Q2 2018 Investor Highlights August 8, 2018
Forward Looking Statements This document contains forward-looking statements, that is, information related to future, not past, events. Such statements generally include the words believes, plans, intends, targets, will, expects, suggests, anticipates, outlook, continues, or similar expressions. Forward-looking statements include, without limitation, statements about expected financial positions; results of operations; cash flows; financing plans; business strategy; operating plans; capital and other expenditures; competitive positions; growth opportunities for existing products; benefits from new technology and cost reduction initiatives, plans and objectives; and markets for securities. Like other businesses, GCP is subject to risks and uncertainties that could cause its actual results to differ materially from its projections or that could cause other forward-looking statements to prove incorrect. Factors that could cause actual results to materially differ from those contained in the forward-looking statements, or that could cause other forward-looking statements to prove incorrect, include, without limitation, risks related to: the cyclical and seasonal nature of the industries that GCP serves; foreign operations, especially in emerging regions; changes in currency exchange rates; the cost and availability of raw materials and energy; the effectiveness of GCP s research and development, new product introductions and growth investments; acquisitions and divestitures of assets and gains and losses from dispositions; developments affecting GCP s outstanding liquidity and indebtedness, including debt covenants and interest rate exposure; developments affecting GCP s funded and unfunded pension obligations; warranty and product liability claims; legal proceedings; the inability to establish or maintain certain business relationships and relationships with customers and suppliers or the inability to retain key personnel; and the handling of hazardous materials and the costs of compliance with environmental regulation. These and other factors are identified and described in more detail in GCP's Annual Report on Form 10-K, which has been filed with the U.S. Securities and Exchange Commission and is available online at www.sec.gov. Readers are cautioned not to place undue reliance on GCP s projections and forward-looking statements, which speak only as the date thereof. GCP undertakes no obligation to publicly release any revision to the projections and forward-looking statements contained in this document, or to update them to reflect events or circumstances occurring after the date of this announcement. Non-GAAP Financial Measures These slides contain certain non-gaap financial measures. Please refer to the Appendix for definitions of the non-gaap financial measures used herein and a reconciliation of those non-gaap financial measures to their most comparable GAAP measures. 2
Second Quarter 2018 Overview Net sales increased 5% Y/Y to $303M due to growth in Specialty Construction Chemicals Net loss from continuing operations attributable to GCP shareholders was $29M in 2Q18 compared to income of $1M in 2Q17; diluted loss per share was $0.40 in 2Q18 compared to diluted income per share of $0.02 in 2Q17 Change primarily due to $60M pre-tax debt refinancing charge Adjusted EPS (1) increased 17% to $0.27 in 2Q18 due to lower interest expense Decline in interest expense due to Term Loan repayment in 3Q17 and lower interest rate on 5.5% Senior Notes issued in 2Q18 Adjusted EBIT (1) declined 19% Y/Y to $34M Decrease due to lower segment operating income in both SCC and SBM June 30, 2018 cash balance of $289M; 2018 YTD Adjusted Free Cash Flow (1) of ($25M) compared to ($37M) for 2017 YTD Improvement in Adjusted FCF (1) includes impact of $10M accrued interest payment for redemption of 9.50% Senior Notes and $5M Transition Toll payment Taking actions to improve profitability of admixtures business by implementing price increases, restructuring admixtures footprint to reduce costs by $25M and focusing investments on VERIFI penetration (1) Refer to Appendix for reconciliations between GAAP and non-gaap measures. 3
2Q18 Continuing Operations Summary $ in millions. Net Sales Adjusted Gross Profit (1) As Reported Constant Currency (1) $287.2 $302.8 $287.2 $298.9 $117.4 $112.6 +5% +4% 40.9% -370 bps 37.2% 2Q17 2Q18 2Q17 2Q18 2Q17 2Q18 Adjusted EBIT (1) Adjusted FCF (1) $42.0 14.6% $33.9-340 bps 11.2% ($25.2) ($36.6) 2Q17 2Q18 2017 YTD 2018 YTD (1) Refer to Appendix for reconciliations between GAAP and non-gaap measures. 4
