our trademark applications will be approved. Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources to advertising and marketing new brands. Further, we cannot assure you that competitors will not infringe our trademarks, or that we will have adequate resources to enforce our trademarks. We also license third parties to use our trademarks. In an effort to preserve our trademark rights, we enter into license agreements with these third parties that govern the use of our trademarks and contain limitations on their use. Although we make efforts to police the use of our trademarks by our licensees, we cannot assure you that these efforts will be sufficient to ensure that our licensees abide by the terms of their licenses. In the event that our licensees fail to do so, our trademark rights could be diluted.

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If we are sued for infringing intellectual property rights of third parties, it may be costly and time consuming, and an unfavorable outcome in any litigation could harm our business.
We cannot assure you that our activities will not, unintentionally or otherwise, infringe on the patents, trademarks or other intellectual property rights owned by others. We may spend significant time and effort and incur significant litigation costs if we are required to defend ourselves against intellectual property rights claims brought against us, regardless of whether the claims have merit. If we are found to have infringed on the patents, trademarks or other intellectual property rights of others, we may be subject to substantial claims for damages, which could materially impact our cash flow, business, financial condition and results of operations. We may also be required to cease development, use or sale of the relevant products or processes, or we may be required to obtain a license on the disputed rights, which may not be available on commercially reasonable terms, if at all.
Risks Related to Other Aspects of our Business
We may engage in acquisitions and divestitures, and may encounter difficulties integrating acquired businesses with, or disposing of divested businesses from, our current operations and, as a result, we may not realize the anticipated benefits of these acquisitions and divestitures.
We may seek to grow through strategic acquisitions, joint ventures or other arrangements. Our due diligence reviews in these transactions may not identify all of the material issues necessary to accurately estimate the cost or potential loss contingencies with respect to a particular transaction, including potential exposure to regulatory sanctions resulting from a counterparty’s previous activities. We may incur unanticipated costs or expenses, including post-closing asset impairment charges, expenses associated with eliminating duplicate facilities, litigation and other liabilities. We may also face regulatory scrutiny as a result of perceived concentration in certain markets, which could cause additional delay or prevent us from completing certain acquisitions that would be beneficial to our business. We may also encounter difficulties in integrating acquisitions with our operations, applying our internal controls processes to these acquisitions or in managing strategic investments. Additionally, we may not achieve the benefits we anticipate when we first enter into a transaction in the amount or timeframe anticipated. Any of the foregoing could adversely affect our business and results of operations. In addition, accounting requirements relating to business combinations, including the requirement to expense certain acquisition costs as incurred, may cause us to experience greater earnings volatility and generally lower earnings during periods in which we acquire new businesses. Furthermore, we may make strategic divestitures from time to time. These divestitures may result in continued financial involvement in the divested businesses, such as through indemnities, guarantees or other financial arrangements. These arrangements could result in financial obligations imposed upon us and could affect our future financial condition and results of operations. Acquisitions and divestitures may also require us to devote significant internal resources and could divert management's attention away from operating our business.
Our joint ventures may not operate according to our business strategy if our joint venture partners fail to fulfill their obligations.
As part of our business, we have entered into certain joint venture arrangements, and may enter into additional joint venture arrangements in the future. The nature of a joint venture requires us to share control over significant decisions with unaffiliated third parties. Since we may not exercise control over our current or future joint ventures, we may not be able to require our joint ventures to take actions that we believe are necessary to implement our business strategy. Additionally, differences in views among joint venture participants may result in delayed decisions or failures to agree on major issues. If these differences cause the joint ventures to deviate from our business strategy, our results of operations could be materially adversely affected.
The insurance we maintain may not fully cover all potential exposures.
Our product liability, property, business interruption and casualty insurance coverages may not cover all risks associated with the operation of our business and may not be sufficient to offset the costs of any losses, lost sales or increased costs experienced during business interruptions. For some risks, we elect not to obtain insurance. As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance policies may become unavailable or available only for reduced amounts of coverage. As a result, we may not be able to renew our insurance policies or procure other desirable insurance on commercially reasonable terms, if at all. Losses and liabilities from uninsured or underinsured events and delay in the payment of insurance proceeds could have a material adverse effect on our business, financial condition and results of operations.

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We may need to recognize impairment charges related to goodwill, identifiable intangible assets and fixed assets.
Under the acquisition method of accounting, the net assets acquired were recorded at fair value as of the date of the Acquisition, with any excess purchase price allocated to goodwill. The Acquisition resulted in significant balances of goodwill and identifiable intangible assets. We are required to test goodwill and any other intangible asset with an indefinite life for possible impairment on the same date each year, unless conditions exist that would require a more frequent evaluation. We are also required to evaluate amortizable intangible assets and fixed assets for impairment if there are indicators of a possible impairment.
There is significant judgment required in the analysis of a potential impairment of goodwill, identified intangible assets and fixed assets. If, as a result of a general economic slowdown, deterioration in one or more of the markets in which we operate or impairment in our financial performance and/or future outlook, the estimated fair value of our long-lived assets decreases, we may determine that one or more of our long-lived assets is impaired. An impairment charge would be determined based on the estimated fair value of the assets and any such impairment charge could have a material adverse effect on our results of operations and financial position.
Our Predecessor financial information may not be comparable to the Successor financial information.
Our Predecessor financial information may not reflect what our results of operations and cash flows would have been had we been a separate, standalone entity during those periods and may not be indicative of what our results of operations and cash flows will be in the future. As a result, you have limited information on which to evaluate our business. This is primarily because:
Our Predecessor combined financial information has been derived from the financial statements and accounting records of DuPont and reflects assumptions made by DuPont. Those assumptions and allocations may be different from the comparable expenses we would have incurred as a standalone company;
Certain general corporate expenses were historically allocated to the Predecessor period by DuPont that, while reasonable, may not be indicative of the actual expenses that would have been incurred had we been operating as a standalone company, nor are they indicative of the costs that will be incurred in the future as a standalone company;
Our working capital requirements historically were satisfied as part of DuPont’s corporate-wide cash management policies. Since becoming a standalone company, we no longer rely on DuPont for working capital. In connection with the Acquisition, we incurred a large amount of indebtedness and will therefore assume significant debt service costs. As a result, our cost of debt and capitalization is significantly different from that reflected in the Predecessor financial information; and
Following the Acquisition, we have experienced increases in our costs, including the cost to establish an appropriate accounting and reporting system, debt service obligations, providing healthcare and other costs of being a standalone company.
See Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and Note 8 to the consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K.
DuPont’s potential breach of its obligations in connection with the Acquisition, including failure to comply with its indemnification obligations, may materially affect our business and operating results.
Although the Acquisition closed on February 1, 2013, DuPont still has performance obligations to us, including fulfilling indemnification requirements. We could incur material additional costs if DuPont fails to meet its obligations or if we otherwise are unable to recover costs associated with such liabilities.

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If we are treated as a financial institution under FATCA, withholding tax may be imposed on payments on our common shares.
Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and applicable Treasury Regulations commonly referred to as “FATCA” may impose 30% withholding on “foreign passthru payments” made by a “foreign financial institution” (as defined in the Code) that has entered into an agreement with the U.S. Internal Revenue Service to perform certain diligence and reporting obligations with respect to the foreign financial institution’s U.S.-owned accounts. Such withholding on “foreign passthru payments” will apply from January 1, 2019 at the earliest. The applicable Treasury Regulations treat an entity as a “financial institution” if it is a holding company formed in connection with or availed of by a private equity fund or other similar investment vehicle established with an investment strategy of investing, reinvesting, or trading in financial assets. The term “foreign passthru payment” is currently not defined. The United States has entered into an intergovernmental agreement (an “IGA”) with Bermuda, which modifies the FATCA withholding regime described above. It is not clear whether we would be treated as a financial institution subject to the diligence, reporting and withholding obligations under FATCA or the Bermuda IGA. Furthermore, it is not yet clear how the Bermuda IGA will address foreign passthru payments. Prospective investors should consult their tax advisors regarding the potential impact of FATCA, the Bermudan IGA and any non-U.S. legislation implementing FATCA, on their investment in our common shares.
We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our common shares.
Based on the market price of our common shares and the composition of our income, assets and operations, we do not expect to be treated as a passive foreign investment company ("PFIC") for U.S. federal income tax purposes for the current taxable year or in the foreseeable future. However, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you the U.S. Internal Revenue Service will not take a contrary position. Furthermore, this is a factual determination that must be made annually after the close of each taxable year. If we are a PFIC for any taxable year during which a U.S. person holds our common shares, certain adverse U.S. federal income tax consequences could apply to such U.S. person.
Risks Related to our Indebtedness
Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy and our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations with respect to our indebtedness.
As of December 31, 2015, we had approximately $3.4 billion of indebtedness on a consolidated basis, including $750.0 million of our Dollar Senior Notes (as defined herein), $274.4 million of our Euro Senior Notes (as defined herein), $2,042.5 million of the Dollar Term Loan facility (as defined herein) and $428.0 million of the Euro Term Loan facility (as defined herein). In addition, as of December 31, 2015, we had approximately $375.1 million in borrowing capacity available under our Revolving Credit Facility, after giving effect to $24.9 million of outstanding letters of credit. As of December 31, 2015, we were in compliance with all of the covenants under our outstanding debt instruments.
Our substantial indebtedness could have important consequences to you. For example, it could:
limit our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions, general corporate purposes or other purposes;
require us to devote a substantial portion of our annual cash flow to the payment of interest on our indebtedness;
expose us to the risk of increased interest rates as, over the term of our debt, the interest cost on a significant portion of our indebtedness is subject to changes in interest rates;
hinder our ability to adjust rapidly to changing market conditions;
limit our ability to secure adequate bank financing in the future with reasonable terms and conditions or at all; and
increase our vulnerability to and limit our flexibility in planning for, or reacting to, a potential downturn in general economic conditions or in one or more of our businesses.
We are more leveraged than some of our competitors, which could adversely affect our business plans. A relatively greater portion of our cash flow is used to service debt and other financial obligations. This reduces the funds we have available for working capital, capital expenditures, acquisitions and other purposes and, given current credit constriction, may make it more difficult for us to borrow in the future. Similarly, our relatively greater leverage increases our vulnerability to, and limits our flexibility in planning for, adverse economic and industry conditions and creates other competitive disadvantages compared with other companies with relatively less leverage.

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In addition, the indentures governing the Senior Notes (as defined herein) and the agreements governing our Senior Secured Credit Facilities (as defined herein) contain affirmative and negative covenants that limit our and certain of our subsidiaries’ ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all of our debts.
To service all of our indebtedness, we will require a significant amount of cash and our ability to generate cash depends on many factors beyond our control.
Our operations are conducted through our subsidiaries and our ability to make cash payments on our indebtedness will depend on the earnings and the distribution of funds from our subsidiaries. None of our subsidiaries, however, is obligated to make funds available to us for payment on our indebtedness. Further, the terms of the instruments governing our indebtedness significantly restrict our subsidiaries from paying dividends and otherwise transferring assets to us. Our ability to make cash payments on and refinance our debt obligations, to fund planned capital expenditures and to meet other cash requirements will depend on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to financial, business, legislative, regulatory and other factors beyond our control. We might not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
Our business may not generate sufficient cash flow from operations and future borrowings may not be available under our Senior Secured Credit Facilities in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs, including planned capital expenditures. In such circumstances, we may need to refinance all or a portion of our indebtedness on or before maturity. We may not be able to refinance any of our indebtedness on commercially reasonable terms or at all. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances. Such actions, if necessary, may not be effected on commercially reasonable terms or at all. The instruments governing our indebtedness restrict our ability to sell assets and our use of the proceeds from such sales, and we may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.
If we are unable to generate sufficient cash flow or are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under our Revolving Credit Facility could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to obtain waivers from the required lenders under the credit agreement governing our Senior Secured Credit Facilities to avoid being in default. If we breach our covenants under our Senior Secured Credit Facilities or we are in default thereunder and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under the credit agreement governing our Senior Secured Credit Facilities, the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation.
Despite our current level of indebtedness and restrictive covenants, we and our subsidiaries may incur additional indebtedness or we may pay dividends in the future. This could further exacerbate the risks associated with our substantial financial leverage.
We and our subsidiaries may incur significant additional indebtedness under the agreements governing our indebtedness. Although the indentures governing the Senior Notes and the credit agreement governing our Senior Secured Credit Facilities contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of thresholds, qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. Additionally, these restrictions also will not prevent us from incurring obligations that, although preferential to our common shares in terms of payment, do not constitute indebtedness. As of December 31, 2015, we had $375.1 million of additional borrowing capacity under our Revolving Credit Facility, after giving effect to $24.9 million of outstanding letters of credit.
In addition, if new debt is added to our and/or our subsidiaries’ debt levels, the related risks that we now face as a result of our leverage would intensify. See Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financial Condition."

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We are dependent upon our lenders for financing to execute our business strategy and meet our liquidity needs. If our lenders are unable or unwilling to fund borrowings under their credit commitments or we are unable to borrow, it could negatively impact our business.
We are dependent upon our lenders for financing to execute our business strategy and meet our liquidity needs. If our lenders are unable to fund borrowings under their credit commitments or we are unable to borrow from them for any reason, our business could be negatively impacted. During periods of volatile credit markets, there is risk that any lenders, even those with strong balance sheets and sound lending practices, could fail or refuse to honor their legal commitments and obligations under existing credit commitments, including, but not limited to, extending credit up to the maximum permitted by a credit facility, allowing access to additional credit features and otherwise accessing capital and/or honoring loan commitments. If our lenders are unable or unwilling to fund borrowings under their revolving credit commitments or we are unable to borrow from them, it could be difficult in such environments to obtain sufficient liquidity to meet our operational needs.
Our ability to obtain additional capital on commercially reasonable terms may be limited.
Although we believe our cash and cash equivalents, together with cash we expect to generate from operations and unused capacity available under our Revolving Credit Facility, provide adequate resources to fund ongoing operating requirements, we may need to seek additional financing to compete effectively.
If we are unable to obtain capital on commercially reasonable terms, it could:
reduce funds available to us for purposes such as working capital, capital expenditures, research and development, strategic acquisitions and other general corporate purposes;
restrict our ability to introduce new products or exploit business opportunities;
increase our vulnerability to economic downturns and competitive pressures in the markets in which we operate; and
place us at a competitive disadvantage.
Difficult and volatile conditions in the capital, credit and commodities markets and in the overall economy could have a material adverse effect on our financial position, results of operations and cash flows.
Difficult global economic conditions, including concerns about sovereign debt and significant volatility in the capital, credit and commodities markets, could have a material adverse effect on our financial position, results of operations and cash flows. These global economic factors, combined with low levels of business and consumer confidence and high levels of unemployment, have precipitated a slow recovery from the global recession and concern about a return to recessionary conditions. The difficult conditions in these markets and the overall economy affect our business in a number of ways. For example:
as a result of the volatility in commodity prices, we may encounter difficulty in achieving sustained market acceptance of past or future price increases, which could have a material adverse effect on our financial position, results of operations and cash flows;
under difficult market conditions there can be no assurance that borrowings under our Revolving Credit Facility would be available or sufficient, and in such a case, we may not be able to successfully obtain additional financing on reasonable terms, or at all;
in order to respond to market conditions, we may need to seek waivers from various provisions in the credit agreement governing our Senior Secured Credit Facilities, and in such case, there can be no assurance that we can obtain such waivers at a reasonable cost, if at all;
market conditions could cause the counterparties to the derivative financial instruments we may use to hedge our exposure to interest rate, commodity or currency fluctuations to experience financial difficulties and, as a result, our efforts to hedge these exposures could prove unsuccessful and, furthermore, our ability to engage in additional hedging activities may decrease or become more costly; and
market conditions could result in our key customers experiencing financial difficulties and/or electing to limit spending, which in turn could result in decreased sales and earnings for us.

