UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended		~~September~~March 3031, ~~2021~~2022
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number		1-37533

GCP Applied Technologies Inc.

Delaware						47-3936076
(State of Incorporation)						(I.R.S. Employer Identification No.)
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2325 Lakeview Parkway, Alpharetta, Georgia 30009

(Address of principal executive offices) (Zip Code)

(617) 876-1400

(~~Address~~Registrant’s ~~and~~telephone ~~phone~~ number, ofincluding ~~principal~~area ~~executive offices~~code)

Securities registered pursuant to Section 12(b) of the Act:

Class

Trading Symbol

Exchange on which registered

Common Stock, $0.01 par value per share

GCP

New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Class

Trading Symbol

Exchange on which registered

Common Stock, $0.01 par value per share

GCP

New York Stock Exchange

Securities registered pursuant to Section 12(b) of the Act:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class						Outstanding at ~~October~~April 3130, ~~2021~~2022
Common Stock, $0.01 par value per share						7374,~~506~~011,~~691~~349

Table of Contents

TABLE OF CONTENTS
Part I.	Financial Information
	Item 1.	Financial Statements (unaudited)		3
		Condensed Consolidated Statements of Operations		3
		Condensed Consolidated Statements of Comprehensive Income (Loss)		4
		Condensed Consolidated Statements of Comprehensive Loss		4
		Condensed Consolidated Balance Sheets		5
		Condensed Consolidated Statements of Stockholders’ Equity		6
		Condensed Consolidated Statements of Cash Flows		7
		Notes to the Condensed Consolidated Financial Statements
		1.	~~Basis~~Nature of ~~Presentation~~Business and ~~Summary~~Basis of ~~Significant Accounting and Financial Reporting Policies~~Presentation	87
		2.	Revenue from ~~Lessor Arrangements and~~ Contracts with Customers	109
		3.	Restructuring and Repositioning Expenses	1110
		4.	Debt	1211
		5.	~~Derivative Instruments~~Derivatives	1311
		6.	Income Taxes	1312
		7.	~~Pension~~Retirement ~~and Postretirement Benefit~~ Plans	1513
		8.	Other Balance Sheet ~~Information~~Accounts	1513
		9.	~~Commitments~~Accumulated ~~and~~Other ~~Contingencies~~Comprehensive Loss	1614
		10.	~~Accumulated~~Stock ~~Other~~Incentive ~~Comprehensive Loss~~Plans	1715
		11.	~~Stock~~Earnings ~~Incentive~~Per ~~Plans~~Share	1816
		12.	~~Related~~Commitments ~~Party Transactions~~ and ~~Transactions with Grace~~Contingencies	1916
		13.	~~Earnings~~Related ~~Per~~Party ~~Share~~Transactions	2018
		14.	~~Operating Segment and Geographic Information~~Segments	2119
		15.	Revisions of Previously Issued Condensed Consolidated Financial Statements	22
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		31
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		39
	Item 4.	Controls and Procedures		31
	Item 4.	Controls and Procedures		39
Part II.	Other Information
	Item 1.	Legal Proceedings		4031
	Item 1A.	Risk Factors		4032
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		4132
	Item 6.	Exhibits		4232
		Signatures		4334

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

GCP Applied Technologies Inc.

Condensed Consolidated Statements of Operations (unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended
	2021		2020		2021		2020
	March 31,
	(in millions, except per share amounts)
	2022		2021
Net sales	$	249.6	$	248.4	$	725.8	$	660.5
	(in millions, except per share amounts)
Cost of goods sold	165.1		146.6		461.7		398.5
Net sales	$	237.3	$	222.8
Gross profit	84.5		101.8		264.1		262.0
Cost of goods sold	164.3		136.3
Selling, general and administrative expenses	59.2		64.7		190.0		198.8
Gross profit	73.0		86.5
Restructuring and repositioning expenses	6.7		7.8		22.6		15.0
Selling, general and administrative expenses	62.5		66.6
Interest expense and related financing costs	5.6		5.6		16.8		16.3
Interest expense, net	5.6		5.6
Gain on sale of corporate headquarters	—		(110.2)		—		(110.2)
Restructuring and repositioning expenses	3.5		8.9
Other expense, net	3.61		2.78		~~5.2~~		~~6.4~~
Total costs (income)	75.1		(29.4)		234.6		126.3
Total costs	74.7		83.9
Income from continuing operations before income taxes	9.4		131.2		29.5		135.7
(Loss) income from continuing operations before income taxes	(1.7)		2.6
Income tax expense	(1.69)		(311.0)		~~(9.6)~~		~~(34.0)~~
Income from continuing operations	7.8		100.2		19.9		101.7
(Loss) income from continuing operations	(3.6)		1.6
Loss from discontinued operations, net of income taxes	(0.13)		~~(0.1)~~—		~~(0.3)~~		~~(0.4)~~
Net income	7.7		100.1		19.6		101.3
Net (loss) income	(3.9)		1.6
Less: Net income attributable to noncontrolling interests	—(0.1)		(0.21)		~~(0.2)~~		~~(0.4)~~
Net income attributable to GCP shareholders	$	7.7	$	99.9	$	19.4	$	100.9
Net (loss) income attributable to GCP shareholders	$	(4.0)	$	1.5
Amounts Attributable to GCP Shareholders:
Income from continuing operations attributable to GCP shareholders	$	7.8	$	100.0	$	19.7	$	101.3
(Loss) income from continuing operations attributable to GCP shareholders	$	(3.7)	$	1.5
Loss from discontinued operations, net of income taxes	(0.13)		~~(0.1)~~—		~~(0.3)~~		~~(0.4)~~
Net income attributable to GCP shareholders	$	7.7	$	99.9	$	19.4	$	100.9
Net (loss) income attributable to GCP shareholders	$	(4.0)	$	1.5
Earnings Per Share Attributable to GCP Shareholders
Basic earnings per share:
Income from continuing operations attributable to GCP shareholders	$	0.11	$	1.37	$	0.27	$	1.39
(Loss) income from continuing operations attributable to GCP shareholders	$	(0.05)	$	0.02
Loss from discontinued operations, net of income taxes	(0.01)		—		(0.01)		(0.01)
Net (loss) income attributable to GCP shareholders	$	(0.05)	$	0.02
Net income attributable to GCP shareholders	$	0.10	$	1.37	$	0.26	$	1.38
Weighted average number of basic shares	74.0		73.2
Weighted average number of basic shares	73.5		73.0		73.3		72.9
Diluted earnings per share:
Income from continuing operations attributable to GCP shareholders	$	0.11	$	1.36	$	0.27	$	1.39
(Loss) income from continuing operations attributable to GCP shareholders	$	(0.05)	$	0.02
Loss from discontinued operations, net of income taxes	(0.01)		—		(0.01)		(0.01)
Net (loss) income attributable to GCP shareholders	$	(0.05)	$	0.02
Net income attributable to GCP shareholders	$	0.10	$	1.36	$	0.26	$	1.38
Weighted average number of diluted shares	74.0		73.4
Weighted average number of diluted shares	73.6		73.2		73.5		73.1

The Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these statements.

Table of Contents

GCP Applied Technologies Inc.

Condensed Consolidated Statements of Comprehensive ~~Income (~~Loss) (unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended
	2021		2020		2021		2020
	March 31,
	(In millions)
	2022		2021
Net income	$	7.7	$	100.1	$	19.6	$	101.3
	(in millions)
Other comprehensive (loss) income:
Net (loss) income	$	(3.9)	$	1.6
Defined benefit pension and postretirement plans	—		0.1		0.1		0.2
Other comprehensive loss:
Currency translation adjustments	(12.4)		10.3		(15.2)		(18.4)
Defined benefit pension and postretirement plans	(0.3)		—
Income tax effect	(0.2)1		~~0.5~~—		~~(0.5)~~		~~0.3~~
Loss from hedging activities	0.1		(0.1)		0.1		—
Currency translation adjustments	(1.0)		(7.6)
Total other comprehensive (loss) income	(12.5)		10.8		(15.5)		(17.9)
Income tax effect	(0.2)		(0.4)
Comprehensive (loss) income	(4.8)		110.9		4.1		83.4
Derivatives	(0.1)		—
Less: Comprehensive income attributable to noncontrolling interests	—		(0.2)		(0.2)		(0.4)
Total other comprehensive loss	(1.5)		(8.0)
Comprehensive (loss) income attributable to GCP shareholders	$	(4.8)	$	110.7	$	3.9	$	83.0
Comprehensive loss	(5.4)		(6.4)
Less: Comprehensive income attributable to noncontrolling interests	(0.1)		(0.1)
Comprehensive loss attributable to GCP shareholders	$	(5.5)	$	(6.5)

The Notes to the Unaudited Condensed Consolidated Financial Statements ~~(unaudited)~~ are an integral part of these statements

Table of Contents

GCP Applied Technologies Inc.

Condensed Consolidated Balance Sheets (unaudited)

	September 30,2021		December 31,2020
	March 31,2022		December 31,2021
	(in millions, except par value and shares)
ASSETS
Current Assets
Cash and cash equivalents	$	~~481~~471.53	$	~~482~~500.76
Trade accounts receivable, net	168.54		~~169~~162.4
Inventories	~~130~~143.05		98130.47
Other current assets	50.4		41.2
Current assets held for sale	—		22.0
Total Current Assets	830.4		791.7
Other current assets	45.5		45.9
Properties and equipment, net	215.1		225.6
Total Current Assets	828.7		861.6
Goodwill	209.7		215.0
Properties and equipment, net	216.6		213.2
Technology and other intangible assets, net	63.2		70.9
Goodwill	207.0		205.5
Other assets	121.7		114.4
Technology and other intangible assets, net	58.5		48.8
Total Assets	$	1,440.1	$	1,417.6
Other assets	114.7		117.5
Total Assets	$	1,425.5	$	1,446.6
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current maturities of long-term debt	$	21.72	$	2.81
Accounts payable	90.9		87.8
Current liabilities held for sale	—		2.6
Other current liabilities	126.4		133.8
Accounts payable	99.5		102.3
Total Current Liabilities	220.0		224.4
Other current liabilities	111.9		124.9
Long-term debt	348.9		348.9
Total Current Liabilities	212.6		231.9
Defined benefit pension plans	64.9		62.9
Long-term debt	348.1		348.8
Unrecognized tax benefits	41.2		41.0
Defined benefit pension plans	57.0		56.5
Income taxes payable	24.1		28.4
Unrecognized tax benefits	41.2		41.1
Other liabilities	74.3		57.9
Income taxes payable	24.1		24.1
Total Liabilities	773.4		763.5
Other liabilities	72.7		72.3
Commitments and Contingencies - Note 9
Total Liabilities	755.7		774.7
Commitments and Contingencies (Note 12)
Stockholders’ Equity
Preferred stock, par value $0.01; 50,000,000 shares authorized, no shares issued or outstanding	—		—
Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 73,505,485 and 73,082,066, respectively	0.7		0.7
Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 74,007,869 and 73,845,554, respectively	0.7		0.7
Paid-in capital	7284.01		6180.92
Accumulated earnings	~~729~~727.75		~~710~~731.35
Accumulated other comprehensive loss	(~~126~~130.09)		(~~110~~129.54)
Treasury stock	(1214.30)		(1013.78)
Total GCP’s Shareholders’ Equity	~~664~~667.14		~~651~~669.72
Noncontrolling interests	2.64		2.47
Total Stockholders’ Equity	~~666~~669.78		~~654~~671.19
Total Liabilities and Stockholders’ Equity	$	1,~~440~~425.15	$	1,~~417~~446.6

The Notes to the Unaudited Condensed Consolidated Financial Statements ~~(unaudited)~~ are an integral part of these statements

Table of Contents

GCP Applied Technologies Inc.

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended
	2021		2020		2021		2020
	March 31,
	(in millions)
	2022		2021
	(in millions)
Common stock
Balance, beginning of period	$	0.7	$	0.7	$	~~0.7~~	$	~~0.7~~
Change in common stock at par value	—		—		—		—
Balance, end of period	0.7		0.7
Balance, end of period	0.7		0.7		0.7		0.7
Additional paid-in-capital
Balance, beginning of period	7080.2		5661.9		~~61.9~~		~~53.4~~
Share-based compensation	10.52		3.1.4		~~5.5~~		~~5.9~~
Exercise of stock options	0.3.7		02.42		~~4.6~~		~~1.1~~
Balance, end of period	7284.01		6065.45		~~72.0~~		~~60.4~~
Accumulated Earnings
Accumulated earnings
Balance, beginning of period	~~722~~731.05		~~611~~710.23		~~710.3~~		~~610.2~~
Net income attributable to GCP shareholders	7.7		99.9		19.4		100.9
Net (loss) income attributable to GCP shareholders	(4.0)		1.5
Balance, end of period	~~729~~727.75		711.18		~~729.7~~		~~711.1~~
Accumulated other comprehensive loss
Balance, beginning of period	(~~113~~129.54)		(~~145~~110.75)		~~(110.5)~~		~~(117.0)~~
Other comprehensive (loss) income	(12.5)		10.8		(15.5)		(17.9)
Other comprehensive loss	(1.5)		(8.0)
Balance, end of period	(~~126~~130.09)		(~~134~~118.95)		~~(126.0)~~		~~(134.9)~~
Treasury stock
Balance, beginning of period	(1213.38)		(810.97)		~~(10.7)~~		~~(8.6)~~
Share repurchases	—(0.2)		(10.17)		~~(1.6)~~		~~(1.4)~~
Balance, end of period	(1214.30)		(1011.04)		~~(12.3)~~		~~(10.0)~~
Non-controlling interests
Balance, beginning of period	2.67		2.24		~~2.4~~		~~2.4~~
Net income attributable to noncontrolling interests	—0.1		0.21		~~0.2~~		~~0.4~~
Dividends and other changes	—(0.4)		~~(0.1)~~—		—		~~(0.5)~~
Balance, end of period	2.64		2.35		~~2.6~~		~~2.3~~
Total stockholders’ equity	$	~~666~~669.78	$	~~629~~650.6	$	~~666.7~~	$	~~629.6~~

The Notes to the Unaudited Condensed Consolidated Financial Statements ~~(unaudited)~~ are an integral part of these statements

Table of Contents

GCP Applied Technologies Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

	Nine Months Ended September 30,
	Three Months Ended
	2021		2020
	March 31,
	2022		2021
	(in millions)
OPERATING ACTIVITIES
Net income	$	19.6	$	101.3
Net (loss) income	$	(3.9)	$	1.6
Less: Loss from discontinued operations	(0.3)		~~(0.4)~~—
Income from continuing operations	19.9		101.7
(Loss) income from continuing operations	(3.6)		1.6
Reconciliation to net cash provided by operating activities
Reconciliation to net cash (used in) provided by operating activities
Depreciation and amortization	3310.74		3411.53
Deferred income taxes	(5.7)		21.9
Provisions for expected credit losses and inventory obsolescence	3.6		1.8
Stock-based compensation expense	4.4		3.8
Deferred income taxes	1.5		(0.2)
Unrealized loss on foreign currency	2.3		2.7
Impairment of assets related to restructuring plans	0.4		2.2
Amortization of debt discount and financing costs	1.1		1.1
Stock-based compensation expense	0.2		1.0
Loss (gain) on disposal of property and equipment	0.8		(109.7)
Unrealized loss (gain) on foreign currency	0.1		(2.3)
(Gain) loss on disposal of assets and product lines	(0.1)		1.1
Other	0.3		0.4
Changes in assets and liabilities, excluding effect of currency translation
Trade accounts receivable	(43.29)		84.68
Inventories	(3412.4)		3(21.25)
Accounts payable	5(2.49)		(39.9)
Pension and postretirement plans, net	3.0		(12.4)
Pension assets and liabilities, net	0.8		1.1
Other assets and liabilities, net	(010.54)		7(10.85)
Net cash provided by operating activities from continuing operations	25.8		59.3
Net cash (used in) provided by operating activities	(16.0)		0.7
Net cash used in operating activities from discontinued operations	(0.3)		(2.5)
Net cash provided by operating activities	25.5		56.8
INVESTING ACTIVITIES
Capital expenditures	(2312.95)		(288.01)
Proceeds from sale of corporate headquarters, net of transaction costs	—		122.5
Net cash used in investing activities	(12.5)		(8.1)
Other investing activities	0.1		0.4
Net cash (used in) provided by investing activities from continuing operations	(23.8)		94.9
FINANCING ACTIVITIES
Proceeds from exercise of stock options	43.67		1.18
Share repurchases	(1.6)		—
Payments of tax withholding obligations related to employee equity awards	(1.5)		(0.7)
Borrowings under credit arrangements	0.5		1.5
Payments on finance lease obligations	(1.2)		(0.2)
Repayments under credit arrangements	(0.5)		—
Payments of dividends to noncontrolling interests	(0.4)		—
Payments on finance lease obligations	(0.5)		(0.6)
Repayments under credit arrangements	(0.4)		(0.3)
Change in bank overdrafts	0.4		—
Other financing activities	(0.2)		—
Other financing activities	(0.7)		(1.3)
Net cash provided by financing activities	—		0.6
Net cash provided by financing activities from continuing operations	2.2		0.7
Effect of currency exchange rate changes on cash and cash equivalents	(0.8)		(3.0)
Effect of currency exchange rate changes on cash and cash equivalents	(5.1)		(4.0)
Decrease in cash and cash equivalents	(29.3)		(9.8)
(Decrease) increase in cash and cash equivalents	(1.2)		148.4
Cash and cash equivalents, beginning of period	500.6		482.7
Cash and cash equivalents, beginning of period	482.7		325.0
Cash and cash equivalents, end of period	$	471.3	$	472.9
Cash and cash equivalents, end of period	$	481.5	$	473.4
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES
Supplemental disclosure of non-cash investing activities:
Property and equipment purchases unpaid and included in accounts payable	$	8.1	$	3.0
Property and equipment purchases unpaid and included in accounts payable	$	5.2	$	4.9
Operating lease right of use assets obtained in exchange for new lease obligations	$	19.5	$	12.9

The Notes to the Unaudited Condensed Consolidated Financial Statements ~~(unaudited)~~ are an integral part of these statements

Table of Contents

GCP Applied Technologies Inc.

Notes to the Condensed Consolidated Financial Statements (unaudited)

1. ~~Basis~~Nature of ~~Presentation~~Business and ~~Summary~~Basis of ~~Significant~~Presentation ~~Accounting and Financial Reporting Policies~~

Nature of Business

GCP Applied Technologies Inc. (“GCP”, or the “Company”) is engaged in the production and sale of specialty construction chemicals and specialty building materials through two operating segments. Specialty Construction Chemicals (“SCC”) operating segment provides products, services and technologies to the concrete and cement industries, including concrete addmixtures and cement, as well as in-transit monitoring and management systems, which reduce the cost and improve the performance and quality of cement, concrete, mortar, masonry, and other cementitious-based construction materials. Specialty Building Materials (“SBM”) operating segment manufactures and markets sheet and liquid membrane systems that protect structures from water, air and vapor penetration, as well as fireproofing and other products designed to protect the building envelope.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements are presented on a consolidated basis and include all of the accounts and operations of GCP and its majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The financial statements reflect the financial position, results of operations and cash flows of GCP in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X for interim financial information.

