1-137533 | 47-3936076 | |
(Commission File Number) | (IRS Employer Identification No.) |
62 Whittemore Avenue | ||
Cambridge, Massachusetts | 02140 | |
(Address of Principal Executive Offices) | (Zip Code) |
Exhibit No. | Description of Exhibit | |
GCP APPLIED TECHNOLOGIES INC. | |||
(Registrant) | |||
By | /s/ Dean P. Freeman | ||
Dean P. Freeman | |||
Vice President and Chief Financial Officer | |||
Dated: | November 6, 2018 |
3Q 2018 | 3Q 2017 | % Change | |||
Net sales | $296.3 | $282.4 | 4.9% | ||
Net Sales, Constant Currency* | $302.6 | $282.4 | 7.2% | ||
Gross margin | 37.3% | 37.9% | (60) bps | ||
Adjusted Gross Margin* | 37.4% | 38.1% | (70) bps | ||
Income (loss) from continuing operations attributable to GCP shareholders | $7.2 | $(18.1) | NM | ||
Net income (loss) attributable to GCP shareholders | $25.4 | $659.2 | (96.1)% | ||
Diluted EPS from continuing operations attributable to GCP shareholders | $0.10 | $(0.25) | NM | ||
Adjusted EPS* | $0.34 | $0.22 | 54.5% | ||
Adjusted EBIT* | $39.7 | $36.2 | 9.7% | ||
Adjusted EBIT Margin* | 13.4% | 12.8% | 60 bps |
• | Net sales increased 4.9% and Net Sales, Constant Currency increased 7.2% due to growth in Specialty Construction Chemicals and Specialty Building Materials |
• | Gross margin of 37.3% decreased 60 basis points as an increase in SBM's gross margin was offset by a decline in SCC's gross margin |
• | Income from continuing operations attributable to GCP shareholders was $7.2 million compared to loss from continuing operations of $18.1 million in the third quarter of 2017. The change was primarily due to lower expenses as a result of a loss recognized during the prior-year quarter on the deconsolidation of our Venezuela operations, partially offset by higher income taxes. |
• | Adjusted EBIT of $39.7 million increased 9.7% primarily due to higher SBM segment operating income and lower corporate costs |
3Q 2018 | 3Q 2017 | % Change | |||
Net sales | $165.4 | $156.2 | 5.9% | ||
Net Sales, Constant Currency* | $171.5 | $156.2 | 9.8% | ||
Gross margin | 32.5% | 34.2% | (170) bps | ||
Segment operating income | $12.7 | $15.7 | (19.1)% | ||
Segment operating margin | 7.7% | 10.1% | (240) bps |
• | Net sales increased 5.9% and Net Sales, Constant Currency increased 9.8% due to higher volumes in our Concrete and Cement businesses. Volumes increased despite being negatively impacted in September by wet weather and storm-related disruptions in North America and Asia Pacific, as well as planned exits from certain admixture markets. |
• | Gross margin declined 170 basis points as price increases were offset by raw material inflation, increases in logistics costs and volatile foreign exchange rates in certain emerging markets |
• | Segment operating margin decreased 240 basis points primarily due to lower gross margin |
3Q 2018 | 3Q 2017 | % Change | |||
Net sales | $130.9 | $126.2 | 3.7% | ||
Net Sales, Constant Currency* | $131.1 | $126.2 | 3.9% | ||
Gross margin | 43.6% | 42.9% | 70 bps | ||
Segment operating income | $34.3 | $30.1 | 14.0% | ||
Segment operating margin | 26.2% | 23.9% | 230 bps |
• | Net sales increased 3.7% and Net Sales, Constant Currency grew 3.9% primarily due to growth in our Building Envelope and Residential businesses |
• | Gross margin increased 70 basis points due to price increases and productivity gains, partially offset by increased raw materials and logistics costs |