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In general, downturns in economic conditions can cause fluctuations in demand for our and our customers’ products, product prices, volumes and margins. Future economic conditions may not be favorable to our industry and future growth in demand for our products, if any, may not be sufficient to alleviate any existing or future conditions of excess industry capacity. A decline in the demand for our products or a shift to lower-margin products due to deteriorating economic conditions could have a material adverse effect on our financial condition and results of operations and could also result in impairments of certain of our assets. We do not know if market conditions or the state of the overall economy will continue to improve in the near future. We cannot provide assurance that a continuation of current economic conditions or a further economic downturn in one or more of the geographic regions in which we sell our products would not have a material adverse effect on our business, financial condition and results of operations.
Our debt obligations may limit our flexibility in managing our business.
The indentures governing our Senior Notes and the credit agreement governing our Senior Secured Credit Facilities require us to comply with a number of customary financial and other covenants, such as maintaining leverage ratios in certain situations and maintaining insurance coverage. See Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financial Condition." These covenants may limit our flexibility in our operations, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness even if we had satisfied our payment obligations. If we were to default on the indentures governing our Senior Notes, the credit agreement governing our Senior Secured Credit Facilities or other debt instruments, our financial condition and liquidity would be adversely affected.
Risks Related to Ownership of our Common Shares
Axalta Coating Systems Ltd. is a holding company with no operations of its own. Because our operations are conducted almost entirely through our subsidiaries and joint ventures, we are largely dependent on our receipt of distributions and dividends or other payments from our subsidiaries and joint ventures for cash to fund all of our operations and expenses, including to make future dividend payments, if any.
Our operations are conducted almost entirely through our subsidiaries and our ability to generate cash to meet our debt service obligations or to make future dividend payments, if any, is highly dependent on the earnings and the receipt of funds from our subsidiaries in the form of dividends, loans or advances and through repayment of loans or advances from us. Payments to us by our subsidiaries and joint ventures will be contingent upon our subsidiaries’ or joint ventures’ earnings and other business considerations and may be subject to statutory or contractual restrictions. We do not currently expect to declare or pay dividends on our common shares for the foreseeable future; however, to the extent that we determine in the future to pay dividends on our common shares, the credit agreement governing our Senior Secured Credit Facilities and the indentures governing the Senior Notes significantly restrict the ability of our subsidiaries to pay dividends or otherwise transfer assets to us. In addition, Bermuda law imposes requirements that may restrict our ability to pay dividends to holders of our common shares. In addition, there may be significant tax and other legal restrictions on the ability of foreign subsidiaries or joint ventures to remit money to us.

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The price of our common shares may fluctuate significantly, and you could lose all or part of your investment.
Volatility in the market price of our common shares may prevent you from being able to sell your common shares at or above the price you paid for your common shares. The market price of our common shares could fluctuate significantly for various reasons, including:
our operating and financial performance and prospects;
our quarterly or annual earnings or those of other companies in our industry;
the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
changes in, or failure to meet, earnings estimates or recommendations by research analysts who track our common shares or the stock of other companies in our industry;
the failure of research analysts to cover our common shares;
strategic actions by us, our customers or our competitors, such as acquisitions or restructurings;
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
changes in accounting standards, policies, guidance, interpretations or principles;
the impact on our profitability temporarily caused by the time lag between when we experience cost increases until these increases flow through cost of sales because of our method of accounting for inventory, or the impact from our inability to pass on such price increases to our customers;
material litigations or government investigations;
changes in general conditions in the United States and global economies or financial markets, including those resulting from war, incidents of terrorism or responses to such events;
changes in key personnel;
sales of common shares by us, Carlyle, Berkshire Hathaway Inc. affiliate ("Berkshire") or members of our management team;
termination or expiration of lock-up agreements with our management team and principal shareholders;
the granting of restricted common shares, stock options and other equity awards;
volume of trading in our common shares; and
the realization of any risks described under this “Risk Factors” section.
In addition, over the past several years, the stock markets have experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry. The changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our common shares could fluctuate based upon factors that have little or nothing to do with our company, and these fluctuations could materially reduce our share price and cause you to lose all or part of your investment. Further, in the past, market fluctuations and price declines in a company’s stock have led to securities class action litigations. If such a suit were to arise, it could have a substantial cost and divert our resources regardless of the outcome.
If we fail to maintain proper and effective internal controls over financial reporting, our ability to produce accurate and timely financial statements could be impaired and investors’ views of us could be harmed.
The Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. One key aspect of the Sarbanes-Oxley Act is that we must perform system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, with auditor attestation of the effectiveness of our internal controls. If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our common shares could decline and we could be subject to sanctions or investigations by the NYSE, the SEC or other regulatory authorities, which would require additional financial and management resources.

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Our ability to successfully implement our business plan and comply with the Sarbanes-Oxley Act requires us to be able to prepare timely and accurate financial statements, among other requirements. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls, may cause our operations to suffer and we may be unable to conclude that our internal control over financial reporting is effective and to obtain an unqualified report on internal controls from our auditors. Moreover, we cannot be certain that these measures would ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. Even if we were to conclude, and our independent registered public accounting firm were to concur, that our internal control over financial reporting provided reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), because of its inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements. This, in turn, could have an adverse impact on the market price for our common shares, and could adversely affect our ability to access the capital markets.
We have incurred and will continue to incur increased costs as a result of operating as a publicly traded company, and our management will be required to devote substantial time to new compliance initiatives.
As a publicly traded company, we have incurred and will continue to incur additional legal, accounting and other expenses that we did not previously incur. In addition, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules of the SEC and the NYSE impose various requirements on public companies. Our management and other personnel devote a substantial amount of time to these compliance initiatives as well as investor relations. Moreover, these rules and regulations have increased our legal and financial compliance costs and have made some activities more time-consuming and costly. For example, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance, and we have incurred additional costs to maintain such coverage.
Furthermore, if we are not able to continue to comply with these requirements, the market price of our common shares could decline and we could be subject to potential delisting by the NYSE and review by the NYSE, the SEC, or other regulatory authorities, which would require the expenditure by us of additional financial and management resources and could harm our business and the market price of our common shares.
We are no longer a controlled company, and we may have difficulties complying with NYSE rules relating to the composition of our Board of Directors.
Our common shares are listed on the NYSE. Prior to April 2015, we were a controlled company under NYSE rules, meaning that we were not subject to a number of corporate governance rules relating to the composition of our Board of Directors and certain committees. Following the sales of common shares by Carlyle in April 2015, we are no longer a controlled company. Under NYSE rules, we are permitted to phase into compliance with certain corporate governance requirements from which we were previously exempt, including:
the requirement that a majority of the Board of Directors consist of independent directors;
the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;
the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.
We intend to comply with these NYSE rules. However, we may not be able to attract and retain the number of independent directors needed to comply with NYSE rules during the phase-in period for compliance.

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Carlyle will continue to have the ability to significantly influence our decisions, and their interests in our business may be different from yours.
As of December 31, 2015, Carlyle owned 29.6% of our common shares and continues to exercise significant influence over our affairs. Pursuant to a principal stockholders agreement, a majority of our Board of Directors has been designated by Carlyle. See Part III, Item 13, “Certain Relationships and Related Transactions and Director Independence” As a result, Carlyle and its designees to our Board of Directors currently have the ability to control: the appointment of our management, any determination to enter into a merger, sales of substantially all or all of our assets and other extraordinary transactions and any amendments to our memorandum of association or bye-laws. Pursuant to our principal stockholders agreement, Carlyle continues to have the ability to designate a majority of our directors until it owns less than 25% of our outstanding common shares and, as a result, until such time, Carlyle will exercise significant influence over the vote in any election of directors and will have the ability to prevent any transaction that requires shareholder approval regardless of whether other shareholders believe the transaction is in our best interests. In any of these matters, the interests of Carlyle may differ from or conflict with your interests. Moreover, this concentration of share ownership may also adversely affect the trading price for our common shares to the extent investors perceive disadvantages in owning shares of a company with a controlling shareholder.
In addition, Carlyle is in the business of making investments in companies and may, from time to time, acquire interests in businesses that directly or indirectly compete with our business, as well as businesses that are our significant existing or potential suppliers or customers. Carlyle may acquire or seek to acquire assets that we seek to acquire and, as a result, those acquisition opportunities may not be available to us or may be more expensive for us to pursue.
We do not intend to pay dividends on our common shares and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common shares.
We do not intend to declare and pay dividends on our common shares for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth and potentially reduce our indebtedness. Therefore, you are not likely to receive any dividends on your common shares for the foreseeable future and the success of an investment in our common shares will depend upon any future appreciation in their value. There is no guarantee that our common shares will appreciate in value or even maintain the price at which our shareholders have purchased their shares. The payment of future dividends, however, will be at the discretion of our Board of Directors and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that our Board of Directors deems relevant. The credit agreement governing our Senior Secured Credit Facilities and the indentures governing the Senior Notes also effectively limit our ability to pay dividends. As a consequence of these limitations and restrictions, we may not be able to make, or may have to reduce or eliminate, the payment of dividends on our common shares.
Future sales of our common shares in the public market could lower our share price, and any additional capital raised by us through the sale of equity or convertible debt securities may dilute your ownership in us and may adversely affect the market price of our common shares.
We and our shareholders may sell additional common shares in subsequent offerings. We may also issue additional common shares or convertible debt securities. As of February 15, 2016, we had 1,000,000,000 common shares authorized and 238,295,641 common shares outstanding.
We cannot predict the size of future issuances or sales of our common shares or the effect, if any, that future issuances and sales of our common shares will have on the market price of our common shares. Sales of substantial amounts of our common shares (including sales that may occur pursuant to the registration rights of Carlyle and/or Berkshire, sales by members of management and shares that may be issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices for our common shares. See Part III, Item 13, “Certain Relationships and Related Transactions and Director Independence”
We are a Bermuda company and it may be difficult for you to enforce judgments against us or our directors and executive officers.
We are a Bermuda exempted company. As a result, the rights of our shareholders are governed by Bermuda law and our memorandum of association and bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies incorporated in another jurisdiction, and a substantial portion of our assets are located outside the United States. As a result, it may be difficult for investors to effect service of process on those persons in the United States or to enforce in the United States judgments obtained in U.S. courts against us or those persons based on the civil liability provisions of the U.S. securities laws. It is doubtful whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the United States, against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions.

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Bermuda law differs from the laws in effect in the United States and may afford less protection to our shareholders.
We are organized under the laws of Bermuda. As a result, our corporate affairs are governed by the Companies Act 1981 (the "Companies Act"), which differs in some material respects from laws typically applicable to U.S. corporations and shareholders, including the provisions relating to interested directors, amalgamations, mergers and acquisitions, takeovers, shareholder lawsuits and indemnification of directors. Generally, the duties of directors and officers of a Bermuda company are owed to the company only. Shareholders of Bermuda companies typically do not have rights to take action against directors or officers of the company and may only do so in limited circumstances. Shareholder class actions are not available under Bermuda law. The circumstances in which shareholder derivative actions may be available under Bermuda law are substantially more proscribed and less clear than they would be to shareholders of U.S. corporations. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the company’s memorandum of association or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than those who actually approved it.
When the affairs of a company are being conducted in a manner that is oppressive or prejudicial to the interests of some shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company. Additionally, under our bye-laws and as permitted by Bermuda law, each shareholder has waived any claim or right of action against our directors or officers for any action taken by directors or officers in the performance of their duties, except for actions involving fraud or dishonesty. In addition, the rights of our shareholders and the fiduciary responsibilities of our directors under Bermuda law are not as clearly established as under statutes or judicial precedent in existence in jurisdictions in the United States, particularly the State of Delaware. Therefore, our shareholders may have more difficulty protecting their interests than would shareholders of a corporation incorporated in a jurisdiction within the United States.
We have anti-takeover provisions in our bye-laws that may discourage a change of control.
Our bye-laws contain provisions that could make it more difficult for a third party to acquire us without the consent of our Board of Directors. These provisions provide for:
a classified Board of Directors with staggered three-year terms;
directors only to be removed for cause;
restrictions on the time period in which directors may be nominated; and
our Board of Directors to determine the powers, preferences and rights of our preference shares and to issue the preference shares without shareholder approval.
These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company and may prevent our shareholders from receiving the benefit from any premium to the market price of our common shares offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common shares if the provisions are viewed as discouraging takeover attempts in the future. These provisions could also discourage proxy contests, make it more difficult for you and other shareholders to elect directors of your choosing and cause us to take corporate actions other than those you desire.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate headquarters is located in Philadelphia, PA. Our extensive geographic footprint is comprised of 36 manufacturing facilities (including nine manufacturing sites operated by our joint ventures), four major technology centers and 46 customer training centers supporting our global operations. The table below presents summary information regarding our facilities as of December 31, 2015.
Type of Facility/Country
  
Location
  
Segment
Manufacturing Facilities
  
 
  
 
North America
  
 
  
 
Canada
  
Ajax
  
Transportation
United States of America
  
Front Royal, VA
  
Performance; Transportation
 
  
Ft. Madison, IA
  
Performance; Transportation
 
  
Houston, TX
  
Performance
 
  
Hilliard, OH
  
Performance
 
  
Mt. Clemens, MI
  
Performance; Transportation
 
  
Toledo, OH
  
Performance; Transportation
 
 
Orrville, OH
 
Performance
 
 
 
Latin America
  
 
  
 
Brazil
  
Guarulhos
  
Performance; Transportation
Mexico
  
Monterrey
  
Performance
 
  
Ocoyoacac
  
Performance; Transportation
 
  
Tlalnepantla
  
Performance; Transportation
Venezuela
  
Valencia
  
Performance; Transportation
 
 
 
EMEA
  
 
  
 
Austria
  
Guntramsdorf
  
Performance; Transportation
Belgium
  
Mechelen
  
Performance; Transportation
France
  
Montbrison
  
Performance
Germany
  
Wuppertal
  
Performance; Transportation
 
  
Landshut
  
Performance
Sweden
  
Vastervik
  
Performance
Switzerland
  
Bulle
  
Performance
Turkey
  
Gebze
  
Performance; Transportation
United Kingdom
  
Darlington
  
Performance
 
 
 
 
 
Asia Pacific
  
 
  
 
Australia
  
Riverstone
  
Performance; Transportation
China
  
Changchun
  
Performance; Transportation
 
  
Jiading
  
Performance; Transportation
India
  
Savli
  
Performance; Transportation
Malaysia
  
Kuala Lumpur
  
Performance
 
 
 
Joint Venture Owned Manufacturing
Facilities
  
 
  
 
China
  
Chengdu
  
Performance
 
  
Dongguan
  
Performance
 
  
Huangshan
  
Performance
 
  
Qingpu
  
Performance
 
  
Shangdong
  
Performance
Colombia
  
Cartagena de Indias
  
Performance
Indonesia
  
Cikarang
  
Performance
Taiwan
  
Taipei
  
Transportation
Guatemala
  
Amatitlan
  
Performance

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Type of Facility/Country
  
Location
  
Segment
 
 
 
Joint Venture Partner-Owned Manufacturing Facilities
  
 
  
 
China
  
Wuhan
  
Performance
Japan
  
Amagasaki
  
Transportation
 
  
Chiba
  
Transportation
South Africa
  
Durban
  
Transportation
 
  
Port Elizabeth
  
Transportation
Russia
  
Moscow
  
Transportation
 
 
 
Technology Centers
  
 
  
 
China
  
Shanghai
  
Performance; Transportation
Germany
  
Wuppertal
  
Performance; Transportation
United States of America
  
Mt. Clemens, MI
  
Performance; Transportation
 
  
Wilmington, DE
  
Performance; Transportation
 
 
 
Customer Training Centers
  
Location by Region
  
Number of Facilities
 
  
North America
  
11
 
  
Latin America
  
8
 
  
EMEA
  
19
 
  
Asia Pacific
  
8
ITEM 3. LEGAL PROCEEDINGS
We are from time to time party to legal proceedings that arise in the ordinary course of business. We are not involved in any litigation other than that which has arisen in the ordinary course of business. We do not expect that any currently pending lawsuits will have a material effect on us. See Part I, Item 1A, "Risk Factors—Risks Related to our Business—Risks Related to Legal and Regulatory Compliance and Litigation—Our results of operations could be adversely affected by litigation" and Part I, Item 1A, "Risk Factors—Risks Related to our Business—Risks Related to Other Aspects of our Business—DuPont’s potential breach of its obligations in connection with the Acquisition, including failure to comply with its indemnification obligations, may materially affect our business and operating results."
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.