$ in millions. Specialty Construction Chemicals Markets, sells and manufactures concrete admixtures, concrete production management systems and cement additives Q2 2018 $/% Delta YOY Net Sales $175.0 10% Net Sales (2) (Constant Currency) $173.7 9% Gross margin 32.6% (450) Bps Segment operating income $12.6 (38)% Segment operating margin 7.2% (550) bps Factors Impacting Sales (1) 8.2% 1.1% 0.8% Net sales (1) increase 10% Y/Y - Higher concrete admixtures sales in North America and Europe, plus growth in cement additives and VERIFI Gross margin decreases 450 bps - Decline reflects higher raw material and logistics costs, partially offset by price increases and productivity Segment operating margin decreases 550 bps - Decline reflects lower gross margin, higher operating expenses primarily due to corporate allocations and deconsolidation of Venezuela in 3Q17 $158.9 $158.0 $171.0 $173.0 $175.0 Q2 2017 Volume Mix Price Currency Q2 2018 (1) Includes the results of Ductilcrete. Comparisons with second quarter 2017 results were impacted by GCP's deconsolidation of its Venezuela operations on July 3, 2017. In the second quarter of 2017, SCC s Venezuela operations contributed net sales of $3.0 million and operating income of $2.3 million. (2) Refer to Appendix for reconciliations between GAAP and non-gaap measures. 5
Specialty Building Materials Markets, sells and manufactures building envelope, residential and specialty construction products $ in millions. Q2 2018 (1) $/% Delta YOY Net sales $127.8 0% Net Sales (2) (Constant Currency) $125.2 2% Gross margin 43.5% (210) Bps Segment operating income $31.8 (10)% Segment operating margin 24.9% (260) Bps Net sales (1) flat - Revenue shifts due to fewer price promotions, which reduced Residential volumes, and project timing in Building Envelope Gross margin decreases 210 bps - Margin decline reflects unfavorable product mix as result of volume shifts, with price increases and productivity offsetting higher raw material and logistics costs Segment operating income declines 10% - Decline due to lower gross profit Factors Impacting Sales (4.8)% 2.4% 2.0% $128.3 $122.0 $122.0 $125.0 $127.8 Q2 2017 Volume Mix Price Currency Q2 2018 (1) Includes the results of Stirling Lloyd and RIW. (2) Refer to Appendix for reconciliations between GAAP and non-gaap measures. 6
Restructuring and Repositioning Admixtures Business Implementing three-point plan to improve profitability of SCC s admixture business and accelerate penetration of high margin technologies Raising prices and rationalizing position in low profit, high volatility admixtures markets Estimated revenue loss from rationalization of ~10% of annual SCC sales Markets that consume disproportionate resources and offer minimal near-term opportunities for differentiated technologies Targeting $25 million in annualized savings Able to cut costs due to rationalization of low profit business $6M to $8M of savings in 2018; entire $25M of annualized savings realized in 2019 Focusing on core admixtures markets where GCP is well-positioned and generates strong margins Allocating resources to growing VERIFI and integrated In-Transit Management admixture system VERIFI continues to gain market acceptance by delivering value to customers through materials savings, enhanced productivity and improved quality VERIFI sales growing 60% Y/Y; targeting annual sales of $50M to $75M by 2021 7
GCP s Strategy Create leadership position in high value segments of $15B global construction market through: Specialty Products, Sensors and Data, and Engineered Systems $15B Market SCC: Concrete admixtures, in-transit management, cement additives SBM: Waterproofing, fire protection, roofing, flooring, repair products Completed Bolt-on Acquisitions: Specialty Products Sensors and Data Engineered Systems High performance products that reduce costs and extend life cycle Focused R&D and product commercialization Penetrate high-value product segments Extend geographic reach and product lines through bolt-on acquisitions Disruptive technologies to deliver data that enables productivity, quality and material savings Expand VERIFI into the global ready mix market Build and acquire sensor and data technologies to add further value Create high-margin engineered systems product lines Combine and develop proprietary products Integrated offering to improve quality and reduce construction costs Acquire additional solutions for systems offering 8
Strategically Allocate Capital While Maintaining Financial Discipline Investing to support growth and technology development Strategic Investments Optimize Capital Structure Pursuing bolt-on acquisition opportunities with technology advantages, low capital intensity and strong financial synergies Acquired R.I.W. Limited in May 2018 Healthy pipeline of bolt-on acquisition opportunities Maintain modest leverage across cycle Issued $350M of 5.50% Senior Notes due 2026 and increased available Revolving Credit Facility commitments to $350M Used net proceeds from 5.50% Senior Notes offering, borrowings under Revolving Credit Facility and cash on hand to redeem all $525M of 9.50% Senior Notes Return of Capital Consider returning excess capital to shareholders over time 9