The ~~interim~~preparation of financial statements ~~presented herein are unaudited and should be read~~ in ~~conjunction~~conformity with ~~the~~U.S. ~~audited~~GAAP ~~Consolidated~~requires ~~Financial~~management ~~Statements~~to ~~and~~make ~~notes~~estimates ~~thereto~~and ~~contained~~assumptions inthat ~~GCP’s~~affect ~~Annual~~the ~~Report~~reported onamounts ~~Form~~of ~~10-K~~assets ~~filed~~and ~~with~~liabilities ~~the~~and ~~SEC~~disclosures ~~for~~of ~~the~~contingent ~~year~~assets ~~ended~~and ~~December 31,~~liabilities ~~2020~~at (the ~~“2020~~date ~~Annual~~of ~~Report~~the onunaudited ~~Form 10-K”). The~~ Condensed Consolidated ~~Balance~~Financial ~~Sheet at December 31~~Statements, ~~2020~~and ~~was derived from~~ the ~~audited~~reported ~~annual~~amounts ~~consolidated financial statements as~~ of ~~the~~revenues ~~period then ended. Certain information~~ and ~~footnote~~expenses ~~disclosures~~for ~~typically~~the ~~included~~periods ~~in GCP’s annual consolidated financial statements have been condensed or omitted~~presented. The ~~unaudited~~Company ~~financial~~assesses ~~statements reflect all adjustments that, in~~ the ~~opinion~~estimates ofon ~~management,~~an ~~are~~ongoing ~~necessary~~basis ~~for~~and arecords ~~fair~~changes ~~statement~~in ofestimates in the ~~results~~period ofthey ~~the~~occur ~~interim~~and ~~periods~~become ~~presented~~known. ~~All~~GCP’s ~~such~~accounting ~~adjustments~~measurements that are ofmost aaffected ~~normal~~by ~~recurring~~management’s ~~nature~~estimates ~~except for the impacts~~ of ~~adopting~~future ~~new~~events ~~accounting~~are ~~standards~~disclosed ~~discussed~~in ~~below.~~its ~~The~~2021 ~~results~~Annual ofReport ~~operations~~on ~~for~~Form ~~the~~10-K ~~three~~filed ~~and~~with ~~nine months ended September 30, 2021 are not necessarily indicative of~~ the ~~results~~SEC ~~of operations~~ for the year ~~ending~~ended December 31, 2021~~. Certain~~ ~~amounts~~(the in“2021 ~~prior~~Annual ~~period~~Report ~~financial~~on ~~statements~~Form ~~have been reclassified to conform to the current period presentation~~10-K”). ~~Such~~Actual ~~reclassifications~~results ~~have~~could ~~not~~differ ~~materially~~from ~~affected~~those ~~previously reported amounts~~estimates.

~~Revisions~~The ofinterim ~~Previously~~financial ~~Issued~~statements ~~Condensed~~presented herein are unaudited and should be read in conjunction with the audited Consolidated Financial Statements and notes thereto contained in the 2021 Annual Report on Form 10-K. The Condensed Consolidated Balance Sheet at December 31, 2021 was derived from the audited annual consolidated financial statements as of the period then ended. Certain information and footnote disclosures typically included in GCP’s annual consolidated financial statements have been condensed or omitted. The unaudited financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. All such adjustments are of a normal recurring nature. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results of operations for the year ending December 31, 2022. Certain amounts in prior period financial statements have been reclassified to conform to the current period presentation. Such reclassifications have not materially affected previously reported amounts.

InProposed connection with the preparation of the consolidated financial statements for the year ended December 31, 2020, the Company identified an error in the freight expense accrual and other errors in its previously filed unaudited quarterly condensed consolidated financial statements for the first three quarterly periods of 2020.Merger

~~The~~On ~~Company~~December ~~considered~~5, ~~the~~2021, ~~guidance~~GCP inentered ~~ASC~~into ~~Topic~~an ~~250,~~Agreement ~~Accounting~~and ~~Changes~~Plan ~~and~~of ~~Error~~Merger, ~~Corrections~~or the (“~~ASC~~Merger ~~250~~Agreement”), ~~ASC~~with ~~Topic~~Cyclades ~~250-10-S99-1~~Parent, ~~Assessing~~Inc., ~~Materiality~~or Parent, and ~~ASC~~Cyclades ~~Topic~~Merger ~~250-10-S99-2~~Sub, ~~Considering~~Inc., ~~the~~a ~~Effects~~wholly ofowned ~~Prior~~subsidiary ~~Year~~of ~~Misstatements~~Parent, ~~when~~(“Merger ~~Quantifying~~Sub”), ~~Misstatements~~and inCompagnie ~~Current~~de ~~Year~~Saint-Gobain ~~Financial~~S.A., ~~Statements~~collectively, (“~~ASC 250~~Saint-~~10-S99-2~~Gobain”). inPursuant ~~evaluating~~to ~~whether~~the terms of the ~~Company’s~~Merger ~~previously~~Agreement, ~~issued~~Merger ~~unaudited~~Sub ~~condensed~~will ~~consolidated~~merge ~~financial~~with ~~statements~~and ~~were~~into ~~materially~~GCP ~~misstated.~~(the ~~The~~“Merger”), ~~Company~~with ~~concluded~~GCP continuing as the ~~errors~~surviving ~~were~~corporation ~~not~~of ~~material~~the ~~individually~~Merger orand inas a wholly-owned subsidiary of Parent. At the ~~aggregate~~effective totime of the ~~previously~~Merger, each share of GCP’s common stock that is issued ~~condensed~~and ~~consolidated~~outstanding ~~financial~~immediately ~~statements.~~prior Into ~~accordance~~the ~~with~~effective ~~ASC~~time ~~250-10-S99-2,~~of the ~~Company~~Merger ~~has~~shall ~~corrected~~be ~~these~~automatically ~~errors~~converted byinto ~~revising~~the ~~previously~~right ~~filed~~to ~~unaudited~~receive ~~quarterly~~$32.00 ~~condensed~~in ~~consolidated~~cash, ~~financial~~without ~~statements~~interest. ~~for~~GCP’s Board of Directors and the ~~three~~board of directors of Saint-Gobain have each approved the Merger and ~~nine~~the ~~months~~Merger ~~ended~~Agreement. ~~September 30,~~The ~~2020~~Company incurrently ~~connection~~expects ~~with~~the Merger to close in the ~~filing~~second half of ~~this~~2022. ~~Form~~Until ~~10-Q~~the closing, GCP will continue to operate as an independent company.

GCP may be required to pay a cash termination fee to Saint-Gobain of up to $71 million, as required under the Merger Agreement under certain circumstances, including in the event GCP terminates the Merger Agreement to enter into a “Superior Proposal,” as defined in the Merger Agreement, or in the event GCP enters into an alternative transaction within nine months of termination of the Merger Agreement in certain circumstances and such alternative transaction is consummated.

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Notes to the Condensed Consolidated Financial Statements (unaudited)

~~The~~Assets ~~accompanying~~Held ~~footnotes have been corrected to reflect the impact of the revisions of the previously filed unaudited quarterly condensed consolidated financial statements~~ for ~~the three and nine months ended September 30, 2020.~~ Sale

~~Please~~In ~~refer~~October to2021, ~~Note~~the 15Company approved the sale of a business unit within the SBM segment and classified it as held for sale in its 2021 Annual Report on Form 10-K. In the first quarter of 2022, ~~“Revisions~~the Company decided to discontinue the proposed sale of ~~Previously~~this ~~Issued~~business ~~Condensed~~unit ~~Consolidated~~and ~~Financial~~recorded ~~Statements”~~a $0.7 million charge for ~~reconciliations~~accumulated ~~between~~unrecognized depreciation and amortization expense during the period the associated assets were classified as held for sale. In the first quarter of 2022, the Company also reversed the $0.8 million loss on sale of a product line that it had previously ~~reported~~recorded ~~and~~in as2021 ~~revised~~resulting ~~quarterly~~in ~~amounts~~a $0.1 million overall gain recorded in “Other expenses, ~~respectively~~net” in the unaudited Condensed Consolidated Statement of Operations. Beginning March 1, 2022, all depreciation and amortization associated with this business will be included in operating costs and expense in the unaudited Condensed Consolidated Statement of Operations.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses for the periods presented. The Company assesses the estimates on an ongoing basis and records changes in estimates in the period they occur and become known. GCP’s accounting measurements that are most affected by management’s estimates of future events are disclosed in its 2020 Annual Report on Form 10-K. Actual results could differ from those estimates.

On March 11, 2020, the World Health Organization declared the outbreak of the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended a number of restrictive measures to contain the spread. Many governments in the regions where GCP generates the majority of its revenue have adopted such policies. GCP has been closely monitoring the impact of COVID-19 and working to manage the effects on its business globally. Despite progress in vaccination efforts, it is difficult to estimate with reasonable certainty at this time the duration and extent of the impact of this pandemic on the Company’s business, financial position and results of operations. GCP has made certain estimates within its financial statements related to the impact of COVID-19, including allowances for credit losses related to the estimated amount of receivables not expected to be collected and excess, obsolete or damaged inventories, future expected cash flows related to impairment assessments of goodwill and long-lived assets, incentive compensation accruals, contingent liabilities, and sales allowances related to volume rebates recognized based on anticipated sales volume. There may be changes to the Company’s estimates in future periods due to uncertainty associated with the impact of COVID-19, the extent of which will depend largely on future developments, including new information which may emerge concerning the resurgence of the COVID-19 pandemic, as well as additional and unanticipated actions by government authorities to further contain its spread which may result in extended ongoing business disruptions.

Income Tax

As a global enterprise, GCP is subject to a complex array of tax regulations and needs to make assessments of applicable tax law and judgments in estimating its ultimate income tax liability. Income tax expense and income tax balances represent GCP’s federal, state and foreign income taxes as an independent company. GCP files a U.S. consolidated income tax return, along with foreign and state corporate income tax filings, as required. Please refer to Note 6, “Income Taxes,” for details regarding estimates used in accounting for income tax matters, including unrecognized tax benefits.

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes, Simplifying the Accounting for Income Taxes. This guidance removes certain exceptions to the general principles of ASC 740, and clarifies and amends the existing guidance to improve consistent application. GCP adopted this guidance on January 1, 2021. The adoption did not have a material impact on its results of operations, financial position and cash flows.

Discontinued Operations

In ~~July~~ 2017, GCP completed the sale of its Darex Packaging Technologies (“Darex”) business to Henkel AG & Co. KGaA (“Henkel”) for $1.061 billion in cash. ~~The~~Since ~~agreement~~that ~~with~~time, ~~Henkel provided for a series of delayed closings in certain non-U.S. jurisdictions.~~ Darex results of operations and cash flows have been reclassified and reflected as “discontinued operations” in the ~~statements~~unaudited Condensed Statements of ~~operations~~Operations and ~~cash~~Cash ~~flows~~Flows for all periods presented. Unless otherwise noted, the information throughout the Notes to the accompanying unaudited Condensed Consolidated Financial Statements pertains only to the continuing operations of GCP.

Risk and Uncertainties

In March 2020, the World Health Organization declared the outbreak of the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended a number of restrictive measures to contain the spread. Many governments in the regions where GCP generates the majority of its revenue have adopted such policies. GCP has been closely monitoring the impact of COVID-19 and working to manage the effects on its business globally. It is difficult to estimate with reasonable certainty at this time the duration and extent of the impact of the pandemic on the global economy, the Company’s business, financial position and results of operations. GCP has made certain estimates within its financial statements related to the impact of COVID-19, including allowances for credit losses related to the estimated amount of receivables not expected to be collected and excess, obsolete or damaged inventories, future expected cash flows related to impairment assessments of goodwill and long-lived assets, incentive compensation accruals, contingent liabilities, and sales allowances related to volume rebates recognized based on anticipated sales volume. There may be changes to the Company’s estimates in future periods due to uncertainty associated with the impact of COVID-19, the extent of which will depend largely on future developments, including new information which may emerge concerning the resurgence of the pandemic, as well as additional and unanticipated actions by government authorities to further contain the spread of COVID-19.

2. Revenue from Contracts with Customers

Revenue is recognized upon transfer of control of products or services promised to customers in an amount that reflects the consideration the Company expects to receive in exchange for these products or services. GCP disaggregates its revenue from contracts with customers by operating segments, which it believes best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Please refer to Note 14, “Segments”.

Short-Term Arrangements

The majority of the Company’s revenue is generated from short-term arrangements associated with the production and sale of concrete admixtures and cement additives within its SCC segment, as well as sheet and liquid membrane systems and other specialty products designed to protect the building envelope within its SBM segment. Short-term arrangements within its SCC segment involve selling concrete admixtures and providing dispensers to customers. Such arrangements contain a lease element due to the customer’s right to control the use of dispensers over a period of time in exchange for consideration. For such arrangements, the transfer of control takes place at a point in time when products are shipped or delivered to the customer. Revenue from these contracts with customers is therefore typically recognized upon shipment of the product or delivery at the customer’s site based on shipping terms.

Long-Term Arrangements

The Company generates revenue from long-term arrangements within its SCC segment, which generally consist of VERIFI® and Ductilcrete sales arrangements. VERIFI® sales arrangements involve installing equipment on the customers’ trucks and at their plants, as well as performing slump management and truck location tracking services. The Company recognizes lease and service revenue for these arrangements.

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Notes to the Condensed Consolidated Financial Statements (unaudited)

2performed. ~~Revenue~~At ~~from~~March 31, ~~Lessor~~2022, ~~Arrangements~~the aggregate amount of transaction price allocated to remaining performance obligations was immaterial and ~~Contracts~~will ~~with~~be ~~Customers~~earned as revenue over the remaining term of these contracts, which is generally one to four years.

The majority of the Company’s revenue is generated from short-term arrangements associated with the production and sale of concrete admixtures and cement additives within its SCC operating segment, as well as sheet and liquid membrane systems and other specialty products designed to protect the building envelope within its SBM operating segment. Short-term arrangements within its SCC operating segment involve selling concrete admixtures and providing dispensers to customers. Such arrangements contain a lease element due to the customer’s right to control the use of dispensers over a period of time in exchange for consideration. For such arrangements, the transfer of control takes place at a point in time when products are shipped or delivered to the customer. Revenue from these contracts with customers is therefore typically recognized upon shipment of the product or delivery at the customer’s site based on shipping terms.

The Company generates revenue from long-term arrangements within its SCC operating segment, which generally consist of VERIFI® and Ductilcrete sales arrangements.

VERIFI® sales arrangements involve installing equipment on the customers’ trucks and at their plants, as well as performing slump management and truck location tracking services. The Company recognizes lease and service revenue for these arrangements. Revenue generated from VERIFI® sales arrangements represented less than 10% of the Company’s net sales during the three and nine months ended September 30, 2021 and 2020.

During the three months ended September 30, 2021 and 2020, the Company recognized lease revenue of $10.1 million and $9.9 million, respectively, and service revenue of $2.3 million and $2.1 million, respectively. During the nine months ended September 30, 2021 and 2020, the Company recognized lease revenue of $29.3 million and $28.4 million, respectively, and service revenue of $6.6 million and $5.4 million, respectively. Lease revenue consists of dispenser lease revenue of $6.4 million and $6.6 million during the three months ended September 30, 2021 and 2020, respectively, and $18.6 million and $19.6 million during the nine months ended September 30, 2021 and 2020, respectively, as well as an allocated portion of VERIFI® fixed fees and variable slump management fees. Service revenue consists of an allocated portion of VERIFI® fixed fees and variable slump management fees. Lease and service revenue is included within net sales in the accompanying unaudited Condensed Consolidated Statements of Operations.

Revenue generated from Ductilcrete sales arrangements represented less than 10% of the Company’s net sales during the three and nine months ended September 30, 2021 and 2020.

The Company has certain long-term arrangements, under which the Company has certain performance obligations that are satisfied over time, resulting in remaining obligations for which the work has not been performed or has been partially performed. At September 30, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $9.6 million, including the estimated transaction price to be earned as revenue over the remaining term of these contracts, which is generally 1 to 5 years. The Company’s contract assets and liabilities resulting from its contracts in the SCC or SBM operating segments were not material at September 30, 2021 and December 31, 2020. Additionally, the amounts recorded in the accompanying unaudited Condensed Consolidated Statements of Operations during the three and nine months ended September 30, 2021 and 2020 related to changes in the contract assets and liabilities were not material.

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Notes to the Condensed Consolidated Financial Statements (unaudited)

3. Restructuring and Repositioning Expenses

Repositioning expenses are primarily related to consulting, professional services, and other employee-related costs associated with the Company’s restructuring activities.

Restructuring and repositioning activity was as follows and associated costs, which are included in “Other current liabilities” on the unaudited Condensed Balance Sheets, were as follows.

	Severance		Asset Impairment		Repositioning and Other Costs		Total
	(in millions)
Balance at December 31, 2020	$	17.9	$	—	$	0.4	$	18.3
Balance at December 31, 2021	$	8.2	$	—	$	4.2	$	12.4
Additional accrual	100.39		50.34		72.02		223.65
Payments	(162.95)		—		(43.82)		(215.7)
Other	~~(0.1)~~—		(50.34)		(10.63)		(7.0.7)
Balance at September 30, 2021	$	11.2	$	—	$	1.0	$	12.2
Balance at March 31, 2022	$	6.6	$	—	$	2.9	$	9.5

The following table summarize the charges incurred and planned in connection with restructuring and repositioning plans.


	Severance & Employee Related Costs	Asset Impairment	Other Costs	Repositioning	Total Costs
	(in millions)
2021 Plan:
Estimated total costs	$13-$15	$8-$9	$8	$5	$34-$37
Cumulative costs to date	$14.4	$7.8	$7.5	$5.2	$34.9
2019 Phase 2 Plan:
Estimated total costs	$25-$26	$1	$—	$7-$8	$33-$35
Cumulative Costs to date	$24.9	$0.9	$—	$7.4	$33.2

	Severance	Asset impairment	Other Costs	Repositioning	Total Costs
	(in millions)
2021 Plan:
Estimated total costs	$13-$15	$8-$9	$6	$5	$32-$35
Cumulative costs to date	$11.1	$5.0	$2.2	$2.1	$20.4
2019 Phase 2 Plan:
Estimated total costs	$25-$29	$1	$—	$6-$7	$32-$37
Cumulative Costs to date	$25.9	$0.7	$—	$7.4	$34.0
2019 Plan:
Estimated total costs	$1	$1	$—$1	$11	$13-$14
Cumulative Costs to date	$0.9	$0.9	$0.2	$10.5	$12.5

2021 Restructuring and Repositioning Plan (the “2021 Plan”)

In March 2021, the Board approved a business restructuring and repositioning plan related to the relocation of the Company’s corporate headquarters to ~~the Atlanta~~Alpharetta, Georgia ~~area~~, the closure of its Cambridge, Massachusetts campus, the build-out of new ~~global research and development (“~~R&D”) locations ~~near~~in ~~the~~Wilmington, ~~Boston/Cambridge area~~Massachusetts, as well as the consolidation of other regional facilities and offices, including an organizational redesign,. ~~which~~The isCompany ~~expected~~moved tointo ~~lower~~the ~~costs.~~Alpharetta headquarters in September 2021 and in the Wilmington R&D facility in April 2022. The program is expected to be completed by June 2022.

