avatar Gcp Applied Technologies Inc. Manufacturing
  • Location: Massachusetts 
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    FOCUSED ON OUR CORE VALUES 2015 A N N UA L R EP O RT


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    Position STATEMENT Through applied knowledge and service excellence, GCP Applied Technologies provides premier specialty construction chemicals and specialty building materials for many of the world’s most renowned structures, and packaging technologies for the best-known consumer brands, delivering superior results for all our customers. Global Operational Footprint Countries with Offices or Plants GCP Global Headquarters Key Manufacturing Facilities Other Facilities Cambridge, MA USA On the cover • The Henderson Waves pedestrian bridge in Singapore was constructed using GCP’s ADVA® products. • The BBC Corporate Office in London was constructed using GCP’s Preprufe® products. • GCP’S Apperta® coatings keep foods safe and fresh every day in many countries around the world.


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    Specialty Construction Specialty Building Darex Packaging Chemicals Materials Technologies Concrete Products Building Envelope Products Sealants and Closures • Concrete admixtures allow customers • Sheet and liquid membrane systems that • Sealants for metal can food, beverage, to modify properties, reduce applica- protect both new and existing structures aerosol and general line packaging tion cost and enhance performance from water • Sealants for crowns, aluminum and • Chemicals enhance surface appear- • Weather barrier products to manage air plastics closures ance and aesthetics of concrete and vapor penetration, for energy savings • Oxygen scavenger sealants and addi- • Services provide in transit digital and durability tives for sensitive beverages monitoring of material performance Residential Products Coatings properties • Roofing underlayment, flashing and • Coatings for metal can food, aerosol Cement Products weather barriers and general line packaging • Formulated chemicals added to the • Protects roofs, walls and windows from • Coatings for crowns, lug caps and milling stage of cement manufacturing water damage caused by wind-driven aluminum closures to improve energy efficiency, enhance rain and ice dams • Strong technology position in can cement performance and help meet Specialty Construction Products coatings for metal cans and closures; environmental regulations • Fire protection products; chemical grouts aluminum monobloc coatings used for leak-sealing repair; cementitious grouts/mortars for infrastructure projects 13% 14% 19% 43% $7.8 $3.5 $3.2 BILLION BILLION BILLION INDUSTRY INDUSTRY INDUSTRY 43% 87% 81% Concrete Admixtures $6.8 billion Residential $1.5 billion Coatings $2.6 billion Cement Additives $1.0 billion Building Envelope $1.5 billion Sealants and Closures $0.6 billion Specialty $0.5 billion GCP Applied Technologies internal estimates for industry size for the period ended 31-Dec-2014 01


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    A Letter from the PRESIDENT AND CHIEF EXECUTIVE OFFICER Shareholders, Customers, and Colleagues: NEW PUBLIC COMPANY • Leverage Leading Positions Globally—Continue to pene- I am very pleased to be writing this trate higher growth markets served by our businesses; grow and shareholder letter as GCP Applied adapt to locally attractive opportunities by commercializing Technologies (GCP) begins its first high value, differentiated products and services. year as a publicly listed company. • Capitalize on Formulation Expertise and Technological GCP began trading on the NYSE Development—Utilize our team of R&D and technical experts on February 4, 2016, successfully to develop new and customized products and formulations completing our transition to an that protect building structures from the elements and extend independent company. Our objec- life cycles, as well as protect the contents of food and bever- tive following this milestone, simply age packages, with a focus on product and environmental put, is to enhance shareholder value by continuously increasing stewardship. our sales, earnings and cash flow, and producing best-in-class products and services. • Focus Investments on Growth—Prioritize and optimize capital spending projects to increase R&D and product inno- Since the spin-off was announced a year ago, our teams have vation, geographic penetration, sales/technical service and remained steadfastly focused on achieving results. Each of our marketing capabilities, and information management solutions business segments—Specialty Construction Chemicals, Specialty to improve connectivity with our customers. Building Materials and Darex Packaging Technologies—enjoy solid positions as leading global suppliers of construction chemi- • Operational Productivity—Maintain flexible and low capital cals, building materials, and packaging sealants and coatings. intensity footprint scaling to evolving market conditions; continue to enhance supply chain, procurement, and logistics In preparation for the launch of GCP, we established guiding programs to deliver cost savings and margin expansion. principles for the business to reinforce our relentless customer focus. One of these, our Mission statement, is aimed squarely SPECIALTY APPLICATIONS IN LARGE MARKETS at “…delivering world-class products, applied knowledge, and Our products play a crucial role in ensuring the integrity, dura- service excellence to create value.” bility and performance of buildings, infrastructure developments, and food and beverage packaging. GCP’s products often reflect Our new Board of Directors and management team are focused a small portion of the costs of our customers’ end-products, yet entirely on value creation for our three business segments. Our satisfy high performance and specification requirements. GCP sales and marketing teams are leveraging and building upon our generates strong earnings and cash flows because we provide competitive advantages—quality, innovation, and technical critical, specialty products. service—to grow revenues and generate attractive margins. The industries we serve are large and diverse with a market Specifically, we are focused on the following investment and size of nearly $15 billion. This provides us with an attractive growth strategies: and balanced mix of opportunities. Our Specialty Construction • Maintain Strong Customer Focus—Continue to deploy our Chemicals and Specialty Building Products segments compete high-touch, customer-centric business model; demonstrate in an industry which is intrinsically linked to global development. exceptional technical expertise and applications support to our Expanding urban centers, increasing population, more stringent diverse and long-term customer base. building regulations, as well as ongoing housing, infrastructure, and commercial building all provide fuel for growth. Darex 02


