EX-99.1 10 form10exhibit991-amendment4.htm EXHIBIT 99.1 Exhibit



Exhibit 99.1
(Subject to Completion, Dated December 22, 2015)

[●]

Dear W. R. Grace & Co. Shareholder:
I am pleased to report that the previously announced separation of the business, assets and liabilities associated with the Grace Construction Products operating segment and the Darex Packaging Technologies business ("GCP") from the remaining W. R. Grace & Co. businesses is expected to become effective on [●]. GCP Applied Technologies Inc., a Delaware corporation, and wholly-owned subsidiary of W. R. Grace & Co., will become an independent public company on that date.
The separation will be completed by way of a pro rata distribution of common stock of GCP Applied Technologies Inc. to the shareholders of record of Grace common stock as of 5:00 p.m., Eastern Time, on [●], the distribution record date. Each holder of Grace common stock will receive one share of GCP common stock for each share of Grace common stock held by the shareholder on the record date. The distribution of these shares will be made in book-entry form, which means that no physical share certificates will be issued. At any time following the distribution, shareholders may request that their shares of GCP common stock be transferred to a brokerage or other account. No fractional shares of GCP common stock will be issued. The distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing rates and distribute the net cash from proceeds from the sales pro rata to each holder who would otherwise have been entitled to receive a fractional share in the distribution.
The distribution is subject to certain customary conditions including, among other conditions, the receipt of an opinion of counsel, in form and substance satisfactory to Grace in its sole discretion, regarding the U.S. federal income tax treatment of the distribution of shares of GCP common stock and certain related transactions. The distribution is intended to qualify as tax-free to the holders of Grace common stock for U.S. federal income tax purposes.
The distribution does not require shareholder approval, nor do you need to take any action to receive your shares of GCP common stock. Grace common stock will continue to trade on the New York Stock Exchange under the symbol “GRA.” GCP has applied to have its common stock listed on the [●] under the symbol “[●].”
The enclosed information statement, which we are mailing to all holders of Grace common stock, describes the separation in detail and contains important information about GCP, including its historical combined financial statements. We encourage you to read this information statement carefully.
Thank you for your continued investment in Grace.
 
Sincerely,
 
 
 
Fred E. Festa
 
Chairman of the Board and
 
Chief Executive Officer
[●]

Dear GCP Applied Technologies Inc. Shareholder:
It is our pleasure to welcome you as a shareholder of GCP Applied Technologies Inc. Our foremost priority as we become an independent public company is to affirm the trust and confidence of our employees, our customers, our communities, and our investors.
Like the very products we sell, we have proven our ability to create value as we protect and build on an industry-leading foundation.
In the following pages, you will read about the past performance of our three operating segments, our strategies for growth, and our focus on our customers.
What is more difficult to convey in an information statement like the accompanying document, is our passion and excitement. We are extraordinarily proud of our place in the long history of W. R. Grace & Co., a pedigree that has given rise to strong relationships with our customers; strong brands; a culture of focus, professionalism, and performance; and a commitment to innovation. Just as our customers expect our products to perform and create value even in the most challenging environments, we expect the same of ourselves and our organization.
As you review our information statement, we believe you will agree we are aligned with our commitment to deliver world-class products, applied knowledge, and service excellence to create value.
Our new logo expresses stepwise movement toward a strong future. Our name acknowledges our proud history with Grace and our unrelenting commitment to technology that works hard for our customers. We believe it’s a formula for success.
Thank you in advance for your investment and your confidence.
Sincerely,
 
 
 
Ronald C. Cambre
Gregory E. Poling
Chairman of the Board of Directors
President and Chief Executive Officer
GCP Applied Technologies Inc.
GCP Applied Technologies Inc.





Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

Preliminary Information Statement

(Subject to Completion, Dated December 22, 2015)

Information Statement
Distribution of Common Stock of
GCP Applied Technologies Inc.
by
W. R. Grace & Co.
To W. R. Grace & Co. Shareholders

W. R. Grace & Co. ("Grace") is furnishing this information statement in connection with the distribution to Grace shareholders of all of the shares of common stock of GCP Applied Technologies Inc. (the "Company") owned by Grace, which will be 100 percent of the GCP common stock outstanding immediately prior to the distribution. The Company is a wholly-owned subsidiary of Grace that at the time of the distribution will hold the business, assets and liabilities associated with the Grace Construction Products operating segment and the Darex Packaging Technologies business ("GCP").
To implement the distribution, Grace will distribute the shares of GCP common stock on a pro rata basis to the holders of Grace common stock in a transaction that is intended to qualify as tax-free to the holders of Grace common stock for U.S. federal income tax purposes. Each of you, as a holder of Grace common stock, will receive one share of GCP common stock for each share of Grace common stock that you hold at 5:00 p.m., Eastern Time, on [●], the record date for the distribution.
The distribution is expected to occur after the New York Stock Exchange (“NYSE”) market closing on [●]. Immediately after Grace completes the distribution, the Company will be an independent, publicly traded company. It is a condition to the completion of the separation that Grace obtains an opinion of counsel, in form and substance satisfactory to Grace in its sole discretion, regarding the U.S. federal income tax treatment of the distribution of shares of GCP common stock and certain related transactions.
No vote of Grace shareholders is required in connection with this distribution. Grace shareholders will not be required to pay any consideration for the shares of GCP common stock they receive in the distribution, and they will not be required to surrender or exchange shares of their Grace common stock or take any other action in connection with the distribution.
As Grace currently owns all of the outstanding shares of GCP common stock, there currently is no public trading market for the GCP common stock. We have applied to have the GCP common stock authorized for listing on the [●] under the ticker symbol “[●].” Assuming that the [●] authorizes the GCP common stock for listing, we anticipate that a limited market, commonly known as a “when-issued” trading market, for GCP common stock will develop on or shortly before the record date for the distribution and will continue up to and including the distribution date, and we expect that the “regular-way” trading of GCP common stock will begin on the first trading day following the distribution date.





In reviewing this information statement, you should carefully consider the matters described in the section entitled “Risk Factors” of this information statement.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of any of the securities of GCP Applied Technologies Inc. or determined whether this information statement is truthful or complete. Any representation to the contrary is a criminal offense.
This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

The date of this information statement is [●].
This information statement was first mailed to holders of Grace common stock on or about [●].





TABLE OF CONTENTS
Our Company
 
Our Strengths
 
Our Business Strategy
 
Summary of Risk Factors
 
The Separation
 
Questions and Answers About the Separation and Distribution
 
Summary of the Separation and Distribution
 
Corporate Information
 
Reason for Furnishing this Information Statement
 
Risks Relating to Our Business
 
Risks Relating to the Separation
 
Risks Relating to Ownership of GCP Common Stock
 
Business Overview
 
Products
 
Sales and Marketing
 
Manufacturing, Raw Materials and Supply Chain
 
Financial Information about Industry Segments and Geographic Areas
 
Backlog of Orders
 
Research Activities; Intellectual Property
 
Environment, Health and Safety Matters
 
Employee Relations
 
Properties
 
Legal Proceedings
 
General
 
Reasons for the Separation
 
The Number of Shares You Will Receive
 
Treatment of Fractional Shares
 
When and How You Will Receive the Distribution
 
Treatment of Equity-Based Compensation
 
Results of the Distribution
 
Incurrence of Debt
 
Market for GCP Common Stock
 
Trading Between Record Date and Distribution Date
 
Conditions to the Distribution
 
Reason for Furnishing this Information Statement
 




Executive Officers Following the Distribution
 
Board of Directors Following the Distribution
 
Corporate Governance Principles
 
Director Independence
 
Committees of the Board of Directors
 
Compensation Committee Interlocks and Insider Participation
 
Corporate Governance
 
Board Leadership Structure
 
Board Risk Oversight
 
Communications with the Board of GCP
 
Grace 2014 Executive Compensation
 
Effects of the Separation on Outstanding Executive Compensation Awards
 
GCP Compensation Programs
 
The Separation from Grace
 
Related Party Transactions
 
Agreements with Grace
 
General
 
Distributions of Securities
 
Common Stock
 
Preferred Stock
 
Restrictions on Payment of Dividends
 
Transfer Restrictions
 
Size of Board and Vacancies; Removal
 
Shareholder Action by Written Consent
 
Shareholder Meetings
 
Requirements for Advance Notice of Shareholder Nominations and Proposals
 
No Cumulative Voting
 
Stock Exchange Listing
 
Limitation on Liability of Directors and Indemnification of Directors and Officers
 
Anti-Takeover Effects of Various Provisions of Delaware Law and GCP’s Certificate of Incorporation and Bylaws
 
Exclusive Forum
 
Transfer Agent and Registrar
 




NOTE REGARDING THE USE OF CERTAIN TERMS
Except as otherwise indicated, we use the following terms to refer to the items indicated:
“W. R. Grace & Co.” refers to W. R. Grace & Co., a Delaware corporation, and “Grace” refers to W. R. Grace & Co. and its consolidated subsidiaries, in each case unless otherwise indicated or the context otherwise requires. “Grace common stock” refers to the common stock, par value $0.01 per share, of W. R. Grace & Co.
“GCP” refers collectively to the business, assets and liabilities associated with the Grace Construction Products operating segment and the Darex Packaging Technologies business that at the time of the distribution will be held by the Company.
Except as otherwise noted, “we,” “us,” and “our,” refer to GCP and, unless otherwise indicated or the context otherwise requires, the management of GCP and/or the Company.
The "Company" refers to GCP Applied Technologies Inc., a Delaware corporation, that prior to the separation is a wholly owned subsidiary of Grace and that at the time of the separation will hold GCP. Where appropriate in context and except as noted, this term includes the subsidiaries of the Company. "GCP common stock" refers to the common stock, par value $0.01 per share, of the Company.
“Separation” or “separation” refers to the separation of GCP from Grace’s other businesses and the creation of an independent, publicly traded company holding GCP through a distribution of shares of GCP common stock to the holders of Grace common stock as of the record date.
“Distribution” or “distribution” refers to the distribution of all of the shares of GCP common stock owned by Grace to shareholders of Grace as of the record date.
“Distribution Date” means the date on which the Distribution occurs.
Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement, including the combined financial statements of GCP, assumes the completion of all the transactions referred to in this information statement in connection with the separation and distribution.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This information statement contains forward-looking statements, that is, information related to future, not past, events. Such statements generally include the words “believes,” “plans,” “intends,” “targets,” “will,” “expects,” "estimates," “suggests,” “anticipates,” “outlook,” “continues” or similar expressions. Forward-looking statements include, without limitation, expected financial positions; results of operations; cash flows; financing plans; business strategy; operating plans; capital and other expenditures; competitive positions; growth opportunities for existing products; benefits from new technology and cost reduction initiatives, plans and objectives; and markets for securities. Like other businesses, GCP is subject to risks and uncertainties that could cause its actual results to differ materially from its projections or that could cause other forward-looking statements to prove incorrect. Factors that could cause actual results to materially differ from those contained in the forward-looking statements include, without limitation, risks related to: the cyclical and seasonal nature of the industries GCP serves; the effectiveness of GCP's research and development and new product introductions; the cost and availability of raw materials and energy; foreign operations, especially in emerging regions; changes in currency exchange rates; developments affecting the Company’s outstanding liquidity and indebtedness, including debt covenants and interest rate exposure; developments affecting the Company’s funded and unfunded pension obligations; acquisitions and divestitures of assets and gains and losses from dispositions; warranty and product liability claims; hazardous materials and costs of environmental compliance; the separation, such as: uncertainties that may delay or negatively impact the separation and distribution or cause the separation and distribution to not occur at all, the Company’s lack of history as a public company and the costs of the separation, the Company’s ability to realize the anticipated benefits of the separation and distribution, and the value of GCP common stock following the separation; and those additional factors set forth in this information statement and W. R. Grace & Co.’s most recent Annual Report on Form 10-K, quarterly report on Form 10-Q and current reports on Form 8‑K, which have been filed with the Securities and Exchange Commission and are readily available on the Internet at www.sec.gov.

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In particular, information included under “The Separation and Distribution,” “Risk Factors,” “Dividend Policy,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements.
You should consider the areas of risk described above, as well as those set forth in the section entitled “Risk Factors” included elsewhere in this information statement, in connection with considering any forward-looking statements that may be made by us and our businesses generally. We cannot assure you that projected results or events reflected in the forward-looking statements will be achieved or occur. The forward-looking statements included in this document are made as of the date of this information statement. Except as may be required by law, we undertake no obligation to publicly release any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.
INDUSTRY DATA
The data included in this information statement regarding industry size and relative industry position is derived from a variety of sources, including company research, third‑party studies and surveys, industry and general publications and estimates based on our knowledge and experience in the industries in which we operate. Our estimates have been based on information obtained from our customers, suppliers, trade and business organizations and other contacts in the industry. In using this information, you should consider the methods by which we obtained the data for our estimates and recognize that this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties.
TRADEMARKS AND TRADE NAMES
As of the date of this information statement, Grace owns, has rights or will own or acquire rights to trademarks, service marks, copyrights and trade names that we use in conjunction with the operation of our business, including Grace®, and, except as otherwise indicated, the other trademarks, service marks or trade names used in this information statement. This information statement may include trademarks, service marks and trade names of other companies. Each trademark, service mark or trade name of any other company appearing in this information statement belongs to its holder. Unless otherwise indicated, use or display by us of other parties’ trademarks, service marks, or trade names is not intended to and does not imply a relationship with the trade name owner, or endorsement or sponsorship by us of the trademark, service mark, or trade name owner.

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SUMMARY
This summary highlights selected information from this information statement relating to GCP, the separation of GCP from W. R. Grace & Co. and the distribution of GCP common stock by W. R. Grace & Co. to holders of Grace common stock. For a more complete understanding of our businesses and the separation and distribution, you should read this information statement carefully, particularly the discussion set forth under “Risk Factors” of this information statement, and our audited and unaudited historical combined financial statements, our unaudited pro forma combined financial statements and the respective notes to those statements appearing elsewhere in this information statement.
Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement, including the combined financial statements of GCP, assumes the completion of all the transactions referred to in this information statement in connection with the separation and distribution.
Our Company
GCP is a leading global provider of products and technology solutions for customers in the specialty construction chemicals, specialty building materials and packaging sealants and coatings industries. We believe our customers derive meaningful value and distinct competitive advantages from our products and technical services. Our products help improve the performance of our customers’ products, increase productivity in their application or manufacturing processes, and meet the increasing regulatory requirements impacting their industry. The result is long-standing relationships with customers that we believe is a durable competitive advantage allowing us to secure high margins. For the year ended December 31, 2014, we had sales of $1.5 billion, and generated net income of $134.3 million.
We are a global business with a diverse sales and geographic mix and operations around the world.