• | Segment operating income increased 14.0% to $34.3 million and segment operating margin increased 230 basis points to 26.2%. The increase in segment operating income and margin was primarily due to higher gross margin and lower operating expenses. |
Guidance | Prior | Current | |
Net Sales, Constant Currency | Growth of 5% to 8% | Growth of 4% to 6% | |
Adjusted EBIT | $125 million to $135 million | $120 million to $130 million | |
Adjusted EPS(2)(3) | $0.92 to $1.06 | $0.86 to $1.00 | |
Adjusted Free Cash Flow | $25 million to $35 million | $25 million to $35 million |
Media Relations Paul Keeffe T +1 617.498.4461 mediainfo@gcpat.com | Investor Relations Joseph DeCristofaro T +1 617.498.2616 investors@gcpat.com |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(In millions, except per share amounts) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net sales | $ | 296.3 | $ | 282.4 | $ | 849.3 | $ | 794.9 | |||||||
Cost of goods sold | 185.9 | 175.9 | 539.7 | 488.1 | |||||||||||
Gross profit | 110.4 | 106.5 | 309.6 | 306.8 | |||||||||||
Selling, general and administrative expenses | 67.3 | 76.3 | 219.8 | 221.9 | |||||||||||
Research and development expenses | 5.2 | 5.2 | 15.4 | 15.2 | |||||||||||
Interest expense and related financing costs | 5.9 | 21.6 | 86.4 | 56.1 | |||||||||||
Repositioning expenses | 3.7 | 1.1 | 5.8 | 6.8 | |||||||||||
Restructuring expenses and asset impairments | 14.3 | 2.1 | 13.2 | 13.0 | |||||||||||
Loss in Venezuela | — | 36.7 | — | 38.3 | |||||||||||
Other income, net | (0.9 | ) | (4.0 | ) | (11.3 | ) | (6.6 | ) | |||||||
Total costs and expenses | 95.5 | 139.0 | 329.3 | 344.7 | |||||||||||
Income (loss) from continuing operations before income taxes | 14.9 | (32.5 | ) | (19.7 | ) | (37.9 | ) | ||||||||
(Provision for) benefit from income taxes | (7.6 | ) | 14.5 | (15.8 | ) | (3.7 | ) | ||||||||
Income (loss) income from continuing operations | 7.3 | (18.0 | ) | (35.5 | ) | (41.6 | ) | ||||||||
Income from discontinued operations, net of income taxes | 18.2 | 677.3 | 26.7 | 679.4 | |||||||||||
Net income (loss) | 25.5 | 659.3 | (8.8 | ) | 637.8 | ||||||||||
Less: Net income attributable to noncontrolling interests | (0.1 | ) | (0.1 | ) | (0.3 | ) | (0.2 | ) | |||||||
Net income (loss) attributable to GCP shareholders | $ | 25.4 | $ | 659.2 | $ | (9.1 | ) | $ | 637.6 | ||||||
Amounts Attributable to GCP Shareholders: | |||||||||||||||
Income (loss) from continuing operations attributable to GCP shareholders | 7.2 | (18.1 | ) | (35.8 | ) | (41.8 | ) | ||||||||
Income from discontinued operations, net of income taxes | 18.2 | 677.3 | 26.7 | 679.4 | |||||||||||
Net income (loss) attributable to GCP shareholders | $ | 25.4 | $ | 659.2 | $ | (9.1 | ) | $ | 637.6 | ||||||
Earnings (Loss) Per Share Attributable to GCP Shareholders | |||||||||||||||
Basic earnings (loss) per share: | |||||||||||||||
Income (loss) from continuing operations attributable to GCP shareholders | $ | 0.10 | $ | (0.25 | ) | $ | (0.50 | ) | $ | (0.59 | ) | ||||
Income from discontinued operations, net of income taxes | $ | 0.25 | $ | 9.46 | $ | 0.37 | $ | 9.54 | |||||||
Net income (loss) attributable to GCP shareholders(1) | $ | 0.35 | $ | 9.21 | $ | (0.13 | ) | $ | 8.96 | ||||||
Weighted average number of basic shares | 72.2 | 71.6 | 72.1 | 71.2 | |||||||||||
Diluted earnings (loss) per share:(2) | |||||||||||||||
Income (loss) from continuing operations attributable to GCP shareholders | $ | 0.10 | $ | (0.25 | ) | $ | (0.50 | ) | $ | (0.59 | ) | ||||