Regional Outlook % Q2 2018 GCP Net Sales by Region: North America 49% EMEA 23% Latin America 6% Asia Pacific 22% Region North America Europe, Middle East, Africa Asia Pacific Latin America Outlook Construction market expansion continues Housing and commercial starts remain positive Recovery continues in most European markets Raw material inflation and FX volatility impacting certain emerging markets Market continues to be healthy in most countries Raw material inflation and FX volatility impacting certain emerging markets Recovery in non-residential and infrastructure Raw material inflation and FX volatility impacting certain markets 10
Long-term Growth Framework and 2018 Annual Guidance 5 Year Growth Framework GCP 2018 Guidance Market Growth Outlook GCP Growth Framework 5 Year Annualized Growth Rate Revenue Growth Constant Currency (1) 5% - 8% Global Construction 2% - 4% 2x Market 4% - 8% Adjusted EBIT (2) $125M - $135M Adjusted Rate (3) 28% - 31% GCP Bolt-on Acquisitions 2% - 4% Adjusted EPS (2)(4) $0.92 - $1.06 Adjusted FCF (2) $25M - $35M Capital Expenditures ~5% of Sales Updated 2018 guidance includes impact of higher-than-expected inflation, admixtures market rationalization and restructuring plan savings (1) GCP guidance assumes average 2017 FX rates carried forward into the guidance period. (2) Refer to Appendix for definition of non-gaap measures. (3) Reflects the Company's current estimate of the impact of the Cuts and Jobs Act of 2017. (4) Assumes approximately 72M shares outstanding. 11
Second Quarter 2018 Summary and Recent Highlights Net sales increased 5% due to growth in SCC Adjusted EPS (1) grew 17% due to lower interest expense Adjusted EBIT (1) declined 19% due to lower segment operating income in both SCC and SBM Increased raw materials and logistics costs partially offset by price increases Inflation significantly impacted SCC s admixtures business in emerging markets Taking actions to improve profitability of admixtures business: Significant price increases in high inflation markets and rationalization of low profit admixtures geographies Reducing cost structure to generate annualized savings of $25M Focusing investments on core admixtures business as well as penetration of VERIFI and integrated In-Transit Management admixture system Recently announced hiring of Randy Dearth as President and Chief Operating Officer (1) Refer to Appendix for reconciliations between GAAP and non-gaap measures. 12
Appendix 13
GCP Applied Technologies Inc. Consolidated Statements of Operations (unaudited) Three Months Ended June 30, Six Months Ended June 30, (In millions, except per share amounts) 2018 2017 2018 2017 Net sales $ 302.8 $ 287.2 $ 553.0 $ 512.5 Cost of goods sold 191.1 172.2 353.8 312.2 Gross profit 111.7 115.0 199.2 200.3 Selling, general and administrative expenses 77.6 72.8 152.5 145.6 Research and development expenses 5.3 5.2 10.2 10.0 Interest expense and related financing costs 66.7 17.5 80.5 34.5 Repositioning expenses 1.2 3.7 2.1 5.7 Restructuring and asset impairments (0.6) 9.8 (1.1) 10.9 Loss in Venezuela 1.6 1.6 Other income, net (4.1) (3.6 ) (10.4) (2.6) Total costs and expenses 146.1 107.0 233.8 205.7 (Loss) income from continuing operations before income taxes (34.4) 8.0 (34.6) (5.4) Income tax benefit (expense) 5.3 (6.6) (8.2) (18.2) (Loss) income from continuing operations (29.1) 1.4 (42.8) (23.6) Income (loss) from discontinued operations, net of income taxes 1.3 (6.0 ) 8.5 2.1 Net loss (27.8) (4.6) (34.3) (21.5) Less: Net income attributable to noncontrolling interests (0.1) (0.1) (0.2) (0.1) Net loss attributable to GCP shareholders $ (27.9) $ (4.7) $ (34.5) $ (21.6) Amounts Attributable to GCP Shareholders: (Loss) income from continuing operations attributable to GCP shareholders (29.2) 1.3 (43.0) (23.7) Income (loss) from discontinued operations, net of income taxes 1.3 (6.0) 8.5 2.1 Net loss attributable to GCP shareholders $ (27.9) $ (4.7) $ (34.5) $ (21.6) (Loss) Earnings Per Share Attributable to GCP Shareholders Basic (loss) earnings per share: (Loss) income from continuing operations attributable to GCP shareholders $ (0.40) $ 0.02 $ (0.60) $ (0.33) Income (loss) from discontinued operations, net of income taxes $ 0.02 $ (0.08) $ 0.12 $ 0.03 Net loss attributable to GCP shareholders (1) $ (0.39 ) $ (0.07 ) $ (0.48 ) $ (0.30 ) Weighted average number of basic shares 72.1 71.5 72.0 71.0 Diluted (loss) earnings per share: (2) (Loss) income from continuing operations attributable to GCP shareholders $ (0.40) $ 0.02 $ (0.60) $ (0.33) Income (loss) from discontinued operations, net of income taxes $ 0.02 $ (0.08) $ 0.12 $ 0.03 Net loss attributable to GCP shareholders (1) $ (0.39 ) $ (0.06 ) $ (0.48 ) $ (0.30 ) Weighted average number of diluted shares 72.1 72.7 72.0 71.0 (1) Amounts may not sum due to rounding. (2) Dilutive effect only applicable to periods where there is net income from continuing operations. 14