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PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Share Price and Dividends
Our common shares are traded on the New York Stock Exchange ("NYSE") under the symbol "AXTA" and began trading on the NYSE on November 12, 2014. The high and low sales prices for our common shares from November 12, 2014 through December 31, 2015 were as follows:
 
2015
2014
Quarter Ended
High
Low
High
Low
First Quarter (March 31)
$
29.64

$
24.74

N/A

N/A
Second Quarter (June 30)
36.50

27.20

N/A
N/A
Third Quarter (September 30)
33.63

23.94

N/A
N/A
Fourth Quarter (December 31)1
30.02

25.01

$
27.50

$
19.50

1Fourth Quarter 2014 includes November 12, 2014 through December 31, 2014.
As of February 15, 2016, there were approximately 30 holders of record of our common shares. Since our incorporation in August 2012, we have not paid dividends on our common shares, and we do not currently intend to pay dividends in the foreseeable future. Instead, we intend to reinvest earnings in our business. The declaration and payment of any dividends in the future will be determined by our board of directors, in its discretion, and will depend on a number of factors, including our earnings, capital requirements, overall financial condition and contractual restrictions, including covenants in the agreements governing our Senior Notes and Senior Secured Credit Facilities, which may limit our ability to pay dividends.
Recent Sales of Unregistered Securities
None.

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Stock Performance
The line graph illustrated below compares the cumulative total shareholder value return of our common shares since the initial public offering with the cumulative total returns of an overall stock market index, the Standard & Poor's (Composite 500 Index ("S&P 500"), and our peer group index, Standard & Poor's 500 Chemicals Index ("S&P 500 Chemicals"). This graph assumes an investment of $100 in our common shares and each index (with all dividends reinvested) on November 12, 2014.


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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical consolidated and combined financial data and other information of Axalta. As a result of the Acquisition, we applied acquisition accounting whereby the purchase price paid was allocated to the acquired assets and liabilities at fair value. The financial reporting periods presented are as follows:
The years ended December 31, 2012 and 2011 and the period from January 1, 2013 through January 31, 2013 ("Predecessor" periods) reflect the combined results of operations of the DPC business.
The years ended December 31, 2015, 2014 and 2013 ("Successor" periods) reflect the consolidated results of operations of Axalta, which include the effects of acquisition accounting commencing on the acquisition date of February 1, 2013.
The historical results of operations and cash flow data for the years ended December 31, 2015, 2014 and 2013 and the historical balance sheet data as of December 31, 2015 and 2014 presented below were derived from our Successor audited financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. The historical balance sheet data as of December 31, 2013 presented below was derived from our Successor audited financial statements and the related notes thereto included in the 2014 Annual Report on Form 10-K.
As of and for the Successor period of August 24, 2012 (inception date) through December 31, 2012, the Successor had no operations or activity prior to the Acquisition, other than merger and acquisition costs of $29.0 million, which consisted primarily of investment banking, legal and other professional advisory services costs.
The historical combined financial data for the years ended December 31, 2012 and 2011 as well as the period January 1, 2013 through January 31, 2013 have been derived from the Predecessor audited combined financial statements and the related notes thereto for the DPC business.

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Our historical financial data and that of the Predecessor DPC business are not necessarily indicative of our future performance, nor does such data reflect what our financial position and results of operations would have been had we operated as an independent company during the periods shown.
 
Successor
Predecessor
 
Year Ended December 31,
Period from January 1
through
January 31,
Year Ended December 31,
(In millions, except per share data)
2015
2014
2013
2013
2012
2011
Statements of Operations Data:
 
 
 
 
 
 
Net sales
$
4,087.2

$
4,361.7

$
3,951.1

$
326.2

$
4,219.4

$
4,281.5

Other revenue
26.1

29.8

35.7

1.1

37.4

34.3

Total revenue
4,113.3

4,391.5

3,986.8

327.3

4,256.8

4,315.8

Cost of goods sold (1)
2,597.3

2,897.2

2,772.8

232.2

2,932.6

3,074.5

Selling, general and administrative expenses (2)
914.8

991.5

1,040.6

70.8

873.4

869.1

Research and development expenses
51.6

49.5

40.5

3.7

41.5

49.6

Amortization of acquired intangibles
80.7

83.8

79.9




Merger and acquisition related expenses


28.1




Income from operations
468.9

369.5

24.9

20.6

409.3

322.6

Interest expense, net
196.5

217.7

215.1



0.2

Bridge financing commitment fees


25.0




Other expense, net
111.2

115.0

48.5

5.0

16.3

20.2

Income (loss) before income taxes
161.2

36.8

(263.7
)
15.6

393.0

302.2

Provision (benefit) for income taxes
63.3

2.1

(44.8
)
7.1

145.2

120.7

Net income (loss)
97.9

34.7

(218.9
)
8.5

247.8

181.5

Less: Net income attributable to noncontrolling interests
4.2

7.3

6.0

0.6

4.5

2.1

Net income (loss) attributable to controlling interests
$
93.7

$
27.4

$
(224.9
)
$
7.9

$
243.3

$
179.4

Per share data:
 
 
 
 
 
 
Net income (loss) per share:
 
 
 
 
 
 
Basic
$
0.40

$
0.12

$
(0.97
)
 
 
 
Diluted
$
0.39

$
0.12

$
(0.97
)
 
 
 
Basic weighted average shares outstanding
233.8

229.3

228.3

 
 
 
Diluted weighted average shares outstanding
239.7

230.3

228.3

 
 
 
 
 
 
 
 
 
 
Other Financial Data:
 
 
 
 
 
 
Cash flows from:
 
 
 
 
 
 
Operating activities
$
399.6

$
251.4

$
376.8

$
(37.7
)
$
388.8

$
236.2

Investing activities
(164.3
)
(178.5
)
(5,011.2
)
(8.3
)
(88.2
)
(116.6
)
Financing activities
(74.5
)
(123.2
)
5,098.1

43.0

(290.6
)
(125.1
)
Depreciation and amortization
307.7

308.7

300.7

9.9

110.7

108.7

Capital expenditures
(138.1
)
(188.4
)
(107.3
)
(2.4
)
(73.2
)
(82.7
)

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Successor
Predecessor
 
December 31,
December 31,
(In millions)
2015
2014
2013
2012
2011
Balance sheet data:
 
 
 
 
 
Cash and cash equivalents
$
485.0

$
382.1

$
459.3

$
28.7

$
18.8

Working capital (3)
1,035.7

926.2

952.2

605.2

640.0

Total assets
5,854.2

6,170.7

6,638.3

2,878.6

2,833.6

Indebtedness
3,441.5

3,614.3

3,822.1

0.2

0.9

Total liabilities
4,713.0

5,058.7

5,426.5

1,181.6

1,028.5

Total shareholders’ equity/combined equity
1,141.2

1,112.0

1,211.8

1,697.0

1,805.1

(1)
In the Successor years ended December 31, 2015 and 2013, cost of goods sold included the impacts of $1.2 million and $103.7 million, respectively, attributable to the increases in inventory value resulting from the fair value adjustments associated with our acquisition accounting for inventories.
(2)
Selling, general and administrative expense included transition-related and cost-savings initiatives of $64.4 million, $127.1 million and $231.5 million for the Successor years ended December 31, 2015, 2014 and 2013, respectively. Additionally, during the Predecessor year ended December 31, 2012, $0.7 million in employee separation and asset related costs were recorded.
(3)
Working capital is defined as current assets less current liabilities.


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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward looking statements as a result of various factors, including, without limitation, those set forth under Part I, Item 1A, "Risk Factors," and other matters included elsewhere in this Annual Report on Form 10-K. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated and combined financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K, as well as the information presented under Part II, Item 6, "Selected Financial Data" of this Annual Report on Form 10-K.
FORWARD-LOOKING STATEMENTS
Many statements made in this Annual Report on Form 10-K that are not statements of historical fact, including statements about our beliefs and expectations, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended ("the "Securities Act") and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. These statements often include words such as "anticipate," "expect," "suggests," "plan," "believe," "intend," "estimates," "targets," "projects," "should," "could," "would," "may," "will," "forecast" and other similar expressions. We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this Annual Report on Form 10-K, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections. Factors that may materially affect such forward-looking statements and projections include:
adverse developments in economic conditions and, particularly, in conditions in the automotive and transportation industries;
volatility in the capital, credit and commodities markets;
our inability to successfully execute on our growth strategy;
risks associated with our non-U.S. operations;
currency-related risks;
increased competition;
risks of the loss of any of our significant customers or the consolidation of MSOs, distributors and/or body shops;
our reliance on our distributor network and third-party delivery services for the distribution and export of certain of our products;
price increases or interruptions in our supply of raw materials;
failure to develop and market new products and manage product life cycles;
litigation and other commitments and contingencies;
significant environmental liabilities and costs as a result of our current and past operations or products, including operations or products related to our business prior to the Acquisition;
unexpected liabilities under any pension plans applicable to our employees;
risk that the insurance we maintain may not fully cover all potential exposures;
failure to comply with the anti-corruption laws of the United States and various international jurisdictions;
failure to comply with anti-terrorism laws and regulations and applicable trade embargoes;
business disruptions, security threats and security breaches;
our ability to protect and enforce intellectual property rights;
intellectual property infringement suits against us by third parties;

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our substantial indebtedness;
our ability to obtain additional capital on commercially reasonable terms may be limited;
our ability to realize the anticipated benefits of any acquisitions and divestitures;
our joint ventures’ ability to operate according to our business strategy should our joint venture partners fail to fulfill their obligations;
the risk of impairment charges related to goodwill, identifiable intangible assets and fixed assets;
ability to recruit and retain the experienced and skilled personnel we need to compete;
work stoppages, union negotiations, labor disputes and other matters associated with our labor force;
terrorist acts, conflicts, wars and natural disasters that may materially adversely affect our business, financial condition and results of operations;
transporting certain materials that are inherently hazardous due to their toxic nature;
weather conditions that may temporarily reduce the demand for some of our products;
reduced demand for some of our products as a result of improved safety features on vehicles and insurance company influence;
the amount of the costs, fees, expenses and charges related to being a public company;
any statements of belief and any statements of assumptions underlying any of the foregoing;
Carlyle’s ability to control our common shares;
other factors disclosed in this Annual Report on Form 10-K; and
other factors beyond our control.
These cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this Annual Report on Form 10-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
BASIS OF PRESENTATION
For information regarding the basis of presentation of our financial statements for our Successor and Predecessor periods, see Note 2 to the consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K.
In addition to the historical analysis of results of operations, we have prepared unaudited supplemental pro forma results of operations for the year ended December 31, 2013, derived from our audited financial statements for the year ended December 31, 2013 and the audited financial statements for the DPC business for the period from January 1, 2013 through January 31, 2013, each of which are included elsewhere in this Annual Report on Form 10-K, as if the Acquisition and related Financing had occurred on January 1, 2013. The pro forma analysis is prepared and presented to aid in explaining the results of operations. The pro forma discussion follows the historical analysis of results of operations.
OVERVIEW
We are a leading global manufacturer, marketer and distributor of high performance coatings systems. We have a 150-year heritage in the coatings industry and are known for manufacturing high-quality products with well-recognized brands supported by market-leading technologies and customer service. Our diverse global footprint of 36 manufacturing facilities, four technology centers, 46 customer training centers and approximately 12,800 employees allows us to meet the needs of customers in over 130 countries. We serve our customers through an extensive sales force and technical support organization, as well as through over 4,000 independent, locally based distributors.
We operate our business in two segments, Performance Coatings and Transportation Coatings. Our segments are based on the type and concentration of customers served, service requirements, methods of distribution and major product lines.
Through our Performance Coatings segment we provide high-quality liquid and powder coatings solutions to a fragmented and local customer base. We are one of only a few suppliers with the technology to provide precise color matching and highly durable coatings systems. The end-markets within this segment are refinish and industrial.
Through our Transportation Coatings segment we provide advanced coating technologies to OEMs of light and commercial vehicles. These increasingly global customers require a high level of technical support coupled with cost-effective, environmentally responsible coatings systems that can be applied with a high degree of precision, consistency and speed. The end-markets within this segment are light vehicle and commercial vehicle.

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In November 2014, we priced our initial public offering (the "Offering", or the "IPO"), in which certain selling shareholders affiliated with Carlyle sold 57,500,000 common shares at a price of $19.50 per share.
In April 2015, we completed a secondary offering (the "Secondary Offering") in which Carlyle sold an aggregate of 46,000,000 common shares at a price of $28.00 per share. In addition, Carlyle also sold 20,000,000 common shares in a private placement to an affiliate of Berkshire Hathaway Inc. (together with the Secondary Offering, the "April 2015 Secondary Offerings") for $28.00 per share. Following the April 2015 Secondary Offerings, Carlyle ceased to control a majority of our common shares.
In August 2015, we completed a secondary offering (together with the IPO and the April 2015 Secondary Offerings, the "Carlyle Offerings") in which Carlyle sold an aggregate of 34,500,000 common shares at a public offering price of $29.75 per share. We did not receive any proceeds from the sale of common shares in any of the Carlyle Offerings.
BUSINESS HIGHLIGHTS AND TRENDS
From 2012 to 2014, we managed the transition of ownership and operational separation resulting from the planned divestiture of our business by DuPont and ultimately the Acquisition, including significant changes to our senior leadership team. During 2015, we continued to focus on our productivity initiatives, capacity expansions, and operational excellence. Since 2012, our Adjusted EBITDA has grown at a 15% CAGR primarily as the result of several strategic initiatives focused on margin improvement. In addition to regular price increases in our refinish end-market, these initiatives included selective price increases in other end-markets, reducing sales with lower margin customers and productivity improvements, which collectively drove Adjusted EBITDA growth in both of our segments.
From 2012 to 2014, our net sales increased at a 2% CAGR with net sales growth in both our Transportation Coatings segment and our Performance Coatings segment. Net sales in our Transportation Coatings segment grew at a 1% CAGR, driven by consistent net sales in our light vehicle end-market and increasing sales in our commercial vehicle end-market, primarily as a result of increased vehicle production in North America and Asia Pacific and improvements in average selling price, driven by new product and color introductions. Net sales in our Performance Coatings segment increased at a 2% CAGR over the same period as a result of higher average selling prices, partially offset by lower volumes in both our refinish and industrial end-markets in developed markets as well as unfavorable impacts of currency exchange. In EMEA, volumes declined as a result of a difficult economic environment. In North America, our lack of participation in the MSO market prior to the Acquisition had a negative impact on our volumes as MSO body shops increased the number of vehicles serviced at the expense of independent body shop customers. These factors in developed markets were partially offset by continued refinish net sales growth in the emerging markets.
Our net sales decreased approximately 6.3% for the year ended December 31, 2015 compared to the year ended December 31, 2014, primarily due to a decline of approximately 11.6% from unfavorable currency translation. Excluding the impact of currency translation, our net sales increased approximately 5.3% as a result of an increase in net sales volumes in all regions and increases in average selling prices primarily in Latin America. The following trends have impacted our segment and end-market sales performance for the year ended December 31, 2015:
Performance Coatings: Net sales excluding currency translation increased approximately 5.2% driven by increases in average selling price within our refinish end-market, particularly in Latin America, and increased volumes in both our refinish and industrial end-markets.
Transportation Coatings: Net sales excluding currency translation increased approximately 5.4% driven primarily by volume growth in both our light vehicle and commercial vehicle end-markets from new business wins and increased vehicle builds, particularly in North America and Asia Pacific.
Since the Acquisition, we have implemented numerous initiatives to reduce our fixed and variable costs that have improved our Adjusted EBITDA margin. Examples include transitioning our IT systems to more cost-effective solutions that better meet our needs as an independent company, developing a global procurement organization to reduce procurement costs and investing in a European manufacturing re-alignment to position the region for profitable growth. Additionally in 2015, we commenced a new "Axalta Way" initiative which focuses on commercial alignment and cost reduction. These initiatives are contributing to our financial results and we believe they will continue to drive profitability improvements over the next several years.