InDuring ~~August~~the ~~2021~~three months ended March 31, 2022, the Company ~~entered~~incurred ~~into~~$4.0 million ~~leases~~of restructuring charges for ~~its~~the ~~corporate~~2021 ~~headquarters~~Plan recorded within “Restructuring and ~~global~~repositioning ~~R&D~~expenses” in ~~Alpharetta,~~the ~~Georgia~~Statement of Operations. $1.4 million was mostly for severance and ~~Wilmington,~~employee ~~Massachusetts~~related costs, ~~respectively~~$1.4 million was for repositioning expenses, ~~and~~$0.8 million ~~recorded~~was afor ~~right-of-use~~other ~~asset~~associated ~~and~~costs ~~corresponding~~related ~~lease~~mostly ~~liability~~to ofthe prior Cambridge headquarters, and $190.5 4 million was for asset impairment charges.

During the ~~nine~~three months ended ~~September~~March 3031, 2021, the Company incurred $206.4 6 million of restructuring charges for the 2021 Plan recorded within “Restructuring and ~~Repositioning~~repositioning ~~Expenses~~expenses” in the ~~statement~~Statement of ~~operations~~Operations. $114.1 5 million was mostly for severance, ~~$5.0~~and ~~million~~employee ~~for~~related ~~asset impairment charges, $2.2 million for other associated~~ costs and $2.1 million for repositioning ~~expenses~~expense and other costs.

2019 Phase 2 Restructuring and Repositioning Plan (the “2019 Phase 2 Plan”)

In July 2019, the Board approved a business restructuring and repositioning plan to optimize the design and footprint of the Company’s global organization, primarily with respect to its general administration and business support functions, and streamline cross-functional activities. The 2019 Phase 2 Plan resulted in the net reduction of approximately 10% of the Company’s workforce. The program was substantially completed in March 2021.

~~During the nine months ended September 30, 2021, the Company incurred $2.4 million of restructuring charges for the~~ 10

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Notes to the Condensed Consolidated Financial Statements (unaudited)

During the three months ended March 31, 2022, the Company reversed $0.5 million of severance charges for the 2019 Phase 2 Plan ~~recorded~~ within “Restructuring and ~~Repositioning~~repositioning ~~Expenses~~expenses” in the ~~statement~~Statement of ~~operations~~Operations.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021, the Company incurred $112.63 million of restructuring charges for the 2019 Phase 2 Plan recorded within “Restructuring and ~~Repositioning~~repositioning ~~Expenses~~expenses” in the ~~statement~~Statement of ~~operations~~Operations. $91.4 3 million was ~~mostly~~ for ~~severance~~repositioning expense, $10.9 million was for ~~repositioning~~severance ~~expense,~~and employee related costs and $0.3 1 million was for asset impairment charges.

2019 Restructuring and Repositioning Plan (the “2019 Plan”)

In February 2019, the Board of Directors approved the 2019 Plan which focused on GCP’s global supply chain strategy, including its manufacturing, purchasing, logistics, and warehousing operations. The plan also addressed GCP’s service delivery model, primarily in North America, to streamline the Company’s pursuit of combined admixture and VERIFI opportunities. The program was completed by December 31, 2020.

During the nine months ended September 30, 2020, the Company incurred $3.1 million of restructuring charges for the 2019 Plan recorded within Restructuring and Repositioning Expenses in the statement of operations. $0.2 million was mostly for severance, $1.7 million of repositioning expense, $0.9 million for asset impairments charges, and $0.3 million for other associated costs.

4. Debt

The following is a summary of obligations under senior notes and other borrowings at March 31, 2022 and December 31, 2021.

	September 30,2021			December 31,2020
	March 31,2022			December 31,2021
	(In millions)
Revolving Credit Facility due 2023	$	—		$	—
5.5% Senior Notes due in 2026	347.14			~~346~~347.62
Other borrowings	41.59			53.17
Total debt	~~351~~349.63			~~351~~350.79
Less: current portion of long-term debt	2(1.72)			(2.81)
Long-term debt	$	348.91		$	348.98
Weighted average interest rates on total debt obligations	5.5		%	5.5		%

Revolving Credit Facility

The Company entered into a $350 million Revolving Credit Facility on April 2018 (the “Revolving Credit Facility”). At ~~September~~March 3031, ~~2021~~2022 and December 31, ~~2020~~2021, there were no outstanding borrowings on the Revolving Credit Facility. There were $2.8 million in outstanding letters of credit which resulted in available credit of $347.2 million at ~~September~~March 3031, ~~2021~~2022.

The Credit Agreement contains conditions that would require mandatory principal payments in advance of the maturity date of the Revolving Credit Facility, as well as certain customary affirmative and negative covenants and events of default, as described in the Company’s ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements included in the ~~2020~~2021 Annual Report in the Form 10-K. The Company was in compliance with all covenant terms at ~~September~~March 3031, ~~2021~~2022. There ~~are~~were no events of default at ~~September~~March 3031, ~~2021~~2022.

5.5% Senior Notes

The Company issued the 5.5% Senior Notes in April 2018 with an aggregate principal amount of $350 million maturing on April 15, 2026 (the “5.5% Senior Notes”). Interest on the 5.5% Senior Notes is payable semi-annually in arrears on April 15 and October 15 of each year. The Company made an interest payment of $9.6 million on April 15, ~~2021~~2022. At ~~September~~March 3031, ~~2021~~2022, the 5.5% Senior Notes are reported net of unamortized discount and debt issuance costs of $2.96 million. Based on quotes from dealers where obtainable or the value of the most recent trade in the market (Level 2), the outstanding 5.5% Senior Notes has a fair value of $~~358~~355.21 million at ~~September~~March 3031, ~~2021~~2022.

The 5.5% Senior Notes contain certain customary affirmative and negative covenants and events of default, as described in the Company’s Consolidated Financial Statements included in the ~~2020~~2021 Annual Report in the Form 10-K. The Company was in compliance with all covenants and conditions under the Indenture at ~~September~~March 3031, ~~2021~~2022. There ~~are~~were no events of default at ~~September~~March 3031, ~~2021~~2022.

12Other Borrowings

Other borrowings of $1.9 million are comprised of various borrowings under lines of credits, primarily by non-U.S. subsidiaries as well as $1.1 million of finance lease obligations at March 31, 2022. Other borrowings have a fair value that approximate their carrying value. We have $41.1 million available under various non-U.S. credit facilities.

5. Derivatives

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Notes to the Condensed Consolidated Financial Statements (unaudited)

~~Other~~€40.0 ~~Borrowings~~million to hedge foreign currency exposure on net investments in certain of its European subsidiaries whose functional currency is the Euro. These forward contracts are designated as hedging instruments and recognized at fair value as assets or liabilities in the accompanying unaudited Condensed Consolidated Balance Sheets. Each contract has a notional amount of €10.0 million and matures annually through June 2025. The forward contracts are designated and qualify as net investment hedges for which effectiveness is assessed based on the spot rate method.

The following table summarizes the fair value of the Company’s derivative instruments designated as net investment hedges at March 31, 2022 and December 31, 2021.

Other borrowings are comprised of various borrowings under lines of credits, primarily by non-U.S. subsidiaries as well as $2.5 million and $3.0 million of finance lease obligations at September 30, 2021 and December 31, 2020, respectively. Other borrowings have a fair value that approximate their carrying value. We have $40.3 million available under various non-U.S. credit facilities.


		Fair Value
	Balance Sheet Location	March 31, 2022		December 31, 2021
		(in millions)
Derivative assets	Other current assets	$	1.0	$	0.7
Derivative assets	Other assets	1.4		1.0
Derivative liabilities	Other current liabilities	—		—
Derivative liabilities	Other liabilities	0.1		0.2

5. Derivative Instruments

The Company uses derivative instruments to partially offset its business exposure to foreign currency risk on net investments in certain foreign subsidiaries. The Company enters into foreign currency forward contracts to offset a portion of the changes in the carrying amounts of its net investments in foreign operations due to fluctuations in foreign currency exchange rates. At September 30, 2021, the Company was a party to four forward contracts with an aggregate notional amount of €40.0 million to hedge foreign currency exposure on net investments in certain of its European subsidiaries whose functional currency is the Euro. These forward contracts are designated as hedging instruments and recognized at fair value as assets or liabilities in the accompanying unaudited Condensed Consolidated balance sheets. Each contract has a notional amount of €10.0 million and matures annually through June 2025. During the nine months ended September 30, 2021, GCP settled one contract with a notional amount of €10.0 million upon its maturity in June 2021 and entered into a new contract with a notional amount of €10.0 maturing in June 2025. The forward contracts are designated and qualify as net investment hedges for which effectiveness is assessed based on the spot rate method.

		Fair Value
	Balance Sheet Location	September 30, 2021		December 31, 2020
		(In millions)
Derivative assets	Other current asset	$	0.5	$	—
Derivative assets	Other asset	0.7		—
Derivative liabilities	Other current liabilities	—		0.4
Derivative liabilities	Other liabilities	0.4		1.4

The fair value of derivative instruments is measured based on expected future cash flows discounted at market interest rates using observable market inputs and classified as Level 2 within the fair value hierarchy.

The effects of our foreign exchange forward contracts on the unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss, is recorded as follows.

Three Months Ended

~~Nine Months Ended~~

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

(In millions)

(in millions)

Gain recognized in the statements of operations and comprehensive income, net of tax

(0.2)

~~(0.6)~~

~~(0.8)~~

Cumulative translation adjustments

0.67

(1.8)

~~1.5~~

~~(1.3)~~

Income tax effect

(0.2)

(0.54)

~~(0.5)~~

~~0.3~~

6. Income Taxes

Income tax expense attributable to continuing operations during the three months ended ~~September~~March 3031, ~~2021~~2022 and ~~2020~~2021 was $1.69 million and $311.0 million, respectively, representing effective tax rates of 17111.08% and 2338.65%, respectively. The difference between the U.S. federal income tax rate of 21.0% and GCP’s overall income tax rate for the three months ended ~~September 30~~March 31, ~~2021~~2022, was primarily due to ~~an income tax benefit on valuation allowance releases of~~ $12.4 2 million, ~~offset~~of by income tax expense onfor ~~non-deductible~~valuation ~~executive~~allowances ~~compensation~~recorded ~~and~~in ~~other~~China ~~expenses~~driven ofby ~~$0.8~~declined ~~million, and foreign rate differential of $0~~profitability.~~3 million.~~

13The difference between the U.S. federal income tax rate of 21.0% and GCP’s overall income tax rate for the three months ended March 31, 2021, was primarily due to income tax expense on unrecognized tax benefits of $0.3 million.

Table of Contents

Notes to the Condensed Consolidated Financial Statements (unaudited)

The difference between the U.S. federal income tax rate of 21.0% and GCP’s overall income tax rate for the three months ended September 30, 2020 was primarily due to state income tax expense from the sale of the Cambridge site of $5.1 million, tax expense due to non-deductible expenses of $1.6 million and the effect of tax rates in foreign jurisdictions of $1.5 million, tax expense of $1.0 million due to income tax rate change in the United Kingdom, partially offset by tax benefits of $5.2 million related to the carryback of losses at the higher 35% U.S. tax rate applicable in prior years.

Income tax expense attributable to continuing operations during the nine months ended September 30, 2021 and 2020 was $9.6 million and $34.0 million, respectively, representing effective tax rates of 32.5% and 25.1%, respectively. The difference between the U.S. federal income tax rate of 21.0% and GCP’s overall income tax rate for the nine months ended September 30, 2021, was due to income tax expense on the United Kingdom rate change of $2.9 million, income tax expense on non-deductible executive compensation and other expenses of $1.8 million, and foreign rate differential of $1.5 million, offset by income tax benefit on valuation allowance releases of $2.9 million.

The difference between the U.S. federal income tax rate of 21.0% and GCP’s overall income tax rate for the nine months ended September 30, 2020, was due to state income tax expense from the sale of the Cambridge site of $5.1 million, tax expense due to non-deductible expenses of $1.7 million and the effect of tax rates in foreign jurisdictions of $1.5 million, tax expense of $1.0 million on valuation allowance charges, and tax expense of $1.0 million due to income tax rate change in the United Kingdom, partially offset by tax benefits of $5.5 million related to the carryback of losses at the higher 35% U.S. tax rate applicable in prior years.

Repatriation

It is GCP’s practice and intention to permanently reinvest the earnings of its foreign subsidiaries and repatriate earnings only when the tax impact is efficient.

Valuation Allowance

In evaluating GCP’s ability to realize its deferred tax assets, GCP considers all reasonably available positive and negative evidence, including recent earnings experience, expectations of future taxable income and the tax character of that income, the period of time over which temporary differences become deductible and the carryforward and/or carryback periods available to GCP for tax reporting purposes in the related jurisdiction. In estimating future taxable income, GCP relies upon assumptions and estimates about future activities, including the amount of future federal, state and foreign pretax operating income that GCP will generate; the reversal of temporary differences; and the implementation of feasible and prudent tax planning strategies. GCP records a valuation allowance to reduce deferred tax assets to the amount that it believes is more likely than not to be realized.

During the three months ended September 30, 2021 GCP recognized an income tax benefit of $1.4 million, consisting primarily of $1.1 million of valuation allowance releases on foreign tax credit carryforwards. During the three months ended September 30, 2020, GCP recognized $0.1 million of income tax expense on valuation allowance increases.12

~~During~~Table ~~the nine months ended September 30, 2021 GCP recognized an income tax benefit~~ of ~~$2.9 million~~Contents consisting primarily of $1.5 million of valuation allowance release on deferred tax assets in France, $1.1 million of valuation allowance release on foreign tax credit carryforwards and $0.2 million on deferred tax assets in Australia. During the nine months ended September 30, 2020, GCP recognized $1.0 million of income tax expense on valuation allowance increases for net operating losses primarily in Argentina and Australia.

Notes to the Condensed Consolidated Financial Statements (unaudited)

During the three months ended March 31, 2022, GCP recognized an income tax expense of $2.2 million, consisting primarily of $2.0 million valuation allowance on Chinese deferred tax assets, driven mostly by declined profitability. During the three months ended March 31, 2021, GCP incurred no income tax expense for valuation allowance.

Tax Sharing Agreement

In connection with the legal separation and transfer of W.R. Grace & Co.’s (“Grace”) construction products and packaging technologies businesses to the Company through a dividend distribution of all of the then-outstanding common stock of GCP to Grace shareholders on February 3, 2016 (the “Separation”), GCP and Grace entered into various agreements that govern the relationship between the parties going forward, including a tax matters agreement (the “Tax Sharing Agreement”). Under the Tax Sharing Agreement, GCP and Grace will indemnify and hold each other harmless in accordance with the principles outlined therein. Please refer to Note 1213, “Related Party Transactions ~~and Transactions with Grace~~” for further information on the Tax Sharing Agreement.

7. Retirement Plans

The components of GCP’s net periodic benefit cost for the three months ended March 31, 2022 and 2021 are as follows.


		Three Months Ended
		2022				2021
		U.S.		Non-US		U.S.		Non-US
	(in millions)
Service cost		$	1.2	$	0.3	$	1.5	$	0.3
Interest cost		1.1		1.1		1.2		0.7
Expected return on plan assets		(1.1)		(1.1)		(1.5)		(0.8)





Net periodic benefit cost		$	1.2	$	0.3	$	1.2	$	0.2

Service cost component of net periodic benefit cost is included in “Selling, general and administrative expenses” and “Cost of goods sold” in the unaudited Condensed Consolidated Statements of Operations. All other components of net periodic benefit costs are presented in Other expense, net within the unaudited Condensed Consolidated Statements of Operations.

8. Other Balance Sheet Accounts

The following is a summary of inventories.


	March 31, 2022		December 31, 2021
	(in millions)
Raw materials	$	70.1	$	62.5
In process	5.9		5.5
Finished products and other	67.5		62.7

Total inventories	$	143.5	$	130.7

The following is a summary of other current assets.


	March 31, 2022		December 31, 2021
	(in millions)
Non-trade receivables	$	19.0	$	22.5
Prepaid expenses and other current assets	15.4		11.4
Income taxes receivable	11.1		12.0

Total other current assets	$	45.5	$	45.9

Table of Contents

Notes to the Condensed Consolidated Financial Statements (unaudited)

The following is a summary of other assets.


	March 31, 2022		December 31, 2021
	(in millions)
Operating lease right-of-use asset	$	47.8	$	48.7
Defined benefit pension plans	30.1		31.0
Deferred income taxes	9.5		10.3
Other assets	27.3		27.5
Total other assets	$	114.7	$	117.5

The following is a summary of other current liabilities.


	March 31, 2022		December 31, 2021
	(in millions)
Accrued customer volume rebates	$	17.4	$	23.6
Accrued compensation	15.5		21.2
Restructuring liability	9.5		12.4
Accrued interest	8.8		4.0
Operating lease obligations	7.2		7.5
Income taxes payable	3.1		3.3
Other accrued liabilities	50.4		52.9
Total other current liabilities	$	111.9	$	124.9

The following is a summary of other liabilities.


	March 31, 2022		December 31, 2021
	(in millions)
Operating lease obligations	$	41.7	$	41.9
Deferred income taxes	15.5		15.9
Other liabilities	15.5		14.5
Total other liabilities	$	72.7	$	72.3

9. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, net of tax, is presented below.


		Currency Translation Adjustments		Pension Plans		Hedging Activities		Accumulated Other Comprehensive Loss
	(in millions)
Balance at December 31, 2021		$	(126.8)	$	(2.7)	$	0.1	$	(129.4)
Net current-period other comprehensive loss		(1.2)		(0.2)		(0.1)		(1.5)
Balance at March 31, 2022		$	(128.0)	$	(2.9)	$	—	$	(130.9)

Table of Contents

Notes to the Condensed Consolidated Financial Statements (unaudited)

710. ~~Pension~~Stock ~~and~~Incentive ~~Postretirement Benefit~~ Plans

		Three Months Ended
		2021				2020
		U.S.		Non-US		U.S.		Non-US
	(in millions)
Service cost		$	1.7	$	0.3	$	1.5	$	0.3
Interest cost		1.1		0.7		1.3		1.0
Expected return on plan assets		(1.5)		(0.8)		(1.6)		(1.2)
Net periodic benefit cost		$	1.3	$	0.2	$	1.2	$	0.1

Stock-Based Compensation Accounting

~~The~~GCP ~~components~~grants restricted stock units (“RSUs”), stock options and performance-based units (“PBUs”) with or without market conditions which vest upon the satisfaction of ~~GCP’s~~a ~~net~~performance ~~periodic~~condition ~~benefit~~and/or ~~cost~~a ~~for~~service condition. During the ~~nine~~three months ended ~~September~~March 3031, 2022 and 2021, stock-based compensation expense was $0.2 million and ~~2020~~$1.7 ~~are~~million, asrespectively. ~~follows~~The decrease in stock-based compensation in the three months ended March 31, 2022 was due mostly to the accelerated vesting and compensation expense of RSUs held by certain executives in December 2021. During the three months ended March 31, 2021, $0.7 million of the stock-based compensation expense is included in “Restructuring and repositioning expenses” in the Statement of Operations.

		Nine Months Ended
		2021				2020
		U.S.		Non-US		U.S.		Non-US
	(in millions)
Service cost		$	4.8	$	0.8	$	4.6	$	0.7
Interest cost		3.5		2.1		3.8		3.1
Expected return on plan assets		(4.6)		(2.3)		(4.9)		(3.5)
Amortization of prior service cost		—		0.1		—		0.1
Net periodic benefit cost		$	3.7	$	0.7	$	3.5	$	0.4

At March 31, 2022, total unrecognized compensation expense of $1.7 million was related to stock options with market conditions and $4.0 million to RSU and PBU awards.