(In millions, except par value and shares) ASSETS Current Assets GCP Applied Technologies Inc. Consolidated Balance Sheets (unaudited) June 30, 2018 December 31, 2017 Cash and cash equivalents $ 289.3 $ 721.5 Trade accounts receivable (including allowances of $5.3 and $5.7, respectively) 215.8 217.1 Inventories, net 114.8 106.3 Other current assets 44.9 48.6 Current assets held for sale 8.0 19.7 Total Current Assets 672.8 1,113.2 Properties and equipment, net 217.3 216.6 Goodwill 212.1 198.2 Technology and other intangible assets, net 95.2 91.8 Deferred income taxes 27.4 30.2 Overfunded defined benefit pension plans 26.3 26.4 Other assets 31.5 23.8 Non-current assets held for sale 2.4 2.8 Total Assets $ 1,285.0 $ 1,703.0 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Debt payable within one year $ 18.4 $ 24.0 Accounts payable 132.4 134.8 Other current liabilities 151.5 316.2 Current liabilities held for sale 3.5 7.8 Total Current Liabilities 305.8 482.8 Debt payable after one year 346.7 520.3 Income taxes payable 49.2 58.3 Deferred income taxes 15.5 14.7 Unrecognized tax benefits 43.0 42.4 Underfunded and unfunded defined benefit pension plans 56.1 57.1 Other liabilities 19.8 35.1 Non-current liabilities held for sale 0.3 0.3 Total Liabilities 836.4 1,211.0 Commitments and Contingencies Stockholders' Equity Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 72,156,872 and 71,754,344, respectively 0.7 0.7 Paid-in capital 40.8 29.9 Accumulated earnings 514.2 548.7 Accumulated other comprehensive loss (104.4) (85.7 Treasury stock (4.7) (3.4 Total GCP's Shareholders' Equity 446.6 490.2 Noncontrolling interests 2.0 1.8 Total Stockholders' Equity 448.6 492.0 Total Liabilities and Stockholders' Equity $ 1,285.0 $ 1,703.0 15
GCP Applied Technologies Inc. Consolidated Statements of Cash Flows (unaudited) Six Months Ended June 30, (In millions) 2018 2017 OPERATING ACTIVITIES Net loss $ (34.3) $ (21.5) Less: Income from discontinued operations 8.5 2.1 Loss from continuing operations (42.8) (23.6) Reconciliation to net cash (used in) provided by operating activities: Depreciation and amortization 20.8 17.2 Amortization of debt discount and financing costs 0.9 1.6 Stock-based compensation expense 5.3 5.3 Unrealized gain on foreign currency (0.8) Gain on termination and curtailment of pension and other postretirement plans (0.1) (5.1) Currency and other losses in Venezuela 2.9 Deferred income taxes (6.0) 12.6 Loss on debt refinancing 59.8 Gain on disposal of property and equipment (1.1) (0.8) Loss on sale of product line 2.1 Changes in assets and liabilities, excluding effect of currency translation: Trade accounts receivable (3.3) (34.5) Inventories (10.7) (11.5) Accounts payable 5.2 17.1 Pension assets and liabilities, net (0.4) 3.1 Other assets and liabilities, net (36.4) (10.7) Net cash used in operating activities from continuing operations (9.6) (24.3) Net cash (used in) provided by operating activities from discontinued operations (124.9) 8.4 Net cash used in operating activities (134.5 ) (15.9) INVESTING ACTIVITIES Capital expenditures (27.6) (21.5) Businesses acquired, net of cash acquired (29.8) (87.7) Proceeds from sale of product line 2.9 Other investing activities (2.8) 3.1 Net cash used in investing activities from continuing operations (60.2) (103.2) Net cash used in investing activities from discontinued operations (0.2) (3.3) Net cash used in investing activities (60.4) (106.5) FINANCING ACTIVITIES Borrowings under credit arrangements 53.5 116.1 Repayments under credit arrangements (58.4) (15.2) Proceeds from issuance of long term notes 350.0 Repayments of long term note obligations (578.3) Cash paid for debt financing costs (6.9) Share repurchases (1.3) (1.0) Proceeds from exercise of stock options 5.1 5.7 Noncontrolling interest dividend (0.6) Other financing activities (0.2) Net cash (used in) provided by financing activities from continuing operations (236.5) 105.0 Net cash provided by financing activities from discontinued operations 0.5 Net cash (used in) provided by financing activities (236.5) 105.5 Effect of currency exchange rate changes on cash and cash equivalents (0.8) 0.9 Decrease in cash and cash equivalents (432.2) (16.0) Cash and cash equivalents, beginning of period 721.5 163.3 Cash and cash equivalents, end of period 289.3 147.3 Less: Cash and cash equivalents of discontinued operations 19.1 Cash and cash equivalents of continuing operations, end of period $ 289.3 $ 128.2 16