Income from discontinued operations, net of income taxes | $ | 0.25 | $ | 9.46 | $ | 0.37 | $ | 9.54 | |||||||
Net income (loss) attributable to GCP shareholders(1) | $ | 0.35 | $ | 9.21 | $ | (0.13 | ) | $ | 8.96 | ||||||
Weighted average number of diluted shares | 72.7 | 71.6 | 72.1 | 71.2 |
GCP Applied Technologies Inc. Consolidated Balance Sheets (unaudited) | |||||||
(In millions, except par value and shares) | September 30, 2018 | December 31, 2017 | |||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 301.0 | $ | 721.5 | |||
Trade accounts receivable (including allowances of $5.9 million and $5.7 million, respectively) | 213.1 | 217.1 | |||||
Inventories, net | 115.9 | 106.3 | |||||
Other current assets | 47.2 | 48.6 | |||||
Current assets held for sale | 3.1 | 19.7 | |||||
Total Current Assets | 680.3 | 1,113.2 | |||||
Properties and equipment, net | 220.2 | 216.6 | |||||
Goodwill | 210.1 | 198.2 | |||||
Technology and other intangible assets, net | 91.9 | 91.8 | |||||
Deferred income taxes | 29.1 | 30.2 | |||||
Overfunded defined benefit pension plans | 26.1 | 26.4 | |||||
Other assets | 31.7 | 23.8 | |||||
Non-current assets held for sale | 0.9 | 2.8 | |||||
Total Assets | $ | 1,290.3 | $ | 1,703.0 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current Liabilities | |||||||
Debt payable within one year | $ | 10.9 | $ | 24.0 | |||
Accounts payable | 125.8 | 134.8 | |||||
Other current liabilities | 156.8 | 316.2 | |||||
Current liabilities held for sale | 1.2 | 7.8 | |||||
Total Current Liabilities | 294.7 | 482.8 | |||||
Debt payable after one year | 346.7 | 520.3 | |||||
Income taxes payable | 49.2 | 58.3 | |||||
Deferred income taxes | 15.4 | 14.7 | |||||
Unrecognized tax benefits | 43.2 | 42.4 | |||||
Underfunded and unfunded defined benefit pension plans | 56.6 | 57.1 | |||||
Other liabilities | 19.5 | 35.1 | |||||
Non-current liabilities held for sale | 0.3 | 0.3 | |||||
Total Liabilities | 825.6 | 1,211.0 | |||||
Commitments and Contingencies | |||||||
Stockholders' Equity | |||||||
Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 72,161,545 and 71,754,344, respectively | 0.7 | 0.7 | |||||
Paid-in capital | 40.4 | 29.9 | |||||
Accumulated earnings | 539.6 | 548.7 | |||||
Accumulated other comprehensive loss | (113.3 | ) | (85.7 | ) | |||
Treasury stock | (4.7 | ) | (3.4 | ) | |||
Total GCP's Shareholders' Equity | 462.7 | 490.2 | |||||
Noncontrolling interests | 2.0 | 1.8 | |||||
Total Stockholders' Equity | 464.7 | 492.0 | |||||
Total Liabilities and Stockholders' Equity | $ | 1,290.3 | $ | 1,703.0 |
GCP Applied Technologies Inc. Consolidated Statements of Cash Flows (unaudited) | |||||||
Nine Months Ended September 30, | |||||||
(In millions) | 2018 | 2017 | |||||
OPERATING ACTIVITIES | |||||||
Net (loss) income | $ | (8.8 | ) | $ | 637.8 | ||
Less: Income from discontinued operations | 26.7 | 679.4 | |||||
Loss from continuing operations | (35.5 | ) | (41.6 | ) | |||
Reconciliation to net cash (used in) provided by operating activities: | |||||||
Depreciation and amortization | 31.3 | 26.9 | |||||
Amortization of debt discount and financing costs | 1.2 | 2.2 | |||||
Stock-based compensation expense | 4.6 | 7.1 | |||||
Unrealized loss on foreign currency | — | 0.7 | |||||
Gain on termination and curtailment of pension and other postretirement benefit plans | (0.1 | ) | (5.8 | ) | |||
Currency and other losses in Venezuela | — | 40.1 | |||||
Deferred income taxes | (2.5 | ) | (5.6 | ) | |||
Loss on debt refinancing | 59.8 | — | |||||