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We hold global leadership positions in each of our businesses. We manage our business in three operating segments:
Specialty Construction Chemicals. Specialty Construction Chemicals (SCC) provides products, technologies, and services that reduce the cost and improve the performance of cement, concrete, mortar, masonry and other cementitious based construction materials.
Specialty Building Materials. Specialty Building Materials (SBM) produces and sells sheet and liquid membrane systems and other products that protect both new and existing structures from water, air, vapor penetration, and fire damage. We also manufacture and sell specialized cementitious and chemical grouts used for soil consolidation and leak-sealing applications.
Darex Packaging Technologies. Darex Packaging Technologies (Darex) produces and sells sealants and coatings for consumer and industrial applications to protect the integrity of packaged products.
Year Ended December 31, 2014
($ in millions)
Specialty Construction Chemicals
Specialty Building
Materials
Darex Packaging Technologies
Net sales
$
726.3

$
379.3

$
374.8

Segment operating income
72.4

75.7

74.1

Adjusted EBITDA
90.9

84.3

79.6

Adjusted EBITDA margin
12.5
%
22.2
%
21.2
%
Product groups
Ÿ Concrete admixtures
Ÿ Cement additives
Ÿ Building envelope
Ÿ Residential building products
Ÿ Specialty construction products
Ÿ Sealants and closures
Ÿ Coatings
End use industries
Ÿ Building and construction
Ÿ Building and construction
Ÿ Packaging
Ÿ Food and beverage
Annual global industry sales(1)
$7.8 billion

$3.5 billion

$3.2 billion

Forecasted annual industry growth rate
3% - 4%(2)

3% - 4%(2)

2% - 3%(1)

________________________________________________________________________________________________________________
(1)
Based on GCP's internal estimates.
(2)
IHS Global Construction Outlook, Q2 2015.
We have manufacturing, research and development (R&D), sales and technical service sites in over 40 countries and on six continents, with approximately 65 manufacturing and technical sites worldwide. As of the date of the separation, we will have approximately 2,850 employees of whom approximately 770 will be employed in the United States.

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Global Operational Footprint
Our Strengths
We expect to grow our segment leadership positions by leveraging our competitive strengths, which we believe include:
Global Leadership Positions — We maintain global leadership positions in each of our operating segments and hold number one or number two positions, based on sales, that accounted for approximately 66% of our sales for the year ended December 31, 2014, including:
SCC — #1 position in cement additives, and #2 position in concrete admixtures;
SBM — #1 position in bonded pre-applied waterproofing membranes; and
Darex — #1 position in can sealants, with leading positions in can coatings and closure sealants.
Our innovative construction chemicals and materials are used in commercial, residential, and infrastructure projects around the world. They have been widely used in projects with demanding product, performance and engineering requirements ranging from the Getty Center in Los Angeles and the London Underground to Hong Kong’s Bank of China Tower and the Guggenheim Museum Bilbao in Spain. Our packaging technologies are used by many of the world’s most recognized brand owners and are part of over 300 billion food and beverage cans and packages produced each year.
GCP’s leadership positions are the result of our reputation for quality, innovation, specialized technical expertise and industry knowledge, which we believe are significant competitive advantages. We believe these strengths permit us to maintain leading segment positions, grow our sales and generate attractive margins.
Global Manufacturing and Sales and Technical Service Presence — We operate manufacturing, R&D, sales and technical service sites in over 40 countries; with approximately 65 manufacturing and technical sites, we are strategically located near our customers’ sites and in our key geographic areas. Our operating segments share common processes, manufacturing sites, and technical service and sales centers around the world. Our global R&D and technical service organizations deliver innovative products and technology solutions to our customers at a local level by leveraging centralized R&D capabilities, regional technical centers for formulation expertise, and expert field technical service resources.

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Ability to Capitalize on Growth Opportunities — We believe our close alignment with our customers and involvement in our local areas allow us to identify changing industry trends and customer dynamics to execute on new growth opportunities. We believe our global infrastructure and low capital manufacturing model enable us to quickly gain customer penetration with minimal capital investment to efficiently invest in new areas and pursue strategic bolt-on acquisitions.
Technology Leadership and Differentiated Products through R&D — Central to our business is our commitment to technology leadership and innovation, sustained by continuing investment in our R&D and technical service capabilities. Our focus on product and formulation development, application expertise, and industry knowledge is a key competitive advantage for GCP.
Our technology position is supported by our intellectual property portfolio consisting of trade secrets, know-how and patents. Additionally, we maintain trademarks including widely recognized brands such as ADVA®, MIRA®, STRUX®, Pieri® and CBA® within specialty construction chemicals; PREPRUFE®, BITUTHENE®, ICE & WATER SHIELD® and MONOKOTE® within specialty building materials; and DAREX®, APPERTA® and CELOX® within packaging technologies. We expect the continued evolution of our product portfolio to allow us to accelerate growth and further our leading global positions. We have over 800 active patents and patent applications in a number of countries around the world, including approximately 150 in the U.S.
Cash Flow Generation — GCP has generated strong cash flow. Driven by differentiated products with high margins, cash flow from operations has been well above $100 million in each of the past three years. Our low capital manufacturing model has also contributed to our strong cash flow. Historically, capital expenditures have been less than 3% of sales on an annual basis. In particular, Darex has provided stable and predictable cash flow supported by the stable can beverage industry. We plan to leverage Darex to support our growth investments across the portfolio as we deploy cash to the highest return projects.
Diverse Customer Base with Long-Standing Relationships — We serve thousands of customers in more than 110 countries with no single customer accounting for more than 5% of sales. Our relationships with many of our customers are long-standing and often span decades. Our products are often specified into customers’ projects, operations or products and we work diligently alongside our customers to tailor solutions to their complex requirements that vary across regions and localities.
Our specialty construction chemicals and specialty building materials products are regularly chosen to meet the demanding product, performance and engineering requirements of our customers. This is reflected in the portfolio of challenging construction projects where our products are used and lends exceptional credibility with architects, engineers, general contractors, specialty contractors and other channel partners, which in turn drives our sales.
Our packaging products consistently and reliably deliver solutions for our customers, including some of the world’s largest packaging companies and most recognizable brand owners for whom quality and reliability are vital to their operations.
Strong Management Team with Extensive Industry Experience — Our global management team has extensive industry experience and a successful track record of managing large global organizations, executing on attractive growth opportunities, reducing costs and driving operating efficiencies, and improving working capital performance.
Our Business Strategy
Our objective is to increase our earnings, cash flow, and return on invested capital to increase shareholder value through the implementation of our business strategies. We use our strengths to pursue these objectives through the following investment and growth strategies:
Grow Sales by Leveraging Strong Segment Leadership Positions — We intend to continue to leverage our global manufacturing and technical service footprint and our research and development and sales organizations to profitably increase geographic and customer penetration. We intend to make targeted investments to expand our geographic footprint in areas and segments where trends and economic cycles present the best opportunities.

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Grow Through Strategic Acquisitions — We will continue to seek strategic, bolt-on acquisitions and alliances to accelerate our customer and geographic penetration, broaden our technology and product portfolios, and expand our manufacturing capacity and capability. Darex has provided stable and predictable cash flow and we plan to leverage Darex to help us capture growth opportunities across our portfolio.
Growth and Margin Enhancement Through Product Innovation — We will seek to further our position as an industry innovator by continuing to invest in research and development to commercialize highly valued, technically differentiated products and services to address both global mega trends and regional and local applications critical to our customers. To drive this innovation, we intend to leverage our model of introducing and supporting new technologies through our centralized research and development center in Cambridge, Massachusetts and regional applications labs globally. We may invest in additional regional application labs and field technical support resources as we expand our customer and geographic penetration.
Maintain Strong Customer Focus — A key aspect of our strategy is to continue to deliver product and technology solutions to our customers that help them improve their product performance and productivity in their manufacturing operations. We believe that maintaining a close partnership with our customers allows us to effectively focus our innovation efforts and respond to their changing demands at a global, regional and local level.
Increase Productivity by Leveraging Global Supply Chain — Given the relatively low conversion costs of our products, GCP’s productivity strategies focus on the supply chain. We have established deep procurement and product formulation expertise to manage our product costs and production efficiencies. Product formulations are optimized at our regional development labs around the world. These formulations are designed to meet specific customer needs while also considering the costs of the various raw material options available to meet those needs. Our global supply chain organization balances local raw material supply with global contracts that leverage our buying power. Our strategic manufacturing network also optimizes production and delivery efficiencies.
Drive Cash Flow and Return on Invested Capital to Deliver Long-Term Value to Our Shareholders — We believe these strategies will allow us to generate significant cash flow to invest in our research and development activities, manufacturing operations, technical service and sales organizations and strategic acquisitions and to return excess capital to shareholders.
Summary of Risk Factors
An investment in our company is subject to a number of risks, including risks relating to our business and the separation and distribution. The following list of certain risk factors is a high-level summary and is not exhaustive. For a more thorough description of risks, see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this information statement.
Risks Relating to Our Business
The length and depth of product and industry business cycles in our segments may result in periods of reduced sales, earnings and cash flows, and portions of our business are subject to seasonality and weather-related effects.
If we are not able to continue our technological innovation and successful introduction of new products, our customers may turn to other suppliers to meet their requirements.
Prices for certain raw materials are volatile and can have a significant effect on our manufacturing and supply chain strategies as we seek to maximize our profitability. If we are unable to successfully adjust our strategies in response to volatile raw materials and energy prices, such volatility could have a negative effect on our earnings in future periods.
The global scope of our operations subjects us to the risks of doing business in foreign countries, which could adversely affect our business, financial condition and results of operations.
We are exposed to currency exchange rate changes that impact our profitability.

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Following the separation, the Company will have debt obligations that could restrict our business, adversely impact our financial condition, results of operations or cash flows or restrict our ability to return cash to shareholders.
We intend to pursue acquisitions, joint ventures and other transactions that complement or expand our businesses. We may not be able to complete proposed transactions and even if completed, the transactions may not achieve the earnings, cash flow or returns on investment that we had contemplated.
Risks Relating to the Separation
We have no history operating as an independent public company. We will incur significant costs to create the corporate infrastructure necessary to operate as an independent public company, and we may experience increased ongoing costs in connection with being an independent public company.
We may not realize the potential benefits from the separation, and our historical combined and pro forma financial information is not necessarily indicative of our future performance.
If the distribution and certain related transactions fail to qualify under applicable Internal Revenue Code provisions, Grace, the Company, and Grace shareholders could be subject to significant tax liabilities and, in certain circumstances, the Company could be required to indemnify Grace for material taxes and other related amounts pursuant to indemnification obligations under the Tax Sharing Agreement.
In connection with our separation from Grace, Grace will indemnify the Company for certain liabilities and the Company will indemnify Grace for certain liabilities. If the Company is required to act on these indemnities to Grace, we may need to divert cash to meet those obligations and our financial results could be negatively impacted. Grace may not be able to satisfy its indemnification obligations to the Company in the future.
Risks Relating to Ownership of GCP Common Stock
Because there has not been any public market for GCP common stock, the market price and trading volume of its common stock may be volatile and you may not be able to resell your shares at or above the initial market price of the GCP common stock following the separation and distribution.
A large number of the Company’s shares are or will be eligible for future sale, which may cause the market price for GCP common stock to decline.
Provisions in the Company’s corporate documents, the Tax Sharing Agreement and Delaware law could delay or prevent a change in control of the Company, even if that change may be considered beneficial by some Company shareholders.
The Separation
Overview — On February 5, 2015, Grace announced its intent to separate GCP into an independent publicly-traded company. Subject to the satisfaction of specified conditions, the separation will be accomplished by distributing to Grace shareholders all of the shares of common stock of the Company. The Company is a wholly owned subsidiary of Grace that at the time of the separation will hold GCP. Immediately following the distribution, Grace shareholders as of the record date will own 100 percent of the outstanding shares of GCP common stock.
Before the separation of GCP from Grace, the Company and Grace will enter into a Separation and Distribution Agreement and they and/or their respective subsidiaries will enter into several other agreements to effect the separation and distribution. These agreements will provide for the allocation between the Company and Grace of Grace’s assets, liabilities and obligations and will govern the relationship between the Company and Grace after the separation (including with respect to employee matters, tax matters and intellectual property matters). The Company and Grace Conn and/or their respective subsidiaries will also enter into one or more Transition Services Agreements which will provide for, among other things, the provision of transitional services.
Reasons for the Separation. The W. R. Grace & Co. board of directors believes that separating GCP from Grace’s other businesses through the distribution is in the best interests of Grace and its shareholders and has

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concluded the separation will provide each company with a number of material opportunities and benefits, including the following:
Enhanced Strategic Focus. Create two strong, more focused operating companies, each with industry-leading customer and technology positions, with Grace well-positioned to pursue distinct growth opportunities in the catalysts and materials businesses, and the Company well-positioned to pursue distinct growth opportunities in the specialty construction chemicals, specialty building materials and packaging products businesses.
Simplified Operating Structures. Allow management of each company to concentrate that company’s resources wholly on its particular industry segments, customers and core businesses, with greater ability to anticipate and respond to changing industry conditions and new opportunities. Each company will focus on cost productivity and optimizing functional support for its core operations, with greater management focus on customized strategies that can deliver long-term shareholder value.
Optimized Capital Structures and Financial Flexibility. Establish a capital structure appropriate for each company’s business needs, with each company having direct access to the debt and equity markets to pursue its distinct growth, acquisition and joint venture opportunities, eliminating competition for capital between the two. The separation will provide each company with an independent equity currency that will (1) facilitate the ability of each company to consummate future acquisitions using its common stock if required and (2) facilitate incentive compensation arrangements for employees that are more directly tied to the performance of each company’s business, and enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives.
Investor Choice. Provide investors with a more targeted investment opportunity in each company that offers different investment and business characteristics, including different growth opportunities, business models, capital requirements and financial returns. This will allow investors to evaluate the separate and distinct merits, performance and future prospects of each company.
Questions and Answers About the Separation and Distribution
Q:     How will W. R. Grace & Co. accomplish the separation of GCP?
A:
The separation involves W. R. Grace & Co.’s distribution to holders of Grace common stock of all the shares of GCP common stock that it owns. Following the separation and distribution, the Company will be an independent, publicly traded company separate from Grace, and Grace will not retain any ownership interest in the Company. You do not have to pay any consideration or give up any portion of your Grace common stock to receive GCP common stock in the distribution.
Q:    What will I receive in the distribution?
A:
W. R. Grace & Co. will distribute one share of GCP common stock for each share of Grace common stock outstanding as of the record date for the distribution. You will pay no consideration nor give up any portion of your Grace common stock to receive shares of GCP common stock in the distribution.
Q:
What is the record date for the distribution, and when will the distribution occur?
A:
The record date is [●], and ownership is determined as of 5:00 p.m. Eastern Time on that date. When we refer to the “record date,” we are referring to that time and date. W. R. Grace & Co. will distribute shares of GCP common stock on or about [●], which we refer to as the distribution date.
Q:
As a holder of shares of Grace common stock as of the record date, what do I have to do to participate in the distribution?
A:
No action is required of shareholders. Holders of Grace common stock on the record date are not required to pay any cash or deliver any other consideration, including any shares of Grace common stock, for the shares of GCP common stock to be distributed to them. No shareholder approval of the distribution is required or sought. You are not being asked for a proxy.