~~Service~~Stock cost component of net periodic benefit cost is included in selling, general and administrative expenses and cost of goods sold in the statements of operations. All other components of net periodic benefit costs are presented in Other expense, net within the Condensed Consolidated Statements of Operations.Options

8.Approximately ~~Other~~145,000 ~~Balance~~options ~~Sheet~~were ~~Information~~exercised during the three months ended March 31, 2022 with a weighted average exercise price of $25.53.

	September 30,2021		December 31,2020
	(in millions)
Raw materials	$	58.5	$	41.3
In process	5.4		4.2
Finished products and other	66.1		52.9
Total inventories	$	130.0	$	98.4

RSUs

	September 30,2021		December 31,2020
	(in millions)
Non-trade receivables	$	21.3	$	20.4
Prepaid expenses and other current assets	17.3		11.1
Income taxes receivable	11.8		9.7
Total other current assets	$	50.4	$	41.2

The following table sets forth the RSU activity for the three months ended March 31, 2022:

	September 30,2021			December 31,2020
RSU Activity			Number Of Shares(in thousands)			Weighted AverageGrant DateFair Value
	(in millions)
Outstanding, December 31, 2021			145			$	24.67
Operating lease right-of-use asset	$	51.8		$	40.0
Less: RSUs settled			(27)			23.72
Defined benefit pension plans	29.6			29.7
Less: RSUs forfeited			(3)			25.72
Deferred income taxes	9.6			9.6
Outstanding, March 31, 2022			115			$	24.88
Other assets	30.7			35.1
Expected to vest at March 31, 2022			107			$	24.85
Total other assets	$	121.7		$	114.4

	September 30,2021		December 31,2020
	(in millions)
Accrued customer volume rebates	$	21.6	$	24.4
Accrued compensation	21.2		25.0
Restructuring liability	12.2		18.3
Accrued interest	8.8		4.0
Operating lease obligations	8.0		8.0
Income taxes payable	5.5		7.1
Pension liabilities	1.3		1.4
Other accrued liabilities	47.8		45.6
Total other current liabilities	$	126.4	$	133.8

PBUs

	September 30,2021		December 31,2020
	(in millions)
Operating lease obligations	$	42.4	$	26.2
Deferred income taxes	16.3		14.9
Other liabilities	15.6		16.8
Total other liabilities	$	74.3	$	57.9

PBUs are performance-based units which are granted by the Company either with or without market conditions and recorded at fair value on the grant date.

9The grant date fair value of PBUs without market conditions is determined based on the closing market price of the Company’s common stock on the date of grant. ~~Commitments~~The ~~and~~grant ~~Contingencies~~date fair value of PBUs with market conditions based on TSR is determined using a Monte Carlo simulation model.

The following table sets forth the PBU activity for the three months ended March 31, 2022.

GCP enters into certain purchase commitments and is a party to many contracts containing guarantees and indemnification obligations.


PBU Activity	Number Of Shares (in thousands)	Weighted Average Grant Date Fair Value
Outstanding, December 31, 2021	270	$	26.11


Less: PBU’s forfeited	(123)	27.22
Outstanding, March 31, 2022	147	$	25.18

Lawsuits and Investigations

Henkel AG & Co. KGaA Matters

In July 2017, GCP completed the sale of its Darex business to Henkel. The Stock and Asset Purchase Agreement with Henkel regarding the sale of the Darex Business dated July 2017, (the “Purchase Agreement”) contains obligations for the Company as sellers to indemnify Henkel as buyer for certain matters, such as breaches of representations and warranties, taxes, as well as certain covenants and liabilities.

In March 2021, Henkel filed suit in the United States District Court for the District of Delaware against the Company, seeking indemnification for alleged breaches of representations and warranties under the Purchase Agreement. Henkel is seeking damages of approximately $11 million, which consist of a claim amount of approximately $16 million, net of a contractual deductible of approximately $5 million. The Company believes that it has meritorious defenses against the plaintiff’s claims and intends to defend this action vigorously. Although the Company does not believe that resolution of this matter will have a material adverse effect on its business or financial condition, at this time, based on available information regarding this litigation, the Company is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or a range of estimates, of potential losses, if any, that might result from an adverse resolution of this matter. Fees

Table of Contents

Notes to the Condensed Consolidated Financial Statements (unaudited)

~~incurred~~11. byEarnings ~~the~~Per ~~Company in relation to the defense of these claims are classified as discontinued operations in the accompanying unaudited Condensed Consolidated Statements of Operations.~~ Share

The following table sets forth a reconciliation of the numerators and denominators used in calculating basic and diluted earnings (loss) per share:

Other Matters


	Three Months Ended
	March 31,
	2022		2021
	(in millions, except per share amounts)
Numerators
(Loss) income from continuing operations attributable to GCP shareholders	$	(3.7)	$	1.5
Loss from discontinued operations, net of income taxes	(0.3)		—
Net (loss) income attributable to GCP shareholders	$	(4.0)	$	1.5
Denominators
Weighted average common shares—basic calculation	74.0		73.2
Dilutive effect of employee stock awards	—		0.2
Weighted average common shares—diluted calculation	74.0		73.4
Basic (loss) earnings per share:
(Loss) income from continuing operations attributable to GCP shareholders	$	(0.05)	$	0.02
Loss from discontinued operations, net of income taxes	—		—
Net (loss) income attributable to GCP shareholders	$	(0.05)	$	0.02
Diluted (loss) earnings per share:
(Loss) income from continuing operations attributable to GCP shareholders	$	(0.05)	$	0.02
Loss from discontinued operations, net of income taxes	—		—
Net (loss) income attributable to GCP shareholders	$	(0.05)	$	0.02

~~From time to time,~~ GCP ~~and~~uses ~~its~~the ~~subsidiaries~~treasury ~~are~~stock ~~parties~~method to, orcompute ~~targets~~diluted ~~of,~~(loss) ~~lawsuits,~~earnings ~~claims,~~per ~~investigations and proceedings which are managed and defended in the ordinary course of business~~share. ~~While~~During ~~GCP is unable to predict~~ the ~~outcome~~three ofmonths ~~these~~ended ~~matters~~March 31, it2022 ~~does~~there ~~not~~were ~~believe,~~no ~~based~~anti-dilutive ~~upon~~shares ~~currently~~based ~~available~~on ~~facts, that~~ the ~~ultimate~~treasury ~~resolution~~stock ofmethod ~~any of such pending matters, except~~ as ~~disclosed~~a ~~above,~~result ~~will~~of ~~have~~ a ~~material~~loss ~~adverse~~from ~~effect~~continuing ~~on its overall financial condition, results of~~ operations orincurred ~~cash~~during ~~flows~~the ~~for~~period. During the three ~~and nine~~ months ended ~~September 30~~March 31, 2021~~. However~~, ~~the~~0.6 ~~results~~million of such ~~pending~~anti-dilutive ~~legal~~stock ~~matters~~awards ~~and~~were ~~claims~~excluded ~~cannot~~from ~~be predicted with sufficient certainty since unfavorable resolutions are possible and could materially affect GCP’s financial position, results of operations, or cash flows. In~~ the ~~event~~computation of ~~unexpected~~diluted ~~subsequent~~earnings ~~developments~~per ~~and due to the inherent unpredictability of these matters, there can be no assurance that the Company’s assessment of any claim will reflect the ultimate outcome~~share. An adverse outcome in certain matters could, from time to time, have a material adverse effect on GCP’s condensed consolidated financial position, results of operations and cash flows in particular quarterly or annual periods.

12. Commitments and Contingencies

GCP enters into certain purchase commitments and is a party to many contracts containing guarantees and indemnification obligations, as described below.

Financial Assurances

Financial assurances have been established for a variety of purposes, including insurance, environmental ~~matters~~ and other matters. At ~~September~~March 3031, ~~2021~~2022 and December 31, ~~2020~~2021, GCP had gross financial assurances issued and outstanding of $6.3 million and $6.83 million, respectively, which were ~~composed~~comprised of standby letters of credit. The letters of credit are related primarily to customer advances and other performance obligations at March 31, 2022 and December 31, 2021. These arrangements guarantee the refund of advance payments received from customers in the event that the product is not delivered or warranty obligations are not fulfilled in accordance with the contract terms. These obligations could be called by the beneficiaries at any time before the expiration date of the particular letter of credit if the Company fails to meet certain contractual requirements.

~~Brazil~~Environmental ~~Indirect Tax Claim~~Matters

~~During~~ GCP ~~the~~is ~~year~~subject ~~ended~~to ~~December~~loss ~~31,~~contingencies ~~2019,~~resulting ~~the~~from ~~Superior~~extensive ~~Judicial~~and ~~Court~~evolving offederal, ~~Brazil~~state, ~~(the~~local ~~“Court”)~~and ~~filed~~foreign ~~its~~environmental ~~final~~laws ~~ruling~~and inregulations ~~favor~~relating ~~of GCP Brasil Industria e Comercio de Produtos Quimicos (“GCP Brazil”) related~~ to athe ~~claim~~generation, asstorage, tohandling, ~~whether~~discharge, adisposition ~~certain~~and ~~state~~stewardship ~~value-added tax should be included in the calculation~~ of ~~federal~~hazardous ~~gross~~waste ~~receipts~~and ~~taxes~~other materials. ~~The ruling allows~~ GCP ~~Brazil~~recognizes ~~the~~accrued ~~right~~liabilities tofor ~~recover,~~anticipated ~~through~~costs ~~offset~~associated ofwith ~~federal~~response ~~tax~~efforts ~~liabilities~~if, ~~amounts~~based ~~collected~~on by the ~~government~~results ~~from~~of ~~May~~the ~~2012 to September 2017~~assessment, ~~including~~it ~~interest.~~concluded Inthat ~~the~~a ~~second~~probable ~~quarter~~liability ~~ended~~has ~~June~~been ~~30,~~incurred ~~2021,~~and the ~~Court~~cost ~~rendered~~can ~~favorable~~be ~~decisions~~reasonably ~~granting~~estimated. ~~GCP~~At ~~Brazil the right to recover $3.3~~March ~~million~~31, of2022 ~~state~~and ~~value-added tax. During the nine months ended September~~December 3031, 2021, ~~the~~GCP ~~Company~~did ~~included~~not ~~the~~have ~~recovery~~any inmaterial ~~Other~~environmental ~~expense, net in the statements of operations~~liabilities.

10. Accumulated Other Comprehensive Loss

Accumulated other comprehensive income, net of tax, is presented below.

		Currency Translation Adjustments		Pension Plans		Hedging Activities		Accumulated other Comprehensive Loss
	(in millions)
Balance at June 30, 2021		$	(110.5)	$	(3.0)	$	—	$	(113.5)
Net current-period other comprehensive (loss) income		(12.6)		—		0.1		(12.5)
Balance at September 30, 2021		$	(123.1)	$	(3.0)	$	0.1	$	(126.0)

Table of Contents

Notes to the Condensed Consolidated Financial Statements (unaudited)

		Currency Translation Adjustments		Pension Plans		Hedging Activities		Accumulated other Comprehensive Loss
	(in millions)
Balance at December 31, 2020		$	(107.4)	$	(3.1)	$	—	$	(110.5)
Net current-period other comprehensive (loss) income		(15.7)		0.1		0.1		(15.5)
Balance at September 30, 2021		$	(123.1)	$	(3.0)	$	0.1	$	(126.0)

GCP’s environmental liabilities are reassessed whenever circumstances become better defined or response efforts and their costs can be better estimated. These liabilities are evaluated based on currently available information, including the progress of remedial investigations at each site, the current status of discussions with regulatory authorities regarding the method and extent of remediation at each site, existing technology, prior experience in contaminated site remediation and the apportionment of costs among potentially responsible parties.

~~11.~~Lawsuits ~~Stock~~and ~~Incentive Plans~~ Investigations

~~Stock-Based~~From ~~Compensation~~time ~~Accounting~~to time, GCP and its subsidiaries are parties to, or targets of, lawsuits, claims, investigations and proceedings which are managed and defended in the ordinary course of business. While GCP is unable to predict the outcome of such pending matters, it does not believe, based upon currently available facts, that the ultimate resolution of any of such matters will have a material adverse effect on its overall financial condition, results of operations or cash flows.

~~GCP~~Litigation ~~grants~~Related ~~restricted~~to ~~stock units (“RSUs”), stock options and performance-based units (“PBUs”) with or without market conditions which vest upon~~ the satisfaction of a performance condition and/or a service condition. During the three and nine months ended September 30, 2021, stock-based compensation expense was $1.8 million and $5.3 million, respectively, and during the three and nine months ended September 30, 2020 it was $3.3 million and $5.6 million, respectively. During the three and nine months ended September 30, 2021, $0.1 million and $1.1 million, respectively, of the stock-based compensation expense is included in Restructuring and Repositioning Expenses in the statement of operations. During the three and nine months ended September 30, 2020, $1.8 million of the stock-based compensation expense is included in Restructuring and Repositioning Expenses in the statement of operations.Merger

~~The~~On ~~Company~~January ~~issues~~18, ~~new~~2022, ~~shares~~in ofthe ~~common~~United ~~stock~~States ~~upon~~District ~~exercise~~Court for the Southern District of ~~stock~~New ~~options~~York ~~and~~(“SDNY”), ~~vesting~~an ofindividual ~~RSUs~~complaint ~~and~~was ~~PBUs.~~filed by a purported GCP ~~withholds~~stockholder ~~and~~in ~~retains~~connection ~~shares~~with ~~issued~~the toMerger. ~~certain~~A ~~holders~~second ofindividual ~~GCP~~complaint ~~awards~~was filed on January 21, 2022 in ~~order~~the toSDNY, ~~fulfill~~a ~~statutory~~third ~~tax~~individual ~~withholding~~complaint ~~requirements~~was filed on January 28, 2022 in the SDNY, and a fourth individual complaint was filed on January 29, 2022 in the United States District Court for the ~~employees~~Eastern District of New York. ~~During~~The ~~the~~complaints ~~nine~~are ~~months~~captioned ~~ended~~as ~~September 30~~follows: Stein v. GCP Applied Technologies, ~~2021~~Inc., ~~and~~et ~~2020~~al., Case No. 1:22-cv-00436; Waterman v. GCP ~~withheld~~Applied ~~and~~Technologies ~~retained~~Inc., ~~approximately~~et 65al.,~~200~~ ~~shares~~Case ~~and~~No. 621:22-cv-00583; Le v. GCP Applied Technologies Inc.,~~200~~ ~~shares~~et al., ~~respectively~~Case No. 1:22-cv-00750; and Newman v. GCP Applied Technologies Inc., inet aal., ~~non~~Case No. 1:22-~~cash~~cv-00545. ~~transaction~~The ~~with~~complaints name as defendants GCP and members of the Board. The complaints generally allege that the defendants filed a ~~cost~~materially incomplete and misleading preliminary proxy statement on Schedule 14A with the SEC. The alleged omissions relate to (i) certain financial projections of $1GCP, (ii) certain financial analyses of RBC Capital Markets, LLC (“RBCCM”), and (iii) the amount of certain compensation provided to RBCCM unrelated to the Merger.~~6 million~~ The complaint also alleges that the sale process leading up to the Merger and $1the disclosure relating thereto was flawed, and certain conflicts of interest of GCP’s management in the Merger.~~4 million~~ The Newman complaint also alleges that the disclosure relating to the sale process leading up to the Merger was flawed. The complaints seek, ~~respectively~~among other things, injunctive relief preventing the consummation of the Merger, damages, and other relief.

AtWhile ~~September 30,~~the ~~2021,~~defendants ~~total~~believe ~~unrecognized~~the ~~compensation~~claims ~~expense~~asserted ofin ~~$1.5 million~~these ~~was~~complaints ~~related~~were towithout ~~stock~~merit ~~options~~and ~~with~~that ~~market~~no ~~conditions~~supplemental ~~and~~disclosures ~~$6.1 million~~were ~~related~~required tounder ~~the~~applicable ~~RSU~~law, ~~and~~on ~~PBU~~March ~~awards.~~3, ~~Such~~2022, ~~expense~~GCP isfiled ~~expected~~an to8-K beCurrent ~~recognized~~Report ~~over~~containing ~~the~~additional ~~remaining~~disclosures. ~~weighted-average~~Subsequent ~~service~~to ~~period~~the filing of ~~approximately~~the ~~2.0~~8-K ~~years~~Current ~~for~~Report ~~stock~~dated ~~options~~March ~~with~~9, ~~market~~2022, ~~conditions~~all ~~and~~plaintiffs ~~approximately~~voluntarily ~~1.5~~dismissed ~~years~~all ~~for~~claims ~~RSU~~against ~~and~~the ~~PBU awards~~defendants.

~~Stock~~Henkel ~~Options~~AG & Co. KGaA Matters

~~Approximately~~When ~~269,000~~GCP ~~options~~completed ~~were~~the ~~exercised~~sale ~~during~~of ~~the~~its ~~nine~~Darex ~~months~~business ~~ended~~to ~~September 30~~Henkel, ~~2021~~the ~~with~~Stock aand ~~weighted~~Asset ~~average~~Purchase ~~exercise~~Agreement ~~price~~with Henkel regarding the sale of ~~$17.16.~~Darex ~~Total~~(the ~~intrinsic~~“Purchase ~~value~~Agreement”) contained obligations for the Company as sellers to indemnify Henkel as buyer for certain matters, such as breaches of ~~these~~representations ~~options~~and ~~was~~warranties, ~~approximately~~taxes, $2as well as certain covenants and liabilities.~~3 million.~~

~~Restricted~~In ~~Stock~~March ~~Units~~2021, Henkel filed suit in the United States District Court for the District of Delaware against the Company, seeking indemnification for alleged breaches of representations and warranties under the Purchase Agreement. Henkel is seeking damages of approximately $11 million, which consist of a claim amount of approximately $16 million, net of a contractual deductible of approximately $5 million. The Company believes that it has meritorious defenses against the plaintiff’s claims and intends to defend this action vigorously. Although the Company does not believe that resolution of this matter will have a material adverse effect on its business or financial condition, at this time, based on available information regarding this litigation, the Company is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or a range of estimates, of potential losses, if any, that might result from an adverse resolution of this matter. Fees incurred by the Company in relation to the defense of these claims are classified as discontinued operations in the accompanying unaudited Condensed Consolidated Statements of Operations.

The following table sets forth the RSU activity for the nine months ended September 30, 2021:

RSU Activity	Number Of Shares(in thousands)	Weighted AverageGrant DateFair Value
Outstanding, December 31, 2020	305	$	22.14
RSUs granted	129	25.81
Less: RSUs settled	(182)	22.54
Less: RSUs forfeited	(18)	23.99
RSUs outstanding, September 30, 2021	234	$	23.74
Expected to vest as of September 30, 2021	231	$	23.72

The weighted average grant date fair value of RSUs granted during the nine months ended September 30, 2021 and 2020 was $25.81 and $21.13. During the nine months ended September 30, 2021 and 2020, GCP distributed 182,000 shares and 151,000 shares, respectively, to settle RSUs upon vesting. The fair value of RSUs vested during the nine months ended September 30, 2021 and 2020 was $4.6 million and $3.4 million, respectively.