Analysis of Operations The Company has set forth in the tables below GCP's key operating statistics with percentage changes for the second quarter compared with the corresponding prior-year periods. In the table, the Company presents financial information in accordance with U.S. GAAP, as well as certain non-gaap financial measures, which it describes below in further detail. GCP believes that the non-gaap financial information supplements its discussions about the performance of its businesses, improves period-to-period comparability and provides insight to the information that management uses to evaluate the performance of its businesses. Management uses non-gaap measures in financial and operational decisionmaking processes, for internal reporting, and as part of its forecasting and budgeting processes, as these measures provide additional transparency to GCP's core operations. In the tables, the Company has provided reconciliations of these non-gaap financial measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. These non-gaap financial measures should not be considered substitutes for financial measures calculated in accordance with U.S. GAAP, and the financial results that the Company calculates and presents in the table in accordance with U.S. GAAP, as well as the corresponding reconciliations from those results, should be carefully evaluated. Constant currency means current period revenue in local currency translated using prior period exchange rates. GCP uses constant currency in assessing trends in sales excluding the impact of fluctuations in foreign currency exchange rates. The Company defines Adjusted EBIT (a non-gaap financial measure) to be net income (loss) from continuing operations attributable to GCP shareholders adjusted for: (i) gains and losses on sales of businesses, product lines and certain other investments; (ii) currency and other financial losses in Venezuela; (iii) costs related to legacy product, environmental and other claims; (iv) restructuring expenses, repositioning and asset impairments; (v) defined benefit plan costs other than service and interest costs, expected returns on plan assets and amortization of prior service costs/credits; (vi) third-party and other acquisition-related costs; (vii) other financing costs associated with the modification or extinguishment of debt; (viii) amortization of acquired inventory fair value adjustments; (ix) tax indemnification adjustments; (x) interest income, interest expense and related financing costs; (xi) income taxes; and (xii) and certain other items that are not representative of underlying trends (such as legal settlements). GCP uses Adjusted EBIT to assess and measure its operating performance and in determining performance-based compensation. GCP uses Adjusted EBIT as a performance measure because it provides improved quarter-to-quarter and year-over-year comparability for decision-making and compensation purposes and because it allows management to measure the ongoing earnings results of the Company's strategic and operating decisions. The Company defines Adjusted EBITDA (a non-gaap financial measure) to be Adjusted EBIT adjusted for depreciation and amortization. GCP uses Adjusted EBITDA as a performance measure in making significant business decisions. The Company defines Adjusted Earnings Per Share (a non-gaap financial measure) to be earnings per share ("EPS") from continuing operations on a diluted basis adjusted for costs related to: (i) gains and losses on sales of businesses, product lines and certain other investments; (ii) currency and other financial losses in Venezuela; (iii) legacy product, environmental and other claims; (iv) restructuring and repositioning expenses and asset impairments; (v) defined benefit plan costs other than service and interest costs, expected returns on plan assets and amortization of prior service costs/credits; (vi) third-party and other acquisition-related costs; (vii) other financing costs associated with the modification or extinguishment of debt; (viii) amortization of acquired inventory fair value adjustments; (ix) tax indemnification adjustments; (x) certain other items that are not representative of underlying trends (such as legal settlements); and (xi) and certain discrete tax items. GCP uses Adjusted EPS as a performance measure to review its diluted earnings per share results on a consistent basis. 17