Gain on disposal of property and equipment | (1.1 | ) | (0.6 | ) | |||
Loss on sale of product line | — | 2.1 | |||||
Changes in assets and liabilities, excluding effect of currency translation: | |||||||
Trade accounts receivable | (6.3 | ) | (40.0 | ) | |||
Inventories | (13.1 | ) | (13.3 | ) | |||
Accounts payable | (2.3 | ) | 18.8 | ||||
Pension assets and liabilities, net | — | 7.2 | |||||
Other assets and liabilities, net | (6.4 | ) | (7.3 | ) | |||
Net cash provided by (used in) operating activities from continuing operations | 29.6 | (9.1 | ) | ||||
Net cash used in operating activities from discontinued operations | (130.4 | ) | (15.3 | ) | |||
Net cash used in operating activities | (100.8 | ) | (24.4 | ) | |||
INVESTING ACTIVITIES | |||||||
Capital expenditures | (40.7 | ) | (32.4 | ) | |||
Businesses acquired, net of cash acquired | (29.7 | ) | (87.7 | ) | |||
Proceeds from sale of product line | — | 2.9 | |||||
Other investing activities | (2.9 | ) | 2.4 | ||||
Net cash used in investing activities from continuing operations | (73.3 | ) | (114.8 | ) | |||
Net cash provided by investing activities from discontinued operations | 0.1 | 1,038.3 | |||||
Net cash (used in) provided by investing activities | (73.2 | ) | 923.5 | ||||
FINANCING ACTIVITIES | |||||||
Borrowings under credit arrangements | 54.6 | 120.0 | |||||
Repayments under credit arrangements | (66.4 | ) | (416.6 | ) | |||
Proceeds from issuance of long term note obligations | 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 | 5.2 | 6.1 | |||||
Noncontrolling interest dividend | (0.1 | ) | (2.0 | ) | |||
Other financing activities | (0.7 | ) | — | ||||
Net cash used in financing activities from continuing operations | (243.9 | ) | (293.5 | ) | |||
Net cash provided by financing activities from discontinued operations | — | 1.1 | |||||
Net cash used in financing activities | (243.9 | ) | (292.4 | ) | |||
Effect of currency exchange rate changes on cash and cash equivalents | (2.6 | ) | 1.4 | ||||
(Decrease) increase in cash and cash equivalents | (420.5 | ) | 608.1 | ||||
Cash and cash equivalents, beginning of period | 721.5 | 163.3 | |||||
Cash and cash equivalents, end of period | $ | 301.0 | $ | 771.4 |
GCP Applied Technologies Inc. Analysis of Operations (unaudited) | |||||||||||||||||||||
Analysis of Operations (in millions, except per share amounts) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | ||||||||||||||||
Net sales: | |||||||||||||||||||||
Specialty Construction Chemicals | $ | 165.4 | $ | 156.2 | 5.9 | % | $ | 487.4 | $ | 449.1 | 8.5 | % | |||||||||
Specialty Building Materials | 130.9 | 126.2 | 3.7 | % | 361.9 | 345.8 | 4.7 | % | |||||||||||||
Total GCP net sales | $ | 296.3 | $ | 282.4 | 4.9 | % | $ | 849.3 | $ | 794.9 | 6.8 | % | |||||||||
Net sales by region: | |||||||||||||||||||||
North America | $ | 154.1 | $ | 141.5 | 8.9 | % | $ | 426.4 | $ | 396.0 | 7.7 | % | |||||||||
Europe Middle East Africa (EMEA) | 61.7 | 67.0 | (7.9 | )% | 189.2 | 178.9 | 5.8 | % | |||||||||||||
Asia Pacific | 63.9 | 58.0 | 10.2 | % | 181.6 | 168.4 | 7.8 | % | |||||||||||||
Latin America | 16.6 | 15.9 | 4.4 | % | 52.1 | 51.6 | 1.0 | % | |||||||||||||
Total net sales by region | $ | 296.3 | $ | 282.4 | 4.9 | % | $ | 849.3 | $ | 794.9 | 6.8 | % | |||||||||
Net Sales, Constant Currency: | |||||||||||||||||||||
Specialty Construction Chemicals | $ | 171.5 | $ | 156.2 | 9.8 | % | $ | 488.0 | $ | 449.1 | 8.7 | % | |||||||||