Table of Contents

Notes to the Condensed Consolidated Financial Statements (unaudited)

~~PBUs~~GCP Brazil Indirect Tax Claim

~~PBUs~~During ~~are~~2019, ~~performance-based units which are granted by~~ the ~~Company~~Superior ~~either~~Judicial ~~with~~Court orof ~~without~~Brazil ~~market conditions and recorded at fair value on~~ (the ~~grant~~“Court”) ~~date.~~filed ~~The~~its ~~performance~~final ~~criteria~~ruling ~~for PBUs granted~~ in ~~2021~~favor ~~includes~~of ~~the~~GCP ~~following~~Brasil ~~metrics:~~Industria ~~(i)~~e aComercio ~~2-year~~de ~~cumulative~~Produtos ~~free~~Quimicos ~~cash~~(“GCP ~~flow~~Brazil”) ~~target~~related ~~metric~~to ~~for~~a ~~approximately~~claim ~~33.3%~~as ofto ~~awards;~~whether ~~(ii)~~ a 2certain state value-~~year~~added ~~cumulative adjusted earnings before interest,~~ tax, ~~depreciation~~should ~~and~~be ~~amortization~~included ~~metric~~in ~~for~~the ~~approximately~~calculation ~~33.3%~~ of ~~awards;~~federal ~~(iii)~~gross ~~the~~receipts ~~Company’s~~taxes. ~~2-year~~The ~~total~~ruling ~~shareholder~~allows ~~return~~GCP ~~(“TSR”)~~Brazil ~~relative to~~ the ~~performance~~right ofto ~~the~~recover, ~~Russell~~through ~~3000~~offset ~~Specialty~~of ~~Building~~federal ~~Materials~~tax ~~Index~~liabilities, ~~and~~amounts ~~the~~collected ~~peer group approved~~ by the ~~Board’s~~government ~~Compensation~~from ~~Committee~~May ~~for~~2012 ~~approximately~~to ~~33.3%~~September of2017, ~~awards~~including interest. ~~The~~In ~~number~~the ofsecond ~~shares~~quarter ~~that~~ended ~~ultimately~~June ~~vest~~30, ~~if any~~2021, isthe ~~based~~Court onrendered ~~Company~~favorable ~~performance~~decisions ~~against~~granting ~~these~~GCP ~~metrics,~~Brazil ~~and~~the ~~can~~right ~~range from 0%~~ to ~~200%~~recover of the ~~target~~state ~~number~~value-added ~~of shares granted to employees~~tax. ~~The~~During ~~awards~~the ~~will~~second ~~become~~quarter ~~vested,~~of ~~if at all~~2021, ~~2 years from~~ the ~~grant~~Company ~~date~~included ~~once actual performance is certified by~~ the ~~Board’s~~recovery ~~Compensation~~of ~~Committee~~$3.3 million ~~Vesting~~in is“Other ~~also~~expenses, ~~subject~~net” toin the ~~employees’~~Condensed Consolidated ~~continued~~Statements ~~employment~~of ~~through the vesting date~~Operations.

~~The~~Accounting ~~grant~~for date fair value of PBUs without market conditions is determined based on the closing market price of the Company’s common stock on the date of grant. The grant date fair value of PBUs with market conditions based on TSR is determined using a Monte Carlo simulation model.Contingencies

	Nine Months Ended
	September 30,
Assumptions used to calculate expense for PBUs:	2021	2020
Expected Term (Remaining Performance Period)	1.81	2.85
Expected volatility	51.48%	29.85%
Risk-free interest rate	0.14%	1.21%
Expected dividends	—	—
Median correlation coefficient of constituents	54.00%	54.01%

Although the outcome of each of the matters discussed above cannot be predicted with certainty, GCP has assessed its risk and has made accounting estimates and disclosures as required under U.S. GAAP.

PBU Activity	Number Of Shares(in thousands)	Weighted AverageGrant DateFair Value
Outstanding, December 31, 2020	343	$	28.10
PBU’s granted	97	27.17
Less: PBU’s forfeited	(165)	30.80
Outstanding, September 30, 2021	275	$	26.13

13. Related Party Transactions

The weighted average grant date fair value of PBUs granted during the nine months ended September 30, 2021 and 2020 was $27.17 and $22.43 per share, respectively. GCP expects to settle in stock all future PBU vestings.

12. Related Party Transactions and Transactions with Grace

All contracts with related parties are at rates and terms that GCP believes are comparable with those that could be entered into with independent third parties. Subsequent to the Separation, transactions with Grace represent third-party transactions.

Tax Sharing Agreement

~~Per~~In connection with the Separation, GCP and Grace entered into various agreements that govern the relationship between the parties going forward, including the Tax Sharing Agreement. The Tax Sharing Agreement governed the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, as well as other matters regarding taxes. In general, and subject to the terms of the Tax Sharing Agreement, GCP is responsible for all U.S. federal, state and foreign taxes, including any related interest, penalties or audit adjustments, reportable on a GCP separate return (a return that does not include Grace or any of its subsidiaries). Grace is responsible for all U.S. federal, state and foreign income taxes, including any related interest, penalties or audit adjustments, reportable on a consolidated, combined or unitary return that includes Grace or any of its subsidiaries and GCP or any of its subsidiaries up to the Separation date. At ~~September~~March 3031, ~~2021~~2022 and December 31, ~~2020~~2021, GCP has recorded $10.8 5 million and $0.6 million, respectively, of indemnified receivables in “Other assets” and $1.0 million and $1.0 million, respectively, of indemnified payables in “Other current liabilities” in the unaudited Condensed Consolidated Balance Sheets.

In addition, the Tax Sharing Agreement imposes certain restrictions on GCP and its subsidiaries, including restrictions on share issuances, business combinations, sales of assets and similar transactions, that are designed to preserve the qualification of the Distribution, together with certain related transactions, under Section 355 and certain other relevant provisions of the Code. In the event that the Distribution, together with certain related transactions, does not qualify under Section 355 and certain other relevant provisions of the Code, the Tax Sharing Agreement provides specific rules for allocating tax liabilities. In general, under the Tax Sharing Agreement, each party is expected to be responsible for any taxes imposed on and certain related amounts payable by GCP or Grace that arise from the failure of the Distribution and certain related transactions to qualify under Section 355 and certain other relevant provisions of the Code, to the extent that the failure to qualify as such is attributable to actions, events or transactions relating to such party’s respective stock, assets or business, or a breach of the relevant representations or covenants made by such party in the Tax Sharing Agreement.

Table of Contents

Notes to the Condensed Consolidated Financial Statements (unaudited)

1314. ~~Earnings Per Share~~Segments

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(in millions, except per share amounts)
Numerators
Income from continuing operations attributable to GCP shareholders	$	7.8	$	100.0	$	19.7	$	101.3
Loss from discontinued operations, net of income taxes	(0.1)		(0.1)		(0.3)		(0.4)
Net income attributable to GCP shareholders	$	7.7	$	99.9	$	19.4	$	100.9
Denominators
Weighted average common shares—basic calculation	73.5		73.0		73.3		72.9
Dilutive effect of employee stock awards	0.1		0.2		0.2		0.2
Weighted average common shares—diluted calculation	73.6		73.2		73.5		73.1
Basic earnings per share:
Income from continuing operations attributable to GCP shareholders	$	0.11	$	1.37	$	0.27	$	1.39
Loss from discontinued operations, net of income taxes	(0.01)		—		(0.01)		(0.01)
Net income attributable to GCP shareholders	$	0.10	$	1.37	$	0.26	$	1.38
Diluted earnings (loss) per share:
Income from continuing operations attributable to GCP shareholders	$	0.11	$	1.36	$	0.27	$	1.39
Loss from discontinued operations, net of income taxes	(0.01)		—		(0.01)		(0.01)
Net income attributable to GCP shareholders	$	0.10	$	1.36	$	0.26	$	1.38

GCP uses the treasury stock method to compute diluted earnings (loss) per share. During the three and nine months ended September 30, 2021, 0.6 million and 0.5 million, respectively, of such anti-dilutive stock awards were excluded from the computation of diluted earnings per share. During the three and nine months ended September 30, 2020, 0.6 million and 0.6 million, respectively, of anti-dilutive stock awards were excluded from the computation of diluted earnings per share.

Table of Contents

Notes to the Condensed Consolidated Financial Statements (unaudited)

14. Operating Segment and Geographic Information

Operating Segment Data

The following table presents information related to GCP’s operating segments.

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended March 31,
	2021		2020		2021		2020
	2022		2021
	(in millions)
Net Sales
SCC	$	~~142~~135.06	$	~~138~~123.39	$	~~410.5~~	$	~~379.6~~
SBM	~~107~~101.67		~~110~~98.19		~~315.3~~		~~280.9~~
Total net sales	$	249.6	$	248.4	$	725.8	$	660.5
Total	$	237.3	$	222.8
Segment Operating Income
SCC	$	71.73	$	186.81	$	~~29.1~~	$	~~37.7~~
SBM	2015.98		2519.64		~~60.2~~		~~51.3~~
Total Segment Operating Income	$	28.6	$	44.4	$	89.3	$	89.0
Total	$	17.1	$	25.5
Restructuring and Repositioning Expenses
SCC	$	02.93	$	02.69	$	~~7.3~~	$	~~3.2~~
SBM	2(1.2)		01.28		~~6.3~~		~~1.1~~
Corporate	32.64		74.02		~~9.0~~		~~10.7~~
Total segment Restructuring and Repositioning Expenses	$	6.7	$	7.8	$	22.6	$	15.0
Total	$	3.5	$	8.9

Reconciliation of Operating Segment Data to Financial Statements

Corporate expenses directly related to the operating segments are allocated to the segment’s operating income. GCP excludes from the segments’ operating income certain functional costs, certain impacts of foreign currency exchange, as well as certain corporate costs and other costs included in the table below. GCP also excludes from the segment’s operating income certain ongoing defined benefit pension costs recognized during each reporting period, which include service and interest costs, the effect of expected returns on plan assets and amortization of prior service costs/credits. GCP believes that the exclusion of certain corporate costs and pension costs provides a better indicator of its operating segment performance since such costs are not managed at an operating segment level.

Total segment operating income for the three months ended March 31, 2022 and 2021 is reconciled below to “Loss (income) from continuing operations before income taxes” presented in the accompanying unaudited Condensed Consolidated Statements of Operations.

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended
	2021		2020		2021		2020
	March 31,
	(in millions)
	2022		2021
Total segment operating income	$	28.6	$	44.4	$	89.3	$	89.0
	(in millions)
Restructuring and repositioning expenses	(6.7)		(7.8)		(22.6)		(15.0)
Total segment operating income	$	17.1	$	25.5
Interest expense, net	(5.5)		(5.3)		(16.3)		(15.1)
Corporate costs	(6.1)		(7.2)
Third-party and other acquisition-related costs	(2.9)		—		(3.4)		(0.7)
Interest expense, net	(5.4)		(5.4)
Corporate costs	(2.6)		(7.1)		(16.6)		(19.7)
Restructuring and repositioning expenses	(3.5)		(8.9)
Certain pension costs	(1.5)		(1.3)		(4.4)		(3.9)
Merger and other acquisition-related costs	(2.5)		(0.1)
Shareholder activism and other related costs	—		(2.1)		—		(9.5)
Certain pension costs	(1.5)		(1.4)
Gain on sale of corporate headquarters	—		110.2		—		110.2
Gain on sale of product line	0.1		—
Net income attributable to noncontrolling interests	—0.1		0.21		~~0.2~~		~~0.4~~
Gain on Brazil tax recoveries	—		—		3.3		—
(Loss) income from continuing operations before income taxes	$	(1.7)	$	2.6
Income from continuing operations before income taxes	$	9.4	$	131.2	$	29.5	$	135.7

2019

Table of Contents

Notes to the Condensed Consolidated Financial Statements (unaudited)

Certain amounts related to COVID-19 costs have been reclassified between segments’ operating income and corporate expenses that do not get allocated directly to the segments. Such reclassifications have not materially affected previously reported amounts.

Shareholder activism and other related costs consist primarily of professional fees incurred in connection with the actions by certain GCP shareholders seeking changes in the composition of the Company’s Board of Directors and nomination of candidates to stand for election at the 2020 Annual Shareholders’ Meeting, as well as other related matters.

Disaggregation of Total Net Sales

The Company disaggregates its revenue from contracts with customers by operating segments, which it believes best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Geographic Area Data

The table below presents information related to the geographic areas in which GCP operates.

Three Months Ended

~~Nine Months Ended~~

September 30,

March 31,

2021

2020

2021

2020

2022

2021

(in millions)

Net Sales

United States

~~127~~124.89

~~132~~112.51

~~363.8~~

~~351.8~~

Canada and Other

87.83

86.70

~~23.0~~

~~20.9~~

Total North America

~~136~~132.62

~~141~~118.21

~~386.8~~

~~372.7~~

Europe Middle East Africa

5045.28

4744.46

~~148.9~~

~~126.3~~

Asia Pacific

4542.01

4746.47

~~144.3~~

~~127.4~~

Latin America

17.82

1213.4

~~45.8~~

~~34.1~~

Total

~~249~~237.63

~~248~~222.48

~~725.8~~

~~660.5~~

Sales are attributed to geographic areas based on customer location. With the exception of the U.S. presented in the table above, there were no individually significant countries with sales exceeding 10% of total sales during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2021~~2022 and ~~2020. There were no customers that individually accounted for 10% or more of the Company’s condensed consolidated net sales during the three and nine months ended September 30,~~ 2021 ~~and 2020~~. ~~There were no customers that individually accounted for 10% or more of the Company’s accounts receivable balance at September 30, 2021 and December 31, 2020.~~

2120

Table of Contents

Notes to the Condensed Consolidated Financial Statements (unaudited)

15. Revisions of Previously Issued Consolidated Financial Statements

As described in Note 1, “Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies,” the following tables set forth the impact of the revisions of the previously filed unaudited quarterly Consolidated Financial Statements at and for the three and nine months ended September 30, 2020.

GCP Applied Technologies Inc.

	Three Months Ended September 30, 2020
	Previously Reported		Adjustments		As Revised
	(in millions, except per share amounts)
Net sales	$	248.4	$	—	$	248.4
Cost of goods sold	147.0		(0.4)		146.6
Gross profit	101.4		0.4		101.8
Selling, general and administrative expenses	65.2		(0.5)		64.7
Interest expense and related financing costs	5.6		—		5.6
Restructuring and reposition expenses	7.8		—		7.8
Gain on sale of corporate headquarters	(110.2)		—		(110.2)
Other expense, net	2.7		—		2.7
Total costs and expenses	(28.9)		(0.5)		(29.4)
Income from continuing operations before income taxes	130.3		0.9		131.2
Provision for income taxes	(30.6)		(0.4)		(31.0)
Income from continuing operations	99.7		0.5		100.2
Income from discontinued operations, net of income taxes	(0.1)		—		(0.1)
Net income	99.6		0.5		100.1
Less: Net income attributable to non-controlling interests	(0.2)		—		(0.2)
Net income attributable to GCP shareholders	$	99.4	$	0.5	$	99.9
Amounts Attributable to GCP Shareholders:
Net income from continuing operations attributable to GCP shareholders	$	99.5	$	0.5	$	100.0
Loss from discontinued operations, net of income taxes	(0.1)		—		(0.1)
Net income attributable to GCP shareholders	$	99.4	$	0.5	$	99.9
Comprehensive income attributable to GCP shareholders	$	110.2	$	0.5	$	110.7
Basic earnings per share:
Net income from continuing operations attributable to GCP shareholders	$	1.36	$	0.01	$	1.37
Loss from discontinued operations, net of income taxes	—		—		—
Net income attributable to GCP shareholders	$	1.36	$	0.01	1.37
Weighted average number of basic shares	73.0				73.0
Diluted earnings per share:
Income from continuing operations attributable to GCP shareholders	$	1.36	$	—	$	1.36
Loss from discontinued operations, net of income taxes	—		—		—
Net income attributable to GCP shareholders	$	1.36	$	—	$	1.36
Weighted average number of diluted shares	73.2		—		73.2

Table of Contents

Notes to the Condensed Consolidated Financial Statements (unaudited)

	Nine Months Ended September 30, 2020
	Previously Reported		Adjustments		As Revised
	(in millions, except per share amounts)
Net sales	$	660.5	$	—	$	660.5
Cost of goods sold	400.8		(2.3)		398.5
Gross profit	259.7		2.3		262.0
Selling, general and administrative expenses	199.0		(0.2)		198.8
Interest expense and related financing costs	16.3		—		16.3
Restructuring and reposition expenses	15.0		—		15.0
Gain on sale of corporate headquarters	(110.2)		—		(110.2)
Other expense, net	6.4		—		6.4
Total costs and expenses	126.5		(0.2)		126.3
Income from continuing operations before income taxes	133.2		2.5		135.7
Provision for income taxes	(33.2)		(0.8)		(34.0)
Income from continuing operations	100.0		1.7		101.7
Loss from discontinued operations, net of income taxes	(0.4)		—		(0.4)
Net income	99.6		1.7		101.3
Less: Net loss attributable to non-controlling interests	(0.4)		—		(0.4)
Net income attributable to GCP shareholders	$	99.2	$	1.7	$	100.9
Amounts Attributable to GCP Shareholders:
Income from continuing operations attributable to GCP shareholders	$	99.6	$	1.7	$	101.3
Loss from discontinued operations, net of income taxes	(0.4)		—		(0.4)
Net income attributable to GCP shareholders	$	99.2	$	1.7	$	100.9
Comprehensive income attributable to GCP shareholders	$	81.3	$	1.7	$	83.0
Basic earnings per share:
Income from continuing operations attributable to GCP shareholders	$	1.37	$	0.02	$	1.39
Loss from discontinued operations, net of income taxes	(0.01)		—		(0.01)
Net income attributable to GCP shareholders	$	1.36	$	0.02	$	1.38
Weighted average number of basic shares	72.9				72.9
Diluted earnings per share:
Income from continuing operations attributable to GCP shareholders	$	1.36	$	0.03	$	1.39
Loss from discontinued operations, net of income taxes	—		(0.01)		(0.01)
Net income attributable to GCP shareholders	$	1.36	$	0.02	$	1.38
Weighted average number of diluted shares	73.1				73.1

Table of Contents

Notes to the Condensed Consolidated Financial Statements (unaudited)

GCP Applied Technologies Inc.

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

	Three Months Ended September 30, 2020
	Previously Reported		Adjustments		As Revised
	(in millions)
Balance, June 30, 2020	$	515.2	$	1.2	516.4
Net income	99.6		0.5		100.1
Share-based compensation	3.1		—		3.1
Exercise of stock options	0.4		—		0.4
Share repurchases	(1.1)		—		(1.1)
Dividends and other changes in non-controlling interest	(0.1)		—		(0.1)
Other comprehensive loss	10.8		—		10.8
Balance, September 30, 2020	$	627.9	$	1.7	$	629.6

	Nine Months Ended September 30, 2020
	Previously Reported		Adjustments		As Revised
	(in millions)
Balance, December 31, 2019	$	541.1	$	—	$	541.1
Net income	99.6		1.7		101.3
Share-based compensation	5.9		—		5.9
Exercise of stock options	1.1		—		1.1
Share repurchases	(1.4)		—		(1.4)
Dividends and other changes in non-controlling interest	(0.5)		—		(0.5)
Other comprehensive loss	(17.9)		—		(17.9)
Balance, September 30, 2020	$	627.9	$	1.7	$	629.6

Table of Contents

Notes to the Condensed Consolidated Financial Statements (unaudited)

GCP Applied Technologies Inc.