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    Net Sales by Segment Net Sales by Region 15% 23% 38% 2015 Net Sales Facilities in 49% 23% $1.4 Billion 40 Countries 28% 24% Specialty Construction Chemicals North America Specialty Building Materials Europe, the Middle East and Africa Darex Packaging Products Asia Pacific Latin America Packaging Technologies is likewise tied to global development for growth. Our supply chain organization has the people and trends. Our products play a critical role for brand owners who processes to position us to minimize raw material costs in the are faced with meeting the demanding standards for food face of fluctuating commodity markets. Finally, our low-capital packaging and quality. business model is well-established. In other words, we already have resources in place to capitalize on our global presence, with FULL YEAR 2015 RESULTS* locations which include 65 manufacturing and technical facilities Our 2015 results positioned us well for the future. Net sales in over 40 countries and on six continents. totaled $1.4 billion, down 4.2% as reported, and up 6.6% on a constant currency basis. I would like to thank all of our shareholders, customers, and colleagues for their support. GCP Applied Technologies is off Our business achieved a 60 basis point increase in Adjusted to an excellent start to the year. You can be assured we plan to Gross Margin to 36.4%. Adjusted EBIT was $226.7 million, continue our commercial focus, and intend to grow on GCP’s an increase of 16.0% compared to the prior year period. solid foundation. Adjusted EBIT ROIC achieved a best-in-class level of 48.0% Sincerely, along with strong Adjusted Free Cash Flow of $126.7 million. The strength of these financial results enabled us to successfully raise $800 million in new debt financing, despite a particularly turbulent bond market in late 2015 and early 2016. THE PATH FORWARD GREGORY E. POLING Looking ahead, we see a terrific range of new opportunities. President and Chief Executive Officer We will build on our robust new product pipeline as an engine June 2016 *Definitions of Adjusted Gross Margin, Adjusted EBIT, Adjusted EBIT ROIC and Adjusted Free Cash Flow, as well as reconciliations to the most comparable GAAP measure, may be found in Item 7 of the Company’s Form 10-K or at the end of this Annual Report. GCP APPLIED TECHNOLOGIES / 2015 ANNUAL REPORT 03


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    Financial HIGHLIGHTS Net Sales Adjusted Gross Margin* ($ in millions) $1,480.4 $1,442.3 $1,418.6 35.8% 36.4% 34.8% 2013 2014 2015 2013 2014 2015 Adjusted EBIT* Adjusted EBIT ROIC* ($ in millions) 48.0% $226.7 16.0% $194.9 $195.4 36.5% 13.5% 13.2% 34.0% 2013 2014 2015 2013 2014 2015 Adjusted EBIT Margin *A definition of this Non-GAAP measure as well as a reconciliation to the most comparable GAAP measure may be found in Item 7 of the Company’s Form 10-K included in this Annual Report. 04


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    FOCUSED ON OUR CORE VALUES 2015 F O R M 10 - K


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    UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________________________________________________________________________ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number 1-37533 GCP Applied Technologies Inc. Delaware 47-3936076 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 62 Whittemore Avenue, Cambridge, Massachusetts 02140-1623 (Address of principal executive offices) (Zip code) (617) 876-1400 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Exchange Act: Title of each class Name of each exchange on which registered Common Stock, $.01 par value New York Stock Exchange, Inc. Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10- K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No As of June 30, 2015, the registrant's common stock was not publicly traded. Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No At February 29, 2016, 70,625,404 shares of GCP Applied Technologies Common Stock, $.01 par value, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE None.


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    TABLE OF CONTENTS PART I Item 1. Business 4 Item 1A. Risk Factors 15 Item 1B. Unresolved Staff Comments 28 Item 2. Properties 28 Item 3. Legal Proceedings 29 Item 4. Mine Safety Disclosures 29 PART II Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 29 Item 6. Selected Financial Data 29 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 56 Item 8. Financial Statements and Supplementary Data 57 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 99 Item 9A. Controls and Procedures 99 Item 9B. Other Information 99 PART III Item 10. Directors, Executive Officers and Corporate Governance 100 Item 11. Executive Compensation 104 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 128 Item 13. Certain Relationships and Related Transactions, and Director Independence 129 Item 14. Principal Accountant Fees and Services 133 PART IV Item 15. Exhibits and Financial Statement Schedules 134 SIGNATURES 136


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    Presentation of Information Unless the context requires otherwise, references to "GCP Applied Technologies Inc.," "GCP," "we," "us," "our" and "the Company" refer to GCP Applied Technologies Inc. and its consolidated subsidiaries for periods subsequent to its separation from W. R. Grace & Co. on February 3, 2016. For periods prior to February 3, 2016, these terms refer to the combined historical business and operations of W. R. Grace & Co.’s construction products and packaging technologies businesses as they were historically managed as part of W. R. Grace & Co. Unless the context requires otherwise, references to "Grace" refer to W. R. Grace & Co. and its consolidated subsidiaries, which is the Company’s former parent company. References in this Annual Report on Form 10-K to the "Separation" refer to the legal separation and transfer of Grace’s construction products and packaging technologies businesses to the Company through a dividend distribution to Grace shareholders on February 3, 2016. Forward-Looking Statements The Company has made forward-looking statements in this Annual Report on Form 10-K that are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements include, but are not limited to, information concerning the Company's possible or assumed future results of operations, financial position, business strategies, financing plans, capital or other expenditures, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believe," "expect," "plan," "intend," "project," "target," "suggest," "outlook," "anticipate," "estimate," "predict," "potential," "continue," "may," "will," "should" or the negative of these terms or similar expressions. Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any forward- looking statements. The risk factors included in Item 1A of this Annual Report on Form 10-K could cause the Company's results to differ materially from those expressed in forward-looking statements. Additionally, there may be other risks and uncertainties that the Company is unable to predict at this time or that the Company currently does not expect to have a material adverse effect on its business that may cause the Company's results to differ materially from those expressed in forward-looking statements. These forward-looking statements are made as of the filing date of this Annual Report on Form 10-K. The Company expressly disclaims any obligation to update these forward-looking statements other than as required by law. Trademarks and Trade Names We own or have rights to trademarks, service marks, copyrights and trade names that we use in conjunction with the operation of our business, including, except as otherwise indicated, the trademarks, service marks or trade names used in this report. This report 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 Annual Report on Form 10-K 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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    PART I Item 1. BUSINESS BUSINESS OVERVIEW We are engaged in the production and sale of specialty construction chemicals, specialty building materials and packaging sealants and coatings through three global operating segments in which we have achieved leadership positions. Specialty Construction Chemicals manufactures and markets products to improve the performance of Portland cement, the most widely used construction material in the world, and materials based on Portland cement such as concrete admixtures and cement additives, as well as, concrete production management systems. Specialty Building Materials manufactures and markets building envelope products, residential building products and specialty construction products. Darex Packaging Technologies manufactures and markets sealants and coatings for use in beverage and food containers and other consumer and industrial applications. GCP Applied Technologies Inc. was incorporated on May 1, 2015 for the purpose of holding the construction products and packaging technologies businesses of W. R. Grace & Co. On February 3, 2016, Grace shareholders of record received one common share of GCP for every one common share of Grace held as of the record date, January 27, 2016, and the construction products and packaging technologies businesses of Grace were transferred to GCP, thereby completing our legal separation from Grace ("the Separation"). On February 4, 2016, we began "regular way" trading on the New York Stock Exchange under the ticker symbol "GCP." For the years ended December 31, 2015 and 2014, while we were still a part of Grace, we had net sales of $1.4 billion and $1.5 billion, income before income taxes of $125.2 million and $191.1 million and net income of $40.1 million and $134.3 million, respectively. Approximately 64% of our 2015 sales are generated outside the United States and we operate in over 40 countries. Strategy Overview Our objective is to deliver value to shareholders by growing our earnings, cash flow and returns on invested capital through the implementation of our business strategies. The Specialty Construction Chemicals, Specialty Building Materials and Darex Packaging Technologies segments are comprised of a portfolio of high-performance products. These products must satisfy well-defined performance requirements and specifications providing high- value to our customers, although they typically represent a low percentage of the total cost of customers’ end- products. We implement our growth strategies using a number of key levers to accelerate our progress: Leverage Strong Segment Leadership Positions for Sales Growth — We utilize our global manufacturing and technical service footprint, our research and development and sales organizations, to increase geographic and customer penetration across our global footprint. We intend to make targeted investments to expand our capabilities in geographies and segments where trends and economic cycles present the best opportunities. Strengthen and Enhance Our Segment Positions with Product Innovation — We will seek to further advance our position as an industry innovator by investing in research development focused on commercializing differentiated products and services. To drive this innovation, we intend to employ our business model of introducing and supporting new technologies through our centralized research and development center in Cambridge, Massachusetts as well as our regional global applications labs. We may invest in additional regional application labs and field technical support resources as we expand our customer base 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 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. 4