Specialty Building Materials | 131.1 | 126.2 | 3.9 | % | 356.4 | 345.8 | 3.1 | % | |||||||||||||
Total GCP Net Sales, Constant Currency (non-GAAP) | $ | 302.6 | $ | 282.4 | 7.2 | % | $ | 844.4 | $ | 794.9 | 6.2 | % | |||||||||
Profitability performance measures: | |||||||||||||||||||||
Adjusted EBIT (A): | |||||||||||||||||||||
Specialty Construction Chemicals segment operating income | $ | 12.7 | $ | 15.7 | (19.1 | )% | $ | 31.2 | $ | 44.5 | (29.9 | )% | |||||||||
Specialty Building Materials segment operating income | 34.3 | 30.1 | 14.0 | % | 84.2 | 80.6 | 4.5 | % | |||||||||||||
Corporate costs (B) | (5.3 | ) | (7.5 | ) | (29.3 | )% | (22.8 | ) | (28.9 | ) | (21.1 | )% | |||||||||
Certain pension costs (C) | (2.0 | ) | (2.1 | ) | (4.8 | )% | (5.8 | ) | (7.0 | ) | (17.1 | )% | |||||||||
Adjusted EBIT (non-GAAP) | 39.7 | 36.2 | 9.7 | % | 86.8 | 89.2 | (2.7 | )% | |||||||||||||
Currency and other financial losses in Venezuela | — | (36.7 | ) | (100.0 | )% | — | (39.1 | ) | (100.0 | )% | |||||||||||
Litigation settlement | — | (4.0 | ) | (100.0 | )% | — | (4.0 | ) | (100.0 | )% | |||||||||||
Repositioning expenses | (3.7 | ) | (1.1 | ) | NM | (5.8 | ) | (6.8 | ) | (14.7 | )% | ||||||||||
Restructuring expenses and asset impairments | (14.3 | ) | (2.1 | ) | NM | (13.2 | ) | (13.0 | ) | 1.5 | % | ||||||||||
Pension MTM adjustment and other related costs, net | — | (3.0 | ) | (100.0 | )% | (0.9 | ) | (2.9 | ) | (69.0 | )% | ||||||||||
Gain on termination and curtailment of pension and other postretirement plans | — | 0.8 | (100.0 | )% | 0.1 | 5.9 | (98.3 | )% | |||||||||||||
Loss on sale of product line | — | — | — | % | — | (2.1 | ) | (100.0 | )% | ||||||||||||
Third-party and other acquisition-related costs | (0.5 | ) | (2.0 | ) | (75.0 | )% | (2.1 | ) | (5.0 | ) | (58.0 | )% | |||||||||
Other financing costs | — | (6.0 | ) | (100.0 | )% | — | (6.0 | ) | (100.0 | )% | |||||||||||
Amortization of acquired inventory fair value adjustment | — | (0.2 | ) | (100.0 | )% | (0.2 | ) | (2.9 | ) | (93.1 | )% | ||||||||||
Tax indemnification adjustments | — | — | — | % | — | (2.4 | ) | (100.0 | )% | ||||||||||||
Interest expense, net | (5.3 | ) | (14.5 | ) | (63.4 | )% | (83.6 | ) | (49.0 | ) | 70.6 | % | |||||||||
Currency losses in Argentina | (1.1 | ) | — | NM | (1.1 | ) | — | NM | |||||||||||||
Income tax (expense) benefit | (7.6 | ) | 14.5 | NM | (15.8 | ) | (3.7 | ) | NM | ||||||||||||
Income (loss) from continuing operations attributable to GCP shareholders (GAAP) | $ | 7.2 | $ | (18.1 | ) | NM | $ | (35.8 | ) | $ | (41.8 | ) | (14.4 | )% | |||||||
Diluted EPS from continuing operations (GAAP) | $ | 0.10 | $ | (0.25 | ) | NM | $ | (0.50 | ) | $ | (0.59 | ) | 15.3 | % | |||||||
Adjusted EPS (non-GAAP) | $ | 0.34 | $ | 0.22 | 54.5 | % | $ | 0.62 | $ | 0.39 | 59.0 | % |
GCP Applied Technologies Inc. Analysis of Operations (unaudited) (continued) | |||||||||||||||||||||
Analysis of Operations (in millions) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | ||||||||||||||||
Adjusted profitability performance measures: | |||||||||||||||||||||
Gross Profit: | |||||||||||||||||||||
Specialty Construction Chemicals | $ | 53.7 | $ | 53.4 | 0.6 | % | $ | 156.7 | $ | 160.1 | (2.1 | )% | |||||||||
Specialty Building Materials | 57.1 | 54.1 | 5.5 | % | 154.6 | 152.1 | 1.6 | % | |||||||||||||
Adjusted Gross Profit (non-GAAP) | 110.8 | 107.5 | 3.1 | % | 311.3 | 312.2 | (0.3 | )% | |||||||||||||