	Nine Months Ended September 30, 2020
	Previously Reported		Adjustments		As Revised
	(in millions)
OPERATING ACTIVITIES
Net income	$	99.6	$	1.7	$	101.3
Less: Loss from discontinued operations	(0.4)		—		(0.4)
Income from continuing operations	100.0		1.7		101.7
Reconciliation to net cash provided by operating activities:
Loss on disposal of property and equipment	(109.7)		—		(109.7)
Depreciation and amortization	34.5		—		34.5
Deferred income taxes	21.1		0.8		21.9
Stock-based compensation expense	3.8		—		3.8
Unrealized loss on foreign currency	2.7		—		2.7
Amortization of debt discount and financing costs	1.1		—		1.1
Changes in assets and liabilities, excluding effect of currency translation:
Trade accounts receivable	8.6		—		8.6
Inventories	3.2		—		3.2
Accounts payable	(3.9)		—		(3.9)
Pension assets and liabilities, net	(12.4)		—		(12.4)
Other assets and liabilities, net	10.3		(2.5)		7.8
Net cash provided by operating activities from continuing operations	59.3		—		59.3
Net cash used in operating activities from discontinued operations	(2.5)		—		(2.5)
Net cash provided by operating activities	56.8		—		56.8
INVESTING ACTIVITIES
Capital expenditures	(28.0)		—		(28.0)
Proceeds from sale of corporate headquarters, net of transaction costs	122.5		—		122.5
Other	0.4		—		0.4
Net cash provided by investing activities from continuing operations	94.9		—		94.9
FINANCING ACTIVITIES
Borrowings under credit arrangements	1.5		—		1.5
Proceeds from exercise of stock options	1.1		—		1.1
Payments on finance lease obligations	(0.6)		—		(0.6)
Other	(1.3)		—		(1.3)
Net cash used in financing activities from continuing operations	0.7		—		0.7
Effect of currency exchange rate changes on cash and cash equivalents	(4.0)		—		(4.0)
Decrease in cash and cash equivalents	148.4		—		148.4
Cash and cash equivalents, beginning of period	325.0		—		325.0
Cash and cash equivalents, end of period	$	473.4	$	—	$	473.4

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Notes to the Condensed Consolidated Financial Statements (unaudited)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~The~~Forward-Looking ~~unaudited Condensed Consolidated Financial~~ Statements for the three and nine months ended September 30, 2020 have been revised to correct prior period errors as discussed in Note 1, “Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies” and Note 15, “Revisions of Previously Issued Unaudited Condensed Consolidated Financial Statements” in the Notes to the unaudited Condensed Consolidated Financial Statements included in Item 1, “Financial Statements” on this Quarterly Report on Form 10-Q. Accordingly, the tables presented in the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) reflect the impact of those revisions.

~~Information~~This ~~Related~~Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and these statements involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements generally relate to future events and our future financial or operating performance. Such statements generally include the words “believes,” “plans,” “intends,” “targets,” “will,” “expects,” “suggests,” “anticipates,” “outlook,” “continues” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-~~Looking~~looking ~~Statements~~statements include, without limitation, expected financial positions; results of operations; cash flows; financing plans; business strategy; operating plans; strategic alternatives; 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, we are subject to risks and uncertainties that could cause our actual results to differ materially from our 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; business disruptions due to public health or safety emergencies, such as the novel strain of coronavirus (“COVID-19”) pandemic; 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; the timing of the closing of the proposed merger, including the risks that a condition to closing would not be satisfied within the expected timeframe and the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the proposed merger agreement; 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; the handling of hazardous materials and the costs of compliance with environmental regulations; extreme weather events and natural disasters. These and other factors are identified and described in more detail in Item 1A in our Annual Report on Form 10-K.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and these statements involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements generally relate to future events and our future financial or operating performance. Such statements generally include the words “believes,” “plans,” “intends,” “targets,” “will,” “expects,” “suggests,” “anticipates,” “outlook,” “continues” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, without limitation, statements about expected financial positions; results of operations; cash flows; financing plans; business strategy; operating plans; strategic alternatives; 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.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectation and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. Like other businesses, we are subject to risks and uncertainties that could cause our actual results to differ materially from our 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; business disruptions due to public health or safety emergencies, such as the COVID-19 pandemic; 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; the handling of hazardous materials and the costs of compliance with environmental regulation, and those factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020.

The forward-looking statements made in this Quarterly Report on Form 10-Q and our reported results should not be considered as an indication of our future performance. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.

RESULTS OF OPERATIONS

~~Business~~We ~~Description~~are ~~Summary~~engaged in the production and sale of specialty construction chemicals and specialty building materials through two global operating segments:

We•Specialty ~~are~~Construction ~~engaged~~Chemicals (“SCC”). Our SCC operating segment provides products, services and technologies to the concrete and cement industries, including concrete addmixtures and cement, as well as in-transit monitoring and management systems, which reduce the ~~production~~cost and ~~sale~~improve the performance and quality of ~~specialty~~cement, ~~construction~~concrete, ~~chemicals~~mortar, masonry, and ~~specialty~~other ~~building~~cementitious-based ~~materials~~construction ~~through~~ materials.

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two global operating segments:

•Specialty Construction Chemicals (“SCC”). Our SCC operating segment provides products, services and technologies to the concrete and cement industries, including concrete add mixtures and cement, as well as in-transit monitoring and management systems, which reduce the cost and improve the performance and quality of cement, concrete, mortar, masonry, and other cementitious-based construction materials.

•Specialty Building Materials (“SBM”). Our SBM operating segment produces and sells sheet and liquid membrane systems and other products that protect both new and existing structures from water, air, and vapor penetration, as well as from fire damage. We also manufacture and sell specialized cementitious and chemical grouts used for soil consolidation and leak-sealing applications in addition to a moisture barrier system and installation tools for the flooring industry.

We operate our business on a global scale. During the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022, approximately 5047% of our net sales were generated outside of the U.S. We operate and have locations in over 30 countries and transact business in over 30 currencies. ~~We manage our operating segments on a global basis to serve global markets. Currency fluctuations affect our reported results of operations, cash flows, and financial position.~~

~~Impact of COVID-19 Pandemic~~21

The global health crisis caused by the COVID-19 outbreak and its resurgences has and will continue to negatively impact global economic activity, which, despite progress in vaccination efforts, remains uncertain and cannot be predicted with confidence. We have been closely monitoring the impact of COVID-19 and managing its effects on our business globally as the situation continues to evolve. As global economies continue to reopen we are seeing strong demand across business segments and geographies and expect this growth to continue into 2022

We are encouraged by stable demand across both our business segments globally during the third quarter 2021. We continued to capture improved pricing and realized positive benefits from our corporate restructuring, ongoing productivity actions in our manufacturing organization, and headquarters move. Despite this positive momentum, inflation headwinds, specifically raw material prices, logistics and global supply chain disruptions, had a tangible impact on our quarterly performance. The combination of these factors, adversely affected volumes in both the SBM and our SCC segments. We continue to take actions to protect margins and have announced new price increases in all regions to offset the inflationary headwinds we are experiencing. However, the effect of the ongoing global supply chain disruptions and continued increases in the cost of raw materials and freight transportation have outpaced our mitigating efforts and we expect margin compression to remain over the next few quarters.

It is difficult for us to predict at this time the duration and extent of the impact of COVID-19 on the global construction industry and our business, financial position, results of operations, and liquidity although we expect that managing the impacts of the pandemic will be a part of our ongoing operations for the foreseeable future. We are focused on protecting the health, safety and well-being of our employees in accordance with guidelines issued by national and other health and safety authorities, while seeking to meet the needs of our global customers and suppliers. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, suppliers and stockholders.

The following is an overview of our financial performance for the third quarter and nine months ended September 30, 2021 compared with the prior-year periods.

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	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2021			2020			% Change		2021			2020			% Change
	(in millions, except per share amounts)
Net sales	$	249.6		$	248.4		0.5	%	$	725.8		$	660.5		9.9	%
Cost of goods sold	165.1			146.6			12.6	%	461.7			398.5			15.9	%
Gross profit	84.5			101.8			(17.0)	%	264.1			262.0			0.8	%
Gross margin	33.9		%	41.0		%	(7.1)	%	36.4		%	39.7		%	(3.3)	%
Selling, general and administrative expenses	59.2			64.7			(8.5)	%	190.0			198.8			(4.4)	%
Restructuring and repositioning expenses	6.7			7.8			(14.1)	%	22.6			15.0			50.7	%
Interest expense and related financing costs	5.6			5.6			—	%	16.8			16.3			3.1	%
Gain on sale of corporate headquarters	—			(110.2)			100.0	%	—			(110.2)			100.0	%
Other expense, net	3.6			2.7			33.3	%	5.2			6.4			(18.8)	%
Income from continuing operations before income taxes	9.4			131.2			(92.8)	%	29.5			135.7			(78.3)	%
Income tax expense	(1.6)			(31.0)			(94.8)	%	(9.6)			(34.0)			(71.8)	%
Loss from discontinued operations, net of income taxes	(0.1)			(0.1)			—	%	(0.3)			(0.4)			(25.0)	%
Net income	7.7			100.1			(92.3)	%	19.6			101.3			(80.7)	%
Less: Net income attributable to noncontrolling interests	—			(0.2)			100.0	%	(0.2)			(0.4)			(50.0)	%
Net income attributable to GCP shareholders	$	7.7		$	99.9		(92.3)	%	$	19.4		$	100.9		(80.8)	%
Income from continuing operations attributable to GCP shareholders	7.8			100.0			(92.2)	%	$	19.7		$	101.3		NM
Diluted EPS from continuing operations attributable to GCP shareholders	$	0.10		$	1.36		(92.6)	%	$	0.26		$	1.38		(81.2)	%
Net sales:
SCC	$	142.0		$	138.3		2.7	%	$	410.5		$	379.6		8.1	%
SBM	107.6			110.1			(2.3)	%	315.3			280.9			12.2	%
Total GCP net sales	$	249.6		$	248.4		0.5	%	$	725.8		$	660.5		9.9	%
Net sales by region:
North America	$	136.6		$	141.2		(3.3)	%	$	386.8		$	372.7		3.8	%
Europe Middle East Africa (EMEA)	50.2			47.4			5.9	%	148.9			126.3			17.9	%
Asia Pacific	45.0			47.4			(5.1)	%	144.3			127.4			13.3	%
Latin America	17.8			12.4			43.5	%	45.8			34.1			34.3	%
Total net sales by region	$	249.6		$	248.4		0.5	%	$	725.8		$	660.5		9.9	%

Proposed Merger

~~Third~~ On ~~Quarter~~December ~~Performance~~5, ~~Summary~~2021, we entered into the Merger Agreement with Saint-Gobain. Pursuant to the terms of the Merger Agreement, at the effective time of the Merger, each share of our common stock that is issued and outstanding immediately prior to the effective time of the Merger shall be automatically converted into the right to receive $32.00 in cash, without interest. Because the Merger is not yet complete, and except as otherwise specifically stated, the descriptions and disclosures presented elsewhere in this Quarterly Report on Form 10-Q, including those that present forward-looking information, assume the continuation of GCP as a public company. If the Merger is consummated, our actions and results may be different than those anticipated by such forward-looking statements. See Note 20, “Proposed Merger” in the Notes to the Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data” of the 2021 Annual Report on Form 10-K for further information.

~~Following~~Business ~~is a summary of our financial performance for the third quarter ended September 30, 2021 compared with the prior-year quarter.~~Update

~~•Net~~The ~~sales~~global ~~increased~~health ~~0.5%~~crisis caused by the COVID-19 outbreak and its resurgences has and will continue to ~~$249.6~~impact ~~million~~global economic activity, particularly the timing of fulfilling demands for our products. Furthermore, macroeconomic factors such as the conflict in Ukraine and historic inflation headwinds impacted our results of operation in the first quarter of 2022.

~~•Gross~~Our ~~profit~~net ~~decreased~~sales 17in the first quarter of 2022 increased 6.05%. Despite tothis ~~$84~~positive momentum, inflation, specifically raw material prices, logistic costs and global supply chain disruptions, had a tangible impact on our quarterly performance.5 ~~million;~~The combination of these factors adversely affected gross ~~margin~~margins ~~decreased~~by approximately ~~710~~800 basis points. We took actions to 33protect margins in 2021 and in the first quarter of 2022 by announcing new price increases in all regions to offset the inflationary headwinds we are experiencing.9% However, the effect of the ongoing global supply chain disruptions and continued increases in the cost of raw materials and freight transportation have outpaced our mitigating efforts and we expect margin compression to remain into the first half of 2022.

~~•Selling,~~The ~~general,~~following ~~and~~is ~~administrative~~an ~~expenses~~overview ~~(“SG&A”)~~of ~~decreased~~our ~~8.5%~~financial toperformance ~~$59.2~~for ~~million~~the first quarter ended March 31, 2022 compared with the prior-year quarter.

•Income from continuing operations attributable to GCP shareholders was $7.8 million, or $0.10 per diluted share, compared to $100.0 million, or $1.36 per diluted share, for the prior-year quarter.


	Three Months Ended
	March 31,
	2022			2021			% Change
	(in millions, except per share amounts)
Net sales	$	237.3		$	222.8		6.5	%
Cost of goods sold	164.3			136.3			20.5	%
Gross profit	73.0			86.5			(15.6)	%
Gross margin	30.8		%	38.8		%	(800) bps
Selling, general and administrative expenses	62.5			66.6			(6.2)	%

Interest expense, net	5.6			5.6			—	%
Restructuring and repositioning expenses	3.5			8.9			(60.7)	%


Other expense, net	3.1			2.8			10.7	%

(Loss) income from continuing operations before income taxes	(1.7)			2.6			NM
Income tax expense	(1.9)			(1.0)			90.0	%

Loss from discontinued operations, net of income taxes	(0.3)			—			(100.0)	%
Net (loss) income	(3.9)			1.6			NM
Less: Net income attributable to noncontrolling interests	(0.1)			(0.1)			—	%
Net (loss) income attributable to GCP shareholders	$	(4.0)		$	1.5		NM
(Loss) income from continuing operations attributable to GCP shareholders	$	(3.7)		$	1.5		NM
Diluted EPS from continuing operations attributable to GCP shareholders	$	(0.05)		$	0.02		NM

2822

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	Three Months Ended
	March 31,
	2022		2021		% Change
	(in millions, except per share amounts)
Net sales:
SCC	$	135.6	$	123.9	9.4	%
SBM	101.7		98.9		2.8	%
Total GCP net sales	$	237.3	$	222.8	6.5	%
Net sales by region:
North America	$	132.2	$	118.1	11.9	%
Europe, Middle East, Africa (“EMEA”)	45.8		44.6		2.7	%
Asia Pacific	42.1		46.7		(9.9)	%
Latin America	17.2		13.4		28.4	%
Total net sales by region	$	237.3	$	222.8	6.5	%

First Quarter Performance Summary

Following is a summary of our financial performance for the first quarter ended March 31, 2022 compared with the prior-year quarter.

•Net sales increased 6.5% to $237.3 million.

•Gross profit decreased 15.6% to $73.0 million; gross margin decreased approximately 800 basis points to 30.8%.

•Selling, general, and administrative expenses (“SG&A”) decreased 6.2% to $62.5 million.

•Loss from continuing operations attributable to GCP shareholders was $3.7 million, or $0.05 per diluted share, compared to income from continuing operations of $1.5 million, or $0.02 per diluted share, for the prior-year period.

GCP Overview

Net Sales and Gross Margin

	Three Months Ended
Net Sales Variance Analysis	Volume		Price		Currency Translation		Total Change
SCC	(0.3)	%	1.8	%	1.2	%	2.7	%
SBM	(4.4)	%	0.6	%	1.5	%	(2.3)	%
Net sales	(2.2)	%	1.3	%	1.4	%	0.5	%
By Region:
North America	(4.5)	%	0.9	%	0.3	%	(3.3)	%
Europe Middle East Africa	(1.0)	%	3.4	%	3.5	%	5.9	%
Asia Pacific	(5.7)	%	(1.4)	%	2.0	%	(5.1)	%
Latin America	34.5	%	6.1	%	2.9	%	43.5	%

Net sales of $249.6 million for the third quarter ended September 30, 2021 increased $1.2 million, or 0.5%, from the prior-year quarter primarily due to favorable sale pricing and foreign currency translation, partially offset by lower sale volumes primarily in North America and Asia Pacific, partially offset by increase in Latin America.

Gross profit of $84.5 million for the third quarter ended September 30, 2021 decreased $17.3 million, or 17.0%, from the prior-year quarter primarily due to significant higher raw material costs. Gross margin decreased 710 basis points to 33.9% primarily due to higher raw material and logistics costs.

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The following table identifies the period-over-period increase or decrease in sales attributable to changes in volume and/or mix, product price, and the impact of currency translation for the three months ended March 31, 2022 from the same period in the prior year.

The following table identifies the period-over-period increase or decrease in sales attributable to changes in volume and/or mix, product price, and the impact of currency translation for the nine months ended September 30, 2021 from the same period in the prior year.


	Three Months Ended
Net Sales Variance Analysis	Volume		Price		Currency Translation		Total Change
SCC	6.0	%	6.2	%	(2.8)	%	9.4	%
SBM	0.7	%	3.5	%	(1.4)	%	2.8	%
Net sales	3.8	%	4.8	%	(2.1)	%	6.5	%
By Region:
North America	7.2	%	4.7	%	—	%	11.9	%
EMEA	1.6	%	4.8	%	(3.7)	%	2.7	%
Asia Pacific	(7.5)	%	1.0	%	(3.4)	%	(9.9)	%
Latin America	13.8	%	18.8	%	(4.2)	%	28.4	%

	Nine Months Ended
Net Sales Variance Analysis	Volume		Price		Currency Translation		Total Change
SCC	4.9	%	1.2	%	2.0	%	8.1	%
SBM	9.4	%	0.2	%	2.6	%	12.2	%
Net sales	6.8	%	0.8	%	2.3	%	9.9	%
By Region:
North America	3.0	%	0.4	%	0.4	%	3.8	%
Europe Middle East Africa	8.6	%	2.1	%	7.2	%	17.9	%
Asia Pacific	9.5	%	(1.1)	%	4.9	%	13.3	%
Latin America	31.7	%	7.4	%	(4.8)	%	34.3	%

Net sales of $237.3 million for the first quarter ended March 31, 2022 increased $14.5 million, or 6.5%, from the prior-year quarter primarily due to favorable sale pricing of 4.8% and volume of 3.8% particularly in Latin America, North America and EMEA. This was partially offset by decreases in volume in Asia Pacific and foreign currency translation.

~~Net~~Gross ~~sales~~profit of $~~725~~73.80 million for the ~~nine~~first ~~months~~quarter ended ~~September~~March 3031, ~~2021~~2022 ~~increased~~decreased $6513.35 million, or 915.96%, ~~compared~~from ~~with~~ the prior-year ~~period~~quarter. Gross ~~primarily~~margin ~~due~~decreased to800 ~~higher~~basis ~~sales~~points ~~volumes~~to ~~in SBM and SCC and the favorable impact of foreign currency translation~~30.8% ~~Sales~~primarily ~~volumes were higher in the nine months~~ due to ~~increased~~significant ~~construction~~higher ~~activity~~raw inmaterial ~~all~~and ~~regions~~logistics costs.

Gross profit of $264.1 million for the nine months ended September 30, 2021 increased $2.1 million, or 0.8%, compared with the prior-year period, primarily due to higher sales volumes in SBM and SCC, largely offset by higher raw material and logistic costs. Gross margin decreased 330 basis points to 36.4% primarily due to higher raw material and logistics costs.