9



Q:
If I sell my shares of Grace common stock before or on the distribution date, will I still be entitled to receive shares of GCP common stock in the distribution?
A:
If you sell your shares of Grace common stock prior to or on the distribution date, you may also be selling your right to receive shares of GCP common stock. See “The Separation and Distribution—Trading Between Record Date and Distribution Date.” You are encouraged to consult with your financial advisor regarding the specific implications of selling your Grace common stock prior to or on the distribution date.
Q:
How will fractional shares be treated in the distribution?
A.
Grace will not distribute any fractional shares of GCP common stock to Grace stockholders. Any fractional share of GCP common stock otherwise issuable to you will be sold on your behalf, and you will receive a cash payment with respect to that fractional share. For an explanation of how the cash payments for fractional shares will be determined, see “The Separation and Distribution—Treatment of Fractional Shares.”
Q:
Will the distribution affect the number of shares of Grace common stock that I currently hold?
A:
No, the number of shares of Grace common stock held by a shareholder will be unchanged. The market value of each share of Grace common stock, however, will decline to reflect the effect of the separation and distribution.
Q:
What are the material U.S. federal income tax consequences of the distribution of shares of GCP common stock to U.S. shareholders?
A:
The distribution is conditioned upon, among other things, the receipt by Grace of an opinion of counsel, in form and substance satisfactory to Grace in its sole discretion, regarding the U.S. federal income tax treatment of the distribution of shares of GCP common stock and certain related transactions. We expect that, for U.S. federal income tax purposes, you will not recognize any gain or loss, and no amount will be included in your income, upon your receipt of shares of GCP common stock pursuant to the distribution, except with respect to any cash received in lieu of fractional shares. You should consult your own tax advisor as to the particular consequences of the distribution to you, including the applicability and effect of any U.S. federal, state and local tax laws, as well as foreign tax laws. For more information regarding certain material U.S. federal income tax consequences of the distribution, see the section entitled “Material U.S. Federal Income Tax Consequences.”
Q:
Will I receive a stock certificate for shares of GCP common stock distributed as a result of the distribution?
A:
No. Registered holders of Grace common stock who are entitled to participate in the distribution will receive a book-entry account statement reflecting their ownership of GCP common stock. For additional information, registered shareholders in the United States, Canada or Puerto Rico should contact W. R. Grace & Co.’s transfer agent, Wells Fargo Shareowner Services, at 800-648-8392 or through its website at shareowneronline.com. Shareholders from outside the United States, Canada and Puerto Rico may call 651-450-4064. See “The Separation and Distribution—When and How You Will Receive the Distribution.”
Q:
What if I hold my shares through a broker, bank or other nominee?
A:
Holders of Grace common stock who hold their shares through a broker, bank or other nominee will have their brokerage account credited with GCP common stock. For additional information, those shareholders should contact their broker or bank directly.
Q:
What if I have stock certificates reflecting my shares of Grace common stock? Should I send them to the transfer agent or to W. R. Grace & Co.?
A:
No, you should not send your stock certificates to the transfer agent or to W. R. Grace & Co. You should retain your Grace common stock certificates.

10



Q:
Why is the separation of the two companies structured as a distribution of shares of GCP common stock?
A:
Grace believes a distribution of shares of GCP common stock to holders of Grace common stock is the most efficient way to separate the companies.
Q:
Can Grace decide to cancel the distribution of the GCP common stock even if all the conditions have been met?
A:
Yes. Grace has the right to terminate the distribution at any time prior to the distribution date, even if all of the conditions are satisfied, if at any time Grace’s board determines that the distribution is not in the best interests of Grace and its shareholders. In the event the W. R. Grace & Co. board of directors determines to abandon, modify or change the terms of the distribution, the Company and W. R. Grace & Co. intend to promptly issue a press release and file a Current Report on Form 8-K to report such event.
Q:
Will GCP incur any debt prior to or at the time of the distribution?
A:
Yes. We intend to enter into new financing arrangements in anticipation of the distribution for borrowings of approximately $810 million. Approximately $750 million of the debt proceeds are expected to be distributed to Grace and the balance is expected to be retained to meet operating requirements. See “Risk Factors” and “Description of Material Indebtedness.”
Q:
Does GCP intend to pay cash dividends?
A:
GCP does not anticipate paying cash dividends on GCP common stock in the immediate future. The declaration and amount of future dividends, however, will be determined by our board of directors and will depend on our financial condition, earnings and cash flow, capital requirements, legal requirements, regulatory constraints and any other factors that our board of directors believes are relevant. See “Dividend Policy.”
Q:
Will GCP common stock trade on a stock market?
A:
Currently, there is no public market for GCP common stock. Subject to the consummation of the distribution, we have applied to list GCP common stock on the [●] under the symbol “[●].” We cannot predict the trading prices for GCP common stock when such trading begins.
Q:
Will my shares of Grace common stock continue to trade?
A:
Yes. Grace common stock will continue to be listed and trade on the NYSE under the symbol “GRA.”
Q:
Will the separation affect the trading price of my Grace stock?
A:
Yes. The trading price of shares of Grace common stock immediately following the distribution is expected to be lower than immediately prior to the distribution because the trading price will no longer reflect the value of GCP. We cannot provide you with any assurance regarding the price at which shares of Grace common stock will trade following the separation.
Q:
What will happen to W. R. Grace & Co. stock options and other equity-based compensation awards?
A:
For information on the treatment of W. R. Grace & Co. equity-based compensation awards, see “The Separation and Distribution—Treatment of Equity-Based Compensation” and “Certain Relationships and Related Transactions—Agreements with Grace-Employee Matters Agreement."
Q:
What will the relationship be between Grace and GCP following the separation?
A:
After the separation, Grace will not own any shares of GCP common stock, and each of Grace and GCP will be independent, publicly traded companies with their own management teams and boards of directors. However, in connection with the separation, we expect to enter into a number of agreements with Grace that will govern the separation and allocate responsibilities for obligations arising before and after the separation, including, among others, obligations relating to our employees, tax matters,

11



intellectual property matters and transitional services. See “Certain Relationships and Related Transactions—Agreements with Grace.”
Q:
How much will the separation cost and who will bear that cost?
A:
The separation is expected to cost approximately $[●], of which approximately [●]% is expected to be incurred prior to the separation. Grace will bear all costs prior to the separation. GCP will bear its costs after the separation which we expect to be approximately $[●].
Q:
Will I have appraisal rights in connection with the separation and distribution?
A:
No. Holders of Grace common stock are not entitled to appraisal rights in connection with the separation and distribution.
Q:
Who is the transfer agent for the GCP common stock?
A:
Wells Fargo Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0874
Telephone: 800-648-8392 or 651-450-4064 (outside the United States, Canada and Puerto Rico).
Q:    Who is the distribution agent for the distribution?
A:    Wells Fargo Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0874
Telephone: 800-648-8392 or 651-450-4064 (outside the United States, Canada and Puerto Rico).
Q:
Whom can I contact for more information?
A:
If you have questions relating to the mechanics of the distribution of shares of GCP common stock, you should contact the distribution agent:
Wells Fargo Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0874
Telephone: 800-648-8392 or 651-450-4064 (outside the United States, Canada and Puerto Rico).
Before the separation, if you have questions relating to the separation and distribution, you should contact Grace at:
W. R. Grace & Co.
7500 Grace Drive
Columbia, MD 21044
Attention: Investor Relations/Shareholder Services
Telephone: 410-531-4000
Email: investor.relations@grace.com

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Summary of the Separation and Distribution
The following is a summary of the material terms of the separation, distribution and other related transactions.
Distributing company
 
W. R. Grace & Co., a Delaware corporation. After the distribution, W. R. Grace & Co. will not own any shares of GCP common stock.
 
 
 
Distributed company
 
GCP Applied Technologies Inc., a Delaware corporation, the Company, an indirect wholly owned subsidiary of W. R. Grace & Co. that was formed in 2015. At the time of the distribution, the Company will hold the businesses, assets and liabilities associated with the Grace Construction Products operating segment and the Darex Packaging Technologies business. After the distribution, the Company will be an independent, publicly traded entity.
 
 
 
Record date
 
The record date for the distribution is 5:00 p.m. Eastern Time on [●].
 
 
 
Distribution date
 
The distribution date is [●].
 
 
 
Distributed securities
 
Grace will distribute 100 percent of the shares of GCP common stock outstanding immediately prior to the distribution. Based on the approximately [●] million shares of Grace common stock outstanding on [●], and applying the distribution ratio of one share of GCP common stock for each share of Grace common stock, Grace will distribute approximately [●] million shares of GCP common stock to Grace shareholders who hold Grace common stock as of the record date.
 
 
 
Distribution ratio
 
Each holder of Grace common stock will receive one share of GCP common stock for each share of Grace common stock held at 5:00 p.m. Eastern Time on [●].
 
 
 
Fractional shares
 
Grace will not distribute any fractional shares of GCP common stock to Grace stockholders. Instead, as soon as practicable on or after the distribution date, the distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market and distribute the aggregate cash proceeds, net of brokerage fees and other costs, from the sales pro rata to each holder who would otherwise have been entitled to receive a fractional share in the distribution. The distribution agent will determine when, how, through which broker-dealers and at what prices to sell the aggregated fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payments made in lieu of fractional shares. The receipt of cash in lieu of fractional shares generally will be taxable to the recipient stockholders for U.S. federal income tax purposes as described in “Material U.S. Federal Income Tax Consequences” in this information statement.
 
 
 
Distribution method
 
GCP common stock will be issued only by direct registration in book-entry form. Registration in book-entry form is a method of recording stock ownership when no physical paper share certificates are issued to shareholders, as is the case in this distribution.
 
 
 
Conditions to the distribution
 
The distribution is subject to the satisfaction or waiver by Grace of the following condition, as well as other conditions described in this information statement in “The Separation and Distribution-Conditions to the Distribution.”
The receipt of an opinion of counsel, in form and substance satisfactory to Grace in its sole discretion, regarding the U.S. federal income tax treatment of the distribution and certain related transactions.
The fulfillment of the foregoing condition and the other conditions to the distribution does not create any obligations on Grace’s part to effect the distribution, and the Grace board of directors has reserved the right, in its sole discretion, to abandon, modify or change the terms of the distribution, including by accelerating or delaying the timing of the consummation of all or part of the distribution, at any time prior to the distribution date.
 
 
 
Stock exchange listing
 
GCP has applied to have the GCP common stock listed on the [●] under the symbol “[●].”
 
 
 

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Dividend policy
 
While remaining at the discretion of the Company's board of directors, the Company does not anticipate paying cash dividends on GCP common stock in the immediate future.
 
 
 
Transfer agent
 
Wells Fargo Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0874
Telephone: 800-648-8392 or 651-450-4064 (outside the United States, Canada and Puerto Rico).
 
 
 
U.S. federal income tax consequences
 
It is a condition to the completion of the distribution that Grace obtains an opinion of counsel, in form and substance satisfactory to Grace in its sole discretion, regarding the U.S. federal income tax treatment of the distribution of shares of GCP common stock and certain related transactions. We expect that, for U.S. federal income tax purposes, a holder of Grace common stock will not recognize any gain or loss, and no amount will be included in the income of a holder of Grace common stock, upon the receipt of shares of GCP common stock pursuant to the distribution, except with respect to any cash received in lieu of fractional shares. You should consult your own tax advisor as to the particular tax consequences of the distribution to you, including the applicability and effect of any U.S. federal, state and local tax laws, as well as foreign tax laws. For more information regarding certain material U.S. federal income tax consequences of the distribution, see “Material U.S. Federal Income Tax Consequences.”
Corporate Information
The Company was formed in 2015 and will, at the time of the distribution, hold the businesses, assets and liabilities associated with the Grace Construction Products operating segment and the Darex Packaging Technologies business. Our headquarters will be located at 62 Whittemore Avenue, Cambridge, MA 02140 and our general telephone number is [●]. Our Internet website is www.gcpat.com. Our website and information contained on that site, or connected to that site, are not incorporated by reference into this information statement.
Reason for Furnishing this Information Statement
This information statement is being furnished solely to provide information to Grace shareholders who are entitled to receive shares of GCP common stock in the distribution. The information statement is not, and is not to be construed as, an inducement or encouragement to buy, hold or sell any of our securities. We believe the information contained in this information statement is accurate as of the date set forth on the cover. Changes may occur after that date and neither Grace nor we undertake any obligation to update such information except in the normal course of our respective public disclosure obligations.