Analysis of Operations The Company defines Adjusted Gross Profit (a non-gaap financial measure) to be gross profit adjusted for: (i) corporate and pension-related costs included in cost of goods sold; (ii) loss in Venezuela included in cost of goods sold; and (iii) amortization of acquired inventory fair value adjustment. Adjusted Gross Margin means Adjusted Gross Profit divided by net sales. Management uses this performance measure to understand trends and changes and to make business decisions regarding core operations. The Company defines Adjusted Free Cash Flow (a non-gaap financial measure) to be net cash provided by or used for operating activities minus capital expenditures plus cash paid for restructuring and repositioning; capital expenditures related to repositioning; cash paid for thirdparty and other acquisition-related costs; cash taxes paid for repositioning, restructuring, third-party and other acquisition-related costs; accelerated payments under defined benefit pension arrangements; and expenditures for legacy items. GCP uses Adjusted Free Cash Flow as a liquidity measure to evaluate its ability to generate cash to support its ongoing business operations, to invest in its businesses, to provide a return of capital to shareholders and to determine payments of performance-based compensation. The Company defines Adjusted EBIT Return On Invested Capital (a non-gaap financial measure) to be Adjusted EBIT (on a trailing four quarters basis) divided by the sum of net working capital, properties and equipment and certain other assets and liabilities. Management uses Adjusted EBIT Return On Invested Capital as a performance measure to review investments and to make capital allocation decisions. Adjusted EBIT, Adjusted EBITDA, Adjusted EPS, Adjusted Gross Margin, Adjusted Free Cash Flow, and Adjusted EBIT Return on Invested Capital do not purport to represent income measures as defined under U.S. GAAP. These measures are provided to improve the period-toperiod comparability and peer-to-peer comparability of GCP's financial results and to ensure that investors understand the information GCP uses to evaluate the performance of its businesses. Adjusted EBIT has material limitations as an operating performance measure because it excludes costs related to income and expenses from restructuring and repositioning activities, which historically has been a material component of our net income (loss). Adjusted EBITDA also has material limitations as an operating performance measure because it excludes the impact of depreciation and amortization expense. GCP's business is substantially dependent on the successful deployment of capital, and depreciation and amortization expense is a necessary element of its costs. GCP compensates for the limitations of these measurements by using these indicators together with net income (loss) as measured under GAAP to present a complete analysis of its results of operations. Adjusted EBIT and Adjusted EBITDA should be evaluated together with net income (loss) measured under GAAP for a complete understanding of GCP's results of operations. The Company does not provide GAAP earnings on a forward-looking basis because the Company is unable to estimate with reasonable certainty unusual or unanticipated charges, expenses or gains without unreasonable effort. These items are uncertain, depend on various factors, and could be material to the Company s results computed in accordance with GAAP. 18
GCP Applied Technologies Inc. Analysis of Operations (unaudited) Analysis of Operations (In millions, except per share amounts) Net sales: Three Months Ended June 30, Six Months Ended June 30, 2018 2017 % Change 2018 2017 % Change Specialty Construction Chemicals $ 175.0 $ 158.9 10.1 % $ 322.0 $ 292.9 9.9 % Specialty Building Materials 127.8 128.3 (0.4 )% 231.0 219.6 5.2 % Total GCP net sales $ 302.8 $ 287.2 5.4 % $ 553.0 $ 512.5 7.9 % Net sales by region: North America $ 149.3 $ 142.6 4.7 % $ 272.3 $ 254.5 7.0 % Europe Middle East Africa (EMEA) 69.2 66.4 4.2 % 127.5 111.9 13.9 % Asia Pacific 65.7 59.2 11.0 % 117.7 110.4 6.6 % Latin America 18.6 19.0 (2.1 )% 35.5 35.7 (0.6 )% Total net sales by region $ 302.8 $ 287.2 5.4 % $ 553.0 $ 512.5 7.9 % Net Sales, Constant Currency: Specialty Construction Chemicals $ 173.7 $ 158.9 9.3 % $ 316.5 $ 292.9 8.1 % Specialty Building Materials 125.2 128.3 (2.4 )% 225.3 219.6 2.6 % Total GCP Net Sales, Constant Currency (non-gaap) $ 298.9 $ 287.2 4.1 % $ 541.8 $ 512.5 5.7 % Profitability performance measures: Adjusted EBIT(A): Specialty Construction Chemicals segment operating income $ 12.6 $ 20.2 (37.6 )% $ 18.5 $ 28.8 (35.8 )% Specialty Building Materials segment operating income 31.8 35.3 (9.9 )% 49.9 50.5 (1.2 )% Corporate costs(b) (8.6 ) (11.2 ) 23.2 % (17.5 ) (21.4 ) 18.2 % Certain pension costs(c) (1.9 ) (2.3 ) 17.4 % (3.8 ) (4.9 ) 22.4 % Adjusted EBIT (non-gaap) 33.9 42.0 (19.3 )% 47.1 53.0 (11.1 )% Currency and other financial