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    Increase Productivity by Optimizing Global Supply Chain Opportunities — Given the relatively low conversion costs of our products, GCP’s productivity strategies focus on the supply chain. We have established 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 improve our buying power. Our manufacturing network also maximizes production and delivery efficiencies. Grow Through Strategic Acquisitions — When consistent with our business strategies, we will continue to consider seeking strategic, bolt-on acquisitions and alliances to accelerate our customer and geographic penetration, broaden our technology and product portfolios and bolster our manufacturing capacity and capability. Darex Packaging Technologies has provided stable and predictable cash flows and we plan to operate Darex in a manner which allows us to capture growth opportunities across our portfolio. Drive Cash Flow Conversion and Adjusted EBIT Return on Invested Capital to Deliver Long-Term Value to Our Shareholders — We believe the above strategies will allow us to accelerate our cash flow conversion to invest in research and development activities, manufacturing operations, technical service and sales organizations, strategic acquisitions and to return excess capital to shareholders. PRODUCTS AND SEGMENTS Specialty Construction Chemicals Operating Segment (SCC) We supply concrete admixtures, polymer fibers and in transit monitoring systems to concrete producers that are used to improve the rheology, workability, quality, durability and other engineering properties of concrete, mortar, masonry and other cementitious construction materials. We also supply cement additives to cement manufacturers that are used to improve energy efficiency in cement processing, enhance the characteristics of finished cement and improve ease of use. Our products reduce our customers' environmental footprints by lowering the energy use and CO2 emissions of our customers' processes. Portland cement-based concrete is the most widely used construction material in the world, with global production of approximately 4 billion tons of Portland cement and more than 10 billion cubic yards of concrete. We compete with several large international suppliers and regionally with smaller competitors. Competition for our products is based on product performance, technical support, the breadth of our manufacturing and distribution infrastructure and our ability to bring value to our customers in the construction industry. Our major global competitors are BASF and Sika. The following table sets forth SCC sales of similar products as a percentage of GCP total revenue. 2015 2014 2013 % of GCP % of GCP % of GCP (In millions) Sales Revenue Sales Revenue Sales Revenue Concrete Admixtures $ 532.7 37.5% $ 541.9 36.6% $ 513.5 35.6% Cement Additives 161.6 11.4% 184.4 12.5% 174.6 12.1% Total SCC Revenue $ 694.3 48.9% $ 726.3 49.1% $ 688.1 47.7% The following table sets forth SCC sales by geographic region as a percentage of SCC total revenue. 2015 2014 2013 % of SCC % of SCC % of SCC (In millions) Sales Revenue Sales Revenue Sales Revenue North America $ 242.0 34.9% $ 235.0 32.4% $ 219.1 31.8% Europe Middle East Africa (EMEA) 141.2 20.3% 170.3 23.4% 164.6 23.9% Asia Pacific 181.9 26.2% 185.5 25.5% 170.6 24.8% Latin America 129.2 18.6% 135.5 18.7% 133.8 19.5% Total SCC Revenue $ 694.3 100.0% $ 726.3 100.0% $ 688.1 100.0% 5


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    SCC consists of two product groups: concrete admixtures and cement additives. Concrete admixtures The concrete admixtures product group includes concrete admixtures, admixtures for decorative concrete and concrete production management systems. Concrete admixtures allow concrete producers to use a limited selection of locally-sourced raw materials (cement and aggregates) to produce concrete to meet a wide variety of performance specifications. Our products are based on a set of core platform technologies formulated regionally into admixtures tailored to local end-use requirements. For example, our MIRA® admixtures allow concrete to be produced with a lower amount of water, which improves the compressive strength and the long-term durability of the concrete. ADVA® admixtures are used to make flowable "self-compacting concrete" which is popular in precast concrete manufacturing where the rapid filling of large molds is a major driver of economics. ECLIPSE® admixtures are used to minimize the formation of shrinkage cracks in critical applications, such as bridge decks. STRUX® polymeric fibers are designed to improve the ductility of concrete which is a naturally brittle material. In some cases, STRUX® polymeric fibers may be used to replace steel reinforcement near the surface of concrete that will be exposed to corrosive de-icing salts. Admixtures for decorative concrete are used to create decorative/architectural concrete. PIERI® surface retarders are used to obtain exposed aggregate finishes in precast and cast-in-place concrete, achieving the desired surface appearance. PIERI® release agents allow for the efficient removal of mold forms with a resultant blemish-free concrete surface. Concrete production management systems provide sophisticated process monitoring and control while concrete is in transit to the jobsite. Our patented concrete production management system, VERIFI®, measures, monitors and manages critical concrete properties and systematically adds water or admixtures to maintain optimum concrete flow properties. The result is increased product quality and consistency of concrete, fewer rejected loads, increased jobsite efficiency and minimized costly project delays. Cement additives Portland cement is the binding agent for concrete. National standards usually dictate the compressive strength and other properties that must be met by cement. Cement additives are used to reduce the energy required to mill cement to the desired fineness and to improve the handling characteristics of the powdered material. These products are also used to adjust the performance of Portland cement, permitting our customers to optimize production economics. Examples include HEA2®, which is used around the world to improve the energy efficiency of cement grinding operations and CBA®, which is used to produce higher cement strength, providing a high level of process flexibility to the cement manufacturer. Increasingly, cement manufacturers seek to reduce the environmental impact of their manufacturing processes; our additives provide greater flexibility in raw materials, enabling customers to achieve improvements such as reductions in energy use and CO2 emissions. 6