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Our business serves four end-markets globally as follows:
 
Successor
Pro Forma
 
 
 (In millions)
Year Ended December 31,
2015 vs 2014
2014 vs 2013
 
2015
2014
2013
% change
% change
Performance Coatings
 
 
 
 
 
Refinish
$
1,702.0

$
1,850.8

$
1,799.4

(8.0
)%
2.9
 %
Industrial
683.1

734.2

712.7

(7.0
)%
3.0
 %
Total Net sales Performance Coatings
2,385.1

2,585.0

2,512.1

(7.7
)%
2.9
 %
Transportation Coatings
 
 
 
 
 
Light Vehicle
1,310.6

1,384.5

1,403.1

(5.3
)%
(1.3
)%
Commercial Vehicle
391.5

392.2

362.1

(0.2
)%
8.3
 %
Total Net sales Transportation Coatings
1,702.1

1,776.7

1,765.2

(4.2
)%
0.7
 %
Total Net sales
$
4,087.2

$
4,361.7

$
4,277.3

(6.3
)%
2.0
 %
Acquisition Accounting
We allocated the purchase price paid to acquire the DPC business to the acquired assets and liabilities assumed based on their respective estimated fair value as of the acquisition date. The application of acquisition accounting resulted in an increase in amortization and depreciation expense relating to our acquired intangible assets and property, plant and equipment. In addition to the increase in the net carrying value of property, plant and equipment, we revised the remaining depreciable lives of property, plant and equipment to reflect the estimated remaining useful lives for purposes of calculating periodic depreciation expense. We adjusted the carrying values of the joint ventures to reflect their estimated fair values at the date of purchase. We adjusted the value of inventory to its estimated fair value, which increased the costs recognized upon the sale of this acquired inventory. We also provided for deferred income taxes for the future tax consequences of acquisition date basis differences between the carrying amounts of assets and liabilities utilized for financial reporting purposes and the respective amounts used for income tax purposes. The excess of the purchase price over the estimated fair value of assets and liabilities was assigned to goodwill, which is not amortized for accounting purposes but is subject to testing for impairment at least annually. See Note 5 to our consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K for further discussion on the Acquisition.
Factors Affecting Our Operating Results
The following discussion sets forth certain components of our statements of operations as well as factors that impact those items.
Net sales
We generate revenue from the sale of our products across all major geographic areas. Our net sales include total sales less estimates for returns and price allowances. Price allowances include discounts for prompt payment as well as volume-based incentives. Our overall net sales are generally impacted by the following factors:
fluctuations in overall economic activity within the geographic markets in which we operate;
underlying growth in one or more of our end-markets, either worldwide or in particular geographies in which we operate;
the type of products used within existing customer applications, or the development of new applications requiring products similar to ours;
changes in product sales prices (including volume discounts and cash discounts for prompt payment);
changes in the level of competition faced by our products, including price competition and the launch of new products by competitors;
our ability to successfully develop and launch new products and applications; and
fluctuations in foreign exchange rates.
While the factors described above impact net sales in each of our operating segments, the impact of these factors on our operating segments can differ, as described below. For more information about risks relating to our business, see Part I, Item 1A, "Risk Factors—Risks Related to our Business."

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Other revenue
Other revenue consists primarily of consulting and other service revenue and royalty income.
Cost of goods sold ("cost of sales")
Our cost of sales consists principally of the following:
Production Materials Costs. We purchase a significant amount of the materials used in production on a global lowest-cost basis.
Employee Costs. These include the compensation and benefit costs for employees involved in our manufacturing operations. These costs generally increase on an aggregate basis as production volumes increase and may decline as a percent of net sales as a result of economies of scale associated with higher production volumes.
Depreciation Expense. Property, plant and equipment are stated at cost and depreciated or amortized on a straight-line basis over their estimated useful lives. Property, plant and equipment acquired through the Acquisition were recorded at their estimated fair value on the acquisition date resulting in a new cost basis for accounting purposes.
Other. Our remaining cost of sales consists of freight costs, warehousing expenses, purchasing costs, costs associated with closing or idling of production facilities, functional costs supporting manufacturing, product claims and other general manufacturing expenses, such as expenses for utilities and energy consumption.
The main factors that influence our cost of goods sold as a percentage of net sales include:
changes in the price of raw materials;
production volumes;
the implementation of cost control measures aimed at improving productivity, including reduction of fixed production costs, refinements in inventory management and the coordination of purchasing within each subsidiary and at the business level; and
fluctuations in foreign exchange rates.
Selling, general and administrative expenses
Our selling, general and administrative expense consists of all expenditures incurred in connection with the sales and marketing of our products, as well as administrative overhead costs, including:
compensation and benefit costs for management, sales personnel and administrative staff, including share-based compensation expense. Expenses relating to our sales personnel increase or decrease principally with changes in sales volume due to the need to increase or decrease sales personnel to meet changes in demand. Expenses relating to administrative personnel generally do not increase or decrease directly with changes in sales volume; and
depreciation, advertising and other selling expenses, such as expenses incurred in connection with travel and communications.
Changes in selling, general and administrative expense as a percentage of net sales have historically been impacted by a number of factors, including:
changes in sales volume, as higher volumes enable us to spread the fixed portion of our administrative expense over higher sales;
changes in our customer base, as new customers may require different levels of sales and marketing attention;
new product launches in existing and new markets, as these launches typically involve a more intense sales activity before they are integrated into customer applications;
customer credit issues requiring increases to the allowance for doubtful accounts; and
fluctuations in foreign exchange rates.
Research and development expenses
Research and development expense represents costs incurred to develop new products, services, processes and technologies or to generate improvements to existing products or processes.

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Interest expense, net
Interest expense, net consists primarily of interest expense on institutional borrowings and other financing obligations and changes in fair value of interest rate derivative instruments, net of capitalized interest expense. Interest expense, net also includes the amortization of debt issuance costs and debt discounts associated with our Senior Secured Credit Facilities and Senior Notes.
Other expense, net
Other expense, net represents costs incurred, net of income, on various non-operational items including historical management expenses to Carlyle, indemnity gains and losses associated with the Acquisition, as well as foreign exchange gains and losses and impairment losses on assets that are not part of our core operational activities.
Provision for income taxes
We and our subsidiaries are subject to income tax in the various jurisdictions in which we operate. While the extent of our future tax liability is uncertain, the impact of acquisition accounting for the Acquisition and for future acquisitions, changes to the debt and equity capitalization of our subsidiaries, and the realignment of the functions performed and risks assumed by the various subsidiaries are among the factors that will determine the future book and taxable income of the respective subsidiary and the Company as a whole. For the Predecessor period, DPC did not file separate tax returns in the majority of its jurisdictions as it was included in the tax returns of DuPont entities within the respective tax jurisdictions. The income tax provision for the Predecessor period was calculated using a separate return basis as if DPC was a separate taxpayer.
NON-GAAP FINANCIAL MEASURES
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
To supplement our financial information presented in accordance with U.S. GAAP, we use the following non-GAAP financial measures to clarify and enhance an understanding of past performance: EBITDA and Adjusted EBITDA. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance. We further believe that these financial measures are useful financial metrics to assess our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business. We use certain of these financial measures for business planning purposes and in measuring our performance relative to that of our competitors. We utilize Adjusted EBITDA as the primary measure of segment performance.
EBITDA consists of net income (loss) before interest, taxes, depreciation and amortization. Adjusted EBITDA consists of EBITDA adjusted for (i) non-operating income or expense, (ii) the impact of certain non-cash, non-recurring or other items that are included in net income and EBITDA that we do not consider indicative of our ongoing operating performance and (iii) certain unusual or non-recurring items impacting results in a particular period. We believe that making such adjustments provides investors meaningful information to understand our operating results and ability to analyze financial and business trends on a period-to-period basis.
We believe these financial measures are commonly used by investors to evaluate our performance and that of our competitors. However, our use of the terms EBITDA and Adjusted EBITDA may vary from that of others in our industry. These financial measures should not be considered as alternatives to income (loss) before income taxes, net income (loss), earnings (loss) per share or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance.
EBITDA and Adjusted EBITDA have important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
EBITDA and Adjusted EBITDA:
do not reflect the significant interest expense on our debt, including the Senior Secured Credit Facilities and the Senior Notes;
eliminate the impact of income taxes on our results of operations; and
contain certain estimates for periods prior to the Acquisition of standalone costs;
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any expenditures for such replacements; and
other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

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We compensate for these limitations by using EBITDA and Adjusted EBITDA along with other comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance. Such U.S. GAAP measurements include income (loss) before income taxes, net income (loss), earnings (loss) per share and other performance measures.
In evaluating these financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in this presentation. Our presentation of EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
The following table reconciles net income (loss) to the EBITDA and Adjusted EBITDA measures discussed above for the periods presented:
 
Successor
Predecessor
Pro Forma
 
Year Ended December 31,
Period from January 1
through
January 31,
Year Ended December 31,
(In millions)
2015
2014
2013
2013 (1)
2013 (1)
Net income (loss)
$
97.9

$
34.7

$
(218.9
)
$
8.5

$
(106.8
)
Interest expense, net
196.5

217.7

215.1


234.8

Provision (benefit) for income taxes
63.3

2.1

(44.8
)
7.1

(1.3
)
Depreciation and amortization
307.7

308.7

300.7

9.9

327.3

EBITDA
665.4

563.2

252.1

25.5

454.0

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

34.0

Long-term employee benefit plan adjustments (e)
(0.3
)
(0.6
)
9.5

2.3

11.8

Termination benefits and other employee related costs (f)
36.6

18.4

147.5

0.3

147.8

Consulting and advisory fees (g)
24.7

36.3

54.7


54.7

Transition-related costs (h)
(3.4
)
101.8

29.3


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
)

2.4

Dividends in respect of noncontrolling interest (l)
(4.7
)
(2.2
)
(5.2
)

(5.2
)
Management fee expense (m)

3.2

3.1


3.1

Asset impairment (n)
30.6





Adjusted EBITDA
$
867.2

$
840.5

$
699.0

$
32.7

$
731.9

(1)
The Adjusted EBITDA information for the Predecessor period January 1, 2013 through January 31, 2013 and the pro forma year ended December 31, 2013 excludes the net benefit of $5.7 million, which is comprised of (1) the add-back of corporate allocations from DuPont to DPC for the usage of DuPont’s facilities, functions and services; costs for administrative functions and services performed on behalf of DPC by centralized staff groups within DuPont; a portion of DuPont’s general corporate expenses; and certain pension and other long-term employee benefit costs, in each case because we believe these costs are not indicative of costs we would have incurred as a standalone company, net of (2) estimated standalone costs based on a corporate function resource analysis that included a standalone executive office, the costs associated with supporting a standalone information technology infrastructure, corporate functions such as legal, finance, treasury, procurement and human resources and certain costs related to facilities management. This resource analysis included anticipated headcount and the associated overhead costs of running these functions effectively as a standalone company of our size and complexity.
(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.

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(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 separate pay-downs of $100.0 million of principal on the New Dollar Term Loan in each year (See Note 22 to the consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K).
(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-saving 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 Axalta Coating Systems Bermuda Co., Ltd 2013 Equity Incentive Plan (the "2013 Plan") as a result of Carlyle's interest falling below 50% and triggering a 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 (See Note 27 to the consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K).

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RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information contained in the accompanying financial statements and related notes included elsewhere in this Annual Report on Form 10-K. Our historical results of operations set forth below may not necessarily reflect what would have occurred if we had been a separate standalone entity prior to the Acquisition or what will occur in the future.
Year ended December 31, 2015 compared to year ended December 31, 2014
The following table was derived from the consolidated statements of operations for the years ended December 31, 2015 and 2014 included elsewhere in this Annual Report on Form 10-K.
 
Year Ended December 31,
(In millions)
2015
2014
Net sales
$
4,087.2

$
4,361.7

Other revenue
26.1

29.8

Total revenue
4,113.3

4,391.5

Cost of goods sold
2,597.3

2,897.2

Selling, general and administrative expenses
914.8

991.5

Research and development expenses
51.6

49.5

Amortization of acquired intangibles
80.7

83.8

Income from operations
468.9

369.5

Interest expense, net
196.5

217.7

Other expense, net
111.2

115.0

Income before income taxes
161.2

36.8

Provision for income taxes
63.3

2.1

Net income
97.9

34.7

Less: Net income attributable to noncontrolling interests
4.2

7.3

Net income attributable to controlling interests
$
93.7

$
27.4

Net sales
Net sales decreased $274.5 million, or 6.3%, to $4,087.2 million for the year ended December 31, 2015 compared to net sales of $4,361.7 million for the year ended December 31, 2014. Our net sales decrease for the year ended December 31, 2015 compared to the year ended December 31, 2014 was primarily attributable to unfavorable impacts of currency translation, which reduced net sales by 11.6% due mainly to the weakening Euro and certain currencies within Latin America and Asia compared to the U.S. dollar. This net sales decline was partially offset by increases in volumes across all regions, which contributed to net sales growth of 3.9%. Higher average selling prices, primarily in Latin America, also contributed to an increase of 1.4%.
Other revenue
Other revenue decreased $3.7 million, or 12.4%, to $26.1 million for the year ended December 31, 2015 as compared to $29.8 million for the year ended December 31, 2014. This decrease in other revenue was primarily related to the impacts of weakening currencies against the U.S. dollar, which caused a decrease of $5.1 million, or 17.3%.
Cost of sales
Cost of sales decreased $299.9 million, or 10.4%, to $2,597.3 million for the year ended December 31, 2015 compared to $2,897.2 million for the year ended December 31, 2014. The decrease for the year ended December 31, 2015 compared to the year ended December 31, 2014 resulted primarily from a 9.4% decrease associated with currency exchange due to the impact of the weakening Euro and certain currencies within Latin America and Asia. The decrease from currency translation was slightly offset by higher volumes of 3.9%, as well as the impacts of stock-based compensation resulting primarily from the impact of the accelerated vesting of all outstanding stock options issued under the 2013 Plan. Cost of sales as a percentage of net sales decreased from 66.4% for the year ended December 31, 2014 to 63.5% for the year ended December 31, 2015 primarily as a result of reductions associated with our cost-savings initiatives as well as lower raw material prices.