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RISK FACTORS
You should carefully consider each of the following risk factors and all of the other information set forth in this information statement. The risk factors generally have been separated into three groups: (1) risks relating to our business, (2) risks relating to the separation and (3) risks relating to the ownership of GCP common stock. Based on the information currently known to us, we believe that the following information identifies the most significant risk factors affecting the Company and our business in each of these categories of risks. However, the risks and uncertainties the Company faces are not limited to those set forth in the risk factors described below. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. In addition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.
If any of the following risks and uncertainties develops into actual events, these events could have a material adverse effect on our business, financial condition or results of operations. In such case, the trading price of our common stock could decline.
Risks Relating to Our Business
The length and depth of product and industry business cycles in our segments may result in periods of reduced sales, earnings and cash flows, and portions of our business are subject to seasonality and weather-related effects.
Our operating segments are sensitive to the cyclical nature of the industries they serve. Our construction business is cyclical in response to economic conditions and construction demand and is also seasonal and dependent on favorable weather conditions, with a decrease in construction activity during the winter months. Our packaging products are affected by seasonal and weather-related factors including the consumption of beverages and the size and quality of food crops.
If we are not able to continue our technological innovation and successful introduction of new products, our customers may turn to other suppliers to meet their requirements.
The specialty chemicals industry and the end-use applications into which we sell our products experience ongoing technological change and product improvements. A key element of our business strategy is to invest in research and development activities with the goal of introducing new high-performance, technically differentiated products. We may not be successful in developing new technology and products that successfully compete with products introduced by our competitors, and our customers may not accept, or may have lower demand for, our new products. If we fail to keep pace with evolving technological innovations or fail to improve our products in response to our customers’ needs, then our business, financial condition and results of operations could be adversely affected as a result of reduced sales of our products.
Prices for certain raw materials are volatile and can have a significant effect on our manufacturing and supply chain strategies as we seek to maximize our profitability. If we are unable to successfully adjust our strategies in response to volatile raw materials prices, such volatility could have a negative effect on our earnings in future periods.
We use petroleum-based materials, natural gas derivatives and other materials in the manufacture of our products. Prices for these materials are volatile and can have a significant effect on our pricing, sales, manufacturing and supply chain strategies as we seek to maximize our profitability. Our ability to successfully adjust strategies in response to volatile raw material prices by increasing prices, reducing costs or taking other actions is a significant factor in maintaining or improving our profitability. If we are unable to successfully adjust our strategies in response to volatile prices, such volatility could have a negative effect on our sales and earnings in future periods.
A substantial portion of our raw materials are commodities whose prices fluctuate as market supply and demand fundamentals change. We attempt to manage exposure to price volatility of major commodities through:
long-term supply contracts;
customer contracts that permit adjustments for changes in prices of commodity-based materials and energy;

15



forward buying programs that layer in our expected requirements systematically over time; and
limited use of financial instruments.
Although we regularly assess our exposure to raw material price volatility, we cannot always predict the prospects of volatility and we cannot always cover the risk in a cost-effective manner.
We have a policy of maintaining, when available, multiple sources of supply for raw materials. However, certain of our raw materials may be provided by single sources of supply. We may not be able to obtain sufficient raw materials due to unforeseen developments that would cause an interruption in supply. Even if we have multiple sources of supply for raw materials, these sources may not make up for the loss of a major supplier.
The global scope of our operations subjects us to the risks of doing business in foreign countries, which could adversely affect our business, financial condition and results of operations.
We operate our business on a global scale with approximately 68% of our 2014 sales outside the United States. We conduct business in over 40 countries and in approximately 40 currencies. We currently have many production facilities, technical centers and administrative and sales offices located outside North America, including facilities and offices in Europe, the Middle East, Africa, Asia and Latin America. We expect non-U.S. sales to continue to represent a substantial majority of our revenue. Accordingly, our business is subject to risks related to the differing legal, political, social and economic conditions as well as regulatory requirements of many jurisdictions. Risks inherent in non-U.S. operations include the following:
commercial agreements may be more difficult to enforce and receivables more difficult to collect;
intellectual property rights may be more difficult to enforce;
we may experience increased shipping costs, disruptions in shipping or reduced availability of freight transportation;
we may have difficulty transferring our profits or capital from foreign operations to other countries where such funds could be more profitably deployed;
we may experience unexpected adverse changes in export duties, quotas and tariffs and difficulties in obtaining export licenses;
some foreign countries have adopted, and others may impose, additional withholding taxes or other restrictions on foreign trade or investment, including currency exchange and capital controls;
foreign governments may nationalize private enterprises;
our business and profitability in a particular country could be affected by political or economic repercussions on a domestic, country specific or global level from terrorist activities and the response to such activities;
we may be affected by unexpected adverse changes in foreign laws or regulatory requirements; and
unanticipated events, such as geopolitical changes, could adversely affect our foreign operations.
Our success as a global business will depend, in part, upon our ability to succeed in differing legal, regulatory, economic, social and political conditions by developing, implementing and maintaining policies and strategies that are effective in each location where we do business.
We are exposed to currency exchange rate changes that impact our profitability.
We are exposed to currency exchange rate risk through our U.S. and non-U.S. operations. Changes in currency exchange rates may materially affect our operating results. For example, changes in currency exchange rates may affect the relative prices at which we and our competitors sell products in the same region and the cost of materials used in our operations. A substantial portion of our net sales and assets are denominated in currencies other than the U.S. dollar. When the U.S. dollar strengthens against other currencies, at a constant level of business, our reported sales, earnings, assets and liabilities are reduced because the non-U.S. currencies translate into fewer U.S. dollars. In addition, since we manufacture a portion of our construction products and packaging products in emerging regions using raw materials from suppliers in the U.S., Europe and other

16



advanced economies, changes in the values of the currencies of these emerging regions versus the U.S. dollar and the euro may adversely affect our raw material costs.
We incur a currency transaction risk whenever one of our operating subsidiaries enters into either a purchase or a sales transaction using a currency different from the operating subsidiary's functional currency. Given the volatility of exchange rates, we may not be able to manage our currency transaction risks effectively, or volatility in currency exchange rates may expose our financial condition or results of operations to significant additional risk.
Following the separation, the Company will have debt obligations that could restrict our business, adversely impact our financial condition, results of operations or cash flows or restrict our ability to return cash to shareholders.
As of December 31, 2014, we had $79.0 million of unsecured indebtedness outstanding. Immediately following the separation, we expect the Company will bear a total combined indebtedness for borrowed money of approximately $[●] million, including approximately $[●] million borrowed to pay a distribution to Grace prior to the separation. The Company's indebtedness may have material effects on our business, including to:
require us to dedicate a substantial portion of our cash flow to debt payments, thereby reducing funds available for working capital, capital expenditures, acquisitions, research and development, distributions to holders of GCP common stock and other purposes;
restrict us from making strategic acquisitions or taking advantage of favorable business opportunities;
limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;
increase our vulnerability to adverse economic, credit and industry conditions, including recessions;
make it more difficult for us to satisfy our debt service and other obligations;
place us at a competitive disadvantage compared to our competitors that have relatively less debt; and
limit the Company's ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, research and development and other purposes.
The Company may also incur substantial additional indebtedness in the future. If the Company incurs additional debt, the risks related to the Company's indebtedness may intensify.
We require liquidity to service the Company's debt and to fund operations, capital expenditures, research and development efforts, acquisitions and other corporate expenses.
Our ability to fund operations, capital expenditures, research and development efforts, acquisitions and other corporate expenses, including repayment of our debt, depends on our ability to generate cash through future operating performance, which is subject to economic, financial, competitive, legislative, regulatory and other factors. Many of these factors are beyond our control. We cannot be certain that our businesses will generate sufficient cash or that future borrowings will be available to us in amounts sufficient to fund all of our requirements. If we are unable to generate sufficient cash to fund all of our requirements, we may need to pursue one or more alternatives, such as to:
reduce or delay planned capital expenditures, research and development spending or acquisitions;
obtain additional financing or restructure or refinance all or a portion of our debt on or before maturity;
sell assets or businesses; and
sell additional equity.
Any reduction or delay in planned capital expenditures, research and development spending or acquisitions or sale of assets or businesses may materially and adversely affect our future revenue prospects. In addition, we

17



cannot be certain that we will be able to raise additional equity capital, restructure or refinance any of our debt or obtain additional financing on commercially reasonable terms or at all.
We expect restrictions imposed by agreements governing the Company's indebtedness may limit our ability to operate our business, finance our future operations or capital needs or engage in other business activities. If we fail to comply with certain restrictions under these agreements, the Company's debt could be accelerated and the Company may not have sufficient cash to pay the accelerated debt.
We expect the agreements governing our indebtedness may contain various covenants that limit, among other things, our ability, and the ability of certain of our subsidiaries, to:
incur certain liens;
enter into sale and leaseback transactions; and
consolidate, merge or sell all or substantially all of our assets or the assets of our guarantors.
As a result of these covenants, we will be limited in the manner in which we can conduct our business, and may be unable to engage in favorable business activities or finance future operations or capital needs. Accordingly, these restrictions may limit our flexibility to operate our business. A failure to comply with the restrictions contained in these agreements, including maintaining the financial ratios that we expect to be required by our credit facilities, could lead to an event of default which could result in an acceleration of the indebtedness. We cannot assure you that our future operating results will be sufficient to enable us to comply with the covenants contained in the agreements that we expect to govern our indebtedness or to remedy any such default. In addition, in the event of an acceleration, we may not have or be able to obtain sufficient funds to make any accelerated payments.
Our indebtedness exposes us to interest expense increases if interest rates increase.
As of the time of the separation and distribution, we expect that $[●] million, or approximately [●]%, of our borrowings, will be at variable interest rates and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed would remain the same, and our net income would decrease. An increase of 1% in the interest rates payable on the variable rate indebtedness we expect to have at the time of the separation and distribution would increase our annual estimated debt-service requirements by $[●] million, assuming our consolidated variable interest rate indebtedness outstanding as of the time of the separation and distribution remains the same.
We have unfunded and underfunded pension plan liabilities. We will require future operating cash flow to fund these liabilities. We have no assurance that we will generate sufficient cash to satisfy these obligations.
We maintain U.S. and non-U.S. defined benefit pension plans covering current and former employees who meet or met age and service requirements. Our net pension liability and cost is materially affected by the discount rate used to measure pension obligations, the longevity and actuarial profile of our workforce, the level of plan assets available to fund those obligations and the actual and expected long-term rate of return on plan assets. Significant changes in investment performance or a change in the portfolio mix of invested assets can result in corresponding increases and decreases in the valuation of plan assets or in a change in the expected rate of return on plan assets. In addition, any changes in the discount rate could result in a significant increase or decrease in the valuation of pension obligations, affecting the reported funded status of our pension plans as well as the net periodic pension cost in the following years. Similarly, changes in the expected return on plan assets can result in significant changes in the net periodic pension cost in the following years.
We intend to pursue acquisitions, joint ventures and other transactions that complement or expand our businesses. We may not be able to complete proposed transactions and even if completed, the transactions may not achieve the earnings, cash flow or returns on investment that we had contemplated.
We have recently completed a number of acquisitions that we believe will contribute to our future success. We intend to continue to pursue opportunities to buy other businesses or technologies that could complement, enhance or expand our current businesses or product lines or that might otherwise offer us growth opportunities. We may have difficulty identifying appropriate opportunities or, if we do identify opportunities, we may not be

18



successful in completing transactions for a number of reasons. Any transactions that we are able to identify and complete may involve a number of risks, including:
the diversion of management's attention from our existing businesses to integrate the operations and personnel of the acquired or combined business or joint venture;
possible adverse effects on our operating results during the integration process;
failure of the acquired business to achieve expected operational objectives; and
our possible inability to achieve the intended objectives of the transaction.
In addition, we may not be able to successfully or profitably integrate, operate, maintain and manage our newly acquired operations or their employees. We may not be able to maintain uniform standards, controls, procedures and policies, which may lead to operational inefficiencies.
Our results of operations could be adversely affected by warranty claims and product liability.
We provide standard warranties that our products perform according to their specifications and do not have material defects. In particular, for a limited number of high value construction projects we warrant the performance of some products for periods of 10 to 20 years. Our products are generally sold to the commercial construction, residential construction and food packaging industries and they often constitute an integral part of our customers’ products. If our products do not meet specifications, are otherwise defective, or are used contrary to our instructions or in applications for which they are not designed, they may contribute to damage to our customers’ products, the end users of our customers’ products and buildings and other installations that contain our products.   Although we take measures to avoid product defects and instruct our customers on the proper use of our products, if a substantial warranty claim or product liability lawsuit is brought against us, the cost of defending the claim or lawsuit could be significant and any adverse determination could have a material adverse effect on our results of operations.
We manufacture and sell products into many global jurisdictions where our efforts to contractually limit our liability (e.g. by defining a maximum liability, disclaiming implied or other statutory forms of liability or by waiving certain types of damages, including consequential, indirect and non-proximately caused damages) may not be enforceable or may be found by a court to not apply in a particular situation.
We work with dangerous materials that can injure our employees, damage our facilities and disrupt our operations.
Some of our operations involve the handling of hazardous materials that may pose the risk of fire, explosion, or the release of hazardous substances. Such events could result from terrorist attacks, natural disasters, or operational failures, and might cause injury or loss of life to our employees and others, environmental contamination, and property damage. These events might cause a temporary shutdown of an affected plant, or portion thereof, and we could be subject to penalties or claims as a result. A disruption of our operations caused by these or other events could have a material adverse effect on our results of operations.
We may be required to spend large amounts of money for environmental compliance and are subject to extensive environmental, health and safety laws and regulations, which could result in significant costs or liabilities.
As a manufacturer of specialty chemicals and specialty materials, we are subject to stringent regulations under numerous U.S. federal, state, local and foreign environmental, health and safety laws and regulations relating to among other things, the discharge and emission of hazardous materials into the environment, the generation, storage, handling, discharge, disposition, treatment, disposal and stewardship of hazardous substances, wastes and other materials, and the investigation and remediation of contamination. We expend funds to comply with such laws and regulations and have established a policy to minimize our emissions to the environment. Nevertheless, legislative, regulatory and economic uncertainties (including existing and potential laws and regulations pertaining to climate change) make it difficult for us to project future spending for these purposes and if there is a change in, or stricter interpretation of, existing laws and regulations or if there is the promulgation of new requirements, we may be required to expend significant additional funds, including capital expenditures, to remain in compliance, which could reduce our profitability. Failure to comply with such laws and