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    The SCC product portfolio includes: Products Uses Customers Key Brands Chemicals and polymeric fibers used to reduce the production and in-place costs of concrete, increase the Ready-mix and precast ADVA®, STRUX®, MIRA®, POLARSET®, Concrete performance of concrete and improve concrete producers, engineers ECLIPSE®, DARACEM®, DARASET®, admixtures the life cycle cost of structures and specifiers DCI®, RECOVER®, WRDA®, ZYLA® Products for architectural concrete include surface retarders, coatings, pigments and release agents used by Admixtures for concrete producers and contractors to decorative enhance the surface appearance and Precast concrete producers concrete aesthetics of concrete and architects PIERI® Proprietary sensors, algorithms and control systems which monitor and Concrete adjust the flow properties while in transit production to construction sites, providing concrete management producers quality control and Ready-mix concrete systems operational efficiencies manufacturers VERIFI® Formulated chemicals added to the milling stage of the cement manufacturing process to improve plant energy efficiency, enhance the performance of the finished cement and help our customers meet environmental Cement regulations and reduce their CO2 additives footprints Cement manufacturers CBA®, SYNCHRO®, HEA2®, TDA®, ESE® Specialty Building Materials Operating Segment (SBM) We supply building materials used in both new construction and renovation/repair projects. We manufacture and sell products that protect structures from water, vapor transmission and air penetration as well as fire damage. Our products also reduce energy usage and improve the long-term durability of structures. They include waterproofing membranes and roofing underlayments for use in commercial and residential buildings, polymeric grouts for use in waterproofing and soil stabilization applications, air and vapor barriers, cementitious grouts and passive fire protection. Our products are specified and installed on commercial, residential and infrastructure projects around the world. Our technology platforms, project selling competencies and international reach are the foundation for our industry leadership. We are dedicated to understanding local codes and construction practices to ensure that our technology solutions address the regional needs of our customers. Our global specification sales organization emphasizes its technical expertise and has established relationships with key influencers and decision makers across the entire project selling value chain including architects, engineers, general contractors, specialty contractors and other channel partners. We continue to expand our international presence in targeted regions with our core product lines and by adding new technologies. Our specialty building materials product sales are global. We engage with global architectural and contracting firms as well as local specifiers, engineers, contractors and building material distributors that influence the buying decisions for our products. We compete globally with several large international construction materials suppliers, also regionally and locally with numerous smaller competitors. Competition for our products is based on product performance, technical support and service, brand name recognition and price. Our major competitors are Sika, RPM and Carlisle. The following table sets forth SBM sales of similar products as a percentage of GCP total revenue. 7


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    2015 2014 2013 % of GCP % of GCP % of GCP (In millions) Sales Revenue Sales Revenue Sales Revenue Building Envelope $ 234.7 16.6% $ 236.3 16.0% $ 219.1 15.2% Residential Building Products 79.3 5.6% 59.2 4.0% 69.3 4.8% Specialty Construction Products 84.1 5.9% $ 83.8 5.6% 81.7 5.7% Total SBM Revenue $ 398.1 28.1% $ 379.3 25.6% $ 370.1 25.7% The following table sets forth SBM sales by geographic region as a percentage of SBM total revenue. 2015 2014 2013 % of SBM % of SBM % of SBM (In millions) Sales Revenue Sales Revenue Sales Revenue North America $ 229.6 57.7% $ 201.0 53.0% $ 204.2 55.2% Europe Middle East Africa (EMEA) 94.7 23.8% 100.4 26.4% 96.3 26.0% Asia Pacific 69.4 17.4% 72.0 19.0% 63.0 17.0% Latin America 4.4 1.1% 5.9 1.6% 6.6 1.8% Total SBM Revenue $ 398.1 100.0% $ 379.3 100.0% $ 370.1 100.0% SBM consists of three product groups: building envelope, residential building products and specialty construction products. Building envelope products Building envelope products protect structures from water and help manage air and vapor transmission through building walls. The majority of sales in this product group are waterproofing products that protect commercial structures, residential structures and infrastructure. Our waterproofing products are used in both above-grade and below-grade applications. Above grade, our products protect the material to which they are applied and allow architects to design occupied spaces free from water infiltration, and below grade, our products enable the construction of structures in challenging sites, including portions below the existing water table. Examples of these products include our self-adhesive rubberized asphalt membrane, BITUTHENE® and our innovative pre-applied sheet membrane, PREPRUFE®. Our BITUTHENE® product line is manufactured globally and has a long track record of providing waterproofing in the most challenging conditions. Designers and contractors have relied on BITUTHENE® for over 40 years and continue to specify it by name. We pioneered the pre-applied waterproofing category with our Advanced Bond Technology™ found in PREPRUFE®. Our unique technology allows a waterproofing membrane to be installed on the ground or on walls before concrete is placed for a foundation. This technology also allows waterproofing of walls normally inaccessible during the construction of a building, such as foundations in densely populated cities. Major projects around the world have successfully implemented our PREPRUFE® system and it continues to gain recognition for its waterproofing performance. Residential building products Residential building products consist of roofing underlayments, flashing and weather barriers. Roofing underlayments are placed below the outermost roof covering, such as shingles, to protect sloped roofs from water damage caused by wind-driven rain and ice dams. ICE & WATER SHIELD® roofing underlayments are known throughout the industry and are sold in North America through a network of distributors. The VYCOR® flashing portfolio consists of high performance self-adhered flashing products that provide premium protection against water infiltration in critical areas such as windows and doors. VYCOR® flashing reduces the risk of mold and rot development and contributes to energy efficiency by sealing air leakages from the building. Specialty construction products Specialty construction products include fire protection, chemical grouts and cementitious grouts and mortars. Passive fire protection products are marketed under the MONOKOTE® brand. Chemical grouts are sold under the DE NEEF® brand and are used to repair cracks in concrete, seal water leaks in commercial buildings and infrastructure in addition to soil stabilization. BETEC® cementitious grouts and mortars are used in applications 8


