REPORTABLE SEGMENT INFORMATION

The Company reports segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding allocation of resources in accordance with the Segment Disclosures Topic of the ASC. Upon completion of the Valspar acquisition in the second quarter of 2017 (see Note 3), the Company made important changes to its organizational and reporting structure that resulted in establishing three new reportable segments. The Americas Group reportable segment includes the Company's previous Paint Stores Group and Latin America Coatings Group, along with a specialty retail business of Valspar. The Americas Group operates stores in the United States, Canada, Latin America, and the Caribbean islands servicing the needs of architectural and industrial painting contractors and do-it-yourself homeowners. The Americas Group sells a variety of architectural paints, coatings and related products through dedicated dealers, home centers, distributors, hardware stores and other retailers throughout Latin America. The Consumer Brands Group reportable segment includes the Company's previous Consumer Group along with Valspar's previous Consumer Paints segment, excluding Valspar's automotive refinishes products business. The Consumer Brands Group supplies a broad portfolio of branded and private-label architectural paints, stains, varnishes, industrial products, wood finishes products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks and adhesives to retailers and distributors throughout North America, as well as in Australia, China and Europe. The Consumer Brands Group also supports the Company's other businesses around the world with new product research and development, manufacturing, distribution and logistics. The Performance Coatings Group reportable segment includes the Company's previous Global Finishes Group and Valspar's previous Coatings Group segment. The Performance Coatings Group also includes Valspar's automotive refinishes products business, which was previously reported under Valspar's Consumer Paints segment. Valspar’s North American industrial wood coatings business, which was previously reported under the Valspar's Coatings Group segment, was divested. The Performance Coatings Group develops and sells industrial coatings for wood finishing and general industrial (metal and plastic) applications, automotive refinish, protective and marine coatings, coil coatings, packaging coatings and performance-based resins and colorants worldwide. In addition, a specialty coatings business previously in the Company's Consumer Group is now included in the Performance Coatings Group. Prior period segment reporting has been adjusted to reflect the updated reportable segments.



(Thousands of dollars)	Three Months Ended September 30, 2017
	The Americas Group		Consumer Brands Group		Performance Coatings Group		Administrative			Consolidated Totals
Net external sales	$	2,539,256	$	723,341	$	1,242,336	$	2,087		$	4,507,020
Intersegment transfers	1,184		860,181		4,709		(866,074		)
Total net sales and intersegment transfers	$	2,540,440	$	1,583,522	$	1,247,045	$	(863,987	)	$	4,507,020

Segment profit	$	525,577	$	70,427	$	59,615				$	655,619
Interest expense							$	(91,593	)	(91,593		)
Administrative expenses and other							(136,304		)	(136,304		)
Income from continuing operations before income taxes *	$	525,577	$	70,427	$	59,615	$	(227,897	)	$	427,722

* Income from continuing operations before income taxes for the Consumer Brands Group and Performance Coatings Group includes inventory step-up amortization of $35.0 million and $43.5 million, respectively, and intangibles amortization of $19.5 million and $58.4 million, respectively, based on the preliminary purchase accounting. Income from continuing operations before income taxes for the Administrative segment includes $28.0 million of acquisition-related expenses included in SG&A.



	Three Months Ended September 30, 2016
	The Americas Group		Consumer Brands Group		Performance Coatings Group		Administrative			Consolidated Totals
Net external sales	$	2,384,528	$	398,222	$	495,422	$	1,290		$	3,279,462
Intersegment transfers	10,348		760,594		2,954		(773,896		)
Total net sales and intersegment transfers	$	2,394,876	$	1,158,816	$	498,376	$	(772,606	)	$	3,279,462

Segment profit	$	519,283	$	87,193	$	68,023				$	674,499
Interest expense							$	(44,100	)	(44,100		)
Administrative expenses and other							(94,779		)	(94,779		)
Income from continuing operations before income taxes	$	519,283	$	87,193	$	68,023	$	(138,879	)	$	535,620




	Nine Months Ended September 30, 2017
	The Americas Group		Consumer Brands Group		Performance Coatings Group		Administrative			Consolidated Totals
Net external sales	$	6,928,657	$	1,583,148	$	2,487,884	$	4,535		$	11,004,224
Intersegment transfers	5,544		2,420,356		15,740		(2,441,640		)
Total net sales and intersegment transfers	$	6,934,201	$	4,003,504	$	2,503,624	$	(2,437,105	)	$	11,004,224