19



regulations can result in significant fines, penalties, costs, liabilities or restrictions on operations that could negatively affect our business, financial condition or results of operations.
From time to time, we are subject to lawsuits and regulatory actions, in connection with current and former operations for breaches of environmental laws that seek clean-up or other remedies. We are also subject to lawsuits and investigations by public and private parties under various environmental laws in connection with our current and former operations in various states, including with respect to off-site disposal at facilities where we have been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, commonly referred to as “CERCLA.” CERCLA, and other similar environmental laws, may impose joint and several liability for the costs of remedial investigations and cleanup actions, as well as damages to natural resources, regardless of fault, the legality of the original disposal or ownership of the disposal site. We are also subject to similar risks outside the United States.
Some of our employees are unionized, represented by works councils or employed subject to local laws that are less favorable to employers than the laws in the United States.
As of the date of the separation, we will have approximately 2,850 employees. Approximately 85 of our approximately 770 U.S. employees are unionized. In addition, a large number of our employees are employed in countries in which employment laws provide greater bargaining or other rights to employees than the laws in the United States. Such employment rights require us to work collaboratively with the legal representatives of the employees to effect any changes to labor arrangements. For example, most of our employees in Europe are represented by works councils that have co-determination rights on any changes in conditions of employment, including salaries and benefits and staff changes, and may impede efforts to restructure our workforce. A strike, work stoppage or slowdown by our employees or significant dispute with our employees, whether or not related to these negotiations, could result in a significant disruption of our operations or higher ongoing labor costs.
We may be subject to claims of infringement of the intellectual property rights of others, which could hurt our business.
From time to time, we face claims from our competitors or others alleging that our processes or products infringe or otherwise misappropriate their intellectual property rights. Any claims that our products or processes infringe or misappropriate the intellectual property rights of others, regardless of the merit or resolution of the claims, could cause us to incur significant costs in responding to, defending and resolving the claims, and may divert the efforts and attention of our management and technical personnel from our business. If we are found to be infringing or misappropriating intellectual property of others, we may be liable for damages, including damages that may have occurred from our customers using any infringing products, and we may be required to change our processes, redesign our products, pay others to use the technology or stop using the technology or producing the infringing product or otherwise exploiting the misappropriated intellectual property. Even if we ultimately prevail, the existence of the lawsuit could prompt our customers to switch to products that are not the subject of infringement or misappropriation suits.
We are subject to business continuity risks associated with centralization of certain administrative functions.
We have centralized certain administrative functions in a few designated centers around the world, to improve efficiency and reduce costs. To the extent that these central locations are disrupted or disabled, key business processes, such as invoicing, payments and general management operations, could be interrupted.
A failure of our information technology infrastructure could adversely impact our business and operations.
We rely upon the capacity, reliability and security of our information technology (IT) infrastructure and our ability to expand and continually update this infrastructure in response to the changing needs of our business. If we experience a problem with the functioning of an important IT system or a security breach of our IT systems, the resulting disruptions could have an adverse effect on our business.
We and certain of our third-party vendors receive and store personal information in connection with our human resources operations and other aspects of our business. Despite our implementation of security measures, our IT systems are vulnerable to damages from computer viruses, natural disasters, unauthorized access, cyber-attack and other similar disruptions. Any system failure, accident or security breach could result in

20



disruptions to our operations. A material network breach in the security of our IT systems could include the theft of our intellectual property, trade secrets or customer information. To the extent that any disruptions or security breach results in a loss or damage to our data, or an inappropriate disclosure of confidential or customer information, it could cause significant damage to our reputation, affect our relationships with our customers, lead to claims against us and ultimately harm our business. In addition, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.
Risks Relating to the Separation
We have no history operating as an independent public company. We will incur significant costs to create the corporate infrastructure necessary to operate as an independent public company, and we may experience increased ongoing costs in connection with being an independent public company.
We have historically used Grace’s corporate infrastructure to support our business functions, including information technology systems. The expenses related to establishing and maintaining this infrastructure were spread among all of Grace’s businesses. Following the separation and after the expiration of the Transition Services Agreement, we will no longer have access to Grace’s infrastructure, and we will need to establish our own. We expect to incur costs beginning in 2015 to establish the necessary infrastructure. See “Unaudited Pro Forma Combined Financial Statements.”
Grace Conn currently performs many important corporate functions for us, including some information technology, treasury, tax administration, accounting, financial reporting, human resources, compensation, legal and other services. We currently compensate Grace Conn for many of these services on a cost-allocation basis. Following the separation, Grace Conn will continue to provide some of these services to us on a transitional basis, generally for a period of up to 18 months, pursuant to a Transition Services Agreement that we will enter into with Grace Conn. For more information regarding the Transition Services Agreement, see “Certain Relationships and Related Transactions-Agreements with Grace-Transition Services Agreement.” Grace Conn may not successfully execute all these functions during the transition period or we may have to expend significant efforts or costs materially in excess of those estimated under the Transition Services Agreement. Any interruption in these services could have a material adverse effect on our business, financial condition, results of operation and cash flows. In addition, at the end of this transition period, we will need to perform these functions ourselves or hire third parties to perform these functions on our behalf. The costs associated with performing or outsourcing these functions may exceed the amounts reflected in our historical combined financial statements or that we have agreed to pay Grace Conn during the transition period. A significant increase in the costs of performing or outsourcing these functions could materially and adversely affect our business, financial condition, results of operations and cash flows.
Currently, the Company is not directly subject to the reporting and other requirements of the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act.” After the separation, the Company will be directly subject to reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which will require, in the future, annual management assessments of the effectiveness of our internal control over financial reporting and a report by the Company's independent registered public accounting firm addressing the effectiveness of these controls. These reporting and other obligations will place significant demands on our management and administrative and operational resources, including accounting resources.
We may not realize the potential benefits from the separation, and our historical combined and pro forma combined financial information is not necessarily indicative of our future performance.
We may not realize the potential benefits we expect from our separation from Grace. We have described those anticipated benefits elsewhere in this information statement. See “The Separation and Distribution-Reasons for the Separation.” In addition, we will incur significant costs, including those described below, which may exceed our estimates, and we will incur some negative effects from our separation from Grace, including loss of access to some of the financial, managerial and professional resources from which we have benefited in the past.
Our historical combined and pro forma combined financial information is not necessarily indicative of our future financial condition, future results of operations or future cash flows, nor does it reflect what our financial condition, results of operations or cash flows would have been as an independent public company during the

21



periods presented. The historical combined financial information is not necessarily indicative of our future financial condition, results of operations or cash flows primarily because of the following factors:
Our historical combined financial results reflect allocations of expenses for services historically provided by Grace Conn, and those allocations may be significantly lower than the comparable expenses we would have incurred as an independent company;
Our working capital requirements historically have been satisfied as part of Grace’s corporate-wide cash management programs, and our cost of debt and other capital may significantly differ from that reflected in our historical combined financial statements;
The historical combined financial information may not fully reflect the costs associated with the Company being an independent public company, including significant changes that may occur in our cost structure, management, financing arrangements and business operations as a result of our separation from Grace including all the costs related to being an independent public company; and
The historical combined financial information may not fully reflect the effects of certain liabilities that we will incur or assume.
We based the pro forma adjustments on available information and assumptions that may prove not to be accurate. In addition, our unaudited pro forma combined financial information may not give effect to various ongoing additional costs we may incur in connection with being an independent public company. Accordingly, our unaudited pro forma combined financial information does not reflect what our financial condition, results of operations or cash flows would have been as an independent public company and is not necessarily indicative of our future financial condition or future results of operations.
Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Combined Financial Statements” and our historical combined financial statements and the notes to those statements included elsewhere in this information statement.
If the distribution and certain related transactions fail to qualify under applicable Internal Revenue Code provisions, Grace, the Company and Grace shareholders could be subject to significant tax liabilities and, in certain circumstances, the Company could be required to indemnify Grace for material taxes and other related amounts pursuant to indemnification obligations under the Tax Sharing Agreement.
It is a condition to the distribution that Grace receive an opinion of counsel, in form and substance satisfactory to Grace in its sole discretion, regarding the U.S. federal income tax treatment of the distribution and certain related transactions. The opinion of counsel will be based upon and rely on, among other things, certain facts and assumptions, as well as certain representations, statements and undertakings of Grace and us, including those relating to the past and future conduct of Grace and us. If any of these representations, statements or undertakings are, or become, inaccurate or incomplete, or if Grace or we breach any of its or our covenants in the separation documents, the opinion of counsel may be invalid and the conclusions reached therein could be jeopardized.
Notwithstanding the opinion of counsel, the Internal Revenue Service (the “IRS”) could determine that the distribution and certain related transactions fail to qualify under applicable Internal Revenue Code provisions if it determines that any of the representations, assumptions or undertakings upon which the opinion of counsel was based are false or have been violated, or if it disagrees with the conclusions in the opinion of counsel. The opinion of counsel is not binding on the IRS and there can be no assurance that the IRS will not assert a contrary position.
If the distribution is determined to fail to qualify under applicable Internal Revenue Code provisions, then, in general, Grace may recognize taxable gain as if it had sold the GCP common stock in a taxable sale for its fair market value (unless Grace and the Company jointly make an election under Section 336(e) of the Internal Revenue Code (the “Code”) with respect to the distribution, in which case, in general, the Company would (i) recognize taxable gain as if it had sold all of its assets in a taxable sale in exchange for an amount equal to the fair market value of the GCP common stock and the assumption of all of the Company’s liabilities and (ii) obtain a related step up in the basis of its assets), and Grace shareholders who receive shares of GCP common stock in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares. For more information, see “Material U.S. Federal Income Tax Consequences.”

22



Under the Tax Sharing Agreement to be entered into between Grace and the Company, the Company may be required to indemnify Grace against any additional taxes and related amounts resulting from (1) an acquisition under certain circumstances of all or a portion of the equity securities or assets of the Company, whether by merger or otherwise (and regardless of whether the Company participated in or otherwise facilitated the acquisition), (2) other actions or failures to act by the Company, or (3) any of the Company's representations or undertakings in connection with the separation and the distribution being incorrect or violated. Any such indemnity obligations could be material. See “Certain Relationships and Related Transactions-Agreements with Grace-Tax Sharing Agreement.” In addition, Grace, the Company and their respective subsidiaries may incur certain tax costs in connection with the separation, including non-U.S. tax costs resulting from separations in non-U.S. jurisdictions, which may be material.
U.S. federal income tax consequences may restrict our ability to engage in desirable strategic or capital-raising transactions following the distribution.
Under current law, a separation can be rendered taxable to the parent corporation and its shareholders as a result of certain post-separation acquisitions of shares or assets of the spun-off corporation. For example, a separation may result in taxable gain to the parent corporation under Section 355(e) of the Tax Code if the separation were later deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, shares representing a 50 percent or greater interest (by vote or value) in the spun-off corporation. To preserve the U.S. federal income tax treatment of the separation and distribution, and in addition to our indemnity obligation described immediately above, the Tax Sharing Agreement will restrict the Company, for the two-year period following the distribution, except in specified circumstances, from:
Entering into any transaction pursuant to which all or a portion of the Company's assets or shares of GCP common stock would be acquired, whether by merger or otherwise;
Issuing Company equity securities beyond certain thresholds;
Repurchasing Company shares other than in certain open-market transactions;
Ceasing to actively conduct or run certain of our businesses; or
Taking or failing to take any other action that jeopardizes the expected U.S. federal income tax treatment of the distribution and certain related transactions.
These restrictions may limit the Company's ability to pursue certain equity issuances, strategic transactions or other transactions that may maximize the value of our business. See “Material U.S. Federal Income Tax Consequences” and “Certain Relationships and Related Transactions-Agreements with Grace-Tax Sharing Agreement.”
In connection with our separation from Grace, Grace will indemnify the Company for certain liabilities and the Company will indemnify Grace for certain liabilities. If the Company is required to act on these indemnities to Grace, we may need to divert cash to meet those obligations and our financial results could be negatively impacted. The Grace indemnity may not be sufficient to insure the Company against the full amount of liabilities for which it will be allocated responsibility, and Grace may not be able to satisfy its indemnification obligations in the future.
Pursuant to the Separation and Distribution Agreement and the Tax Sharing Agreement, Grace will agree to indemnify the Company for certain liabilities, and the Company will agree to indemnify Grace for certain liabilities, in each case for uncapped amounts, as discussed further in “Certain Relationships and Related Transactions-Agreements with Grace.” Indemnities that the Company may be required to provide Grace are not subject to any cap, may be significant and could negatively impact our business, particularly indemnities relating to our actions that could impact the U.S. federal income tax treatment of the distribution and certain related transactions. Third parties could also seek to hold the Company responsible for any of the liabilities that Grace has agreed to retain. Further, the indemnity from Grace may not be sufficient to protect the Company against the full amount of such liabilities, and Grace may not be able to fully satisfy its indemnification obligations in the future. Moreover, even if the Company ultimately succeeds in recovering from Grace any amounts for which the Company is held liable, the Company may be temporarily required to bear these losses itself. Each of these risks could negatively affect our business, results of operations and financial condition.