losses in Venezuela (2.4 ) NM (2.4 ) NM Repositioning expenses (1.2 ) (3.7 ) 67.6 % (2.1 ) (5.7 ) 63.2 % Restructuring and asset impairments 0.6 (9.8 ) NM 1.1 (10.9 ) NM Pension MTM adjustment and other related costs, net (0.9 ) 0.1 NM (0.9 ) 0.1 NM Gain on termination and curtailment of pension and other postretirement plans 0.1 5.1 (98.0)% 0.1 5.1 (98.0)% Loss on sale of product line (2.1) NM (2.1) NM Third-party and other acquisition-related costs (0.8 ) (2.6 ) 69.2 % (1.6 ) (3.0 ) 46.7 % Amortization of acquired inventory fair value adjustment (0.2 ) (1.2 ) 83.3 % (0.2 ) (2.7 ) 92.6 % indemnification adjustments NM (2.4 ) NM Interest expense, net (66.0 ) (17.5 ) NM (78.3 ) (34.5 ) NM Income tax benefit (expense) 5.3 (6.6 ) NM (8.2 ) (18.2 ) 54.9 % Loss (income) from continuing operations attributable to GCP shareholders (GAAP) $ (29.2) $ 1.3 NM $ (43.0) $ (23.7) (81.4)% Diluted EPS from continuing operations (GAAP) $ (0.40 ) $ 0.02 NM $ (0.60 ) $ (0.33 ) (81.8 )% Adjusted EPS (non-gaap) $ 0.27 $ 0.23 17.4 % $ 0.28 $ 0.18 55.6 % 19
GCP Applied Technologies Inc. Analysis of Operations (unaudited) (continued) Analysis of Operations (In millions) Three Months Ended June 30, Six Months Ended June 30, 2018 2017 % Change 2018 2017 % Change Adjusted profitability performance measures: Gross Profit: Specialty Construction Chemicals $ 57.0 $ 58.9 (3.2)% $ 103.0 $ 106.7 (3.5)% Specialty Building Materials 55.6 58.5 (5.0)% 97.5 98.0 (0.5)% Adjusted Gross Profit (non-gaap) 112.6 117.4 (4.1)% 200.5 204.7 (2.1)% Amortization of acquired inventory fair value adjustment (0.2) (1.2) 83.3 % (0.2) (2.7) 92.6 % Loss in Venezuela in cost of goods sold (0.8) NM (0.8) NM Corporate costs and pension costs in cost of goods sold (0.7) (0.4) (75.0)% (1.1) (0.9) (22.2)% Total GCP Gross Profit (GAAP) 111.7 115.0 (2.9)% 199.2 200.3 (0.5)% Gross Margin: Specialty Construction Chemicals 32.6 % 37.1 % (4.5) pts 32.0 % 36.4 % (4.4) pts Specialty Building Materials 43.5 % 45.6 % (2.1) pts 42.2 % 44.6 % (2.4) pts Adjusted Gross Margin (non-gaap) 37.2 % 40.9 % (3.7) pts 36.3 % 39.9 % (3.6) pts Loss in Venezuela in cost of goods sold % (0.3)% 0.3 pts % (0.2)% 0.2 pts Amortization of acquired inventory fair value adjustment (0.1)% (0.4)% 0.3 pts % (0.5)% 0.5 pts Corporate costs and pension costs in cost of goods sold (0.2)% (0.1)% (0.1) pts (0.2)% (0.2)% 0.0 pts Total GCP Gross Margin (GAAP) 36.9 % 40.1 % (3.2) pts 36.1 % 39.0 % (2.9) pts Adjusted EBIT(A)(B)(C): Specialty Construction Chemicals segment operating income $ 12.6 $ 20.2 (37.6)% $ 18.5 $ 28.8 (35.8)% Specialty Building Materials segment operating income 31.8 35.3 (9.9)% 49.9 50.5 (1.2)% Corporate and certain pension costs (10.5) (13.5) 22.2 % (21.3) (26.3) 19.0 % Total GCP Adjusted EBIT (non-gaap) 33.9 42.0 (19.3)% 47.1 53.0 (11.1)% Depreciation and amortization: Specialty Construction Chemicals $ 6.0 $ 5.1 17.6 % $ 12.0 $ 10.2 17.6 % Specialty Building Materials 3.7 3.1 19.4 % 7.1 6.0 18.3 % Corporate 0.9 0.6 50.0 % 1.7 1.0 70.0 % Total GCP depreciation and amortization 10.6 8.8 20.5 % 20.8 17.2 20.9 % Adjusted EBITDA: Specialty Construction Chemicals $ 18.6 $ 25.3 (26.5)% $ 30.5 $ 39.0 (21.8)% Specialty Building Materials 35.5 38.4 (7.6)% 57.0 56.5 0.9 % Corporate and certain pension costs (9.6) (12.9) 25.6 % (19.6) (25.3) 22.5 % Total GCP Adjusted EBITDA (non-gaap) 44.5 50.8 (12.4)% 67.9 70.2 (3.3)% Adjusted EBIT Margin: Specialty Construction Chemicals 7.2 % 12.7 % (5.5) pts 5.7 % 9.8 % (4.1) pts Specialty Building Materials 24.9 % 27.5 % (2.6) pts 21.6 % 23.0 % (1.4) pts Total GCP Adjusted EBIT Margin (non-gaap) 11.2 % 14.6 % (3.4) pts 8.5 % 10.3 % (1.8) pts Adjusted EBITDA Margin: Specialty Construction Chemicals 10.6 % 15.9 % (5.3) pts 9.5 % 13.3 % (3.8) pts Specialty Building Materials 27.8 % 29.9 % (2.1) pts 24.7 % 25.7 % (1.0) pts Total GCP Adjusted EBITDA Margin (non-gaap) 14.7 % 17.7 % (3.0) pts 12.3 % 13.7 % (1.4) pts 20
Analysis of Operations (In millions) GCP Applied Technologies Inc. Analysis of Operations (unaudited) (continued) Four Quarters Ended June 30, 2018 June 30, 2017 Calculation of Adjusted EBIT Return On Invested Capital (trailing four quarters): Adjusted EBIT $ 121.5 $ 122.9 Invested Capital: Trade accounts receivable 215.8 210.0 Inventories 114.8 104.0 Accounts payable (132.4) (115.7) Invested working capital 198.2 198.3 Other current assets (excluding income taxes) 35.3 36.9 Properties and equipment, net 217.3 202.8 Goodwill 212.1 176.3 Technology and other intangible assets, net 95.2 76.3 Other assets (excluding capitalized financing fees) 27.0 26.5 Other current liabilities (excluding income taxes, restructuring, repositioning, accrued interest and liabilities incurred in association with the Darex divestiture) (83.5) (111.2) Other