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Selling, general and administrative expenses
Selling, general and administrative expenses decreased $76.7 million, or 7.7%, to $914.8 million for the year ended December 31, 2015 compared to $991.5 million for the year ended December 31, 2014. Selling, general and administrative expenses for the year ended December 31, 2015 included $64.4 million of costs related to our 2015 cost-savings initiatives as compared to $127.1 million of costs for the year ended December 31, 2014 associated with our transition-related activities and cost-savings initiatives, resulting in a decrease of $62.7 million over the comparable period. In addition, favorable impacts of currency exchange during the year ended December 31, 2015 contributed to an approximately 10.4% reduction in selling, general and administrative expenses due to the weakening Euro and certain currencies within Latin America compared to the U.S. dollar. Offsetting the decrease over comparable periods was an increase in selling expense associated with increased sales volumes as well as an increase of $14.2 million in stock-based compensation for the year ended December 31, 2015, resulting primarily from the impact of the accelerated vesting of all outstanding stock options issued under the 2013 Plan. Further offsetting the decrease compared to the year ended December 31, 2014 was the absence of $14.3 million in gains for the amendments of benefit plans, as well as an increase in spending in 2015 as we focused on opportunities to expand our market presence.
Research and development expenses
Research and development expenses increased $2.1 million, or 4.2%, to $51.6 million for the year ended December 31, 2015 compared to $49.5 million for the year ended December 31, 2014. This increase was driven by additional spending as we focus on developing new and existing coatings products. The impacts of currency exchange did not have a material impact on the comparable periods.
Amortization of acquired intangibles
Amortization of acquired intangibles decreased $3.1 million, or 3.7%, to $80.7 million for the year ended December 31, 2015 compared to $83.8 million for the year ended December 31, 2014. This decrease was a result of the impact of currency exchange primarily as a result of the weakening Euro compared to the U.S. dollar.
Interest expense, net
Interest expense, net decreased $21.2 million, or 9.7%, to $196.5 million for the year ended December 31, 2015 compared to $217.7 million for the year ended December 31, 2014. Interest expense, net for the year ended December 31, 2015 reflects a full year of interest expense after refinancing our Term Loans in February of 2014 resulting in a benefit of $2.1 million compared to 2014. Additionally, the year ended December 31, 2015 included a full year of the impact of the 25 basis point step-down in interest rates on our Term Loans resulting from a reduction in our leverage ratio, as well as reductions in principal balances throughout 2014 and 2015. Further contributing to the decrease in interest expense over the comparable periods was a decrease of $3.3 million in losses on an interest rate cap on our Euro Term Loan as well as the impacts of the weakening Euro against the U.S. dollar on our Euro borrowings.
Other expense, net
Other expense, net decreased $3.8 million, or 3.3%, to $111.2 million for the year ended December 31, 2015 compared to $115.0 million for the year ended December 31, 2014. This net decrease was the result of various positive and negative drivers. There were net decreases of $18.8 million and $16.6 million as compared to 2014 relating to Acquisition indemnity provisions and management fee expenses, respectively. For the year ended December 31, 2014, there was a $17.8 million loss compared to a $1.0 million gain for the year ended December 31, 2015 resulting from changes in indemnity provisions. Management fee expenses of $16.6 million for the year ended December 31, 2014, including the termination fee of the management agreement, upon the consummation of our IPO did not recur in 2015.
In addition, during the year ended December 31, 2015 there were $5.6 million in gains on derivative instruments associated with our foreign currency contracts compared to $1.4 million in losses during the year ended December 31, 2014, resulting in a $7.0 million decrease. In addition to this decrease, we recognized a gain of $5.4 million for the year ended December 31, 2015 resulting from the remeasurement of our previously held interest in an equity method investee upon the acquisition of a controlling interest whereas no similar gain was recognized during the year ended December 31, 2014, thereby resulting in a decrease in other expense, net for the comparable periods.
During the year ended December 31, 2015 our Venezuelan subsidiary was impacted by a significant devaluation of its currency translation rates. This devaluation resulted in an impairment charge of $30.6 million for the year ended December 31, 2015 based on our evaluation of the carrying value associated with our real estate investment.

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Exchange losses were $93.7 million during the year ended December 31, 2015 as compared to exchange losses of $81.2 million for the year ended December 31, 2014, resulting in an increase in expense of $12.5 million. This increase was primarily driven by the devaluation of our Venezuelan subsidiary's net monetary assets and liabilities resulting in an increase of $70.2 million over the comparable period. Furthering this increase in expense, was a $24.5 million decrease in gains on our Euro denominated borrowings over the comparable period. The offsetting decrease of $82.2 million was related to the remeasurement of intercompany transactions denominated in currencies different from the functional currency of the relevant subsidiary.
Provision for income taxes
We recorded a provision for income taxes of $63.3 million for the year ended December 31, 2015, which represents a 39.3% effective tax rate in relation to the income before income taxes of $161.2 million. The effective tax rate for the year ended December 31, 2015 differs from the U.S. Federal statutory rate by 4.3%, which is the result of various items that impacted the rate both favorably and unfavorably. We recorded a favorable adjustment for earnings in jurisdictions where the statutory rate is lower than the U.S. Federal rate of $41.4 million. This adjustment was offset by the pre-tax impairment charge in Venezuela of $30.6 million which had an unfavorable $10.7 million impact on the effective rate as it was nondeductible, the unfavorable impact of pre-tax losses attributable to jurisdictions where a tax benefit is not expected to be realized of $34.4 million, and the impact of non-deductible expenses and interest of $10.4 million.
We recorded a provision for income taxes of $2.1 million for the year ended December 31, 2014, which represents a 5.7% effective tax rate in relation to the income before income taxes of $36.8 million. The effective tax rate for the year ended December 31, 2014 differs from the U.S. Federal statutory rate by 29.3%, which is the result of various items that impacted the rate both favorably and unfavorably. We recorded favorable adjustments for earnings in jurisdictions where the statutory rate is lower than the U.S. Federal rate of $46.7 million and unrecognized tax benefit adjustments primarily related to acquisition tax matters of $44.0 million. These adjustments were partially offset by the unfavorable impact of pre-tax losses attributable to jurisdictions where a tax benefit is not expected to be realized of $44.4 million and non-deductible expenses and interest of $29.6 million.

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Successor year ended December 31, 2014 compared to Successor year ended December 31, 2013, Predecessor period January 1, 2013 through January 31, 2013, and the Pro Forma year ended December 31, 2013
The following table was derived from the Successor’s consolidated statements of operations for the years ended December 31, 2014 and 2013 and from the Predecessor’s combined statement of operations for the period from January 1, 2013 through January 31, 2013 included elsewhere in this Annual Report on Form 10-K. It should be noted that the results of operations for the Successor year ended December 31, 2013 only include the results of DPC from the date of the Acquisition. Prior to the Acquisition, Axalta generated no revenue and only incurred merger and acquisition related costs and debt financing costs in anticipation of the Acquisition. We have also presented pro forma financial results for the year ended December 31, 2013 as if the Acquisition and the related Financing had occurred on January 1, 2013. We believe this information, and the related comparisons, provide a more meaningful comparison for the years presented.
 
Successor
Predecessor
Pro Forma
 
Year Ended December 31,
Period from January 1
through
January 31,
Year Ended
December 31,
(In millions)
2014
2013
2013
2013
Net sales
$
4,361.7

$
3,951.1

$
326.2

$
4,277.3

Other revenue
29.8

35.7

1.1

36.8

Total revenue
4,391.5

3,986.8

327.3

4,314.1

Cost of goods sold
2,897.2

2,772.8

232.2

2,909.0

Selling, general and administrative expenses
991.5

1,040.6

70.8

1,113.6

Research and development expenses
49.5

40.5

3.7

44.2

Amortization of acquired intangibles
83.8

79.9


86.5

Merger and acquisition related expenses

28.1



Income from operations
369.5

24.9

20.6

160.8

Interest expense, net
217.7

215.1


234.8

Bridge financing commitment fees

25.0



Other expense, net
115.0

48.5

5.0

34.1

Income (loss) before income taxes
36.8

(263.7
)
15.6

(108.1
)
Provision (benefit) for income taxes
2.1

(44.8
)
7.1

(1.3
)
Net income (loss)
34.7

(218.9
)
8.5

(106.8
)
Less: Net income attributable to noncontrolling interests
7.3

6.0

0.6

6.6

Net income (loss) attributable to controlling interests
$
27.4

$
(224.9
)
$
7.9

$
(113.4
)
Net sales
Historical: Net sales were $4,361.7 million for the Successor year ended December 31, 2014 compared to net sales of $3,951.1 million for the Successor year ended December 31, 2013 and $326.2 million for the Predecessor period January 1, 2013 through January 31, 2013. Our net sales growth in the Successor year ended December 31, 2014 compared to the Successor year ended December 31, 2013 and Predecessor period January 1, 2013 through January 31, 2013 was primarily driven by higher average selling prices in all regions, which contributed to net sales growth of 2.8%. In addition, volumes contributed 1.2% to net sales growth on stronger performance within North America and Asia, offset slightly by continued weakness in Latin America. This net sales growth was partially offset by the unfavorable impacts of currency exchange, which contributed to an approximately 2.0% reduction in net sales due to the impact of weakening currencies in certain jurisdictions within Latin America, Asia and North America.
Pro Forma: Net sales increased $84.4 million, or 2.0%, to $4,361.7 million for the Successor year ended December 31, 2014, as compared to net sales of $4,277.3 million for the Pro Forma year ended December 31, 2013. Our net sales growth in the Successor year ended December 31, 2014 was primarily driven by higher average selling prices in all regions, which contributed to net sales growth of 2.8%. In addition, volumes contributed 1.2% to net sales growth on stronger performance within North America and Asia, offset slightly by continued weakness in Latin America. This net sales growth was partially offset by the unfavorable impacts of currency exchange, which contributed to an approximately 2.0% reduction in net sales due to the impact of weakening currencies in certain jurisdictions within Latin America, Asia and North America.

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Other revenue
Historical: Other revenue was $29.8 million for the Successor year ended December 31, 2014 as compared to $35.7 million for the Successor year ended December 31, 2013 and $1.1 million for the Predecessor period January 1, 2013 through January 31, 2013. The decrease primarily related to a decrease in service revenue within our Light Vehicle end market. The impacts of currency exchange did not have a material impact on the comparable periods.
Pro Forma: Other revenue was $29.8 million for the Successor year ended December 31, 2014 as compared to $36.8 million for the Pro Forma year ended December 31, 2013. The decrease primarily related to a decrease in service revenue within our Light Vehicle end-market. The impacts of currency exchange did not have a material impact on the comparable periods.
Cost of sales
Historical: Cost of sales was $2,897.2 million for the Successor year ended December 31, 2014 compared to $2,772.8 million for the Successor year ended December 31, 2013 and $232.2 million for the Predecessor period January 1, 2013 through January 31, 2013. Cost of sales was lower during the Successor year ended December 31, 2013 compared to the Successor year ended December 31, 2014 but higher when combined with the Predecessor period January 1, 2013 through January 31, 2013, primarily as a result of increased costs of goods of $103.7 million related to fair value adjustments to inventory in conjunction with the Acquisition. Offsetting the increased costs in 2013 related to fair value adjustments to inventory is the absence of $7.9 million of incremental depreciation resulting from the fair value adjustments to property, plant and equipment in conjunction with the Acquisition, which did not impact historical depreciation for the Predecessor period from January 1, 2013 through January 31, 2013. The remaining change in cost of sales in 2014 was driven by lower raw material costs offset by higher volumes. The favorable impact of raw material prices across both our Performance Coatings and Transportation Coatings segments contributed to an approximately 2.0% impact on cost of sales as a percentage of net sales. Favorable impacts of currency exchange contributed to an additional 1.0% decrease in cost of sales as a percentage of net sales, primarily due to the impact of weakening currencies in certain jurisdictions within Latin America, Asia, and North America compared to the U.S. dollar.
Pro Forma: Cost of sales decreased $11.8 million, or 0.4%, to $2,897.2 million for the Successor year ended December 31, 2014 as compared to $2,909.0 million for the Pro Forma year ended December 31, 2013. The Pro Forma year ended December 31, 2013 is adjusted to reflect increased depreciation and the exclusion of increased costs of goods, each related to the Acquisition. As a percentage of net sales, cost of sales decreased from 68.0% to 66.4%. This decrease was driven by lower raw material costs, partially resulting from our purchasing initiatives, as well as product mix. The favorable impact of raw material prices impacted both our Performance Coatings and Transportation Coatings segments. Favorable impacts of currency exchange contributed to an additional 1.0% decrease in cost of sales as a percentage of net sales, primarily due to the impact of weakening currencies in certain jurisdictions within Latin America, Asia and North America compared to the U.S. dollar.
Selling, general and administrative expenses
Historical: Selling, general and administrative expenses were $991.5 million for the Successor year ended December 31, 2014 compared to $1,040.6 million for the Successor year ended December 31, 2013 and $70.8 million for the Predecessor period January 1, 2013 through January 31, 2013. During the Successor year ended December 31, 2014, we incurred $127.1 million of transition-related expenses, primarily related to our transition to a standalone company, compared to $231.5 million of transition-related expenses for the Successor year ended December 31, 2013. This resulted in a $104.4 million decrease over the comparable periods. These decreases were offset slightly by increased selling and administrative costs, as we focused on opportunities to expand our market presence. In addition, the favorable impacts of currency exchange during the Successor year ended December 31, 2014 contributed to a 1.1% decrease in selling, general and administrative expenses, primarily due to the impact of weakening currencies in certain jurisdictions within Latin America, Asia and North America compared to the U.S. dollar.
Pro Forma: Selling, general and administrative expenses decreased $122.1 million, or 11.0%, to $991.5 million for the Successor year ended December 31, 2014, as compared to $1,113.6 million for the Pro Forma year ended December 31, 2013. During the Successor year ended December 31, 2014, we incurred $127.1 million of transition-related expenses, primarily related to our transition to a standalone company, compared to $231.8 million of transition-related expenses for the Pro Forma year ended December 31, 2013. This resulted in a $104.7 million decrease over the comparable period. Contributing to the decrease in comparable periods was a reduction in U.S. pension expense and lower actual costs for our operating structure as a standalone entity during the Successor year ended December 31, 2014. These decreases were offset slightly by increased selling and administrative costs, as we focused on opportunities to expand our market presence. In addition, the favorable impacts of currency exchange during the Successor year ended December 31, 2014 contributed to a 1.1% decrease in selling, general and administrative expenses, primarily due to the impact of weakening currencies in certain jurisdictions within Latin America, Asia and North America compared to the U.S. dollar.