23



After the separation, certain of Grace’s insurance policies may not cover the Company for losses associated with occurrences prior to the separation.
In connection with the separation, the Company will enter into agreements with Grace to address several matters associated with the separation, including insurance coverage. See “Certain Relationships and Related Transactions-Agreements with Grace.” After the separation, some of Grace’s insurance policies may not cover the Company for losses associated with occurrences prior to the separation.
Several members of the Company's board of directors and management may have actual or potential conflicts of interest because of their ownership of shares of common stock of Grace.
Several members of the Company's board of directors and management own common stock of Grace and/or stock options to purchase common stock of Grace or other equity-based awards because of their current or prior relationships with Grace, which could create, or appear to create, potential conflicts of interest when the Company's directors and executive officers are faced with decisions that could have different implications for Grace and the Company. See “Management.”
Transfer or assignment to us of certain contracts, investments in joint ventures and other assets may require the consent of a third party. If such consent is not given, the Company may not be entitled to the benefit of such contracts, investments and other assets in the future.
The Separation and Distribution Agreement provides that in connection with the separation from Grace, a number of contracts with customers, suppliers, landlords and other third-parties are to be assigned from Grace or its affiliates to the Company or its affiliates. However, some of these contracts require the contractual counterparty’s consent to such an assignment. Similarly, in some circumstances, the Company and one or more business units of Grace are joint beneficiaries of contracts, and the Company will need to enter into a new agreement with the third-party to replicate the contract or assign the portion of the contract related to our business. It is possible that some parties may use the requirement of a consent or the fact that the separation is occurring to seek more favorable contractual terms from the Company or to seek to terminate the contract. If (1) the Company is unable to complete the assignments in a timely manner, (2) the Company enters into new agreements on significantly less favorable terms, or (3) if the contracts are terminated, the Company may be unable to obtain the benefits, assets and contractual commitments which are intended to be allocated to the Company as part of the separation from Grace. The failure to timely complete the assignment of existing contracts, or the negotiation of new arrangements, with any of our large customers or key suppliers (including those that are single source or limited source suppliers), or a termination of any of those arrangements, could negatively impact the Company's financial condition and future results of operations.
Risks Relating to Ownership of the GCP Common Stock
Because there has not been any public market for GCP common stock, the market price and trading volume of its common stock may be volatile and you may not be able to resell your shares at or above the initial market price of the GCP common stock following the separation and distribution.
Prior to the separation, there will have been no trading market for GCP common stock. The Company cannot assure you that an active trading market will develop or be sustained for the GCP common stock after the separation nor can the Company predict the prices at which the GCP common stock will trade after the separation. The market price of the GCP common stock could fluctuate significantly due to a number of factors, many of which are beyond the Company's control, including:
fluctuations in the Company's quarterly or annual earnings results or those of other companies in the industry;
failures of the Company's operating results to meet the estimates of securities analysts or the expectations of shareholders or changes by securities analysts in their estimates of the Company's future earnings;
announcements by the Company or our customers, suppliers or competitors;
changes in laws or regulations which adversely affect our industry or the Company;
changes in accounting standards, policies, guidance, interpretations or principles;

24



general economic, industry and stock market conditions;
future sales of GCP common stock by shareholders;
future issuances of the Company’s common stock by the Company; and
the other factors described in these “Risk Factors” and other parts of this information statement.
A large number of the Company’s shares are or will be eligible for future sale, which may cause the market price for GCP common stock to decline.
Upon completion of the separation and distribution, the Company will have outstanding an aggregate of approximately [●] shares of common stock. Virtually all of those shares will be freely tradable without restriction or registration under the Securities Act of 1933, as amended. We are unable to predict whether large amounts of GCP common stock will be sold in the open market following the separation and distribution. We are also unable to predict whether a sufficient number of buyers would be in the market at that time. It is possible that Grace shareholders will sell the shares of GCP common stock they receive in the distribution for various reasons. For example, such shareholders may not believe that our business profile or the Company's level of market capitalization as an independent company fits their investment objectives. The sale of significant amounts of GCP common stock or the perception in the market that this will occur may lower the market price of the GCP common stock.
Provisions in the Company’s corporate documents, the Tax Sharing Agreement and Delaware law could delay or prevent a change in control of the Company, even if that change may be considered beneficial by some Company shareholders.
The existence of some provisions of the Company’s certificate of incorporation and bylaws and Delaware law could discourage, delay or prevent a change in control of the Company that a shareholder may consider favorable. These include provisions:
authorizing a large number of shares of common stock that are not yet issued, which would allow the Company board of directors to issue shares to persons friendly to current management, thereby protecting the continuity of the Company's management, or which could be used to dilute the stock ownership of persons seeking to obtain control of the Company;
prohibiting shareholders from calling special meetings of shareholders or taking action by written consent;
establishing advance notice requirements for nominations of candidates for election to the Company's board of directors or for proposing matters that can be acted on by shareholders at the annual shareholder meetings;
establishing supermajority vote requirements for certain amendments to the Company’s certificate of incorporation or shareholder proposals for amendments to the Company’s bylaws.
In addition, following the separation, the Company will be subject to Section 203 of the Delaware General Corporation Law, which may have an anti-takeover effect with respect to transactions not approved in advance by the Company's board of directors, including discouraging takeover attempts that might result in a premium over the market price for shares of GCP common stock.
We believe these provisions protect the Company's shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with the Company's board of directors and by providing the board of directors with more time to assess any acquisition proposal. However, these provisions apply even if a proposal may be considered beneficial by some shareholders and could delay or prevent an acquisition that the Company's board of directors determines is not in the best interests of the Company and its shareholders. See “Description of Capital Stock-Anti-Takeover Effects of Various Provisions of Delaware and the Company's Certificate of Incorporation and Bylaws.”
In addition, an acquisition or further issuance of our stock could trigger the application of Section 355(e) of the Code. For a discussion of Section 355(e), see “Material U.S. Federal Income Tax Consequences” and “-Risks Relating to the Separation." The Company may not be able to engage in desirable strategic or capital-raising

25



transactions following the distribution. Under the Tax Sharing Agreement, the Company would be required to indemnify Grace for any resulting tax and related amounts, and this indemnity obligation might discourage, delay or prevent a change of control that you may consider favorable.
The Company may issue preferred stock with terms that could dilute the voting power or reduce the value of GCP common stock.
The Company’s certificate of incorporation authorizes it to issue, without the approval of the Company’s shareholders, one or more classes or series of preferred stock having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over GCP common stock respecting dividends and distributions, as the Company's board of directors generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of GCP common stock. For example, the Company could grant holders of preferred stock the right to elect some number of directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences that the Company could assign to holders of preferred stock could affect the residual value of the common stock. See “Description of Capital Stock-Preferred Stock.”
The Company does not expect to pay any cash dividends for the foreseeable future.
The Company currently intends to retain future earnings to finance our business. As a result, the Company does not expect to pay any cash dividends for the foreseeable future. All decisions regarding the payment of dividends by the Company will be made by the Company's board of directors from time to time in accordance with applicable law. There can be no assurance that the Company will have sufficient surplus under Delaware law to be able to pay any dividends at any time in the future. This may result from extraordinary cash expenses, actual expenses exceeding contemplated costs, funding of capital expenditures or increases in reserves. If the Company does not pay dividends, the price of GCP common stock that you receive in the distribution must appreciate for you to receive a gain on your investment. This appreciation may not occur. Further, you may have to sell some or all of your shares of GCP common stock in order to generate cash flow from your investment.

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SELECTED HISTORICAL COMBINED FINANCIAL DATA OF GCP
The following selected financial data reflect the combined operations of GCP. We derived the combined operating data for the years ended December 31, 2014, 2013 and 2012, and the combined balance sheet data as of December 31, 2014 and 2013, as set forth below, from GCP’s audited combined financial statements, which are included elsewhere in this information statement. We derived the combined operating data for the nine months ended September 30, 2015, and September 30, 2014, and the combined balance sheet data as of September 30, 2015, from GCP’s unaudited combined financial statements, which are included elsewhere in this information statement. We derived the combined operating data for the years ended December 31, 2011, and December 31, 2010, and the combined balance sheet data as of September 30, 2014, December 31, 2012, December 31, 2011, and December 31, 2010, from GCP’s underlying financial records, which were derived from the financial records of Grace. In management’s opinion, the unaudited combined financial statements have been prepared on substantially the same basis as the audited combined financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the combined financial information for the periods presented. The historical and pro forma results do not necessarily indicate the results expected for any future period.
The unaudited pro forma combined statement of operations data presented below have been prepared as though the distribution occurred on January 1, 2014. The unaudited pro forma combined balance sheet data presented below have been prepared as though the distribution occurred on September 30, 2015.
The selected historical and unaudited pro forma combined financial data presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the combined financial statements and accompanying notes included elsewhere in this information statement.
Selected Historical Combined Financial Data
 
Nine Months Ended
September 30,
 
Year Ended December 31,
(in millions, except per share amounts)
Pro Forma 2015
 
2015
 
2014
 
Pro Forma 2014
 
2014
 
2013
 
2012
 
2011
 
2010
Statement of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
$
1,086.1

 
$
1,086.1

 
$
1,115.4

 
$
1,480.4

 
$
1,480.4

 
$
1,442.3

 
$
1,409.2

 
$
1,364.0

 
$
1,221.9

Net income
7.9

 
33.0

 
89.6

 
96.0

 
135.5

 
111.3

 
86.3

 
60.3

 
46.8

Net (income) loss attributable to noncontrolling interests
(0.6
)
 
(0.6
)
 
(1.3
)
 
(1.2
)
 
(1.2
)
 
(1.6
)
 
(1.1
)
 
0.6

 
(0.3
)
Net income attributable to GCP
7.3

 
32.4

 
88.3

 
94.8

 
134.3

 
109.7

 
85.2

 
60.9

 
46.5

Financial Position
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
961.6

 
881.8

 
1,005.9

 
NA

 
987.1

 
991.9

 
971.2

 
904.5

 
817.3

Long-term debt
795.9

 

 

 
NA

 

 
4.5

 
11.4

 
0.1

 
0.1

Long-term debt—related party

 

 
7.3

 
NA

 

 
9.3

 
20.1

 
8.8

 
0.9

Data Per Common Share (Basic)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to GCP
$
0.10

 
NA

 
NA

 
$
1.26

 
NA

 
NA

 
NA

 
NA

 
NA

Average common basic shares outstanding
72.5

 
NA

 
NA

 
75.3

 
NA

 
NA

 
NA

 
NA

 
NA

Data Per Common Share (Diluted)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to GCP
$
0.10

 
NA

 
NA

 
$
1.26

 
NA

 
NA

 
NA

 
NA

 
NA

Average common diluted shares outstanding
72.6

 
NA

 
NA

 
75.4

 
NA

 
NA

 
NA

 
NA

 
NA


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UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements of GCP consist of unaudited pro forma combined statements of operations for the nine months ended September 30, 2015, and for the year ended December 31, 2014, and an unaudited pro forma combined balance sheet as of September 30, 2015. The unaudited pro forma combined statements of operations for the nine months ended September 30, 2015, and the year ended December 31, 2014, have been prepared as though the distribution occurred on January 1, 2014. The unaudited pro forma combined balance sheet as of September 30, 2015, has been prepared as though the distribution occurred on September 30, 2015. The unaudited pro forma combined financial statements should be read in conjunction with our historical combined financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this information statement.
The unaudited pro forma combined financial statements have been derived from our historical combined financial statements included in this information statement and include certain adjustments to give effect to events that are (i) directly attributable to the distribution and related transaction agreements, (ii) factually supportable, and (iii) with respect to the statement of operations, expected to have a continuing impact on GCP. The unaudited pro forma combined financial statements are for illustrative purposes only, and do not reflect what our financial position and results of operations would have been had the distribution occurred as of and for the periods indicated. The unaudited pro forma combined financial statements are not necessarily indicative of our future financial position and results of operations as an independent, publicly traded company. The pro forma adjustments are based on available information and assumptions that management believes are reasonable given the information that is currently available. However, such adjustments are subject to change based on the finalization of the terms of the Separation and Distribution Agreement and related agreements.
The unaudited pro forma combined financial statements have been prepared to give effect to the following adjustments:
our anticipated post-separation equity capital, including (i) the issuance and subsequent distribution to holders of Grace common stock of approximately 71.4 million shares of our common stock, based on the distribution of one share of GCP common stock for each share of Grace common stock outstanding as of the record date for the distribution, and (ii) the resulting re-designation of Grace’s historical net investment as common stock and accumulated deficit;
the incurrence of approximately $810 million of indebtedness with unrelated lenders, and the distribution of approximately $750 million of the proceeds to Grace;
the transfer from Grace of certain pension obligations and assets associated with our employees; and
the settlement of intercompany account balances between us and Grace.
The pro forma adjustments do not result in a change to Adjusted EBIT for the nine months ended September 30, 2015 or for the year ended December 31, 2014.
The operating expenses reported in our historical combined statements of operations include allocations of certain Grace costs. These costs include allocation of Grace corporate costs that benefit us, including corporate governance, executive management, finance, legal, IT, human resources, supply chain, other general and administrative costs, shared services and depreciation on shared Grace assets.
To operate as an independent public company, we expect our recurring costs to replace these services to be lower than expenses historically allocated to us from Grace as presented in our historical combined statements of operations.
We estimate that the reduction of these costs as compared to our historical combined statements of operations will range from $5 million to $7 million per year. The reduction in costs is driven by lower estimated costs to replicate functional and shared services, offset by increased costs for corporate governance (including board of director compensation and expenses, audit and other professional services fees, annual report costs, proxy and filing fees and stock exchange fees, among others) and higher incentive and share-based compensation costs than were allocated to us historically. Certain factors could impact these stand-alone public company costs, including the finalization of our staffing and infrastructure needs.

28



Due to the scope and complexity of these activities, the amount and timing of these costs could vary and, therefore, are not included within the Unaudited Pro Forma Consolidated Financial Data.
We currently estimate expenses that we will incur during our transition to being a stand-alone public company to range from approximately $[●] million to $[●] million. We have not adjusted the accompanying unaudited pro forma combined statements of operations for these estimated expenses as they are not expected to have an ongoing impact on our operating results. We anticipate that substantially all of these expenses will be incurred within 12 months of the distribution. The expenses primarily relate to the following:
accounting, tax, legal and other professional costs pertaining to the separation and establishment as a stand-alone public company;
costs related to information technology systems;
salaries, benefits, and stock compensation, such as modifications to certain bonus awards, upon completion of the separation; and
recruiting and relocation costs associated with hiring and relocating employees.
Due to the scope and complexity of these activities, the amount of these costs could increase or decrease materially and the timing of incurrence could change.

29



GCP
Unaudited Pro Forma Combined Statement of Operations
Nine Months Ended September 30, 2015
(in millions, except per share amounts)
Historical
 
Pro Forma Adjustments
 
Pro Forma
 
Net sales
$
1,086.1

 
$

 
$
1,086.1

 
Cost of goods sold
688.0

 

 
688.0

 
Gross profit
398.1

 

 
398.1

 
Selling, general and administrative expenses
217.5

 

 
217.5

 
Research and development expenses
16.8

 

 
16.8

 
Interest expense and related financing costs
1.1

 
43.0

(a)
44.1

 
Interest expense, net—related party
0.7

 
(0.7
)
(b)

 
Loss in Venezuela
59.6

 

 
59.6

 
Restructuring expenses and asset impairments
9.9

 

 
9.9

 
Other expense (income), net
1.3

 

 
1.3

 
Total costs and expenses
306.9

 
42.3

 
349.2

 
Income before income taxes
91.2

 
(42.3
)
 
48.9

 
Provision for income taxes
(58.2
)
 
17.2

(c)
(41.0
)
 
Net income
33.0

 
(25.1
)
 
7.9

 
Less: Net income attributable to noncontrolling interests
(0.6
)
 

 
(0.6
)
 
Net income attributable to GCP
$
32.4

 
$
(25.1
)
 
$
7.3

 
Earnings Per Share Attributable to GCP
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
Net income attributable to GCP


 


 
$
0.10

(j)
Weighted average number of basic shares
 
 
 
 
72.5

(j)
Diluted earnings per share:
 
 
 
 
 
 
Net income attributable to GCP


 


 
$
0.10

(k)
Weighted average number of diluted shares
 
 
 
 
72.6

(k)

See Notes to Unaudited Pro Forma Combined Financial Statements.