liabilities (excluding other postretirement benefits liability and liabilities incurred in association with the Darex divestiture) (17.3) (13.0) Total invested capital $ 684.3 $ 592.9 Adjusted EBIT Return On Invested Capital (non-gaap) 17.8 % 20.7 % Amounts may not add due to rounding. (A) (B) (C) NM GCP's segment operating income includes only GCP's share of income of consolidated joint ventures. Management allocates corporate costs to each segment to the extent such costs are directly attributable to the segments. Corporate costs include approximately $2.4 million and $5.4 million, respectively, of allocated costs for the three and six months ended June 30, 2017 that were previously reported within the Darex operating segment since such costs did not meet the criteria to be reclassified to discontinued operations. As of the third quarter of 2017, the Company began allocating these costs to its remaining operating segments. Certain pension costs include only ongoing costs recognized quarterly, which include service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits. SCC and SBM segment operating income and corporate costs do not include any amounts for pension expense. Other pension related costs including annual mark-to-market adjustments, actuarial gains and losses, gains or losses from curtailments and terminations, and other related costs are excluded from Adjusted EBIT. These amounts are not used by management to evaluate the performance of the GCP businesses and significantly affect the peer-to-peer and quarter-to-quarter comparability of our financial results. Mark-to-market adjustments, actuarial gains and losses, and other related costs relate primarily to changes in financial market values and actuarial assumptions and are not directly related tothe operation of the GCP businesses. Not meaningful. 21
GCP Applied Technologies Inc. Analysis of Operations (unaudited) (continued) (In millions) Six Months Ended June 30, 2018 2018 2017 Cash flow measure: Net cash used in operating activities from continuing operations $ (9.6) $ (24.3) Capital expenditures (27.6) (21.5) Free Cash Flow (non-gaap) (37.2) (45.8) Cash paid for repositioning 3.6 4.1 Cash paid for restructuring 4.3 1.1 Cash paid for third-party and other acquisition-related costs 1.0 4.7 Capital expenditures related to repositioning 2.5 1.2 Cash taxes related to repositioning, restructuring, third-party and other acquisitionrelated costs (2.3) (1.9) Accelerated pension plan contributions 2.9 Adjusted Free Cash Flow (non-gaap) $ (25.2) $ (36.6) GCP Applied Technologies Inc. Adjusted Earnings Per Share (unaudited) (In millions, except per share amounts) Pre- Effect Three Months Ended June 30, 2018 2017 After- Per Share Pre- Effect After- Per Share Diluted EPS from continuing operations (GAAP) $ (0.40) $ 0.02 Repositioning expenses $ 1.2 $ 0.3 $ 0.9 0.01 $ 3.7 $ 1.4 $ 2.3 0.03 Restructuring and asset impairments (0.6) (0.2) (0.4) (0.01) 9.8 3.2 6.6 0.09 Gain on termination and curtailment of pension and other postretirement plans (0.1) (0.1) (5.1) (2.0) (3.1) (0.04) Pension MTM adjustment and other related costs, net 0.9 0.2 0.7 0.01 (0.1) (0.1) Currency and other financial losses in Venezuela 2.4 2.4 0.03 Loss on sale of product line 2.1 0.8 1.3 0.02 Third-party and other acquisition-related costs 0.8 0.2 0.6 0.01 2.6 0.2 2.4 0.03 Loss on debt refinancing 59.8 13.0 46.8 0.65 Amortization of acquired inventory fair value adjustment 0.2 0.2 1.2 0.4 0.8 0.01 Discrete tax items: Discrete tax items, including adjustments to uncertain tax positions 0.1 (0.1) (2.6) 2.6 0.04 Adjusted EPS (non-gaap) $ 0.27 $ 0.23 22
(In millions, except per share amounts) GCP Applied Technologies Inc. Analysis of Operations (unaudited) (continued) Pre- Effect Six Months Ended June 30, 2018 2017 After- Per Share Pre- Effect After- Per Share Diluted EPS from continuing operations (GAAP) $ (0.60) $ (0.33) Repositioning expenses $ 2.1 $ 0.5 $ 1.6 0.02 $ 5.7 $ 2.2 $ 3.5 0.05 Restructuring and asset impairments (1.1) (0.3) (0.8) (0.01) 10.9 4.3 6.6 0.09 Gain on termination and curtailment of pension and other postretirement plans (0.1) (0.1) (5.1) (2.0) (3.1) (0.04) Pension MTM adjustment and other related costs, net 0.9 0.2 0.7 0.01 (0.1) (0.1) Currency and other financial losses in Venezuela 2.4 2.4 0.03 Loss on sale of product line 2.1 0.8 1.3 0.02 Third-party and other acquisition-related costs 1.6 0.3 1.3 0.02 3.0 0.2 2.8 0.04 Loss on debt refinancing 59.8 13.0 46.8 0.65 Amortization of acquired inventory fair value adjustment 0.2 0.2 2.7 0.8 1.9 0.03 indemnification adjustments 2.4 0.9 1.5 0.02 Discrete tax items: Discrete tax items, including adjustments to uncertain tax positions (13.4) 13.4 0.19 (19.3) 19.3 0.27 Adjusted EPS (non-gaap) $ 0.28 $ 0.18 23