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Research and development expenses
Historical: Research and development expenses were $49.5 million for the Successor year ended December 31, 2014 compared to $40.5 million for the Successor year ended December 31, 2013 and $3.7 million for the Predecessor period January 1, 2013 through January 31, 2013. These increases were driven by additional spend as we focus on developing new and existing products in the market. The impacts of currency exchange did not have a material impact on the comparable periods.
Pro Forma: Research and development expenses increased by $5.3 million, or 12.0%, to $49.5 million for the Successor year ended December 31, 2014 compared to $44.2 million for the Pro Forma year ended December 31, 2013. These increases were driven by additional spend as we focus on developing new and existing products in the market. The impacts of currency exchange did not have a material impact on the comparable periods.
Amortization of acquired intangibles
Historical: Amortization of acquired intangibles was $83.8 million for the Successor year ended December 31, 2014 compared to $79.9 million for the Successor year ended December 31, 2013 and $0.0 million for the Predecessor period January 1, 2013 through January 31, 2013. Amortization of acquired intangibles for the Successor year ended December 31, 2013 included a loss of $3.2 million associated with abandoned in-process research and development projects, all of which were recorded at fair value as part of the Acquisition. There was $0.1 million of comparable costs recorded during the year ended December 31, 2014. Excluding the impact of the $3.2 million loss, the increase during the Successor year ended December 31, 2014 included the impact of twelve months of amortization expense associated with purchase accounting while the Successor year ended December 31, 2013 included eleven months due to the timing of the Acquisition. The impacts of currency exchange did not have a material impact on the comparable periods.
Pro Forma: Amortization of acquired intangibles for the Successor year ended December 31, 2014 was $83.8 million and $86.5 million for the Pro Forma year ended December 31, 2013. Amortization of acquired intangibles for the Pro Forma year ended December 31, 2013 included a loss of $3.2 million associated with abandoned in-process research and development projects, all of which were recorded at fair value as part of the Acquisition. There was $0.1 million of comparable costs recorded during the year ended December 31, 2014. The impacts of currency exchange did not have a material impact on the comparable periods.
Merger and acquisition related costs
Historical: 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. There were no comparable costs for the Successor year ended December 31, 2014.
Pro Forma: The Pro Forma year ended December 31, 2013 has been adjusted to remove the impact of these Acquisition related costs. There were no costs for the Successor year ended December 31, 2014.
Interest expense, net
Historical: Interest expense, net for the Successor year ended December 31, 2014 of $217.7 million represented a full year of interest costs, including the Refinancing of our Term Loans in February of 2014. Interest expense, net for the Successor year ended December 31, 2013 of $215.1 million represented interest expense incurred during the period associated with our original debt financing for the Acquisition. The increase in 2014 primarily relates to the Successor year ended December 31, 2014 including twelve months of interest expense while the comparable 2013 periods included eleven months due to the timing of the Acquisition. Further contributing to the increase in interest expense were losses incurred on interest rate derivatives for $10.2 million during the Successor year ended December 31, 2014, compared to gains of $0.2 million during the comparable period. These increases were offset by the reduction in interest rates due to the Refinancing in February 2014 of our Senior Credit Facility combined with an additional step-down in interest rates on our term loans in August of 2014. Further offsetting the increases were slight increases in capitalized interest during the Successor year ended December 31, 2014. The impacts of currency exchange did not have a material impact on the comparable periods.
Pro Forma: Interest expense, net was $217.7 million for the Successor year ended December 31, 2014 and $234.8 million for the Pro Forma year ended December 31, 2013. The Pro Forma amounts reflect the effects of the Financing as if the transaction had occurred on January 1, 2013, which resulted in an additional $19.7 million in interest for the Pro Forma year ended December 31, 2013. The decrease in the Successor year ended December 31, 2014 compared to the Pro Forma year ended December 31, 2013 primarily relates to the reduction in interest rates due to the Refinancing in February 2014 of our Senior Credit Facility combined with an additional step-down in interest rates on our term loans in August of 2014. Further contributing to the decrease in comparable periods was an increase in capitalized interest during the Successor year ended December 31, 2014. Offsetting these decreases were losses incurred on interest rate derivative instruments of $10.2 million for the Successor year ended December 31, 2014 compared with gains of $0.2 million during the Pro Forma year ended December 31, 2013. The impacts of currency exchange did not have a material impact on the comparable periods.

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Bridge financing commitment fees
Historical: On August 30, 2012, we signed a debt commitment letter, which was subsequently amended and restated, that included a bridge facility comprised of $1,100.0 million of unsecured U.S. bridge loans and the Euro equivalent of $300.0 million of secured Euro bridge loans (the "Bridge Facility"), which was to be utilized to partially fund the Acquisition in the event that permanent financing was not obtained. 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 legal and other professional advisory services costs of $4.0 million were expensed upon the termination during the Successor year ended December 31, 2013. There were no such costs incurred for the Successor year ended December 31, 2014.
Pro Forma: The Pro Forma year ended December 31, 2013 has been adjusted to remove the impact of these fees. There were no costs for the Successor year ended December 31, 2014.
Other expense, net
Historical: Other expense, net was $115.0 million for the Successor year ended December 31, 2014 compared to $48.5 million for the Successor year ended December 31, 2013 and $5.0 million of expense for the Predecessor period January 1, 2013 through January 31, 2013. Foreign exchange losses, net, were $81.2 million during the Successor year ended December 31, 2014 as compared to foreign exchange losses of $48.9 million and $4.5 million for the year ended December 31, 2013 and the predecessor period ended January 31, 2013, respectively. Net foreign exchange losses for the year ended December 31, 2014 consisted of $202.1 million in remeasurement losses primarily related to intercompany transactions denominated in currencies different from the functional currency of the relevant subsidiary, partially offset by $103.9 million in gains on our Euro borrowings and $17.0 million in gains related to our Venezuelan operations.
During 2014, we changed the exchange rate we use for remeasuring our Venezuelan subsidiaries’ non-U.S. Dollar denominated monetary assets and liabilities to the rate determined by an auction process conducted by Venezuela’s Complementary System of Foreign Currency Administration (SICAD I), which increased to 12.0 to 1 compared to the historical indexed rate of 6.3 to 1 at December 31, 2013. The devaluation resulted in net gains of $17.0 million for the Successor year ended December 31, 2014 due to our Venezuelan operations being in a net monetary liability position.
Contributing to expense in the Successor year ended December 31, 2013 was the adverse impact of $19.4 million of expense incurred related to the Acquisition date settlement of a foreign currency hedge contract used to hedge the variability of the U.S. dollar equivalent of the original borrowings under the Euro Term Loan and Euro Senior Notes.
Excluding the impact of the $19.4 million expense at the Acquisition date, foreign exchange losses of $29.5 million for the Successor year ended December 31, 2013 were attributable to $9.4 million in remeasurement losses primarily related to intercompany transactions denominated in currencies different from the functional currency of the relevant subsidiary and $14.6 million in remeasurement losses from the remeasurement of the Euro Senior Notes and Euro Term Loan into U.S. Dollars.
Further contributing to the increase in other expense for the Successor year ended December 31, 2014 were $16.6 million in management fees, which included a $13.4 million fee associated with the Carlyle management agreement which terminated with the effectiveness of the IPO. Additionally, during the Successor year ended December 31, 2014, we incurred debt modification fees and losses on extinguishment of debt of $3.1 million and $3.0 million, respectively. Lastly, the Successor year ended December 31, 2014 was impacted by the release of an indemnity receivable that had been recorded in conjunction with our tax indemnities from the Acquisition. This resulted in $17.8 million of expense during the Successor year ended December 31, 2014, relating to an uncertain tax position that was reversed during the Successor year ended December 31, 2014.
Pro Forma: Other expense, net was $115.0 million for the Successor year ended December 31, 2014 as compared to $34.1 million for the Pro Forma year ended December 31, 2013, representing a change of $80.9 million, or 237.2%. The Pro Forma year ended December 31, 2013 excludes the impact of $19.4 million of costs incurred related to the Acquisition date settlement of a foreign currency hedge contract used to hedge the variability of the U.S. dollar equivalent of the original borrowings under the Euro Term Loan and Euro Senior Notes. Net foreign exchange losses of $81.2 million were recorded for the Successor year ended December 31, 2014, as compared to exchange losses of $34.0 million for the Pro Forma year ended December 31, 2013. Net foreign exchange losses for the year ended December 31, 2014 consisted of $202.1 million in translation losses primarily related to intercompany transactions denominated in currencies different from the functional currency of the relevant subsidiary, partially offset by $103.9 million in gains on our Euro borrowings and $17.0 million in gains related to our Venezuelan operations.

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During 2014, we changed the exchange rate we use for remeasuring our Venezuelan subsidiaries’ non-U.S. Dollar denominated monetary assets and liabilities to the rate determined by an auction process conducted by Venezuela’s Complementary System of Foreign Currency Administration (SICAD I), which increased to 12.0 to 1 compared to the historical indexed rate of 6.3 to 1 at December 31, 2013. The devaluation resulted in net gains of $17.0 million for the Successor year ended December 31, 2014 due to our Venezuelan operations being in a net monetary liability position.
Further contributing to the increase in other expense for the Successor year ended December 31, 2014 were $16.6 million in management fees, which included a $13.4 million fee associated with the Carlyle management agreement which terminated with the effectiveness of the IPO. Additionally, during the Successor year ended December 31, 2014 we incurred debt modification fees and losses on extinguishment of debt of $3.1 million and $3.0 million, respectively. Lastly, the Successor year ended December 31, 2014 was impacted by the release of an indemnity receivable that had been recorded in conjunction with our tax indemnities from the Acquisition. This resulted in $17.8 million of expense during the Successor year ended December 31, 2014, relating to an uncertain tax position that was reversed during the Successor year ended December 31, 2014.
Provision (benefit) for income taxes
Historical: We recorded a provision for income taxes of $2.1 million for the Successor year ended December 31, 2014, which represents a 5.7% effective tax rate in relation to the income before income taxes of $36.8 million. The effective tax rate for the Successor year ended December 31, 2014 differs from the U.S. Federal statutory rate by 29.3%, which is the result of various items that impacted the rate both favorably and unfavorably. We recorded favorable adjustments for earnings in jurisdictions where the statutory rate is lower than the U.S. Federal rate of $46.7 million and unrecognized tax benefit adjustments primarily related to acquisition tax matters of $44.0 million. These adjustments were partially offset by the impact of pre-tax losses attributable to jurisdictions where a tax benefit is not expected to be realized of $44.4 million and non-deductible expenses and interest of $29.6 million.
We recorded a benefit for income taxes of $44.8 million for the Successor year ended December 31, 2013, which represents a 17.0% effective tax rate in relation to the loss before income taxes of $263.7 million. The effective tax rate for the Successor year ended December 31, 2013 differs from the U.S. Federal statutory rate by 18.0%. This difference is primarily due to unfavorable adjustments for the impact of pre-tax losses attributable to jurisdictions where a tax benefit is not expected to be realized of $55.0 million, unrecognized tax benefits primarily related to acquisition tax matters of $35.1 million, and non-deductible expenses of $25.8 million. These adjustments were partially offset by the benefit of earnings in jurisdictions where the statutory tax rate was lower than the U.S. Federal statutory rate of $36.6 million and capital losses of $46.7 million.
We recorded a provision for income taxes of $7.1 million for the Predecessor period ended January 31, 2013 which represents a 45.6% effective tax rate in relation to the income before income taxes of $15.6 million.
Pro Forma: We recorded a benefit for income taxes of $1.3 million for the Pro Forma year ended December 31, 2013, which represents a 1.2% effective tax rate in relation to the pro forma loss before income taxes of $108.1 million. The variance in the pro forma effective tax rate from the historical effective tax rate, described in the corresponding historical discussion above, was primarily due to the application of statutory income tax rates to the cumulative pro forma adjustments.

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SEGMENT RESULTS
Year ended December 31, 2015 compared to the year ended December 31, 2014
The following table presents net sales by segment and segment Adjusted EBITDA for the following periods:
 
Year Ended December 31,
(In millions)
2015
2014
Net Sales
 
 
Performance Coatings
$
2,385.1

$
2,585.0

Transportation Coatings
1,702.1

1,776.7

Total
$
4,087.2

$
4,361.7

Segment Adjusted EBITDA
 
 
Performance Coatings
$
539.1

$
547.6

Transportation Coatings
328.1

292.9

Total
$
867.2

$
840.5

Performance Coatings Segment
Net sales decreased $199.9 million, or 7.7%, to $2,385.1 million for the year ended December 31, 2015 compared to net sales of $2,585.0 million for the year ended December 31, 2014. The decrease in net sales for the year ended December 31, 2015 was primarily a result of unfavorable impacts of currency exchange across all regions, which contributed approximately 12.9% to the reduction in net sales. The negative currency exchange impacts were primarily related to the weakening Euro and certain currencies within Latin America compared to the U.S. dollar. The decrease in net sales was partially offset by increases in average selling price, primarily in Latin America, which contributed to an increase of 2.4%. Further offsetting this decrease was an increase in volume across all regions, which contributed to a net sales increase of 2.8%.
Adjusted EBITDA decreased $8.5 million, or 1.6%, to $539.1 million for the year ended December 31, 2015 compared to Adjusted EBITDA of $547.6 million for the year ended December 31, 2014. The decrease in Adjusted EBITDA for the year ended December 31, 2015 was primarily driven by unfavorable impacts of currency exchange across all regions, due mainly to the weakening Euro and certain currencies within Latin America compared to the U.S. dollar. This decrease was partially offset by higher average selling prices primarily within Latin America. Further offsetting the decline were increases driven by higher volumes and lower variable costs. Additionally, dividends from our consolidated joint ventures to our noncontrolling partners negatively impacted Adjusted EBITDA by $3.1 million for the year ended December 31, 2015 as compared to $0.1 million for the year ended December 31, 2014.
Transportation Coatings Segment
Net sales decreased $74.6 million, or 4.2%, to $1,702.1 million for the year ended December 31, 2015 compared to net sales of $1,776.7 million for the year ended December 31, 2014. The decrease in net sales for the year ended December 31, 2015 was primarily driven by unfavorable impacts of currency exchange across all regions, which contributed to an approximately 9.6% reduction in net sales resulting primarily from the impacts of the weakening Euro and certain currencies within Latin America compared to the U.S. dollar. Further contributing to the decline in net sales was a 0.2% decrease in average selling prices primarily within North America, Europe and Asia. The decrease in net sales was partially offset by volume increases primarily within North America and Asia, which contributed to a net sales increase of 5.6%.
Adjusted EBITDA increased $35.2 million, or 12.0%, to $328.1 million for the year ended December 31, 2015 compared to Adjusted EBITDA of $292.9 million for the year ended December 31, 2014. The increase in Adjusted EBITDA for the year ended December 31, 2015 was primarily driven by higher volumes and lower variable costs. This increase was partially offset by unfavorable impacts of the weakening Euro and certain currencies within Latin America compared to the U.S. dollar.