Segment profit	$	1,363,488	$	202,405	$	179,072				$	1,744,965
Interest expense							$	(174,017	)	(174,017		)
Administrative expenses and other							(327,618		)	(327,618		)
Income from continuing operations before income taxes **	$	1,363,488	$	202,405	$	179,072	$	(501,635	)	$	1,243,330

** Income from continuing operations before income taxes for the Consumer Brands Group and Performance Coatings Group includes inventory step-up amortization of $49.5 million and $65.3 million, respectively, and intangibles amortization of $25.3 million and $75.6 million, respectively, based on the preliminary purchase accounting. Income from continuing operations before income taxes for the Administrative segment includes $59.7 million of acquisition-related expenses included in SG&A.




	Nine Months Ended September 30, 2016
	The Americas Group		Consumer Brands Group		Performance Coatings Group		Administrative			Consolidated Totals
Net external sales	$	6,366,588	$	1,225,315	$	1,477,252	$	3,856		$	9,073,011
Intersegment transfers	29,001		2,138,180		10,935		(2,178,116		)
Total net sales and intersegment transfers	$	6,395,589	$	3,363,495	$	1,488,187	$	(2,174,260	)	$	9,073,011

Segment profit	$	1,271,236	$	250,223	$	191,073				$	1,712,532
Interest expense							$	(110,710	)	(110,710		)
Administrative expenses and other							(310,623		)	(310,623		)
Income from continuing operations before income taxes	$	1,271,236	$	250,223	$	191,073	$	(421,333	)	$	1,291,199

In the reportable segment financial information, Segment profit was total net sales and intersegment transfers less operating costs and expenses. Domestic intersegment transfers were accounted for at the approximate fully absorbed manufactured cost, based on normal capacity volumes, plus customary distribution costs. International intersegment transfers were accounted for at values comparable to normal unaffiliated customer sales. The Administrative segment includes the administrative expenses of the Company’s corporate headquarters site. Also included in the Administrative segment was interest expense, interest and investment income, certain expenses related to closed facilities and environmental-related matters, and other expenses which were not directly associated with the reportable segments. The Administrative segment did not include any significant foreign operations. Also included in the Administrative segment was a real estate management unit that is responsible for the ownership, management and leasing of non-retail properties held primarily for use by the Company, including the Company’s headquarters site, and disposal of idle facilities. Sales of this segment represented external leasing revenue of excess headquarters space or leasing of facilities no longer used by the Company in its primary businesses. Gains and losses from the sale of property were not a significant operating factor in determining the performance of the Administrative segment.

As of September 30, 2017, identifiable assets for The Americas Group, Consumer Brands Group, Performance Coatings Group and Administrative segments were $3.251 billion, $6.110 billion, $10.048 billion and $1.371 billion, respectively. These amounts include preliminary purchase accounting adjustments for Goodwill and Intangibles. The allocation of the fair value will be finalized within the allowable measurement period. As of September 30, 2016, identifiable assets for The Americas Group, Consumer Brands Group, Performance Coatings Group and Administrative segments were $2.333 billion, $2.082 billion, $867.8 million and $1.635 billion, respectively.

Net external sales and segment profit of all consolidated foreign subsidiaries were $964.6 million and $38.0 million, respectively, for the third quarter of 2017, and $439.6 million and $19.6 million, respectively, for the third quarter of 2016. Net external sales and segment profit of all consolidated foreign subsidiaries were $1.987 billion and $52.5 million, respectively, for the nine months of 2017, and $1.295 billion and $46.8 million, respectively, for the nine months of 2016. Long-lived assets of these subsidiaries totaled $1.725 billion and $504.4 million at September 30, 2017 and September 30, 2016, respectively. The increase in net external sales and long-lived assets is primarily due to the Valspar acquisition. Domestic operations accounted for the remaining net external sales, segment profits and long-lived assets. No single geographic area outside the United States was significant relative to consolidated net external sales, income before taxes, or consolidated long-lived assets.

Export sales and sales to any individual customer were each less than 10 percent of consolidated sales to unaffiliated customers during all periods presented.