Amortization of acquired inventory fair value adjustment | — | (0.2 | ) | (100.0 | )% | (0.2 | ) | (2.9 | ) | 93.1 | % | ||||||||||
Loss in Venezuela in cost of goods sold | — | — | — | % | — | (0.8 | ) | (100.0 | )% | ||||||||||||
Corporate costs and pension costs in cost of goods sold | (0.4 | ) | (0.4 | ) | — | % | (1.5 | ) | (1.3 | ) | (15.4 | )% | |||||||||
Total GCP Gross Profit (GAAP) | $ | 110.4 | $ | 106.9 | 3.3 | % | $ | 309.6 | $ | 307.2 | 0.8 | % | |||||||||
Gross Margin: | |||||||||||||||||||||
Specialty Construction Chemicals | 32.5 | % | 34.2 | % | (1.7) pts | 32.2 | % | 35.6 | % | (3.4) pts | |||||||||||
Specialty Building Materials | 43.6 | % | 42.9 | % | 0.7 pts | 42.7 | % | 44.0 | % | (1.3) pts | |||||||||||
Adjusted Gross Margin (non-GAAP) | 37.4 | % | 38.1 | % | (0.7) pts | 36.7 | % | 39.3 | % | (2.6) pts | |||||||||||
Loss in Venezuela in cost of goods sold | — | % | — | % | 0.0 pts | — | % | (0.1 | )% | 0.1 pts | |||||||||||
Amortization of acquired inventory fair value adjustment | — | % | (0.1 | )% | 0.1 pts | — | % | (0.4 | )% | 0.4 pts | |||||||||||
Corporate costs and pension costs in cost of goods sold | (0.1 | )% | (0.1 | )% | 0.0 pts | (0.2 | )% | (0.2 | )% | 0.0 pts | |||||||||||
Total GCP Gross Margin (GAAP) | 37.3 | % | 37.9 | % | (0.6) pts | 36.5 | % | 38.6 | % | (2.1) pts | |||||||||||
Adjusted EBIT (A)(B)(C): | |||||||||||||||||||||
Specialty Construction Chemicals segment operating income | $ | 12.7 | $ | 15.7 | (19.1 | )% | $ | 31.2 | $ | 44.5 | (29.9 | )% | |||||||||
Specialty Building Materials segment operating income | 34.3 | 30.1 | 14.0 | % | 84.2 | 80.6 | 4.5 | % | |||||||||||||
Corporate and certain pension costs | (7.3 | ) | (9.6 | ) | (24.0 | )% | (28.6 | ) | (35.9 | ) | (20.3 | )% | |||||||||
Total GCP Adjusted EBIT (non-GAAP) | $ | 39.7 | $ | 36.2 | 9.7 | % | $ | 86.8 | $ | 89.2 | (2.7 | )% | |||||||||
Depreciation and amortization: | |||||||||||||||||||||
Specialty Construction Chemicals | $ | 6.0 | $ | 5.4 | 11.1 | % | $ | 18.0 | $ | 15.6 | 15.4 | % | |||||||||
Specialty Building Materials | 3.8 | 3.6 | 5.6 | % | 10.9 | 9.6 | 13.5 | % | |||||||||||||
Corporate | 0.7 | 0.7 | — | % | 2.4 | 1.7 | 41.2 | % | |||||||||||||
Total GCP depreciation and amortization | $ | 10.5 | $ | 9.7 | 8.2 | % | $ | 31.3 | $ | 26.9 | 16.4 | % | |||||||||
Adjusted EBITDA: | |||||||||||||||||||||
Specialty Construction Chemicals | $ | 18.7 | $ | 21.1 | (11.4 | )% | $ | 49.2 | $ | 60.1 | (18.1 | )% | |||||||||
Specialty Building Materials | 38.1 | 33.7 | 13.1 | % | 95.1 | 90.2 | 5.4 | % | |||||||||||||
Corporate and certain pension costs | (6.6 | ) | (8.9 | ) | (25.8 | )% | (26.2 | ) | (34.2 | ) | (23.4 | )% | |||||||||
Total GCP Adjusted EBITDA (non-GAAP) | $ | 50.2 | $ | 45.9 | 9.4 | % | $ | 118.1 | $ | 116.1 | 1.7 | % | |||||||||
Adjusted EBIT Margin: | |||||||||||||||||||||
Specialty Construction Chemicals | 7.7 | % | 10.1 | % | (2.4) pts | 6.4 | % | 9.9 | % | (3.5) pts | |||||||||||
Specialty Building Materials | 26.2 | % | 23.9 | % | 2.3 pts | 23.3 | % | 23.3 | % | 0.0 pts | |||||||||||
Total GCP Adjusted EBIT Margin (non-GAAP) | 13.4 | % | 12.8 | % | 0.6 pts | 10.2 | % | 11.2 | % | (1.0) pts | |||||||||||
Adjusted EBITDA Margin: | |||||||||||||||||||||
Specialty Construction Chemicals | 11.3 | % | 13.5 | % | (2.2) pts | 10.1 | % | 13.4 | % | (3.3) pts | |||||||||||
Specialty Building Materials | 29.1 | % | 26.7 | % | 2.4 pts | 26.3 | % | 26.1 | % | 0.2 pts | |||||||||||
Total GCP Adjusted EBITDA Margin (non-GAAP) | 16.9 | % | 16.3 | % | 0.6 pts | 13.9 | % | 14.6 | % | (0.7) pts |