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    where specific strength and/or flow are required. Examples of these applications include assembly of concrete precast elements for wind turbines, filling under rails for railroads and providing a high-strength surface for heavy machinery in industrial settings. The SBM product portfolio includes: Products Uses Customers Key Brands Structural barrier systems to prevent above and below ground water, vapor Architects, consultants and and air infiltration of the building structural engineers; specialty envelope of commercial structures, waterproofing, masons, dry wall Building including self-adhered sheet and liquid contractors and general BITUTHENE®, PREPRUFE®, ADPRUFE®, envelope membranes, joint sealing materials, contractors; specialty HYDRODUCT®, ADCOR®, SILCOR®, products drainage composites and waterstops distributors PERM-A-BARRIER® Specialty roofing membranes and flexible flashings for windows, doors, Roofing contractors, home decks and detail areas, including fully builders and remodelers; Residential adhered roofing underlayments, building material distributors, building synthetic underlayments and self- lumberyards and home centers; ICE & WATER SHIELD®, TRI-FLEX®, products adhered flashing architects and specifiers VYCOR® Fire protection products spray-applied to Local contractors and specialty the structural steel frame, encasing and subcontractors and applicators; insulating the steel and protecting the building materials distributors; building in the event of fire and industrial manufacturers; Fire protection enhancing the heat resistance during a architects and structural materials fire engineers MONOKOTE® Contractors; specialty Products for repair and remediation in distributors; municipalities; and waterproofing applications and soil other owners of large DE NEEF®, HYDRO ACTIVE®, Chemical grouts stabilization infrastructure facilities SWELLSEAL®, DE NEEF® PURe™ Specialty contractors engaged in the repair of concrete, Cementitious installation of new precast grouts and Cementitious grouts and mortars used concrete elements and mortars for under filling and gap filling infrastructure repair BETEC® Darex Packaging Technologies Operating Segment (Darex) We supply sealants and coatings to global manufacturers of beverage, food and consumer metal containers and closures and industrial packaging applications. These products, designed with our significant regulatory and application knowledge, protect the packaging materials and preserve their contents. We are the global leader in can sealants. Our growth is driven by innovation of higher performing products, continuous development of new applications, increasing demand for sustainability, rising disposable income in emerging regions, general economic growth and increasing demand for canned and bottled packaged products. Our customers trust and rely on our global technical service as well as our expertise in global regulatory compliance (including food laws) to address industry challenges and enhance their productivity. We believe we are well positioned to capture industry growth, especially in emerging regions with our global infrastructure. We seek to develop and introduce new products that add additional value to the current and future needs of our customers, such as our introduction of new BPA-NI coatings and products with oxygen scavenging functionality. Our Darex business is global. We compete with several large international suppliers, and regionally, with many smaller competitors. Our primary global competitors are Altana, Akzo Nobel, PPG and Valspar. Competition for our products is generally based on product performance and reliability, technical service, price and additional value-added features to address the needs of our customers, end-users and brand owners. 9


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    The following table sets forth Darex sales of similar products as a percentage of GCP total revenue: 2015 2014 2013 % of GCP % of GCP % of GCP (In millions) Sales Revenue Sales Revenue Sales Revenue Sealants and Closures $ 221.2 15.6% $ 254.8 17.2% $ 262.2 18.2% Coatings 105.0 7.4% 120.0 8.1% 121.9 8.4% Total Darex Revenue $ 326.2 23.0% $ 374.8 25.3% $ 384.1 26.6% The following table sets forth Darex sales by geographic region as a percentage of Darex total revenue. 2015 2014 2013 % of Darex % of Darex % of Darex (In millions) Sales Revenue Sales Revenue Sales Revenue North America $ 66.6 20.4% $ 67.9 18.1% $ 64.9 16.9% Europe Middle East Africa (EMEA) 105.2 32.3% 125.3 33.4% 124.3 32.3% Asia Pacific 78.3 24.0% 92.2 24.6% 102.0 26.6% Latin America 76.1 23.3% 89.4 23.9% 92.9 24.2% Total Darex Revenue $ 326.2 100.0% $ 374.8 100.0% $ 384.1 100.0% Darex consists of two product groups: sealants and closures and coatings. Sealants and closures Our sealants and closures product group includes two product lines: can sealants and closures. Can sealants provide a hermetic seal between the lid and the body of the metal can used in beverage, food, aerosol and industrial packaging. We offer our customers a complete portfolio of both water-base and solvent- base technologies to address current industry trends of thinner gauge metals and high-speed production processes. Closures provide the seal for pry-off crowns, twist-off crowns and roll-on pilfer-proof (ROPP) and plastic caps. Our CELOX® oxygen scavenging technology protects sensitive beverages from oxygen ingress into the packaging to extend product shelf life and prevent flavor deterioration, color changes and nutrient depletion. Our SINCERA® lubricants are specifically designed for taste sensitive applications. Coatings Coatings protect both the interior and exterior surfaces of metal packaging containers and closures. Our coatings are engineered to prevent metal corrosion, ensure proper adhesion of sealing compounds and enhance graphic decorations on the exterior of containers and closures. We introduced our APPERTA® coatings to address increasing industry demands for non-BPA technology. We specifically formulated our SISTIAGA® coatings for technically demanding monobloc beverage and aerosol containers. 10