30



GCP
Unaudited Pro Forma Combined Statement of Operations
Year Ended December 31, 2014
(In millions, except per share amounts)
Historical
 
Pro Forma Adjustments
 
Pro Forma
 
Net sales
$
1,480.4

 
$

 
$
1,480.4

 
Cost of goods sold
949.9

 
2.4

(d)
952.3

 
Gross profit
530.5

 
(2.4
)
 
528.1

 
Selling, general and administrative expenses
288.9

 
6.9

(d)
295.8

 
Research and development expenses
27.9

 

 
27.9

 
Interest expense and related financing costs
3.9

 
54.9

(a)
58.8

 
Interest expense, net—related party
0.9

 
(0.9
)
(b)

 
Restructuring expenses and asset impairments
18.3

 

 
18.3

 
Other expense (income), net
(0.5
)
 

 
(0.5
)
 
Total costs and expenses
339.4

 
60.9

 
400.3

 
Income before income taxes
191.1

 
(63.3
)
 
127.8

 
Provision for income taxes
(55.6
)
 
23.8

(c)
(31.8
)
 
Net income
135.5

 
(39.5
)
 
96.0

 
Less: Net income attributable to noncontrolling interests
(1.2
)
 

 
(1.2
)
 
Net income attributable to GCP
$
134.3

 
$
(39.5
)
 
$
94.8

 
Earnings Per Share Attributable to GCP
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
Net income attributable to GCP


 
 
 
$
1.26

(j)
Weighted average number of basic shares
 
 
 
 
75.3

(j)
Diluted earnings per share:
 
 
 
 
 
 
Net income attributable to GCP


 
 
 
$
1.26

(k)
Weighted average number of diluted shares
 
 
 
 
75.4

(k)

See Notes to Unaudited Pro Forma Combined Financial Statements.

31



GCP
Unaudited Pro Forma Combined Balance Sheet
September 30, 2015
(In millions)
Historical
 
Pro Forma Adjustments
 
Pro Forma
ASSETS
 
 
 
 
 
Current Assets
 
 
 
 
 
Cash and cash equivalents
$
99.9

 
$
(1.6
)
(e)
$
98.3

Trade accounts receivable
234.4

 

 
234.4

Inventories
114.2

 

 
114.2

Loans receivable—related party
3.0

 
(3.0
)
(b)

Deferred income taxes
7.4

 
 
 
7.4

Other current assets
32.8

 
(1.4
)
(b)
31.4

Total Current Assets
491.7

 
(6.0
)
 
485.7

Properties and equipment
187.1

 

 
187.1

Goodwill
102.8

 

 
102.8

Technology and other intangible assets, net
34.2

 

 
34.2

Deferred income taxes
12.5

 
60.3

(f)
72.8

Overfunded defined benefit pension plans
44.7

 

 
44.7

Other assets
8.8

 
25.5

(g)
34.3

Total Assets
$
881.8

 
$
79.8

 
$
961.6

LIABILITIES AND EQUITY
 
 
 

 
 

Current Liabilities
 
 
 
 
 
Debt payable within one year
$
10.2

 
$
14.1

(h)
$
24.3

Accounts payable
117.5

 

 
117.5

Loans payable—related party
48.8

 
(48.8
)
(b)

Other current liabilities
129.8

 
(3.5
)
(b)
126.3

Total Current Liabilities
306.3

 
(38.2
)
 
268.1

Debt payable after one year

 
795.9

(h)
795.9

Deferred income taxes
21.5

 
 
 
21.5

Income tax contingencies
7.5

 
7.6

(l)
15.1

Underfunded and unfunded defined benefit pension plans
33.2

 
43.7

(d)
76.9

Other liabilities
8.2

 

 
8.2

Total Liabilities
376.7

 
809.0

 
1,185.7

Parent company equity (accumulated deficit)
 
 
 

 
 

Net parent investment
589.1

 
(589.1
)
(i)

Common stock issued

 
0.8

(i)
0.8

Accumulated deficit

 
(140.9
)
(i)
(140.9
)
Accumulated other comprehensive loss
(87.1
)
 
 
 
(87.1
)
Total GCP Equity (Accumulated Deficit)
502.0

 
(729.2
)
 
(227.2
)
Noncontrolling interests
3.1

 

 
3.1

Total Equity (Accumulated Deficit)
505.1

 
(729.2
)
 
(224.1
)
Total Liabilities and Equity
$
881.8

 
$
79.8

 
$
961.6


See Notes to Unaudited Pro Forma Combined Financial Statements.

32



GCP
Notes to Unaudited Pro Forma Combined Financial Statements
The unaudited pro forma combined financial statements as of and for the nine months ended September 30, 2015, and the unaudited pro forma combined financial statements for the year ended December 31, 2014, include the following adjustments:
(a)
The adjustments of $43.0 million and $54.9 million for the nine months ended September 30, 2015, and the year ended December 31, 2014, respectively, represent interest expense and amortization of debt issuance costs in connection with the debt described in note (h) below. We have assumed a weighted average interest rate of approximately 6.5%. Interest expense may be higher or lower depending on the terms we obtain with third-party lenders. A 1/8% change in the assumed interest rate on new debt securities would change annual interest expense by approximately $1 million.
(b)
These adjustments represent the settlement of intercompany balances between us and Grace.
(c)
These adjustments reflect the tax effect of the pro forma adjustments using the applicable statutory rate.
(d)
Effective as of the distribution date, Grace expects to transfer to GCP certain defined benefit pension plan assets related to GCP employees and GCP expects to become the sponsor of new plans for these employees and assume all liabilities associated with such plans. For purposes of the combined financial statements, these shared plans were accounted for as multi-employer defined benefit plans. The benefit plan expenses (other than mark-to-market adjustments) associated with these plans were allocated to GCP and are included in the historical combined financial statements. The net liability associated with such plans is approximately $44 million. The mark-to-market losses for the year ended December 31, 2014, of $6.9 million added to selling, general and administrative expenses and $2.4 million added to cost of goods sold associated with these plans were not included in the historical combined financial statements. No mark-to-market gains or losses were included in the nine months ended September 30, 2015 as the mark-to-market adjustments are recorded by Grace during the fourth quarter of each year. The actual assumed net benefit plan obligations could change significantly in the future from our estimates.
(e)
This adjustment reflects a change to cash as set forth in the table below.
(In millions)
September 30, 2015
Cash, historical
$
99.9

Principal debt, net
810.0

Debt issuance costs
(19.9
)
Domestic cash dividend(1)
(750.0
)
Other cash payments to Grace, including foreign cash repatriations
(41.7
)
Cash, pro forma
$
98.3

________________________________________________________________________________________________________________
(1)
This reflects the anticipated cash dividend to be paid to Grace from funds obtained through the issuance of principal debt.
(f)
This adjustment reflects the transfer of tax assets to GCP associated with the pension liability discussed in note (d) above as well as a "step up" in tax basis for GCP assets resulting from taxable gain recognized by Grace related to the separation. It also reflects the effect of Grace retaining certain tax assets and liabilities reflected in the historical combined financial statements.
(g)
This adjustment includes debt issuance costs of $19.9 million and a $5.6 million indemnity receivable from Grace associated with indemnity obligations under the Tax Sharing Agreement.
(h)
These adjustments reflect the anticipated incurrence of approximately $810 million of debt, net of unamortized discounts. The target debt balance at the time of separation was determined by senior management based upon a review of a number of factors including forecasted liquidity and capital requirements, expected operating results, credit ratings consideration, and general economic considerations.

33



(i)
These adjustments reflect the pro forma recapitalization of our equity. As of the distribution date, Grace’s investment in our business will be re-designated as our shareholders’ equity and will be allocated between common stock and accumulated deficit.
(In millions)
September 30, 2015
Net parent investment, historical
$
589.1

Domestic cash dividend
(750.0
)
Other cash payments to Grace, including foreign cash repatriations
(41.7
)
Pension liability contribution
(43.7
)
Income tax contingencies, net
(2.0
)
Deferred income taxes, net
60.3

Intercompany settlement, net
47.9

Net parent investment, before redesignation
$
(140.1
)
Redesignation of net parent investment
 
Common stock issued, par value $0.01
$
0.8

Accumulated deficit
(140.9
)
Total
$
(140.1
)
(j)
The number of GCP shares used to compute pro forma basic earnings per share is based on the number of shares of GCP common stock assumed to be outstanding on the record date. This is based on the weighted average number of Grace common shares outstanding for the periods ended September 30, 2015 and December 31, 2014, respectively, assuming a distribution ratio of one share of GCP common stock for each share of Grace common stock.
(k)
Pro forma diluted earnings per share and pro forma weighted-average diluted shares outstanding reflect potential common shares from Grace equity plans in which our employees participate.
(l)
This adjustment reflects the effect of GCP assuming certain income tax contingencies, pursuant to the Tax Sharing Agreement, not reflected in the historical financial statements. This adjustment primarily relates to a $5.6 million income tax contingency arising from transactions between Grace and GCP foreign subsidiaries. As referenced in note (g), Grace will indemnify GCP for this matter under the Tax Sharing Agreement.

34



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our references to "advanced economies" and "emerging regions" refer to classifications established by the International Monetary Fund. We generally refer to the nine months ended September 30, 2015, as the "nine months" and the nine months ended September 30, 2014, as the "prior-year period."
Separation from Grace
On February 5, 2015, Grace announced its intent to separate the business, assets and liabilities associated with the Grace Construction Products operating segment and the Darex Packaging Technologies business, GCP, into an independent publicly-traded company. Subject to the satisfaction of specified conditions, the separation will be accomplished by distributing to holders of Grace common stock all of the shares of common stock of GCP Applied Technologies Inc. GCP Applied Technologies Inc., or the Company, is a wholly-owned subsidiary of Grace that at the time of the separation will hold GCP. Immediately following the distribution, holders of Grace common stock as of the record date will own 100 percent of the outstanding shares of GCP common stock.
Summary Description of the GCP Business
We are engaged in the production and sale of specialty construction chemicals, specialty building materials and packaging products through three operating segments:
Specialty Construction Chemicals. Specialty Construction Chemicals (SCC) provides products, technologies, and services that reduce the cost and improve the performance of cement, concrete, mortar, masonry and other cementitious based construction materials.
Specialty Building Materials. Specialty Building Materials (SBM) produces and sells sheet and liquid membrane systems and other products that protect both new and existing structures from water, air, and vapor penetration, and from fire damage. We also manufacture and sell specialized cementitious and chemical grouts used for soil consolidation and leak-sealing applications.
Darex Packaging Technologies. Darex Packaging Technologies (Darex) produces and sells sealants and coatings for consumer and industrial applications to protect the integrity of packaged products.
We are a global industry leader in each of our operating segments and expect to remain so following our separation from Grace. See "Business—Business Overview" in this information statement for a summary description of our business.
Non-GAAP Financial Measures
The non-GAAP financial measures described below are supplemental measures of our performance and are not required by, or presented in accordance with, GAAP.
We define Adjusted EBIT (a non-GAAP financial measure) to be net income adjusted for interest income and expense; income taxes; restructuring expenses and asset impairments; repositioning expenses; pension costs other than service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits; income and expense items related to certain product lines and other investments; gains and losses on sales of businesses, product lines, and certain other investments; and certain other unusual or infrequent items that are not representative of underlying trends.
We define Adjusted EBITDA (a non-GAAP financial measure) to be Adjusted EBIT adjusted for depreciation and amortization.
We define Adjusted EBIT Return On Invested Capital (a non-GAAP financial measure) to be Adjusted EBIT (on a trailing four quarters basis) divided by the sum of net working capital, properties and equipment and certain other assets and liabilities.
We define Adjusted Gross Margin (a non-GAAP financial measure) to be gross margin adjusted for pension-related costs and loss in Venezuela included in cost of goods sold.

35



We use Adjusted EBIT as a performance measure in significant business decisions and in determining certain incentive compensation. We use Adjusted EBIT as a performance measure because it provides improved period-to-period comparability for decision making and compensation purposes, and because it better measures the ongoing earnings results of our strategic and operating decisions by excluding the earnings effects of our restructuring activities.
Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT Return On Invested Capital and Adjusted Gross Margin do not purport to represent income measures as defined under GAAP, and should not be used as alternatives to such measures as an indicator of our performance. These measures are provided to investors and others to improve the period-to-period comparability and peer-to-peer comparability of our financial results, and to ensure that investors understand the information we use to evaluate the performance of our businesses. We have provided in the following tables a reconciliation of Adjusted EBIT to Net Income attributable to GCP, the most directly comparable financial measure calculated and presented in accordance with GAAP.
Adjusted EBIT has material limitations as an operating performance measure because it excludes costs related to income and expenses from restructuring activities, which historically has been a material component of our net income. Adjusted EBITDA also has material limitations as an operating performance measure because it excludes the impact of depreciation and amortization expense. Our business is substantially dependent on the successful deployment of capital, and depreciation and amortization expense is a necessary element of our costs. We compensate for the limitations of these measurements by using these indicators together with net income as measured under GAAP to present a complete analysis of our results of operations. Adjusted EBIT and Adjusted EBITDA should be evaluated together with net income measured under GAAP for a complete understanding of our results of operations.
Results of Operations
2014 Performance Summary
Following is a summary of our financial performance for the year ended December 31, 2014.
Net sales increased 2.6% to $1,480.4 million.
Adjusted Gross Margin increased 10 basis points to 35.4%.
Adjusted EBIT increased 0.3% to $195.4 million or 13.2% of sales.
Net income increased 22.4% to $134.3 million.
2013 Performance Summary
Following is a summary of our financial performance for the year ended December 31, 2013.
Net sales increased 2.3% to $1,442.3 million.
Adjusted Gross Margin increased 120 basis points to 35.3%.
Adjusted EBIT increased 23.4% to $194.9 million or 13.5% of sales.
Net income increased 28.8% to $109.7 million.