Analysis of Operations (In millions) | Four Quarters Ended | ||||||
September 30, 2018 | September 30, 2017 | ||||||
Calculation of Adjusted EBIT Return On Invested Capital (trailing four quarters): | |||||||
Adjusted EBIT | $ | 125.0 | $ | 122.1 | |||
Invested Capital: | |||||||
Trade accounts receivable | 213.1 | 209.4 | |||||
Inventories | 115.9 | 108.4 | |||||
Accounts payable | (125.8 | ) | (120.8 | ) | |||
Invested working capital | 203.2 | 197.0 | |||||
Other current assets (excluding income taxes) | 36.0 | 51.9 | |||||
Properties and equipment, net | 220.2 | 209.1 | |||||
Goodwill | 210.1 | 183.8 | |||||
Technology and other intangible assets, net | 91.9 | 76.9 | |||||
Other assets (excluding capitalized financing fees) | 27.4 | 24.6 | |||||
Other current liabilities (excluding income taxes, restructuring, repositioning, accrued interest and liabilities incurred in association with the Darex divestiture) | (91.8 | ) | (176.6 | ) | |||
Other liabilities (excluding other postretirement benefits liability and liabilities incurred in association with the Darex divestiture) | (17.2 | ) | (35.5 | ) | |||
Total invested capital | $ | 679.8 | $ | 531.2 | |||
Adjusted EBIT Return On Invested Capital (non-GAAP) | 18.4 | % | 23.0 | % |
(A) | GCP's segment operating income includes only GCP's share of income of consolidated joint ventures. |
(B) | Management allocates corporate costs to each segment to the extent such costs are directly attributable to the segments. Corporate costs include approximately $5.4 million of allocated costs for the nine months ended September 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. Beginning in the third quarter of 2017, the Company began allocating these costs to its remaining operating segments. |
(C) | 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 to the operation of the GCP businesses. |
GCP Applied Technologies Inc. Analysis of Operations (unaudited) (continued) | |||||||
(In millions) | Nine Months Ended September 30, | ||||||
2018 | 2017 | ||||||
Cash flow measure: | |||||||
Net cash provided by (used in) operating activities from continuing operations | $ | 29.6 | $ | (9.1 | ) | ||
Capital expenditures | (40.7 | ) | (32.4 | ) | |||
Free Cash Flow (non-GAAP) | (11.1 | ) | (41.5 | ) | |||
Cash paid for repositioning | 4.5 | 5.4 | |||||
Cash paid for restructuring | 5.8 | 4.3 | |||||
Cash paid for third-party and other acquisition-related costs | 1.5 | 6.2 | |||||
Capital expenditures related to repositioning | 5.5 | 1.9 | |||||
Cash taxes related to repositioning, restructuring, third-party and other acquisition-related costs | (2.2 | ) | (3.5 | ) | |||
Accelerated pension plan contributions | 2.9 | — | |||||
Adjusted Free Cash Flow (non-GAAP) | $ | 6.9 | $ | (27.2 | ) |
GCP Applied Technologies Inc. Adjusted Earnings Per Share (unaudited) | |||||||||||||||||||||||||||||||
Three Months Ended September 30, | |||||||||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||||||||
(in millions, except per share amounts) | Pre- Tax | Tax Effect | After- Tax | Per Share | Pre- Tax | Tax Effect | After- Tax | Per Share | |||||||||||||||||||||||
Diluted EPS from continuing operations (GAAP) | $ | 0.10 | $ | (0.25 | ) | ||||||||||||||||||||||||||
Repositioning expenses | $ | 3.7 | $ | 0.9 | $ | 2.8 | 0.04 | $ | 1.1 | $ | 0.4 | $ | 0.7 | 0.01 | |||||||||||||||||
Restructuring expenses and asset impairments | 14.3 | 3.2 | 11.1 | 0.15 | 2.1 | 0.7 | 1.4 | 0.02 | |||||||||||||||||||||||