SG&A

SG&A costs of $5962.25 million decreased $54.51 million or 86.52%, for the ~~third~~first quarter ended ~~September~~March 3031, ~~2021~~2022 compared to the prior-year quarter primarily due to lower employee and Cambridge headquarters-related costs resulting from restructuring programs and lower incentives compensation costs. These favorable impacts were partially offset by ~~higher~~additional ~~acquisition~~Merger-related costs ~~and facility costs related to the corporate headquarters~~.

SG&A costs of $190.0 million decreased $8.8 million or 4.4%, for the nine months ended September 30, 2021 compared to the prior-year period primarily due to lower employee-related costs resulting from restructuring programs and shareholder activism and other related costs incurred during the prior-year period. These favorable impacts were partially offset by higher facility costs related to corporate headquarters relocation.

Restructuring and repositioning expenses

2021 Restructuring Plan

Cumulative costs incurred under the 2021 Plan since its inception were $2034.49 million with expected total costs of ~~$32.0~~up ~~million-$35.0~~to ~~million. During the current quarter, we increased our previously estimated total costs by~~ $637.0 million ~~due to higher employee related costs and exit costs related to the Cambridge facility~~. We have achieved total annualized pre-tax cost savings through a reduction in general and administrative expenses and a reduction in overhead costs under the 2021 Plan of approximately $712 million at ~~September~~March 3031, ~~2021~~2022, which benefited both the SCC and the SBM operating segments and corporate functions. We expect to realize total pre-tax cost structure savings associated with the 2021 Plan of approximately $13 million to $15 million mostly in general, administrative and overhead costs, with most of the savings occurring in 2022. Substantially all of the restructuring actions under the 2021 Plan are expected to be completed by June 2022. With the exception of asset write offs, substantially all of the restructuring and repositioning activities are expected to be settled in cash.

2019 Phase 2 Restructuring and Repositioning Plan

Cumulative costs incurred under the 2019 Phase 2 Plan since its inception were $3433.02 million. We have achieved total annualized pre-tax cost savings through a reduction in general and administrative expenses under the 2019 Phase 2 Plan of approximately $1920.2 million at ~~September~~March 3031, ~~2021~~2022, which benefited both the SCC and the SBM operating segments and corporate functions. WeSubstantially ~~expect~~all ~~to achieve total estimated cost savings~~ of ~~approximately $20 million. With~~ the ~~exception~~activities ofunder ~~asset write offs, substantially all of~~ the ~~restructuring~~2019 ~~and~~Phase ~~repositioning~~2 ~~activities~~Plan ~~are~~were ~~expected~~completed toby beMarch ~~settled in cash~~2021.

30For further information on our restructuring expenses, please refer to Note 3, “Restructuring and repositioning expenses” in the Notes to the unaudited Condensed Consolidated Financial Statements.

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2019 Restructuring and Repositioning Plan

Cumulative costs incurred under the 2019 Plan since its inception were $12.5 million. We achieved annualized pre-tax cost savings of approximately $18 million through a reduction in cost of goods sold as a result of supply chain, warehouse operations, and logistical enhancements that benefited both the SCC and SBM operating segments under the 2019 Plan. Substantially all of the activities under the 2019 Plan were completed by December 2020.

For further information on our restructuring expenses, please refer to Note 3, “Restructuring and Repositioning Expenses” in the Notes to the unaudited Condensed Consolidated Financial Statements.

Pension Expense

Defined benefit expense includes costs relating to U.S. and non-U.S. defined benefit pension and other postretirement benefit plans that provide benefits for retirees and former employees of divested businesses where we retained these obligations.

Certain pension costs represent ongoing costs recognized quarterly, including service and interest costs, expected return on plan assets and amortization of prior service costs/credits. Certain pension costs during the ~~third~~first quarter ~~and nine months~~ ended ~~September~~March 3031, 2022 and 2021 were $1.5 million and $41.4 million, respectively ~~compared with $1~~.3 ~~million and $3.9 million, respectively, for the corresponding prior-year periods.~~

Other Expense, Net

Other ~~expense~~expenses, net, consists primarily of research and development expense, pension mark-to-market adjustments, net, interest income, foreign currency exchange gains (losses), and defined benefit pension expenses exclusive of service costs~~, income from our Transition Services Agreement related to the sale of Darex, and other items~~.

Other expense, net stayed relatively consistent at $3.61 million during the ~~third~~first quarter ended ~~September~~March 3031, ~~2021~~2022 compared to $2.78 million in the prior period.

Other expense, net was $5.2 million and $6.4 million, respectively, during the nine months ended September 30, 2021 and the prior-year period. The decrease of $1.2 million was primarily due to an indirect tax recovery in Brazil in the 2021 second quarter.

Income Taxes

Income taxes attributable to continuing operations during the ~~third~~first quarter ended ~~September~~March 3031, ~~2021~~2022 and the prior-year quarter was income tax expense of $1.69 million and $311.0 million, respectively, representing effective tax rates of 17111.08% and 2338.65%, respectively.

~~Income~~The ~~tax~~difference ~~attributable~~between tothe ~~continuing~~U.S. ~~operations~~federal ~~during~~income ~~the~~tax ~~nine~~rate ~~months~~of ~~ended~~21.0% ~~September 30,~~and ~~2021~~our ~~and~~overall income tax rate for the ~~prior-year~~first ~~period~~quarter was anprimarily due to income tax expense of $92.6 2 million ~~and~~for ~~$34.0~~valuation ~~million,~~allowances ~~respectively~~recorded, ~~representing~~primarily ~~effective~~in China due to declined profitability. The difference between the U.S. federal income tax ~~rates~~rate of 3221.50% and ~~25.1%,~~our ~~respectively.~~overall income tax rate for the prior-year first quarter was primarily due to income tax expense on unrecognized benefits of $0.3 million.

The difference between the U.S. federal income tax rate of 21.0% and our overall income tax rate for the third quarter was primarily due to valuation allowance releases in the United States and Australia, offset by income tax expense on non-deductible expenses. The difference between the U.S. federal income tax rate of 21.0% and our overall income tax rate for the nine months was primarily due to an income tax rate change in the United Kingdom, non-deductible executive compensation and other expenses, and foreign rate differential, offset by valuation releases in the United States, France and Australia.

In general, it is our practice and intention to permanently reinvest the earnings of our foreign subsidiaries and repatriate earnings only when tax efficient.

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Income from Continuing Operations Attributable to GCP Shareholders

~~Income~~Loss from continuing operations attributable to GCP shareholders was $73.87 million for the ~~third~~first quarter of 2022 compared to ~~$100.0~~income ~~million~~from incontinuing ~~the~~operations ~~prior-year~~attributable ~~quarter.~~to ~~The~~GCP ~~prior~~shares ~~period~~of ~~included~~$1.5 ~~gains~~million ~~from~~in the ~~sale~~prior-year ~~of the Cambridge, Massachusetts corporate headquarters~~period.

Income from continuing operations attributable to GCP shareholders was $19.7 million for the nine months compared to $101.3 million for the prior-year period. The prior period included gains from the sale of the Cambridge, Massachusetts corporate headquarters.25

InTable ~~July 2017, we completed the sale~~ of our Darex business to Henkel. The results of operations of the Darex segment are presented as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented. Unless otherwise noted, the discussion and analysis pertains only to our continuing operations.Contents

Operating Segment Overview

The following is an overview of the financial performance of the SCC and SBM operating segments for the ~~third~~first quarter ~~and nine months~~ compared with the prior-year ~~periods~~period. For further information on our accounting policies related to allocating certain functional and corporate costs and measuring segment operating income, please refer to Note 14, “~~Operating Segment and Geographic Information~~Segments” in the Notes to the unaudited Condensed Consolidated Financial Statements included in Item 1, “Financial Statements” on this Quarterly Report on Form 10-Q. ~~Refer to the table in the “Analysis of Operations” section for the related segment financial performance information.~~

Segment operating margin is defined as segment operating income divided by segment net sales. It represents an operating performance measure related to ongoing earnings and trends in our operating segments that are engaged in revenue generation and other core business activities. We use this metric to allocate resources between the segments and assess our strategic and operating decisions related to core operations of our business.

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SCC

Net Sales and Gross Margin

Net sales were $~~142~~135.06 million for the ~~third~~first quarter ended ~~September~~March 3031, ~~2021~~2022, an increase of $311.7 million or 29.74%, compared with the prior-year quarter. The increase was primarily due to the favorable impact of price increase and ~~foreign currency translation~~volume. SCC had favorable price increases of 16.82% during the ~~third~~first quarter.

Gross profit was $4437.01 million for the ~~third~~first quarter ended ~~September~~March 3031, ~~2021~~2022, a decrease of $118.3 million or 2018.43%, compared with the prior-year quarter. Gross margin decreased ~~900~~920 basis points to 3127.04% compared with the prior-year quarter primarily due to historically higher raw material and logistic costs., partially offset by price.

Net sales were $410.5 million for the nine months ended September 30, 2021, an increase of $30.9 million or 8.1%, compared with the prior-year period. The increase was primarily due to higher sales volumes in EMEA, Asia Pacific, and Latin America, as well as the favorable impact of foreign currency translation.26

Sales volumes increased 4.9% for the nine months ended September 30, 2021 compared with the prior-year period due to higher construction and manufacturing activity.

Gross profit was $141.6 million for the nine months ended September 30, 2021, a decrease of $7 million or 4.7%, compared with the prior-year period, primarily due to higher raw material costs. Gross margin decreased 460 basis points to 34.5% compared with the prior-year period primarily due to higher raw material and logistic costs, partially offset by price and volume.

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Segment Operating Income and Operating Margin

Segment operating income of $71.73 million for the ~~third~~first quarter ended ~~September~~March 3031, ~~2021~~2022 decreased $114.18 million, or 5978.07%, compared with the prior-year quarter primarily due to lower gross profit. Segment operating margin of 51.40% decreased ~~820~~390 basis points compared with the prior-year quarter primarily due to higher raw material costs, offset by lower SG&A.

Segment operating income of $29.1 million for the nine months ended September 30, 2021 decreased $8.6 million or 22.8%, compared with the prior-year period primarily due to lower gross profit. Segment operating margin of 7.1% decreased 280 basis points compared with the prior-year period primarily due to lower gross margin. 200 basis points improvement was achieved through greater operating leverage due to increased volume in the period.

SBM

Net Sales and Gross Margin

Net sales were $~~107~~101.67 million for the ~~third~~first quarter ended ~~September~~March 3031, ~~2021~~2022, aan ~~decrease~~increase of $2.58 million or 2.38%, compared with the prior-year quarter primarily due to ~~lower~~the ~~sales~~favorable ~~volumes~~impact inof ~~most~~price ~~regions,~~increases. North ~~partially~~America ~~offset~~increased volumes by ~~favorable~~8.1%, ~~impact~~offset ~~of foreign~~by ~~currency~~decreases ~~translation~~in Asia Pacific and ~~pricing~~EMEA.

34Gross profit was $36.3 million for the first quarter ended March 31, 2022, a decrease of $5.1 million or 12.3%, from the prior-year quarter. Gross margin decreased 620 basis points to 35.7% primarily due to higher raw material costs, partially offset by price increases.

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Gross profit was $40.8 million for the third quarter ended September 30, 2021, a decrease of $6.0 million or 12.8%, from the prior-year quarter, while gross margin decreased 460 basis points to 37.9% primarily due to higher raw material costs.

Net sales were $315.3 million for the nine months ended September 30, 2021, an increase of $34.4 million or 12.2%, compared with the prior-year period primarily due to higher sales volumes in all regions and the favorable impact of foreign currency translation.

Sales volumes increased 9.4% in the nine months ended September 30, 2021 compared with the prior-year period due to higher construction and manufacturing activity in all regions. Residential volumes increased 19.4% for the nine months driven by the strong demand in North America for roofing materials. Building Envelope and Specialty Construction Products volumes increased 4.2% and 4.5%, respectively for the nine months compared with the prior-year period primarily due to higher construction activity.

Gross profit was $123.6 million for the nine months ended September 30, 2021, an increase of $9.0 million or 7.9%, primarily due to higher sales volumes. Gross margin decreased 160 basis points to 39.2% from the prior-year period primarily due to higher raw material costs partially offset by higher sale volumes.

Segment Operating Income and Operating Margin

Segment operating income of $2015.98 million for the ~~third~~first quarter ended ~~September~~March 3031, ~~2021~~2022 decreased by $43.76 million, or 18.46%, compared with the prior-year quarter primarily due to lower gross profit, partially offset by lower SG&A. Segment operating margin decreased ~~390~~410 basis points to 1915.45% primarily due to higher raw material costs.

Segment operating income of $60.2 million for the nine months ended September 30, 2021 increased by $8.9 million or 17.3%, compared with the prior-year period primarily due to higher gross profit. Segment operating margin increased 80 basis points to 19.1% primarily due to higher sales volumes.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The following is an analysis of our financial condition, liquidity and capital resources at ~~September~~March 3031, ~~2021~~2022.

Proposed Merger

On December 5, 2021, we entered into the Merger Agreement, with Saint-Gobain. Pursuant to the terms of the Merger Agreement, we are prohibited from certain actions without Saint-Gobain’s consent, including the incurrence of debt, capital expenditures above certain thresholds, share repurchases and payment of dividends. Further, we may be required to pay a cash termination fee to Saint-Gobain of up to $71 million, as required under the Merger Agreement under certain circumstances, including in the event GCP terminates the Merger Agreement to enter into a “Superior Proposal,” as defined in the Merger Agreement, or in the event GCP enters into an alternative transaction within nine months of termination of the Merger Agreement in certain circumstances and such alternative transaction is consummated.

Cash Resources and Available Credit Facilities

At ~~September~~March 3031, ~~2021,~~2022 we had $~~481~~471.53 million ofin cash and cash equivalents ~~and available liquidity~~ of which $~~347~~323.2 million, ofwas ~~which~~held ~~$324~~in the U.5S. ~~million~~We ~~was~~had ~~held~~additional inavailable liquidity of $347.2 million under the U.S. revolving line agreement and $4041.31 million was available under various non-U.S. credit facilities. We expect to meet our U.S. cash and liquidity requirements with cash on hand, cash we expect to generate during ~~2021~~2022 and thereafter, future borrowings, if any, and other available liquidity, including royalties and service fees from our foreign subsidiaries. We may also repatriate future earnings from foreign subsidiaries if that results in minimal or no U.S. tax consequences. We expect to have sufficient cash and liquidity to finance our U.S. operations and growth strategy and meet our debt obligations. Our non-U.S. credit facilities are extended to various subsidiaries that use them primarily to issue bank guarantees supporting trade activity and provide working capital during occasional cash shortfalls in certain foreign entities. We generally renew these credit facilities as they expire.

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these credit facilities as they expire.

Sale and Relocation of Corporate Headquarters

In July 2020, we sold our corporate headquarters in Cambridge, Massachusetts for net cash proceeds of $122.5 million. During 2020, we made cash tax payments of approximately $15 million related to the gain on sale of $110.2 million and expect to make additional cash tax payments of approximately $13 million in future years. Pursuant to the terms of the lease, we are required to make certain payments for real estate taxes and other operating expenses related to the property.

In March 2021, the Board approved a business restructuring and repositioning plan related to the relocation of the Company’s corporate headquarters to the Atlanta, Georgia area, the closure of its Cambridge, Massachusetts campus, the build-out of new global research and development locations near the Boston/Cambridge area, as well as the consolidation of other regional facilities and offices, including an organizational redesign, which is expected to lower costs. We expect to incur approximately $6 million of capital expenditures mostly related to the build-out of the global R&D facility, corporate headquarters and information technology infrastructure associated with the relocation.

Share Repurchase Program

In July 2020, our Board of Directors authorized a program to repurchase up to $100 million of our common stock effective through July 2022. The share repurchase program is subject to a periodic review by the Board and may be suspended periodically or discontinued at any time. We plan to fund repurchases from our existing cash balance.

Analysis of Cash Flows

The following table summarizes our cash flows for the first quarter ended March 31, 2022 and the prior-year quarter:

The following table summarizes our cash flows for the nine months ended September 30, 2021 and the prior-year period:


	Three Months Ended
	March 31,
	2022		2021
	(in millions)
Cash flows (used in) provided by continuing operations


Operating activities	$	(16.0)	$	0.7
Investing activities	(12.5)		(8.1)
Financing activities	—		0.6
Effect of exchange rate changes on cash	(0.8)		(3.0)
Change in cash and cash equivalents	(29.3)		(9.8)
Cash and cash equivalents, beginning of period	500.6		482.7
Cash and cash equivalents, end of period	$	471.3	$	472.9

	Nine Months Ended
	September 30,
	2021		2020
	(in millions)
Cash flows provided by (used in) continuing operations:
Net cash provided by operating activities from continuing operations	$	25.8	$	59.3
Net cash used in operating activities from discontinued operations	(0.3)		(2.5)
Operating activities	$	25.5	$	56.8
Investing activities	(23.8)		94.9
Financing activities	2.2		0.7
Effect of exchange rate changes on cash	(5.1)		(4.0)
Change in cash and cash equivalents	(1.2)		148.4
Cash and cash equivalents, beginning of period	482.7		325.0
Cash and cash equivalents, end of period	$	481.5	$	473.4

Cash flows from operating activities. As shown in the table below, our cash flows provided by operating activities from continuing operations decreased by $16.7 million

Cash flows from operating activities. As shown in the table below, our cash flows provided by operating activities from continuing operations decreased by $33.5 million


	Three Months Ended
	March 31,
	2022		2021
	(in millions)
Collections from customers	$	231.3	$	230.3
Other disbursements, other than interest and income tax payments	(246.8)		(228.4)

Income tax payments, net	(0.5)		(1.2)
Cash (used in) provided by operating activities from continuing operations	$	(16.0)	$	0.7

	Nine Months Ended
	September 30,
	2021		2020
	(in millions)
Collections from customers	$	726.7	$	671.4
Other disbursements, other than interest and income tax payments	(676.0)		(589.1)
Interest payments, net	(9.6)		(10.0)
Income tax payments, net	(15.3)		(13.0)
Cash provided by operating activities from continuing operations	$	25.8	$	59.3

For the first quarter ended March 31, 2022, our collection from customers increased $1.0 million due to higher days sales outstanding. The increase in disbursements, other than interest and income tax payments of $18.4 million was due mostly to increase in raw material and logistic costs.

36Cash flows from investing activities. Net cash used by investing activities from continuing operations during the first quarter was $12.5 million compared to $8.1 million during the prior-year quarter.

~~Table~~Cash flows from financing activities. There was no cash provided by financing activities during the first quarter compared to $0.6 million during the prior-year quarter. The period-over-period change was primarily due to higher tax withholding obligations related to employee equity awards and payments for finance lease obligations, partially offset by proceeds received from the exercise of ~~Contents~~stock options.

For the nine months ended September 30, 2021, our collection from customers increased $55.3 million due to higher net sales of 9.9%. The increase in disbursements, other than interest and income tax payments of $86.9 million was due mostly to increase in raw material and logistic costs.

Cash flows from investing activities. Net cash used by investing activities from continuing operations during the nine months was $23.8 million compared to cash provided by of $94.9 million during the prior-year period. The period-over-period included proceeds from the sale of our Cambridge headquarters.

Cash flows from financing activities. Net cash provided by financing activities from continuing operations during the nine months was $2.2 million compared to $0.7 million of cash used during the prior-year period. The period-over-period change was primarily due to higher proceeds received from the exercise of stock options partially offset by share repurchases.