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    The Darex product portfolio includes: Products Uses Customers Key Brands Solvent and water-based compounds for rigid metal containers that ensure a hermetic seal between the lid and the body of beverage, food, aerosol and Packaging manufacturers and Sealants other cans food and beverage companies DAREX® PVC and PVC-free compounds for metal and plastic bottle closures that are used on pry-off and twist-off metal crowns, as well as roll-on pilfer-proof and plastic closures to seal and enhance the shelf life of food and beverages in glass and plastic bottles Manufacturers of closures for DAREX®, DARAFORM®, DARASEAL®, Closures and jars food and beverages DARABLEND®, SINCERA®, CELOX® Products for coating metal cans, crowns and closure packaging that protect the metal against corrosion, protect the contents against the influences of metal, ensure proper adhesion of sealing compounds to metal surfaces and provide base coats for inks and for Packaging manufacturers and Coatings decorative purposes food and beverage companies DAREX®, APPERTA®, SISTIAGA® SALES AND MARKETING Our three operating segments maintain direct sales and technical teams made up of approximately 700 employees supporting customers in over 100 countries worldwide. Our global team sells products under annual and multi-year global, regional and local agreements and has developed deep segment and product application knowledge key to our customers' success. We believe our deep rooted understanding of our customers' needs, challenges and operations and our ability to service at high standards throughout the world, give all three segments a competitive advantage. The majority of our products require local, regional, country and international code approvals related to use, storage and performance. Our commercial organization supports and consults on committees and technical associations in order to ensure codes and product standards are consistently applied. Our SCC and SBM sales professionals work with leading architects, engineers and contractors across the globe seeking to ensure that our products are specified for use in thousands of projects annually. Our products are designed for use in some of the world's most demanding environments including the Getty Center in Los Angeles, the London Underground, Hong Kong’s Bank of China Tower, the Guggenheim Museum Bilbao in Spain and many other landmarks. As part of our "go to market" strategy, the SCC team provides technical services to over 10,000 concrete and cement production facilities worldwide. In many cases, we also provide product dispensing equipment to our customers as an integral part of the concrete and cement production process. Our Darex business employs a dedicated sales and technical service team to market our line of sealants and coatings in over 75 countries. Darex provides a high level of technical service at the customer facility to ensure proper use of our products, as well as ongoing consultation with our customers to drive productivity and value for the customer throughout the value chain. MANUFACTURING, RAW MATERIALS AND SUPPLY CHAIN Our three operating segments share global supply chain processes, manufacturing facilities, as well as technical service and sales centers around the world, which provides cost efficiency. Specialty Construction Chemicals and Specialty Building Materials We utilize internal and third party manufacturing to produce our products to our specifications. Our low capital intensive plants along with third-party manufacturers provide us with flexibility in servicing our customers. Several of our plants ship internationally but most of our facilities are positioned to serve local market demand. We have the ability to respond quickly to changes in local demand by establishing or expanding manufacturing capacity with low capital investment. With both vendors and customers, we have numerous multi-year supply and purchasing agreements which help to minimize volume disruption. Construction demand is seasonal resulting in demand variations requiring effective management of our manufacturing and distribution assets. For many of our 11


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    SCC customers, we install and maintain a chemical dispensing and storage system for our products at their production facilities. We periodically replenish the on-site systems to give our customers instant access to our SCC products in the amounts they require twenty-four hours a day. These dispensing and storage systems have accounted for approximately 32% of our annual capital spend. The raw materials we use in our products are obtained from a variety of suppliers, including basic chemical and petrochemical producers. Many of our raw materials are organic chemicals derived from olefins, including specialty films and fibers. We also make significant purchases of inorganic materials such as gypsum and specialty materials, including papers, rubber and asphalt. We have multiple raw material sources and balance our purchasing requirements between local and global sources seeking to maximize performance and profitability. Global supply and demand factors, changes in currency exchange rates and petroleum prices can significantly impact the price and availability of our key raw materials. Our global supply chain team is constantly monitoring the global market to identify cost and productivity opportunities. We seek to leverage our overall volumes for all regions. Since we manufacture a portion of our products in emerging regions using raw materials from suppliers in the U.S., Europe and other 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. This effect is partially mitigated by our reliance on local sourcing for some raw materials. The construction business is cyclical, in response to economic conditions, as well as seasonal, driven by weather conditions. Demand for our products is primarily driven by global non-residential construction activity and U.S. residential construction activity. We seek to increase profitability and minimize the impact of cyclical downturns in regional economies by introducing technically advanced high-performance products and expanding geographically. Darex Packaging Technologies Our packaging products are manufactured by a network of globally integrated plants that are positioned to service our customers regionally. Our packaging products are manufactured in both large facilities to permit economies of scale and a network of smaller operations that enable customization to local conditions. The principal raw materials for Darex products include resins, solvents, latexes (including certain food-grade raw materials), polyolefins, pigments and rubber. Multiple suppliers are generally available for each of these materials; however, some of our raw materials may be provided by single sources of supply. We seek to mitigate the risk of using single source suppliers by identifying and qualifying alternative suppliers or, for unique materials, by using alternative formulations from other suppliers. In some instances, we produce our own raw materials and intermediates. Prices for many of our raw materials, including specialty and commodity materials such as latex, rubbers, pigments, resins and solvents, have been volatile in recent years. In response to increases in raw material costs, we generally take actions to mitigate the effect of higher costs including increasing our product prices, developing alternative formulations for our products, increasing productivity and fixing purchase costs for certain raw materials. Since we manufacture a substantial portion of our packaging products in emerging regions using raw materials from suppliers in the U.S., Europe and other 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. This effect is partially mitigated by our reliance on local sourcing for many of our raw materials. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS Disclosure of financial information about industry segments and geographic areas for 2015, 2014 and 2013 is provided in this Annual Report on Form 10-K in Item 8 (Financial Statements and Supplementary Data) under Note 14 (Operating Segment Information) to the Combined Financial Statements, which disclosure is incorporated herein by reference. Disclosure of risks attendant to our foreign operations is provided in this Report in Item 1A (Risk Factors). 12


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    BACKLOG OF ORDERS While at any given time there may be some backlog of orders, backlog is not material in respect to our total annual sales, nor are the changes, from time to time, significant. RESEARCH ACTIVITIES; INTELLECTUAL PROPERTY We believe success in our industries is driven by technology and innovation. Growing our businesses and maintaining our margins depends on our ability to introduce new products based on innovative technology, as well as our ability to obtain patent or other intellectual property protection. Our research and development programs emphasize development of new products and processes, improvement of existing products and processes and application of existing products and processes to new industries and uses. The programs with the highest risk- adjusted impacts garner the necessary resources for success. Our world-class Global Technology Center in Cambridge, Massachusetts houses the product research activities of all three of our operating segments. The global marketing resources that we believe are essential to a successful product development process are also located with our research and development group in Cambridge. Overall, we have approximately 65 research and development employees based in Cambridge, Massachusetts. Technologies developed by our Global Technology Center are customized for the regions and supported in the field by a network of Regional Technical Centers. This includes facilities in Sorocaba, Brazil; Singapore; Beijing, China; Atsugi, Japan; Epernon, France; Lügde, Germany; Norderstedt, Germany; and Heist, Belgium. Across all three segments, there are over 300 research and development and technical service employees in our Regional Technical Centers. Globally we have close to 11% of our workforce focused on technology. We believe the collective technical expertise, industry knowledge and professionalism of this team is a significant differentiator for us. We file and patent applications internationally on a routine basis and obtain grants in numerous countries around the world in support of our products, formulations, manufacturing processes, equipment and improvements. We also benefit from technological and commercial advantages protected under trade secret laws, including know-how and other proprietary information relating to many of our products, technologies and internal quality control and testing methodologies. Entering 2016, we have over 800 active patents and patent applications in a number of countries around the world, including approximately 150 in the U.S. During the past five years, we have averaged approximately 5-10 U.S. patent issuances per year, with similar results in other countries in which we have filed counterpart patent applications. The average number of patents filed and granted could go up or down from year to year, depending on various factors, some of which may not be within our control. It is our intent to continue to file for patents to protect our proprietary innovations and investments in research. Research and development expenses were approximately $22.3 million in 2015, $27.9 million in 2014 and $24.3 million in 2013. These amounts include depreciation and amortization expenses related to research and development and expenses incurred in funding external research projects. The amount of research and development expenses relating to government -and customer- sponsored projects (rather than projects that we sponsor) was not material during these periods. ENVIRONMENT, HEALTH AND SAFETY MATTERS We are subject, along with other manufacturers of specialty chemicals, to stringent regulations under numerous U.S. federal, state and local and foreign environmental, health and safety laws and regulations relating to the generation, storage, handling, discharge, disposition and stewardship of hazardous wastes and other materials. Environmental laws require that certain responsible parties, as defined in the relevant statute, fund remediation actions regardless of legality of original disposal or ownership of a disposal site. We are involved in remediation actions to address hazardous wastes or other materials as required by U.S. federal, state and local and foreign laws. We continuously seek to improve our environment, health and safety performance. We have expended funds to comply with environmental laws and regulations and expect to continue to do so in the future. The following table sets forth our expenditures in the past three years and our estimated expenditures in 2016 and 2017, for (i) environmental, health and safety (EH&S) operating costs and waste disposal; (ii) capital expenditures for EH&S related investments; and (iii) site remediation: 13