36



Analysis of Operations for 2014, 2013, and 2012
We have set forth in the table below our key operating statistics with percentage changes for the years ended December 31, 2014, 2013, and 2012. Please refer to this Analysis of Operations when reviewing this Management's Discussion and Analysis of Financial Condition and Results of Operations.
Analysis of Operations
(In millions)
2014
 
2013
 
% Change
 
2012
 
% Change
Net sales:
 
 
 
 
 
 
 
 
 
Specialty Construction Chemicals
$
726.3

 
$
688.1

 
5.6
 %
 
$
680.9

 
1.1
 %
Specialty Building Materials
379.3

 
370.1

 
2.5
 %
 
344.0

 
7.6
 %
Darex Packaging Technologies
374.8

 
384.1

 
(2.4
)%
 
384.3

 
(0.1
)%
Total GCP net sales
$
1,480.4

 
$
1,442.3

 
2.6
 %
 
$
1,409.2

 
2.3
 %
Net sales by region:
 
 
 
 
 
 
 
 
 
North America
$
503.9

 
$
488.2

 
3.2
 %
 
$
478.3

 
2.1
 %
Europe Middle East Africa (EMEA)
396.0

 
385.2

 
2.8
 %
 
392.7

 
(1.9
)%
Asia Pacific
349.7

 
335.6

 
4.2
 %
 
318.6

 
5.3
 %
Latin America
230.8

 
233.3

 
(1.1
)%
 
219.6

 
6.2
 %
Total net sales by region
$
1,480.4

 
$
1,442.3

 
2.6
 %
 
$
1,409.2

 
2.3
 %
Profitability performance measures:
 
 
 
 
 
 
 
 
 
Adjusted EBIT(A):
 
 
 
 
 
 
 
 
 
Specialty Construction Chemicals segment operating income
$
72.4

 
$
62.8

 
15.3
 %
 
$
57.1

 
10.0
 %
Specialty Building Materials segment operating income
75.7

 
76.9

 
(1.6
)%
 
59.0

 
30.3
 %
Darex Packaging Technologies segment operating income
74.1

 
79.6

 
(6.9
)%
 
72.5

 
9.8
 %
Corporate costs
(19.3
)
 
(19.1
)
 
(1.0
)%
 
(24.1
)
 
20.7
 %
Certain pension costs(B)
(7.5
)
 
(5.3
)
 
(41.5
)%
 
(6.6
)
 
19.7
 %
Adjusted EBIT
195.4

 
194.9

 
0.3
 %
 
157.9

 
23.4
 %
Pension MTM adjustment and other related costs, net
18.6

 
(14.4
)
 
 
 
(17.7
)
 
 
Restructuring expenses and asset impairments
(18.3
)
 
(7.4
)
 
 
 
(4.3
)
 
 
Currency and other financial losses in Venezuela
(1.0
)
 
(6.9
)
 
 
 

 
 
Interest expense, net
(4.8
)
 
(4.9
)
 
2.0
 %
 
(2.6
)
 
(88.5
)%
Provision for income taxes
(55.6
)
 
(51.6
)
 
(7.8
)%
 
(48.1
)
 
(7.3
)%
Net income attributable to GCP
$
134.3

 
$
109.7

 
22.4
 %
 
$
85.2

 
28.8
 %

37



Analysis of Operations
(In millions)
2014
 
2013
 
% Change
 
2012
 
% Change
Adjusted profitability performance measures:
 
 
 
 
 
 
 
 
 
Adjusted Gross Margin:
 
 
 
 
 
 
 
 
 
Specialty Construction Chemicals
33.7
%
 
33.0
 %
 
0.7 pts

 
33.8
 %
 
(0.8) pts

Specialty Building Materials
41.7
%
 
42.0
 %
 
(0.3) pts

 
39.1
 %
 
2.9 pts

Darex Packaging Technologies
32.3
%
 
32.8
 %
 
(0.5) pts

 
30.2
 %
 
2.6 pts

Adjusted Gross Margin
35.4
%
 
35.3
 %
 
0.1 pts

 
34.1
 %
 
1.2 pts

Pension costs in cost of goods sold
0.4
%
 
(0.5
)%
 
0.9 pts

 
(0.6
)%
 
0.1 pts

Total GCP
35.8
%
 
34.8
 %
 
1.0 pts

 
33.5
 %
 
1.3 pts

Adjusted EBIT:
 
 
 
 
 
 
 
 
 
Specialty Construction Chemicals
$
72.4

 
$
62.8

 
15.3
 %
 
$
57.1

 
10.0
 %
Specialty Building Materials
75.7

 
76.9

 
(1.6
)%
 
59.0

 
30.3
 %
Darex Packaging Technologies
74.1

 
79.6

 
(6.9
)%
 
72.5

 
9.8
 %
Corporate
(26.8
)
 
(24.4
)
 
(9.8
)%
 
(30.7
)
 
20.5
 %
Total GCP
195.4

 
194.9

 
0.3
 %
 
157.9

 
23.4
 %
Depreciation and amortization:
 
 
 
 
 
 
 
 
 
Specialty Construction Chemicals
$
18.5

 
$
19.9

 
(7.0
)%
 
$
20.4

 
(2.5
)%
Specialty Building Materials
8.6

 
8.1

 
6.2
 %
 
7.8

 
3.8
 %
Darex Packaging Technologies
5.5

 
5.1

 
7.8
 %
 
5.0

 
2.0
 %
Corporate
1.4

 
1.6

 
(12.5
)%
 
1.6

 
 %
Total GCP
34.0

 
34.7

 
(2.0
)%
 
34.8

 
(0.3
)%
Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
Specialty Construction Chemicals
$
90.9

 
$
82.7

 
9.9
 %
 
$
77.5

 
6.7
 %
Specialty Building Materials
84.3

 
85.0

 
(0.8
)%
 
66.8

 
27.2
 %
Darex Packaging Technologies
79.6

 
84.7

 
(6.0
)%
 
77.5

 
9.3
 %
Corporate
(25.4
)
 
(22.8
)
 
(11.4
)%
 
(29.1
)
 
21.6
 %
Total GCP
229.4

 
229.6

 
(0.1
)%
 
192.7

 
19.1
 %
Adjusted EBIT margin:
 
 
 
 
 
 
 
 
 
Specialty Construction Chemicals
10.0
%
 
9.1
 %
 
0.9 pts

 
8.4
 %
 
0.7 pts

Specialty Building Materials
20.0
%
 
20.8
 %
 
(0.8) pts

 
17.2
 %
 
3.6 pts

Darex Packaging Technologies
19.8
%
 
20.7
 %
 
(0.9) pts

 
18.9
 %
 
1.8 pts

Total GCP
13.2
%
 
13.5
 %
 
(0.3) pts

 
11.2
 %
 
2.3 pts

Adjusted EBITDA margin:
 
 
 
 
 
 
 
 
 
Specialty Construction Chemicals
12.5
%
 
12.0
 %
 
0.5 pts

 
11.4
 %
 
0.6 pts

Specialty Building Materials
22.2
%
 
23.0
 %
 
(0.8) pts

 
19.4
 %
 
3.6 pts

Darex Packaging Technologies
21.2
%
 
22.1
 %
 
(0.9) pts

 
20.2
 %
 
1.9 pts

Total GCP
15.5
%
 
15.9
 %
 
(0.4) pts

 
13.7
 %
 
2.2 pts


38



Analysis of Operations
(In millions)
2014
 
2013
 
2012
Calculation of Adjusted EBIT Return On Invested Capital (trailing four quarters):
 
 
 
 
 
Adjusted EBIT
$
195.4

 
$
194.9

 
$
157.9

Invested Capital:
 
 
 
 
 
Trade accounts receivable
225.8

 
240.3

 
252.2

Inventories
122.9

 
104.7

 
112.0

Accounts payable
(112.3
)
 
(118.3
)
 
(126.2
)
 
236.4

 
226.7

 
238.0

Other current assets (excluding income taxes)
38.6

 
34.1

 
29.0

Properties and equipment, net
197.5

 
211.5

 
206.7

Goodwill
114.0

 
128.6

 
122.4

Technology and other intangible assets, net
44.0

 
54.1

 
58.0

Other assets
8.5

 
19.8

 
11.0

Other current liabilities (excluding income taxes, restructuring and accrued interest)
(95.0
)
 
(93.1
)
 
(95.8
)
Other liabilities
(9.1
)
 
(8.0
)
 
(6.9
)
Total invested capital
$
534.9

 
$
573.7

 
$
562.4

Adjusted EBIT Return On Invested Capital
36.5
%
 
34.0
%
 
28.1
%
___________________________________________________________________________________________________________________
Amounts may not add due to rounding.
(A)
GCP segment operating income includes only GCP's share of income of consolidated and unconsolidated joint ventures.
(B)
Certain pension costs include only ongoing costs recognized quarterly, which include service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits. SCC, SBM, and Darex segment operating income and corporate costs do not include any amounts for pension expense. Other pension related costs including annual mark-to-market adjustments and actuarial gains and losses are excluded from Adjusted EBIT. These amounts are not used by management to evaluate the performance of the GCP businesses and significantly affect the peer-to-peer and period-to-period comparability of our financial results. Mark-to-market adjustments and actuarial gains and losses relate primarily to changes in financial market values and actuarial assumptions and are not directly related to the operation of the GCP businesses.
NM—Not Meaningful

39



Nine Months Performance Summary
Following is a summary of our financial performance for the nine months ended September 30, 2015.
Net sales decreased 2.6% to $1,086.1 million.
Adjusted EBIT increased 21.0% to $175.9 million or 16.2% of sales.
Net income decreased 63.3% to $32.4 million.
Net income includes a pre-tax charge of $73.2 million related to our Venezuelan operations.
Adjusted EBIT Return On Invested Capital was 46.6% on a trailing four quarters basis compared with 36.5% on the same basis for the 2014 fourth quarter.
Analysis of Operations for the nine months and the prior-year period
We have set forth in the table below our key operating statistics with percentage changes for the nine months compared with the prior-year period. Please refer to this Analysis of Operations when reviewing this Management's Discussion and Analysis of Financial Condition and Results of Operations.
Analysis of Operations
(In millions)
Nine Months Ended September 30,
2015
 
2014
 
% Change
Net sales:
 
 
 
 
 
Specialty Construction Chemicals
$
534.2

 
$
542.9

 
(1.6
)%
Specialty Building Materials
297.6

 
284.0

 
4.8
 %
Darex Packaging Technologies
254.3

 
288.5

 
(11.9
)%
Total GCP net sales
$
1,086.1

 
$
1,115.4

 
(2.6
)%
Net sales by region:
 
 
 
 
 
North America
$
401.2

 
$
374.4

 
7.2
 %
Europe Middle East Africa (EMEA)
260.7

 
307.8

 
(15.3
)%
Asia Pacific
248.6

 
261.1

 
(4.8
)%
Latin America
175.6

 
172.1

 
2.0
 %
Total net sales by region
$
1,086.1

 
$
1,115.4

 
(2.6
)%
Profitability performance measures:
 
 
 
 
 
Adjusted EBIT(A):
 
 
 
 
 
Specialty Construction Chemicals segment operating income
$
66.9

 
$
52.3

 
27.9
 %
Specialty Building Materials segment operating income
73.3

 
56.7

 
29.3
 %
Darex Packaging Technologies segment operating income
56.0

 
57.3

 
(2.3
)%
Corporate costs
(16.5
)
 
(15.3
)
 
(7.8
)%
Certain pension costs(B)
(3.8
)
 
(5.6
)
 
32.1
 %
Adjusted EBIT
175.9

 
145.4

 
21.0
 %
Currency and other losses in Venezuela
(73.2
)
 
(1.0
)
 
 
Pension MTM adjustment and other related costs, net
(0.5
)
 
0.2

 
 
Restructuring expenses and asset impairments
(9.9
)
 
(16.1
)
 
 
Interest expense, net
(1.7
)
 
(3.8
)
 
55.3
 %
Provision for income taxes
(58.2
)
 
(36.4
)
 
(59.9
)%
Net income attributable to GCP
$
32.4

 
$
88.3

 
(63.3
)%

40



Analysis of Operations
(In millions)
Nine Months Ended September 30,
2015
 
2014
 
% Change
Adjusted profitability performance measures:
 

 
 

 
 

Adjusted Gross Margin:
 

 
 

 
 

Specialty Construction Chemicals
35.6
 %
 
33.2
 %
 
2.4 pts

Specialty Building Materials
44.8
 %
 
41.7
 %
 
3.1 pts

Darex Packaging Technologies
35.2
 %
 
32.3
 %
 
2.9 pts

Adjusted Gross Margin
38.0
 %
 
35.2
 %
 
2.8 pts

Loss in Venezuela
(1.2
)%
 
 %
 
NM

Pension costs in cost of goods sold
(0.1
)%
 
(0.1
)%
 
0.0 pts

Total GCP
36.7
 %
 
35.1
 %
 
1.6 pts

Adjusted EBIT:
 

 
 

 
 

Specialty Construction Chemicals
$
66.9

 
$
52.3

 
27.9
 %
Specialty Building Materials
73.3

 
56.7

 
29.3
 %
Darex Packaging Technologies
56.0

 
57.3

 
(2.3
)%
Corporate
(20.3
)
 
(20.9
)
 
2.9
 %
Total GCP
175.9

 
145.4

 
21.0
 %
Depreciation and amortization:
 

 
 

 
 

Specialty Construction Chemicals
$
13.8

 
$
13.5

 
2.2
 %
Specialty Building Materials
5.9

 
6.4

 
(7.8
)%
Darex Packaging Technologies
3.8

 
4.0

 
(5.0
)%
Corporate
0.9

 
1.1

 
(18.2
)%
Total GCP
24.4

 
25.0

 
(2.4
)%
Adjusted EBITDA:
 

 
 

 
 

Specialty Construction Chemicals
$
80.7

 
$
65.8

 
22.6
 %
Specialty Building Materials
79.2

 
63.1

 
25.5
 %
Darex Packaging Technologies
59.8

 
61.3

 
(2.4
)%
Corporate
(19.4
)
 
(19.8
)
 
2.0
 %
Total GCP
200.3

 
170.4

 
17.5
 %
Adjusted EBIT margin:
 

 
 

 
 

Specialty Construction Chemicals
12.5
 %
 
9.6
 %
 
2.9 pts

Specialty Building Materials
24.6
 %
 
20.0
 %
 
4.6 pts

Darex Packaging Technologies
22.0
 %
 
19.9
 %