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Successor year ended December 31, 2014 compared to the Successor year ended December 31, 2013 and Predecessor period January 1, 2013 through January 31, 2013, and Successor year ended December 31, 2014 compared to the Pro Forma year ended December 31, 2013
The following table presents net sales by segment and segment Adjusted EBITDA for the following periods:
 
Successor
Predecessor
Pro Forma
 
Year Ended December 31,
Period from January 1
through
January 31,
Year Ended
December 31,
(In millions)
2014
2013
2013
2013
Net Sales
 
 
 
 
Performance Coatings
$
2,585.0

$
2,325.3

$
186.8

$
2,512.1

Transportation Coatings
1,776.7

1,625.8

139.4

1,765.2

Total
$
4,361.7

$
3,951.1

$
326.2

$
4,277.3

Segment Adjusted EBITDA(1)
 
 
 
 
Performance Coatings
$
547.6

$
500.2

$
15.0

$
518.7

Transportation Coatings
292.9

198.8

17.7

218.9

Total
$
840.5

$
699.0

$
32.7

$
737.6

(1)
For information about Adjusted EBITDA, including the manner in which it is calculated and a reconciliation from our net income (loss) to Adjusted EBITDA see Part II, Item 7, "Non-GAAP Financial Measures". The Segment Adjusted EBITDA information for the Pro Forma year ended December 31, 2013 includes (a) the add-back of corporate allocations from DuPont to DPC for the usage of DuPont’s facilities, functions and services; costs for administrative functions and services performed on behalf of DPC by centralized staff groups within DuPont; a portion of DuPont’s general corporate expenses; and certain pension and other long-term employee benefit costs net of (b) estimated standalone costs based on a corporate function resource analysis that included a standalone executive office, the costs associated with supporting a standalone information technology infrastructure, corporate functions such as legal, finance, treasury, procurement and human resources and certain costs related to facilities management. This resource analysis included anticipated headcount and the associated overhead costs of running these functions effectively as a standalone company of our size and complexity. This resulted in a net benefit of $5.7 million for the Predecessor period January 1, 2013 through January 31, 2013.
Performance Coatings Segment
Historical: Net sales were $2,585.0 million for the Successor year ended December 31, 2014 compared to net sales of $2,325.3 million for the Successor year ended December 31, 2013 and $186.8 million for the Predecessor period January 1, 2013 through January 31, 2013. The increase in net sales in the Successor year ended December 31, 2014 was primarily driven by volume growth, which contributed to a net sales increase of 3.1%, as well as higher average selling prices, which contributed to a net sales increase of 1.9%. Net sales growth was partially offset by the unfavorable impacts of currency exchange, which contributed to an approximately 2.1% reduction in net sales resulting primarily from the impacts of weakening currencies in certain jurisdictions within Latin America and Asia.
Adjusted EBITDA was $547.6 million for the Successor year ended December 31, 2014 compared to Adjusted EBITDA of $500.2 million for the Successor year ended December 31, 2013 and $15.0 million for the Predecessor period January 1, 2013 through January 31, 2013. The increase in Adjusted EBITDA in the Successor year ended December 31, 2014 was driven by higher volumes and higher average selling price as well as lower raw material input costs slightly offset by higher operating costs. In addition, the absence of the Predecessor corporate allocated costs in January 2013 contributed an approximate $3.4 million benefit.
Pro Forma: Net sales increased $72.9 million, or 2.9%, to $2,585.0 million for the Successor year ended December 31, 2014, as compared to net sales of $2,512.1 million for the Pro Forma year ended December 31, 2013. The increase in net sales in the Successor year ended December 31, 2014 was primarily driven by volume growth, which contributed to a net sales increase of 3.1%, as well as higher average selling prices, which contributed to a net sales increase of 1.9%. Net sales growth was partially offset by the unfavorable impacts of currency exchange, which contributed to an approximately 2.1% reduction in net sales resulting primarily from the impacts of weakening currencies in certain jurisdictions within Latin America and Asia.
Adjusted EBITDA increased $28.9 million, or 5.6%, to $547.6 million for the Successor year ended December 31, 2014 as compared to $518.7 million for the Pro Forma year ended December 31, 2013. As a percentage of net sales, Adjusted EBITDA increased to 21.2% from 20.6%. The increase was driven by higher volumes and higher average selling price as well as lower raw material input costs offset slightly by higher operating costs.

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Transportation Coatings Segment
Historical: Net sales were $1,776.7 million for the Successor year ended December 31, 2014 compared to net sales of $1,625.8 million for the Successor year ended December 31, 2013 and $139.4 million for the Predecessor period January 1, 2013 through January 31, 2013. The increase in net sales in the Successor year ended December 31, 2014 was primarily driven by higher average selling prices, which contributed to net sales growth of 4.0%. This increase was partially offset by volume declines, primarily concentrated in the Latin America region, which contributed to a net sales decline of 1.4%. Unfavorable currency exchange rates also contributed to a reduction to net sales of 1.9% resulting primarily from the impacts of weakening currencies in certain jurisdictions primarily within Latin America.
Adjusted EBITDA was $292.9 million for the Successor year ended December 31, 2014 compared to Adjusted EBITDA of $198.8 million for the Successor year ended December 31, 2013 and $17.7 million for the Predecessor period January 1, 2013 through January 31, 2013. The increase in Adjusted EBITDA in the Successor year ended December 31, 2014 was driven by higher average selling prices as well as lower fixed manufacturing costs, partially resulting from our operational improvement initiatives. In addition, the absence of the Predecessor corporate allocated costs contributed an approximate $2.3 million benefit.
Pro Forma: Net sales increased $11.5 million, or 0.7%, to $1,776.7 million for the year ended December 31, 2014, as compared to net sales of $1,765.2 million for the Pro Forma year ended December 31, 2013. The increase in net sales for the year ended December 31, 2014 as compared to the Pro Forma year ended December 31, 2013 was primarily driven by higher average selling prices, which contributed to net sales growth of 4.0%. This increase was partially offset by declining volumes primarily concentrated in the Latin America region, which contributed to a net sales decline of 1.4%. Unfavorable currency exchange rates also contributed to a reduction to net sales of 1.9% resulting primarily from the impacts of weakening currencies in certain jurisdictions primarily within Latin America
Adjusted EBITDA increased $74.0 million, or 33.8%, to $292.9 million for the year ended December 31, 2014 as compared to $218.9 million for the Pro Forma year ended December 31, 2013. As a percentage of net sales, Adjusted EBITDA increased to 16.5% from 12.4%. This increase was driven by higher average selling prices as well as lower fixed manufacturing costs, partially resulting from our operational improvement initiatives.

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LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are cash on hand, cash flow from operations and available borrowing capacity under our Senior Secured Credit Facilities.
At December 31, 2015, availability under the Revolving Credit Facility was $375.1 million, net of $24.9 million of letters of credit outstanding. All such availability may be utilized without violating any covenants under the credit agreement governing such facility or the indentures governing the Dollar Senior Notes and the Euro Senior Notes. At December 31, 2015, we also had $1.9 million in outstanding borrowings under other lines of credit. Our remaining available borrowing capacity under other lines of credit in certain non-U.S. jurisdictions totaled $3.1 million.
We or our affiliates, at any time and from time to time, may purchase the Dollar Senior Notes, the Euro Senior Notes or other indebtedness. Any such purchases may be made through the open market or privately negotiated transactions with third parties or pursuant to one or more tender or exchange offers or otherwise, upon such terms and at such prices, as well as with such consideration, as we, or any of our affiliates, may determine. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Cash Flows
Successor years ended December 31, 2015, 2014 and 2013 and Predecessor period from January 1 through January 31, 2013.
 
Successor
Predecessor
 
Year Ended December 31,
Period from January 1
through
January 31,
(In millions)
2015
2014
2013
2013
Net cash provided by (used for):
 
 
 
 
Operating activities:
 
 
 
 
Net income (loss)
$
97.9

$
34.7

$
(218.9
)
$
8.5

Depreciation and amortization
307.7

308.7

300.7

9.9

Deferred income taxes
(5.0
)
(38.2
)
(120.8
)
9.1

Amortization of financing costs and original issue discount
20.6

21.0

18.4


Fair value of acquired inventory sold
1.2


103.7


Foreign exchange losses
93.7

75.1

48.9

4.5

Bridge financing commitment fees


25.0


Stock-based compensation
30.2

8.0

7.4


Asset impairment
30.6




Other non-cash items
13.8

(19.2
)
13.2

(3.9
)
Net income adjusted for non-cash items
590.7

390.1

177.6

28.1

Changes in operating assets and liabilities
(191.1
)
(138.7
)
199.2

(65.8
)
Operating activities
399.6

251.4

376.8

(37.7
)
Investing activities
(164.3
)
(178.5
)
(5,011.2
)
(8.3
)
Financing activities
(74.5
)
(123.2
)
5,098.1

43.0

Effect of exchange rate changes on cash
(57.9
)
(26.9
)
(4.4
)

Net increase (decrease) in cash and cash equivalents
$
102.9

$
(77.2
)
$
459.3

$
(3.0
)

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Year Ended December 31, 2015 (Successor)
Net Cash Provided by Operating Activities
Net cash provided by operating activities for the year ended December 31, 2015 was $399.6 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $590.7 million. This was partially offset by net increases in operating assets and liabilities of $191.1 million. The most significant drivers in working capital were increases in accounts receivables and other assets of $126.7 million due primarily to the mix of credit terms which drove an increase in days sales outstanding and increased inventory builds of $35.2 million to support ongoing operational demands. Cash flows associated with accounts payable and other liabilities of $29.1 million related to payments of normal operating activities incurred in 2014 and paid during 2015.
Net Cash Used for Investing Activities
Net cash used for investing activities for the year ended December 31, 2015 was $164.3 million. This use was primarily driven by purchases of property, plant and equipment of $138.1 million and acquisitions of $29.6 million (net of cash received), partially offset by a decrease of $1.9 million in restricted cash.
Net Cash Used for Financing Activities
Net cash used for financing activities for the year ended December 31, 2015 was $74.5 million. The change was primarily driven by repayment of term loans of $127.3 million. These payments were comprised of a $100.0 million prepayment on our Dollar Term Loan made during the year ended December 31, 2015, along with $27.3 million of quarterly principal repayments as required under the Credit Agreement. In addition to these payments, we also paid dividends to non-controlling interests of $4.7 million. Offsetting these payments were cash received from stock option exercises and their associated tax benefits for $72.6 million, and proceeds received from short-term borrowings during the period of $2.0 million.
Year ended December 31, 2014 (Successor)
Net Cash Provided by Operating Activities
Net cash provided by operating activities for the year ended December 31, 2014 was $251.4 million. Net income before deducting depreciation, amortization and other non-cash items generated cash of $390.1 million. This was partially offset by net increases in operating assets and liabilities of $138.7 million. The most significant drivers in working capital were increases in receivables, inventory and other assets of $119.0 million due primarily to increased net sales and inventory builds to support ongoing operational demands compared to the year ended December 31, 2013, as well as reductions of other accrued liabilities of $54.8 million primarily related to the payment of transition-related costs, including restructuring costs, partially offset by a $53.6 million increase in accounts payable.
Net Cash Used for Investing Activities
Net cash used for investing activities for the year ended December 31, 2014 was $178.5 million. This use was driven primarily by purchases of property, plant and equipment of $188.4 million, the purchase of increased ownership in a majority owned joint venture of $6.5 million and an increase of $4.7 million in restricted cash, partially offset by $21.3 million of proceeds from sales of assets. Purchases of property, plant and equipment includes approximately $74.8 million associated with our transition-related capital projects including our information technology systems and finalization of our transition of our global office relocations.
Net Cash Provided by Financing Activities
Net cash used for financing activities for the year ended December 31, 2014 was $123.2 million. The change was primarily driven by repayments of term loans of $121.1 million. These payments were comprised of a $100.0 million prepayment on our Dollar Term Loan made during the year ended December 31, 2014, along with $21.1 million of quarterly principal repayments as required under the Credit Agreement. In addition, we repaid short-term borrowings of $33.8 million partially offset by proceeds received from short-term borrowing during the period of $30.7 million. During the year ended December 31, 2014, we paid $3.0 million in fees related to the amendment of the Senior Secured Credit Facilities. We received $2.5 million through the sale of common shares during the year ended December 31, 2014. We also received $3.0 million related to the exercise of stock options. Dividends paid to noncontrolling interests totaled $2.2 million for the year ended December 31, 2014.

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Year ended December 31, 2013 (Successor)
Net Cash Provided by Operating Activities
Cash provided by operating activities was $376.8 million for the Successor year ended December 31, 2013. The cash flow from operations was the result of cash flows generated by operating earnings and reductions in net working capital, partially offset by merger and acquisition related costs and transition costs associated with our separation from DuPont. An increase in trade and notes receivable was due largely to higher sales levels during the Successor year ended December 31, 2013 resulted in an outflow of cash of $6.4 million. A decrease in inventories resulted in a generation of cash of $33.9 million. The decrease in inventories was primarily the result of the continued focus on working capital levels relative to demand and lower raw material costs. An increase in accounts payable favorably impacted cash flow from operations by $67.1 million. The increase in accounts payable was due in part to the separation from DuPont in February 2013, which resulted in the establishment of new credit terms with our new vendors as a standalone company, including certain raw materials contracts with DuPont, which were historically related party purchases in the Predecessor period. Prior to the Acquisition, transactions between DuPont and DPC were deemed to be settled immediately through the parent company net investment. Further contributing to the cash flows provided by operating activities was an increase in accrued liabilities of $193.1 million related to the timing of cash payments for annual employee performance related benefits, which were paid by DuPont for the 2012 performance period. The remaining increases in accrued liabilities had no impact on cash flows from operations, including severance-related liabilities and transition-related expenses, which had been accrued as of December 31, 2013 and had an offsetting impact within Net income (loss). Offsetting this operating activity was cash used in operating activities related to the restructuring activities during the year ended December 31, 2013, for which $23.7 million of payments were made.
Net Cash Used for Investing Activities
During the Successor year ended December 31, 2013, we acquired DPC for a purchase price of $4,907.3 million. Cash acquired was $79.7 million, which resulted in a net cash outflow of $4,827.6 million to acquire DPC.
During the Successor year ended December 31, 2013, we entered into a foreign currency contract to hedge the variability of the U.S. dollar equivalent of the original borrowings under the Euro Term Loan and the proceeds from the issuance of Euro Senior Notes. Net cash used to settle the derivative instrument was $19.4 million. Additionally, we purchased a €300.0 million 1.5% interest rate cap on our Euro Term Loan for a premium of $3.1 million.
Purchases of property, plant and equipment during the Successor year ending December 31, 2013, were $107.3 million, which included transition costs related to our transition to a standalone entity, which included costs to transition off of the DuPont information technology systems. In addition to the transition costs, we incurred costs for several growth and improvement initiatives including the waterborne projects in Jiading, China and Front Royal, Virginia.
During the Successor year ended December 31, 2013, we also invested $54.5 million for a real estate property.
Net Cash Provided by Financing Activities
As part of the Acquisition, on February 1, 2013 Carlyle made the Equity Contribution of $1,350.0 million. Further, there were additional equity contributions of $5.4 million during the Successor year ended December 31, 2013.
Borrowings during the Successor year ended December 31, 2013 included $2,817.3 million of proceeds from borrowings under our Senior Secured Credit Facilities, net of original issue discount of $25.7 million, and the issuance of our Senior Notes in the amount of $1,089.4 million. We paid $126.0 million of deferred financing costs associated with issuing the Dollar Senior Notes and Euro Senior Notes and entering into the Senior Secured Credit Facilities and $25.0 million of commitment fees related to the Bridge Facility. Other short-term borrowings during the Successor year ended December 31, 2013 also included short-term borrowings of $38.8 million.
During the Successor year ended December 31, 2013, we made our required quarterly amortization payments on the Dollar Term Loan and Euro Term Loan totaling $21.3 million, as well as payments of $25.3 million on short-term borrowings.
During the Successor year ended December 31, 2013, dividends paid to noncontrolling interests totaled $5.2 million.
January 1, 2013 through January 31, 2013 (Predecessor)
Net Cash Used for Operating Activities
Net cash used for operating activities for the Predecessor period from January 1, 2013 through January 31, 2013 was $37.7 million. Net income, before deducting depreciation and amortization and other non-cash items, generated cash of $28.1 million.