Gain on termination and curtailment of pension and other postretirement plans | — | — | — | — | (0.8 | ) | (0.4 | ) | (0.4 | ) | (0.01 | ) | |||||||||||||||||||
Pension MTM adjustment and other related costs, net | — | — | — | — | 3.0 | 1.3 | 1.7 | 0.02 | |||||||||||||||||||||||
Currency and other financial losses in Venezuela | — | — | — | — | 36.7 | 12.2 | 24.5 | 0.34 | |||||||||||||||||||||||
Litigation settlement | — | — | — | — | 4.0 | 1.5 | 2.5 | 0.03 | |||||||||||||||||||||||
Third-party and other acquisition-related costs | 0.5 | 0.1 | 0.4 | 0.01 | 2.0 | 0.4 | 1.6 | 0.02 | |||||||||||||||||||||||
Currency losses in Argentina | 1.1 | 0.3 | 0.8 | 0.01 | — | — | — | — | |||||||||||||||||||||||
Loss on debt refinancing (1) | — | 1.8 | (1.8 | ) | (0.02 | ) | — | — | — | — | |||||||||||||||||||||
Amortization of acquired inventory fair value adjustment | — | — | — | — | 0.2 | 0.1 | 0.1 | — | |||||||||||||||||||||||
Other financing costs | — | — | — | — | 6.0 | 2.3 | 3.7 | 0.05 | |||||||||||||||||||||||
Discrete tax items, including adjustments to uncertain tax positions | — | (3.9 | ) | 3.9 | 0.05 | — | 1.1 | (1.1 | ) | (0.01 | ) | ||||||||||||||||||||
Adjusted EPS (non-GAAP) | $ | 0.34 | $ | 0.22 |
(1) | Represents incremental tax effect related to the loss on debt refinancing of $59.8 million incurred during the 2018 second quarter due to changes from the effect of tax reform on the Company. |
Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||||||||
(in millions, except per share amounts) | Pre- Tax | Tax Effect | After- Tax | Per Share | Pre- Tax | Tax Effect | After- Tax | Per Share | |||||||||||||||||||||||
Diluted EPS from continuing operations (GAAP) | $ | (0.50 | ) | $ | (0.59 | ) | |||||||||||||||||||||||||
Repositioning expenses | $ | 5.8 | $ | 1.5 | $ | 4.3 | 0.06 | $ | 6.8 | $ | 2.6 | $ | 4.2 | 0.06 | |||||||||||||||||
Restructuring expenses and asset impairments | 13.2 | 2.9 | 10.3 | 0.14 | 13.0 | 4.8 | 8.2 | 0.11 | |||||||||||||||||||||||
Gain on termination and curtailment of pension and other postretirement plans | (0.1 | ) | — | (0.1 | ) | — | (5.9 | ) | (2.6 | ) | (3.3 | ) | (0.05 | ) | |||||||||||||||||
Pension MTM adjustment and other related costs, net | 0.9 | 0.2 | 0.7 | 0.01 | 2.9 | 1.3 | 1.6 | 0.02 | |||||||||||||||||||||||
Currency and other financial losses in Venezuela | — | — | — | — | 39.1 | 12.9 | 26.2 | 0.37 | |||||||||||||||||||||||
Litigation settlement | — | — | — | — | 4.0 | 1.5 | 2.5 | 0.03 | |||||||||||||||||||||||
Loss on sale of product line | — | — | — | — | 2.1 | 0.8 | 1.3 | 0.02 | |||||||||||||||||||||||
Third-party and other acquisition-related costs | 2.1 | 0.5 | 1.6 | 0.02 | 5.0 | 1.0 | 4.0 | 0.06 | |||||||||||||||||||||||
Currency losses in Argentina | 1.1 | 0.3 | 0.8 | 0.01 | — | — | — | — | |||||||||||||||||||||||
Loss on debt refinancing | 59.8 | 14.8 | 45.0 | 0.62 | — | — | — | — | |||||||||||||||||||||||
Amortization of acquired inventory fair value adjustment | 0.2 | — | 0.2 | — | 2.9 | 0.9 | 2.0 | 0.03 | |||||||||||||||||||||||
Tax indemnification adjustments | — | — | — | — | 2.4 | 0.9 | 1.5 | 0.02 | |||||||||||||||||||||||
Other financing costs | — | — | — | — | 6.0 | 2.3 | 3.7 | 0.05 | |||||||||||||||||||||||
Discrete tax items, including adjustments to uncertain tax positions | — | (18.6 | ) | 18.6 | 0.26 | — | (18.2 | ) | 18.2 | 0.26 | |||||||||||||||||||||
Adjusted EPS (non-GAAP) | $ | 0.62 | $ | 0.39 |