Operating Segment and Geographic Information

9 Months Ended

Sep. 30, 2019

Operating Segment and Geographic Information

GCP is engaged in the production and sale of specialty construction chemicals and specialty building materials through two operating segments. Specialty Construction Chemicals ("SCC") operating segment manufactures and markets concrete admixtures and cement additives, and supplies in-transit monitoring systems for concrete producers. Specialty Building Materials ("SBM") operating segment manufactures and markets sheet and liquid membrane systems that protect structures from water, air and vapor penetration, as well as fireproofing and other products designed to protect the building envelope.

Operating Segment Data

The following table presents information related to GCP's operating segments:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2019		2018		2019		2018
Net Sales
Specialty Construction Chemicals	$	151.8	$	165.4	$	433.9	$	487.4
Specialty Building Materials	115.1		130.9		321.3		361.9
Total net sales	$	266.9	$	296.3	$	755.2	$	849.3
Segment Operating Income
Specialty Construction Chemicals segment operating income	$	19.8	$	12.7	$	41.9	$	31.2
Specialty Building Materials segment operating income	25.9		34.3		64.1		84.2
Total segment operating income	$	45.7	$	47.0	$	106.0	$	115.4

Reconciliation of Operating Segment Data to Financial Statements

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

Total segment operating income for the three and nine months ended September 30, 2019 and 2018, is reconciled below to "Income (loss) from continuing operations before income taxes" presented in the accompanying unaudited Consolidated Statements of Operations:



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2019			2018			2019			2018
Total segment operating income	$	45.7		$	47.0		$	106.0		$	115.4
Corporate costs	(8.9		)	(5.3		)	(28.2		)	(22.8		)
Certain pension costs	(2.0		)	(2.0		)	(5.9		)	(5.8		)
Gain on Brazil tax recoveries, net ⁽²⁾	0.9			—			0.9			—
Other costs, net	(0.1		)	—			(3.7		)	—
Repositioning expenses	(4.4		)	(3.7		)	(15.6		)	(5.8		)
Restructuring expenses and asset impairments	(3.8		)	(14.3		)	(8.8		)	(13.2		)
Pension MTM adjustment and other related costs, net	—			—			—			(0.9		)
Gain on termination and curtailment of pension and other postretirement plans	—			—			—			0.1
Third-party and other acquisition-related costs	—			(0.5		)	(0.1		)	(2.1		)
Amortization of acquired inventory fair value adjustment	—			—			—			(0.2		)
Legacy product, environmental and other claims	—			—			(0.1		)	—
Net income attributable to noncontrolling interests	0.1			0.1			0.3			0.3
Interest expense, net⁽¹⁾	(4.9		)	(5.3		)	(15.0		)	(83.6		)
Currency losses in Argentina	—			(1.1		)	—			(1.1		)
Income (loss) from continuing operations before income taxes	$	22.6		$	14.9		$	29.8		$	(19.7	)

__________________________


⁽¹⁾	"Interest expense, net" includes a loss of $59.8 million as a result of a debt refinancing transaction completed on April 10, 2018. Please refer to Note 6, "Debt and Other Borrowings," in the Notes to the Consolidated Financial Statements included in Item 8 "Financial Statements and Supplementary Data" of the Annual Report on Form 10‑K.


⁽²⁾	Gain on Brazil tax recoveries, net primarily consists of a $1.7 million pre-tax gain related to indirect tax recoveries, and $0.8 million of legal fees and other charges relating to indirect and income tax recoveries. Please refer to Note 7, "Income Taxes" and Note 10, "Commitments and Contingencies" for further information.

Disaggregation of Total Net Sales

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

Geographic Area Data

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



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2019		2018		2019		2018
Net Sales
United States	$	134.8	$	144.4	$	369.2	$	402.4
Canada and Other	9.1		9.7		24.0		24.0
Total North America	143.9		154.1		393.2		426.4
Europe Middle East Africa	50.7		61.7		149.4		189.2
Asia Pacific	56.8		63.9		166.4		181.6
Latin America	15.5		16.6		46.2		52.1
Total	$	266.9	$	296.3	$	755.2	$	849.3

Sales are attributed to geographic areas based on customer location. With the exception of the U.S. presented in the table above, there were no individually significant countries with sales exceeding 10% of total sales during the three and nine months ended September 30, 2019 and 2018. There were no customers that individually accounted for 10% or more of the Company's accounts receivable balance as of September 30, 2019 and December 31, 2018.

Disaggregation of Long-Lived Assets

As a result of adopting Topic 842, the Company has recorded $34.0 million of operating lease right-of-use-assets as of September 30, 2019. The Company disaggregates such assets by operating segments and geographic areas in which GCP operates. Please refer to Note 1, "Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies" and Note 6, "Lessee Arrangements" for further discussion on the accounting treatment and impact of adopting Topic 842.

The following table sets forth certain long-lived asset information related to the geographic areas in which GCP operates:



(In millions)	As of September 30, 2019
Operating lease right-of-use assets
United States	$	12.6
Canada	0.2
Total North America	12.8
Europe, Middle East, and Africa	12.0
Asia Pacific	8.1
Latin America	1.1
Total	$	34.0
Operating lease right-of-use assets
Specialty Construction Chemicals	$	17.7
Specialty Building Materials	13.4
Corporate	2.9
Total	$	34.0