Defined Benefit Pension Plans

Based on the U.S. advance-funded plans’ status during the ~~nine~~first ~~months~~quarter and the prior-year period, there were no minimum required payments under ERISA. We made contributions of $0.1 million and $0.53 million, respectively, to the U.S. and non-U.S. pension plans during the ~~third~~first quarter and ~~nine months~~ ended ~~September~~March 3031, ~~2021. We made contributions of $0.6 million and $0.7 million~~2022, respectively~~, to the U~~.S. ~~pension plans during the prior year periods.~~ We intend to fund non-U.S. pension plans based upon applicable legal requirements, as well as actuarial and trustee recommendations.

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Debt

Total debt outstanding at ~~September~~March 3031, ~~2021~~2022 was $~~351~~349.63 million. Our debt service requirements are expected to be funded through our existing sources of liquidity and operating cash flows. Subject to certain conditions stated in the Indenture, we may, at our option and at any time and from time to time, redeem the 5.5% Senior Notes prior to their maturity date in whole or in part at certain redemption prices, as discussed in Note 86, “Debt ~~and Other Borrowings~~”, in the Notes to the Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data” of the ~~2020~~2021 Annual Report on Form 10-K.

For further information on our 5.5% Senior Notes and Credit Agreement, please refer to Note 4, “Debt” in the Notes to the unaudited Condensed Consolidated Financial Statements included in Item 1, “Financial Statements” on this Quarterly Report on Form 10-Q.

Other Contractual Obligations and Contingencies

We have various future contractual obligations, including those for debt and related interest payments, pension funding requirements, operating leases and other operating commitments. Please refer to Note 912, “Commitments and Contingencies”, in the Notes to the unaudited Condensed Consolidated Financial Statements included in Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q for a discussion of financial assurances and other contingencies.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

For information on our significant accounting policies and estimates, please refer to ~~Note 1, “Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies” in~~ the Notes to ~~the unaudited Condensed Consolidated Financial Statements included in Item 1, “ Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q and in the Notes to~~ our audited Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data” of our ~~2020~~2021 Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

With respect to information disclosed in the “Quantitative and Qualitative Disclosures About Market Risk” section of our ~~2020~~2021 Annual Report, more recent numerical measures and other information are available in the “Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this Quarterly Report. These more recent measures and the information disclosed in the “Quantitative and Qualitative Disclosures About Market Risk” section of our ~~2020~~2021 Annual Report are incorporated herein by reference.

Item 4. CONTROLS AND PROCEDURES

Management’s Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures are designed to provide reasonable assurance that information we are ~~able~~required to ~~record~~submit under the Exchange Act is recorded, ~~process~~processed, ~~summarize~~summarized and ~~report~~reported within the ~~information~~time ~~required~~periods tospecified bein ~~disclosed~~SEC inrules ~~our~~and ~~disclosure~~forms ~~reports~~and ~~under~~that ~~the~~such ~~Exchange~~information ~~Act~~is ~~within~~accumulated ~~the~~and ~~time~~communicated ~~periods~~to ~~specified~~management, inincluding ~~SEC~~our ~~rules~~principal executive officer and ~~forms~~principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on their evaluation, our principal executive officer and principal financial officer concluded that, as of ~~the~~March ~~end~~31, ~~of the period covered by this report~~2022, our disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting that were disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021.

~~Management’s~~Remediation ~~Plan~~Activities toand ~~Remediate~~Status ~~the~~of Remaining Material Weaknesses

InDuring ~~connection with~~ the ~~financial~~quarter ~~close process and preparation of the consolidated financial statements for the year~~ ended ~~December~~March 31, ~~2020~~2022, wemanagement, ~~identified~~with ~~material~~direction ~~weaknesses~~from inthe ~~our~~Audit ~~internal~~Committee, ~~control~~continued ~~over~~with ~~financial~~the ~~reporting.~~process ~~Refer~~ to ~~Item~~address ~~9A within~~ the ~~2020 Annual Report on Form 10-K for the specific detail on~~ material weaknesses ~~identified. The material weaknesses resulted~~ in ~~the~~internal ~~correction~~control ofover ~~immaterial errors and the revisions of our consolidated~~ financial ~~statements as of and for the years ended December 31~~reporting. Specifically, ~~2019~~management and 2018 and our quarterly condensed consolidated financial statements for the first three quarterly periods of the year ended December 31, 2020 and for each of the quarterly periods of the year ended December 31, 2019. The identified errors did not result in material misstatements to our quarterly or annual financial statements.has:

In•Deployed ~~order~~of toa ~~address~~new ~~the material weaknesses in internal control over financial reporting and~~ revenue ~~recognition~~policy and ~~the~~instituted ~~close~~a ~~process,~~shipping ~~management,~~block ~~with~~for ~~direction~~sales ~~from~~orders ~~the~~in ~~Audit~~non-U.S. ~~Committee,~~to ~~has~~ensure ~~begun~~up ~~the~~front ~~process~~price ofand ~~remediation~~quantity tovalidation ~~address~~and ~~the~~a ~~control~~sales ~~deficiencies~~reserve ~~that~~for ~~led~~price toand ~~these~~quantity ~~material weaknesses~~disputes. ~~Specifically, management has:~~

•~~Initiated~~Implemented ~~personnel~~monitoring ~~changes~~activities atand ~~GCP~~reporting ~~within~~to ~~the~~ensure ~~Accounting~~accuracy ~~organization~~of accounting and financial reporting as well as compliance.

~~•Engaged~~Management ~~third~~is ~~party~~committed ~~experts~~ to ~~assist~~the ~~management~~remediation of the material weaknesses disclosed in ~~assessing~~our ~~current~~Annual ~~processes~~Report ~~and~~on ~~designing~~Form ~~improved~~10-K ~~processes~~for ~~and~~the ~~controls~~year atended ~~GCP~~December ~~specifically~~31, 2021, as well as the continued improvement of the Company’s internal control over financial reporting. Management believes the ~~revenue~~measures ~~recognition~~described above will remediate the material weaknesses identified in future periods once the controls have been in place and ~~close~~operating ~~processes~~for a sufficient period to evaluate if the material weaknesses have been remediated and will strengthen the Company’s internal control over financial reporting.

•Reviewed business processes surrounding revenue recognition as well as the close process along with the performance of the risk assessment and identified and began the implementation of enhanced procedures and related internal controls at GCP.

•Redesigned and began implementation of controls over the completeness and accuracy of price and quantity information used for revenue recognition including the appropriate IT access, interface and change controls over our online order entry system, segregation of duties and enhanced sales order review processes.

•Redesigned and implemented controls for the third quarter 2021 close process to achieve accurate and timely financial accounting, reporting and disclosures, including controls over the preparation and review of account reconciliations and journal entries.

In addition, management’s planned actions to remediate the material weaknesses include:

•Complete the documentation and implementation of enhanced policies, procedures and related internal controls to ensure business processes achieve the intended control objectives.

•Enhance and update business process, policies and procedure documentation.

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Management is committed to the remediation of the material weaknesses described above, as well as the continued improvement of the Company’s internal control over financial reporting. Management will continue to review and make necessary change to the overall design of the Company’s internal control environment as well as policies and procedures to improve the overall effectiveness of internal controls over revenue recognition and the close process. Management believes the measures described above and others that will be implemented will remediate the material weaknesses identified and will strengthen the Company’s internal controls over financial reporting. The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Management expects these remediation efforts as well as other future remediation efforts related to the material weaknesses will be effectively implemented in 2021 and 2022.

Changes in Internal Control over Financial Reporting

AsThere ~~described~~have ~~above~~been ~~under~~no ~~“Management’s Plan to Remediate the Material Weaknesses” section, there were~~ changes in our internal control over financial reporting ~~specific~~that tooccurred ~~account reconciliations and journal entries~~ during the quarter ended ~~September~~March 3031, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Information with respect to this Item may be found in Note 912, “Commitments and Contingencies” in the Notes to the unaudited Condensed Consolidated Financial Statements included in Item 1, “Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q which information is incorporated herein by reference.

Additional information on our commitments and contingencies can be found in our Annual Report on Form 10-K for our fiscal year ended December 31, ~~2020~~2021.

~~Item 1A. RISK FACTORS~~31

Except as set forth below, there have been no material changes from the risk factors as previously disclosed in Part I, Item 1A, “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2020.

The COVID-19 pandemic has adversely affected, and may in the future continue to adversely affect, our results of operations, financial condition and liquidity

In December 2019, the COVID-19 virus was first identified in China and has since spread to a number of countries in which we conduct our business operations, including countries in North America, Asia Pacific, EMEA and Latin America. In March 2020, the World Health Organization declared COVID-19 a global pandemic.

The global spread of COVID-19 has created significant worldwide economic uncertainty which has adversely affected, and may in the future continue to adversely affect, demand for our products due to delays in construction projects and reduced construction activity, especially commercial construction. Our results of operations in 2020 have been negatively impacted by COVID-19 and may continue to be negatively impacted in future periods. We may also be negatively impacted by reductions in accounts receivable collections, customer and vendor bankruptcies, increased raw material and transportation costs, as well as significant reduction in the availability of or substantial delays or interruptions in the supply or transportation of raw materials which could negatively impact our ability to sell our products and have a material adverse effect on our financial condition, results of operations and cash flows. For example, COVID-19 has significantly impacted the global supply chain, with restrictions and limitations on related activities causing disruption and delay, which could materially and adversely affect our ability to obtain necessary raw materials and supplies, manufacture and/or distribute our products in a timely manner, or at all. These disruptions and delays have strained certain domestic and international supply chains, could negatively affect our supply chain and the flow or availability of certain materials.

The COVID-19 outbreak has also significantly increased economic uncertainty and has led to disruption and volatility in the global capital markets, which could increase the cost of and accessibility to capital. If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all. The COVID-19 outbreak has caused a significant economic slowdown, which could be of an unknown duration, could lead to increased unemployment, reduced discretionary consumer spending and a corresponding reduction in demand for our products, and could result in a material adverse effect on our business, financial condition and operating results.

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~~The virus also impacted our workforce, moving a large portion of our employees to working-from-home and adding administrative complexity to our everyday business activities~~Item 1A. RISK Disruption caused by business responses to the COVID-19 outbreak, including working-from-home arrangements, may create increased vulnerability to cybersecurity incidents, including breaches of information systems security, which could damage our reputation and commercial relationships, disrupt operations, increase costs and/or decrease net revenues, and expose us to claims from customers, suppliers, financial institutions, regulators, payment card associations, employees and others, any of which could have a material adverse effect on our business, financial condition and operating results. FACTORS

WeThere ~~operate facilities around the world which~~ have been ~~and~~no ~~may~~material ~~continue~~changes tofrom ~~be adversely affected by~~ the ~~pandemic~~risk asfactors ~~a result of disruptions to our supplies of raw materials,~~ as ~~well~~previously asdisclosed ~~the production, transportation and delivery of our products. We may not be able to supply products or services to our customers~~ in aPart ~~timely manner due to travel and transportation restrictions~~I, asItem well as temporary closures of our facilities or those of our suppliers or customers as a result of regulations imposed by local governments to contain COVID-19. Our ability to adequately staff our operations may be adversely impacted by certain temporary restrictions1A, ~~such~~“Risk asFactors” ~~mandatory~~contained ~~facility closures imposed by government authorities~~ in ~~certain~~our ~~countries~~Annual ~~where~~Report weon ~~operate,~~Form ~~as well as voluntary facility closures or other measures, such as work~~10-~~from-home~~K ~~orders and social distancing protocols, imposed~~ for the ~~safety~~year ofended ~~our employees or in response to actual or potential positive diagnoses for COVID-19. Despite our best efforts to protect the health~~December 31, safety and well-being of our employees in accordance with guidelines issued by national and other health and safety authorities, there can be no assurance that the numbers of infected employees will not increase, and that such infections would not have a material adverse impact on our operations2021.

Furthermore, our efforts to mitigate the impact of COVID-19 through social distancing measures, enhanced cleaning measures, the increased use of personal protective equipment and COVID-19 testing at our facilities, as well as other steps taken to protect the health, safety and financial security of our employees, may result in other negative impacts on our operations, including increased costs, reduced efficiency levels or labor disputes resulting in a strike or other work stoppage or interruption.

Governments around the world have implemented fiscal stimulus measures to counteract the effects of the COVID-19 outbreak, however, the magnitude and overall effectiveness of these actions remain uncertain. Further, the full extent of the impact of COVID-19, including the extent of its impact on our business and financial condition, will depend on numerous evolving factors that we may not be able to accurately predict. We cannot predict with any certainty whether and to what degree the disruption caused by the COVID-19 outbreak and reactions thereto will continue, and we expect to face difficulty in accurately predicting our internal financial forecasts.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In July 2020, our Board of Directors authorized a program to repurchase up to $100 million of our common stock effective through July 2022. We did not repurchase any shares during the three months ending ~~September~~March 3031, ~~2021~~2022. The Merger Agreement does not permit GCP to repurchase any shares without the prior consent of Saint-Gobain, and currently, we do not intend to repurchase any shares.

Item 6. EXHIBITS


Exhibit No.						Description of Exhibit
3.1						Amended and Restated Certificate of Incorporation of GCP Applied Technologies Inc., dated February 3, 2016 (incorporated herein by reference to Exhibit 3.1 to GCP’s Current Report on Form 8-K filed on February 4, 2016).
3.2						Certificate of Amendment of the Amended and Restated Certificate of Incorporation of GCP Applied Technologies Inc., dated May 3, 2018 (incorporated herein by reference to Exhibit 3.1 to GCP’s Current Report on Form 8-K filed on May 3, 2018).
3.3						Certificate of Designations of Series A Junior Participating Preferred Stock of GCP Applied Technologies Inc. (incorporated herein by reference to Exhibit 3.1 to GCP’s Current Report on Form 8-K filed on March 15, 2019).
3.4						Amended and Restated Bylaws of GCP Applied Technologies Inc., effective as of May 3, 2018 (incorporated herein by reference to Exhibit 3.2 to GCP’s Current Report on Form 8-K filed on May 3, 2018).
3.5						Amendment to the Amended and Restated By-Laws of GCP Applied Technologies Inc., dated May 6, 2021 (incorporated herein by reference to Exhibit 3.1 to GCP’s Current Report on Form 8-K filed on May 7, 2021).
4.1						Indenture, dated as of April 10, 2018, among GCP Applied Technologies, Inc. the guarantors party thereto and Wilmington Trust, National Association, as trustee
4.2						Form of 5.500% Note due 2026 (included as Exhibit A to Exhibit 4.1)
4.3						Rights Agreement, dated as of March 15, 2019, between GCP Applied Technologies Inc. and Equiniti Trust Company, which includes the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C (incorporated herein by reference to Exhibit 4.1 to GCP’s Current Report on Form 8-K filed on March 15, 2019).
4.4						First Amendment to Rights Agreement, dated as of March 13, 2020, between GCP Applied Technologies Inc. and Equiniti Trust Company (incorporated herein by reference to Exhibit 4.1 to GCP’s Current Report on Form 8-K filed on March 13, 2020).
4.5						Second Amendment to Rights Agreement, dated as of December 5, 2021, between the Company and Equiniti Trust Company (incorporated herein by reference to Exhibit 4.1 to GCP’s Current Report on Form 8-K filed December 6, 2021)
10.1#*						Letter Agreement between GCP Applied Technologies Inc. and Michael Valente, effective as of December 21, 2021
10.2#*						Letter Agreement between GCP Applied Technologies Inc. and Sherry Mennenga, effective as of December 21, 2021
10.3#*						Letter Agreement between GCP Applied Technologies Inc. and David Campos, effective as of December 21, 2021
10.4*						Retention Incentive Agreement between GCP Applied Technologies Inc. and Simon Bates, effective January 24, 2022 (incorporated herein by reference to Exhibit 10.1 to GCP’s Current Report on Form 8-K filed January 28, 2022)
10.5*						Retention Incentive Agreement between GCP Applied Technologies Inc. and Craig Merrill, effective January 24, 2022 (incorporated herein by reference to Exhibit 10.2 to GCP’s Current Report on Form 8-K filed January 28, 2022)
10.6#*						Retention Incentive Agreement between GCP Applied Technologies Inc. and Michael Valente, effective January 24, 2022

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Exhibit No.						Description of Exhibit
10.7#*						Retention Incentive Agreement between GCP Applied Technologies Inc. and Sherry Mennenga, effective January 24, 2022
3.1						Amended and Restated Certificate of Incorporation of GCP Applied Technologies Inc., dated February 3, 2016 (incorporated herein by reference to Exhibit 3.1 to GCP’s Current Report on Form 8-K filed on February 4, 2016).
10.8#*						Retention Incentive Agreement between GCP Applied Technologies Inc. and David Campos, effective January 24, 2022
3.2						Certificate of Amendment of the Amended and Restated Certificate of Incorporation of GCP Applied Technologies Inc., dated May 3, 2018 (incorporated herein by reference to Exhibit 3.1 to GCP’s Current Report on Form 8-K filed on May 3, 2018).
3.3						Certificate of Designations of Series A Junior Participating Preferred Stock of GCP Applied Technologies Inc. (incorporated herein by reference to Exhibit 3.1 to GCP’s Current Report on Form 8-K filed on March 15, 2019).
3.4						Amended and Restated Bylaws of GCP Applied Technologies Inc., effective as of May 3, 2018 (incorporated herein by reference to Exhibit 3.2 to GCP’s Current Report on Form 8-K filed on May 3, 2018).
3.5						Amendment to the Amended and Restated By-Laws of GCP Applied Technologies Inc., dated May 6, 2021 (incorporated herein by reference to Exhibit 3.1 to GCP’s Current Report on Form 8-K filed on May 7, 2021).
4.1						Indenture, dated as of April 10, 2018, among GCP Applied Technologies, Inc. the guarantors party thereto and Wilmington Trust, National Association, as trustee
4.2						Form of 5.500% Note due 2026 (included as Exhibit A to Exhibit 4.1)
4.3						Rights Agreement, dated as of March 15, 2019, between GCP Applied Technologies Inc. and Equiniti Trust Company, which includes the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C (incorporated herein by reference to Exhibit 4.1 to GCP’s Current Report on Form 8-K filed on March 15, 2019).
4.4						First Amendment to Rights Agreement, dated as of March 13, 2020, between GCP Applied Technologies Inc. and Equiniti Trust Company (incorporated herein by reference to Exhibit 4.1 to GCP’s Current Report on Form 8-K filed on March 13, 2020).
31.1*						Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32**						Certification of the Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*						Inline XBRL Instance Document
101.SCH*						Inline XBRL Taxonomy Extension Schema
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase
104*						The cover page from this Quarterly Report on Form 10-Q for the quarter ended ~~September~~March 3031, ~~2021~~2022 (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

41# Indicates a management contract or any compensatory plan, contract or arrangement

Table of Contents

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GCP Applied Technologies Inc.(Registrant)
Date: November 5, 2021	By:	/s/ SIMON M. BATES
Date: May 9, 2022	By:	/s/ SIMON M. BATES
		Simon M. BatesPresident and Chief Executive Officer (Principal Executive Officer)
Date: November 5, 2021	By:	/s/ CRAIG A. MERRILL
Date: May 9, 2022	By:	/s/ CRAIG A. MERRILL
		Craig A. MerrillVice President and Chief Financial Officer(Principal Financial Officer)
Date: November 5, 2021	By:	/s/ JAMES M. WADDELL
Date: May 9, 2022	By:	/s/ JAMES M. WADDELL
		James M. WaddellVice President and Chief Accounting Officer(Principal Accounting Officer)

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