Discontinued Operations

On July 3, 2017, the Company completed the sale of Darex to Henkel for $1.06 billion in cash (the “Disposition”). The agreement with Henkel governing the Disposition (the “Amended Purchase Agreement”) provides for a series of delayed closings in certain non-U.S. jurisdictions for which sale proceeds were received on the July 3, 2017 closing date. The delayed closings implement the legal transfer of the Darex business in the delayed closing jurisdictions in accordance with local law. During the three months ended March 31, 2019, the Company completed the delayed closing in Indonesia and recorded an after-tax gain on sale of $7.2 million. During the three months ended March 31, 2018, the Company completed the delayed closings in Argentina, Colombia, and Peru and recorded an after-tax gain of $10.3 million on the sale of the delayed close entities in these countries. The remaining delayed closing in Venezuela is expected to be completed during the year ended December 31, 2019. The results of the operations of the Darex business within the delayed close countries up to the time of their closings are reported as “Income from discontinued operations, net of income taxes” in the accompanying unaudited Consolidated Statements of Operations, with the exception of operations in Venezuela which were deconsolidated during 2017.

As of December 31, 2018, a liability of $13.6 million related to the consideration received by GCP for the delayed closings was recognized in “Other current liabilities”. During the three months ended March 31, 2019, GCP reduced the liability by $13.1 million which consisted of the sale proceeds received on July 3, 2017 for the delayed closing in Indonesia. The remaining liability of $0.5 million for the consideration received on July 3, 2017 related to the delayed closing in Venezuela is recorded in “Other current liabilities” as of March 31, 2019.

The following table includes a reconciliation of the gain on the sale of the Darex business related to delayed close entities recorded during the three months ended March 31, 2019 and 2018:



	Three Months Ended March 31,
(In millions)	2019		2018
Net proceeds included in gain	$	12.7	$	25.0
Less: Net assets derecognized	3.1		6.5
Gain recognized before income taxes	9.6		18.5
Less: Tax effect of gain recognized	2.4		8.2
Gain recognized after income taxes	$	7.2	$	10.3

In connection with the Disposition and related tax gain, as noted above, the Company recorded tax expense of $2.4 million and $8.2 million, respectively, within discontinued operations during the three months ended March 31, 2019 and 2018. The tax consequences of the Disposition are complex and the calculation of the provision is based on management’s best estimate using all readily accessible information. Based on the overall complexity of the calculation, management believes that there is a reasonable possibility that differences between the estimated tax provision and actual outcome may result within the next nine months, which could have a material impact on the Company's results of operations.

In connection with the Disposition, the Company and Henkel also entered into a Transition Services Agreement pursuant to which Henkel and the Company provided various services to each other in connection with the transition of the Darex business to Henkel. The services were related to real estate, information technology, accounts payable, payroll and other financial functions, as well as administrative services, and covered various periods up to 36 months following the closing date. The services substantially ended during the year ended December 31, 2018. The charges for such services generally allowed the servicing party to recover all out-of-pocket costs and expenses and were recorded in "Other income, net" on the accompanying unaudited Consolidated Statements of Operations.

Under the Amended Purchase Agreement, GCP is required to indemnify Henkel for certain possible future tax liabilities. As of March 31, 2019 and December 31, 2018, GCP has recorded an indemnification payable of $0.9 million as a result of the Disposition.

The following table sets forth the components of "Income from discontinued operations, net of income taxes" in the accompanying unaudited Consolidated Statements of Operations:



	Three Months Ended March 31,
(In millions)	2019			2018
Net sales	$	—		$	5.7
Cost of goods sold	—			7.1
Gross profit	—			(1.4		)
Selling, general and administrative expenses	0.3			1.8
Restructuring expenses	0.1			1.1
Gain on sale of business	(9.6		)	(18.5		)
Other expenses (income), net	0.1			(0.2		)
Income from discontinued operations before income taxes	9.1			14.4
Provision for income taxes	(2.3		)	(7.2		)
Income from discontinued operations, net of income taxes	$	6.8		$	7.2

The following table sets forth carrying amounts of the major classes of assets and liabilities of Darex classified as held for sale in the accompanying unaudited Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018:



(In millions)	March 31, 2019		December 31, 2018
Trade accounts receivable	$	—	$	2.2
Inventories	—		1.2
Current assets held for sale	$	—	$	3.4
Properties and equipment, net	—		0.2
Other assets	0.5		0.5
Non-current assets held for sale	$	0.5	$	0.7
Underfunded and unfunded defined benefit pension plans	—		0.4
Non-current liabilities held for sale	$	—	$	0.4