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    EH&S Operating Year Costs and Capital Site (In millions) Waste Disposal Expenditures Remediation 2013 $ 4.8 $ 1.9 $ 1.0 2014 4.8 2.4 0.6 2015 4.7 4.4 0.4 2016 4.9 4.6 0.2 * 2017 5.2 5.0 0.1 * ___________________________________________________________________________________________________________________ * Amounts are based on site remediation matters for which sufficient information is available to estimate remediation costs. We do not have sufficient information to estimate all of our possible future remediation costs. As we receive new information, our estimate of remediation costs may change materially. EMPLOYEE RELATIONS As of December 31, 2015, we had approximately 2,900 employees, of which approximately 680 were employed in the United States. Of our total employees, approximately 2,400 were salaried and 500 were hourly. Approximately 85 of our manufacturing employees in the United States are represented for collective bargaining purposes by five different local collective bargaining groups. We have operated without a labor work stoppage for more than 10 years. We have works councils representing the majority of our European sites serving approximately 150 employees. AVAILABLE INFORMATION We maintain an Internet website at www.gcpat.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our website as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission, or "SEC." Further, the SEC's website, www.sec.gov, contains reports and other information regarding our filings or you may read and copy any materials that we file with the SEC at its Public Reference Room, located at 100 F Street, NE, Washington, DC 02549. These reports may be accessed through our website's investor relations page. In addition, the charters for the Audit, Compensation, Nominating and Governance, and Corporate Responsibility Committees of our Board of Directors, our corporate governance guidelines and code of ethics are available, free of charge, on our website at http://investor.gcpat.com/corporate-governance/governance- documents. Printed copies of the charters, governance guidelines and code of ethics may be obtained free of charge by contacting GCP Shareholder Services at (617) 876-1400.The information on our website is not, and shall not be deemed to be, a part of this report or incorporated into any other filings we make with the SEC. 14


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    Item 1A. RISK FACTORS Our operations are subject to a number of risks, including those listed below. When considering investments in our company, you should carefully consider each of the following risk factors and all of the other information set forth in this Annual Report on Form 10-K. 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 company 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 or in the case that an additional risk or uncertainty not presently known to us or that we currently believe to be immaterial develops into actual events, the trading price of our common stock could decline. Risks Relating to Our Business We face significant competition and, if we are not able to respond to competition, our revenues may decrease. We face significant competition from a variety of competitors in each of our markets. Some of our competitors have substantially greater financial, marketing, personnel and other resources than we do. New competitors also could enter our markets and certain of our customers could decide to self-manufacture or otherwise enter our markets. We consider product quality, performance, customer service, on-time delivery, price, distribution capabilities and breadth of product offerings to be the primary competitive factors in our markets. Our competitors may be able to offer more attractive pricing, duplicate our strategies, or develop enhancements to products that could offer performance features that are superior to our products. Competitive pressures, including those described above, could adversely affect our competitive position, leading to a loss of market share or decreases in prices, either of which could have a material adverse effect on our business, financial condition or results of operations. 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. 15


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    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; and • forward buying programs that layer in our expected requirements systematically over time; 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 64% of our 2015 sales outside the United States. We operate in over 40 countries and in over 30 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 Pacific 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; 16


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    • 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. In particular, our ability to manage our Venezuelan operations has been and will continue to be negatively affected by difficult conditions in Venezuela, including continuing high inflation and the significant devaluation of the Venezuelan bolivar. Government regulations regarding price increases limit our ability to offset the effects of high inflation and the currency devaluations. Import authorization controls and the limited availability of foreign exchange limit our ability to import raw materials needed for the production of our products. In addition, labor laws limit our ability to manage overhead costs and, at times, production has been negatively impacted by local labor issues. Additional government actions, including in the form of further currency devaluations or effective devaluations or continued or worsening import authorization controls, foreign exchange or price or profit controls could have further adverse impacts on our business, results of operations, cash flows and financial condition, as could further deterioration in the Venezuelan economy resulting from the decline in the price of oil or from other factors. We have no assurance that we will be able to sustain operations in Venezuela. Economic factors as well as further government actions affecting our ability to do business (including the possibility of nationalization, expropriation of assets or other similar actions) could affect both our results of operations as well as our accounting presentation for the Venezuelan business. Specialty Construction Chemicals and Darex Packaging Technologies have operated in Venezuela for several decades with sales in that country representing approximately 8% of each segment’s sales in 2015. The future sales of our Venezuelan subsidiary are expected to be immaterial after September 30, 2015 due to Venezuela's currency devaluation. For additional information regarding these and other risks associated with our operations in Venezuela, refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Certain of our customer relationships outside of the United States are with governmental entities and we could be materially and adversely affected by violations of the U.S. Foreign Corrupt Practices Act ("FCPA") and similar worldwide anti-bribery laws in non-U.S. jurisdictions. The FCPA and similar worldwide anti-bribery laws in non-U.S. jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Because certain of our customer relationships outside of the United States are with governmental entities, we are subject to such anti-bribery laws. Our policies mandate compliance with these anti-bribery laws. We operate in many parts of the world that have experienced governmental corruption to some degree, and in certain circumstances strict compliance with anti-bribery laws may conflict with local customs and practices. Despite our training and compliance programs our internal control policies and procedures may not always protect us from reckless or criminal acts committed by our employees or agents. Violations of anti-bribery laws or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations, financial condition and cash flows. 17