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An increase in inventories resulted in a use of cash of $19.3 million. Decreases in other accrued liabilities and accounts payable resulted in a use of cash of $43.8 million and $29.9 million, respectively. The decrease in other current liabilities was primarily due to reductions in compensation and other employee-related cost liabilities related to payment of annual incentive compensation, a reduction in the liabilities for discounts, rebates and warranties related to payments under annual rebate programs and a reduction in our foreign currency contracts derivatives liability. The reduction in accounts payable was primarily related to timing of vendor payments. Partially offsetting these items was a decrease in trade accounts and notes receivable which provided cash of $25.8 million. All other operating assets and liabilities netted to a $1.4 million generation of cash.
Net Cash Used for Investing Activities
During the Predecessor period from January 1, 2013 through January 31, 2013, net cash used for investing activities was $8.3 million. Purchases of property, plant and equipment and intangible assets were $2.4 million and $6.3 million, respectively, during the Predecessor period January 1, 2013 through January 31, 2013.
Net Cash Provided by Financing Activities
During the Predecessor period from January 1, 2013 through January 31, 2013, net cash provided by financing activities was $43.0 million which mainly represents the net cash used by operating activities and net cash used in investing activities discussed above as a result of DuPont’s centralized cash management system.
Financial Condition
We had cash and cash equivalents at December 31, 2015 and 2014 of $485.0 million and $382.1 million, respectively. Of these balances, $372.6 million and $264.2 million were maintained in non-U.S. jurisdictions as of December 31, 2015 and 2014, respectively. We believe our organizational structure allows us the necessary flexibility to move funds throughout our subsidiaries to meet our operational working capital needs.
Our business may not generate sufficient cash flow from operations and future borrowings may not be available under our Senior Secured Credit Facilities in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs, including planned capital expenditures. In such circumstances, we may need to refinance all or a portion of our indebtedness on or before maturity. We may not be able to refinance any of our indebtedness on commercially reasonable terms or at all. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances. See Part I, Item 1A, “Risk Factors-Risks Related to our Indebtedness-To service all of our indebtedness, we will require a significant amount of cash and our ability to generate cash depends on many factors beyond our control.” Our primary sources of liquidity are cash on hand, cash flow from operations and available borrowing capacity under our Revolving Credit Facility. Based on our forecasts, we believe that cash flow from operations, available cash on hand and available borrowing capacity under our Senior Secured Credit Facilities and existing lines of credit will be adequate to service debt, fund the transition-related costs and cost-savings initiatives, meet liquidity needs and fund necessary capital expenditures for the next twelve months.
Our ability to make scheduled payments of principal or interest on, or to refinance, our indebtedness or to fund working capital requirements, capital expenditures and other current obligations will depend on our ability to generate cash from operations. Such cash generation is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
If required, our ability to raise additional financing and our borrowing costs may be impacted by short and long-term debt ratings assigned by independent rating agencies, which are based, in significant part, on our performance as measured by certain credit metrics such as interest coverage and leverage ratios. Our highly leveraged nature may limit our ability to procure additional financing in the future.

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The following table details our borrowings outstanding at the periods indicated:
 
Year Ended December 31,
(In millions)
2015
2014
Dollar Term Loan
$
2,042.5

$
2,165.5

Euro Term Loan
428.0

481.0

Dollar Senior Notes
750.0

750.0

Euro Senior Notes
274.4

305.3

Short-term and other borrowings
26.5

12.9

Unamortized original issue discount
(14.0
)
(18.3
)
Deferred financing costs, net
(65.9
)
(82.1
)
 
3,441.5

3,614.3

Less:
 
 
Short term borrowings
22.7

12.2

Current portion of long-term borrowings
27.4

27.9

Long-term debt
$
3,391.4

$
3,574.2

Our indebtedness, including the Senior Secured Credit Facilities and Senior Notes, are more fully described in Note 22 to the consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K.
Our liquidity requirements are significant due to the highly leveraged nature of our company as well as our working capital requirements. At December 31, 2015 and 2014, there were no borrowings under the Revolving Credit Facility with total availability under the Revolving Credit Facility of $375.1 million and $384.5 million, respectively, all of which may be borrowed by us without violating any covenants under the credit agreement governing such facility or the indentures governing the Dollar Senior Notes and the Euro Senior Notes.
The following tables detail our borrowings outstanding and the associated interest expense, including amortization of debt issuance costs and debt discounts, and average effective interest rates for such borrowings for the Successor years ended December 31, 2015 and 2014, respectively:
 
Year Ended December 31, 2015
(In millions)
Principal
Average Effective
Interest Rate
Interest
Expense
Term Loans
$
2,470.5

4.6
%
$
112.7

Revolving Credit Facility

N/A
3.9

Senior Notes
1,024.4

7.4
%
75.4

Short-term and other borrowings
26.5

Various
1.2

Total
$
3,521.4

 
$
193.2

 
Year Ended December 31, 2014
(In millions)
Principal
Average Effective
Interest Rate
Interest
Expense
Term Loans
$
2,646.5

5.2
%
$
127.6

Revolving Credit Facility

N/A
4.7

Senior Notes
1,055.3

7.5
%
78.6

Short-term and other borrowings
12.9

Various
1.4

Total
$
3,714.7

 
$
212.3


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Contractual Obligations
The following table summarizes our contractual obligations at December 31, 2015:
 
Contractual Obligations Due In:
(In millions)
Total
2016
2017-2018
2019-2020
Thereafter
Debt, including current portion (1)
 
 
 
 
 
Senior Secured Credit Facilities, consisting of the following:
 
 
 
 
 
Term Loan Facilities:
 
 
 
 
 
Dollar Term Loan
$
2,042.5

$
23.0

$
46.0

$
1,973.5

$

Euro Term Loan
428.0

4.4

8.8

414.8


Senior Notes, consisting of the following:
 
 
 
 
 
Dollar Senior Notes
750.0




750.0

Euro Senior Notes
274.4




274.4

Other borrowings (1)
14.5

10.8

2.9

0.4

0.4

Interest payments (1)
789.2

168.0

330.4

241.4

49.4

Operating leases (2)
169.8

39.0

51.1

35.9

43.8

Pension contributions (3)
17.2

17.2




Purchase obligations
68.4

25.9

38.9

3.6


Uncertain tax positions, including interest and penalties (4)





Total
$
4,554.0

$
288.3

$
478.1

$
2,669.6

$
1,118.0

(1)
Amounts assume that the Senior Secured Credit Facilities and Senior Notes are repaid upon maturity, and the Revolving Credit Facility remains undrawn, which may or may not reflect future events. Other borrowings excludes debt associated with a built-to-suit lease arrangement discussed further in the following note. Future interest payments include commitment fees on the unused portion of the Revolving Credit Facility, and reflect the interest payments on our Dollar Term Loan, Euro Term Loan and the Senior Notes. Future interest payments assume December 31, 2015 interest rates will prevail throughout all future periods. Actual interest payments and repayment amounts may change.
(2)
During the year ended December 31, 2015, we entered into two built-to-suit lease arrangements, commencing after December 31, 2015, which collectively require $98.2 million to be paid over a twenty year period. Due to the uncertainty regarding future timing of cash flows associated with these leases, which are dependent on the construction completion dates, we are unable to reasonably estimate the years in which the lease payments will be made.
(3)
We expect to make contributions to our defined benefit pension plans beyond 2016; however, the amount of any contributions is dependent on the future economic environment and investment returns, and we are unable to reasonably estimate the pension contributions beyond 2016.
(4)
As of December 31, 2015, we had approximately $5.4 million of uncertain tax positions, including interest and penalties that could result in potential payments. Due to the high degree of uncertainty regarding future timing of cash flows associated with these liabilities, we are unable to estimate the years in which settlement will occur with the respective taxing authorities.
Scheduled Maturities
Below is a schedule of required future repayments of all borrowings outstanding at December 31, 2015.
(In millions)
 
2016
$
38.1

2017
29.5

2018
28.1

2019
27.6

2020
2,361.2

Thereafter
1,024.9

Total
$
3,509.4


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Off Balance Sheet Arrangements
In connection with the Acquisition, we assumed certain obligations under which we directly guarantee various debt obligations under agreements with third parties related to equity affiliates, customers and suppliers. As of December 31, 2015 and 2014 these off balance sheet arrangements were not material to our consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K.
No amounts were accrued at December 31, 2015 and 2014.
Recent Accounting Guidance
See Note 4 to the consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K for a summary of recent accounting guidance.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of results of operations and financial condition are based upon our financial statements. These financial statements have been prepared in accordance with U.S. GAAP unless otherwise noted. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts reported in the financial statements. We base our estimates and judgments on historical experiences and assumptions believed to be reasonable under the circumstances and re-evaluate them on an ongoing basis. Actual results could differ from our estimates under different assumptions or conditions. Our significant accounting policies, which may be affected by our estimates and assumptions, are more fully described in Note 3 to the consolidated and combined financial statements included elsewhere in this Annual Report.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes the following critical accounting policies reflect its most significant estimates and assumptions used in the preparation of the financial statements.
Accounting for Business Combinations
We account for business combinations under the acquisition method of accounting. This method requires the recording of acquired assets, including separately identifiable intangible assets, and assumed liabilities at their acquisition date fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, royalty rates, asset lives and market multiples, among other items.
The fair values of intangible assets were estimated using an income approach, either the excess earnings method (customer relationships) or the relief from royalty method (technology and trademarks). Under the excess earnings method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows attributable solely to the intangible asset over its remaining useful life. Under the relief from royalty method, fair value is measured by estimating future revenue associated with the intangible asset over its useful life and applying a royalty rate to the revenue estimate. These intangible assets enable us to secure markets for our products, develop new products to meet the evolving business needs and competitively produce our existing products.
The fair value of real properties acquired was based on the consideration of their highest and best use in the market. The fair values of property, plant and equipment, other than real properties, were based on the consideration that unless otherwise identified, they will continue to be used "as is" and as part of the ongoing business. In contemplation of the in-use premise and the nature of the assets, the fair value was developed primarily using a cost approach. The determination of the fair value of assets acquired and liabilities assumed involves assessing factors such as the expected future cash flows associated with individual assets and liabilities and appropriate discount rates at the date of the acquisition.
The fair value of the noncontrolling interests, related to acquired joint ventures, were estimated by applying an income approach. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a fair value measurement categorized within Level 3 of the fair value hierarchy. Key assumptions included a discount rate, a terminal value based on a range of long-term sustainable growth rates and adjustments because of the lack of control that market participants would consider when measuring the fair value of the noncontrolling interests.
The results of operations for businesses acquired are included in the financial statements from the date of the acquisition.
See Note 5 to the consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K for further detail on the Acquisition and related accounting.

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Asset Impairments
Factors that could result in future impairment charges, among others, include changes in worldwide economic conditions, changes in technology, changes in competitive conditions and customer preferences, and fluctuations in foreign currency exchange rates. These risk factors are discussed in Part I, Item 1A, "Risk Factors," included elsewhere in this Annual Report on Form 10-K.
Goodwill and indefinite-lived intangible assets
As discussed in Note 3 to the consolidated and combined financial statements included elsewhere in this Annual Report on Form 10-K, the Company tests goodwill and identifiable intangible assets with indefinite lives for impairment at least annually as of October 1st. We test goodwill and indefinite-lived intangible assets for impairment by performing a qualitative evaluation. The qualitative evaluation is an assessment of factors, including reporting unit or asset specific operating results and cost factors, as well as industry, market and macroeconomic conditions, to determine whether it is more likely than not (more than 50%) that the fair values of a reporting unit or asset is less than the respective carrying amounts, including goodwill when testing goodwill for impairment. In the event the qualitative assessment indicates that an impairment is more likely than not, we would be required to perform a quantitative impairment test, otherwise no further analysis is required. We may elect to bypass this qualitative assessment for some or all of our reporting units and indefinite-lived intangible assets and perform a two-step quantitative test. Fair values under the quantitative test are estimated using a combination of discounted projected future earnings or cash flow methods, that are based on projections of the amounts and timing of future revenue and cash flows, and multiples of earnings in estimating fair value.
For the 2015 impairment tests of our goodwill and indefinite-lived intangible assets, management concluded that the carrying values equaled or exceeded the respective fair values and no impairments existed.
The inputs utilized in a quantitative analysis are classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, Fair Value Measurement. The process of evaluating the potential impairment of goodwill and indefinite-lived intangible assets is subjective because it requires the use of estimates and assumptions as to our future cash flows, discount rates commensurate with the risks involved in the assets, future economic and market conditions, as well as other key assumptions. We believe that the amounts recorded in the financial statements related to goodwill and indefinite-lived intangible assets are based on the best estimates and judgments of the appropriate Axalta management, although actual outcomes could differ from our estimates.
Goodwill is allocated to, and evaluated for impairment at, the reporting unit level, which is defined as an operating segment or one level below an operating segment. We have two operating segments - Performance Coatings and Transportation Coatings - that also serve as our reportable segments. We have goodwill allocated to four reporting units. At December 31, 2015, our $928.2 million in total goodwill is allocated to reportable segments as follows: $866.1 million in Performance Coatings and $62.1 million in Transportation Coatings.
Other intangible assets
Definite-lived intangible assets, such as technology, trademarks, customer relationships and non-compete agreements are amortized over their estimated useful lives, generally for periods ranging from 4 to 20 years. The reasonableness of the useful lives of these assets is continually evaluated. Once these assets are fully amortized, they are removed from the balance sheet.
The in-process research and development projects we acquired are considered indefinite-lived intangible assets until the abandonment or completion of the associated research and development efforts. Upon completion of the research and development process, the carrying values of acquired in process research and development projects are reclassified as definite-lived assets and are amortized over their useful lives. If the project is abandoned, we record the write-off as a loss in the statement of operations. During the years ended December 31, 2015 and 2014, we abandoned certain projects with carrying amounts of $0.1 million and $0.1 million, respectively, and recorded losses associated with these projects, which are included as components of amortization of acquired intangibles in the consolidated statements of operations.
Long-Lived Assets
Long-lived assets, which includes property, plant and equipment, and definite-lived intangible assets, are assessed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. The impairment testing involves comparing the carrying amount of the asset to the forecasted undiscounted future cash flows generated by that asset. In the event the carrying amount of the asset exceeds the undiscounted future cash flows generated by that asset and the carrying amount is not considered recoverable, an impairment exists. An impairment loss is measured as the excess of the asset’s carrying amount over its fair value. An impairment loss is recognized in the statement of operations in the period that the impairment occurs.

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We evaluated the impacts to our Venezuelan operations caused by the volatility of the economic conditions in Venezuela including the weakening of the Venezuelan bolivar and general uncertainty in the political environment.  At December 31, 2015, we concluded an impairment indicator existed and performed a formal recovery test on our long-lived assets.  The Company utilized forecasted undiscounted cash flows associated with our Venezuelan operations.  Our key assumptions utilized historical performance, our ability to utilize price increases to offset inflation as well as demand expectations for 2016 and beyond. Further, our operations are partially dependent on raw material supplies from Axalta subsidiaries to continue to meet our anticipated demand.  We concluded the carrying amount was recoverable as of December 31, 2015.  We intend to monitor the ability of our Venezuelan subsidiary to effectively operate through maintaining our significant market share and continuing to successfully implement and sustain price increases in periods of change in exchange rates and inflation. The outcome of future changes in economic and political conditions could have a material impact on (1) our ability to accurately predict the impacts of future sustained price increases, (2) timing of changes to inflation or exchange rates and (3) impacts on liquidity and demand from our customers. Changes in any of these assumptions may result in reductions to the estimated future cash flows of our Venezuelan subsidiary resulting in the potential impairment to the carrying amount of the long-lived assets. Such impairment charges could materially impact our results of operations in future periods.
Stock-Based Compensation
Successor periods
During 2013, we granted approximately 4.1 million, 5.7 million and 6.4 million non-qualified, service-based stock options to certain employees with strike prices of $5.92, $8.88 and $11.84 (per share), respectively. During 2014, we granted 1.6 million non-qualified, service-based stock options to certain employees with strike prices of $5.92, $7.21, $8.88 and $11.84 per share. These options were granted under the 2013 Plan and generally veste