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    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 advanced economies, changes in the values of the currencies of these emerging regions versus the U.S. dollar, the euro and the currencies of other advanced economies in which we purchase raw materials, 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, we 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, 2015, we had $68.0 million of unsecured indebtedness outstanding. Immediately following the Separation, we had a total combined indebtedness for borrowed money of approximately $826 million, including approximately $750 million borrowed, in part, to pay a distribution to Grace prior to the Separation. The amount of and terms governing 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 company 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 our 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. We may also incur substantial additional indebtedness in the future. If we incur additional debt, the risks related to our indebtedness may intensify. 18


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    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 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. Restrictions imposed by agreements governing our 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, our debt could be accelerated and the Company may not have sufficient cash to pay the accelerated debt. The agreements governing our indebtedness may contain various covenants that we expect may 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 that repayment of our debt is accelerated pursuant to the terms of these agreements, we may not have or be able to obtain sufficient funds to make such accelerated payments. Our indebtedness exposes us to interest expense increases if interest rates increase. As of the Separation, we had approximately $301 million, or 36%, of our borrowings, at a variable interest rates and exposed 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 at the time of the Separation and distribution would increase our annual estimated debt-service requirements by approximately $3 million, assuming our consolidated variable interest rate indebtedness outstanding as of the time of the Separation and distribution remains the same. 19


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    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. When consistent with our business strategies, 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 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. 20


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    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. 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 the generation, storage, handling, discharge, disposition and stewardship of hazardous wastes and other materials. 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 an acceleration in new regulatory requirements, we may be required to expend additional funds to remain in compliance. 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 December 31, 2015, we had approximately 2,900 total employees, of which 680 were employed in the United States. Of our total U.S. employees, approximately 85 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 or financial performance. 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. 21


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    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 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. Previously, 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 necessary standalone infrastructure. Grace previously performed many important corporate functions for us, including some information technology, treasury, tax administration, accounting, financial reporting, human resources, compensation, legal and other services. Following the Separation, Grace continues to provide some of these services to us on a transitional basis, generally for a period of up to 18 months, pursuant to the Transition Services Agreement. Grace 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 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. During fiscal year 2015 and prior to the Separation, we were 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.” However, since the Separation, we have become 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 require, 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 financial statements are not necessarily indicative of our future performance. We may not realize the potential benefits we expect from our Separation from Grace. In addition, we will incur significant costs, including those described below, which may exceed our estimates, and we will incur some 22


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    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 financial statements are 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 periods presented. The historical combined financial statements are not necessarily indicative of our future financial condition, results of operations or cash flows primarily because of the following factors: • Our historical combined financial statements reflect allocations of expenses for services historically provided by Grace, 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 statements 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 statements may not fully reflect the effects of certain liabilities that we will incur or assume. Our historical combined financial statements may not give effect to various ongoing additional costs we may incur in connection with being an independent public company. Accordingly, our historical combined financial statements do 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,” and our historical combined financial statements and the notes to those statements included elsewhere in this Annual Report on Form 10-K. 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. As a condition to the distribution that effected the Separation, Grace was required to 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 was based upon and relied on, among other things, certain facts and assumptions, as well as certain representations, statements and undertakings of Grace and us, including those relating to our and Grace's past and future conduct. If any of these representations, statements or undertakings were, or become, inaccurate or incomplete, or if Grace or we breach any of its or our covenants in the Separation documents, such as the Tax Sharing Agreement, 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 failed 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 were based were 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 our common stock in a taxable sale for its fair market value (unless Grace and GCP 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, we would (i) recognize taxable gain as if we had 23


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    sold all of our assets in a taxable sale in exchange for an amount equal to the fair market value of our common stock and the assumption of all of our liabilities and (ii) obtain a related step up in the basis of our assets), and Grace shareholders at the time of the distribution who received shares of our 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. Under the Tax Sharing Agreement entered into between Grace and GCP, we 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 our equity securities or assets, whether by merger or otherwise (and regardless of whether we participated in or otherwise facilitated the acquisition), (2) other actions that we may take or fail to, or (3) any of our representations or undertakings made in connection with the Separation and the distribution being incorrect or violated. Any such indemnity obligations could be material. In addition, Grace, GCP and our 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, directly or indirectly, acquire 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 restricts GCP, 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 our assets or shares of our common stock would be acquired, whether by merger or otherwise; • Issuing GCP equity securities beyond certain thresholds; • Repurchasing our 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 Separation and certain related transactions. These restrictions may limit our ability to pursue certain equity issuances, strategic transactions or other transactions that may maximize the value of our business. In connection with the Separation, Grace has agreed to indemnify the Company for certain liabilities and we have agreed to 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 may 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 agreed to indemnify us for certain liabilities, and we agreed to indemnify Grace for certain liabilities, and we agreed to indemnify Grace in each case for uncapped amounts, as discussed further in “Certain Relationships and Related Transactions-Agreements with Grace.” Indemnities that we 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 us responsible for any of the liabilities that Grace has agreed to retain. Further, the indemnity from Grace may not be sufficient to protect us 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 we ultimately succeed in recovering from Grace any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves. Each of these risks could negatively affect our business, results of operations and financial condition. 24


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    After the Separation, certain of Grace’s insurance policies may not cover us for losses associated with occurrences prior to the Separation. In connection with the Separation, we entered into agreements with Grace to address several matters associated with the Separation, including insurance coverage. After the Separation, some of Grace’s insurance policies may not cover us for certain losses associated with occurrences prior to the Separation. Several members of our 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 our 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 our directors and executive officers are faced with decisions that could have different implications for Grace and our 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 were to be assigned from Grace or its affiliates to us or our affiliates. However, some of these contracts require the contractual counterparty’s consent to such an assignment. Similarly, in some circumstances, we and one or more business units of Grace are joint beneficiaries of contracts, and we 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 us or to seek to terminate the contract. If (1) we are unable to complete the assignments in a timely manner, (2) we enter into new agreements on significantly less favorable terms, or (3) if the contracts are terminated, we may be unable to obtain the benefits, assets and contractual commitments which are intended to be allocated to us 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 our financial condition and future results of operations. Risks Relating to Ownership of GCP Common Stock Our share price may fluctuate significantly. The market price of our common stock could fluctuate significantly due to a number of factors, many of which are beyond our control, including: • fluctuations in our quarterly or annual earnings results or those of other companies in the industry; • failures of our operating results to meet the estimates of securities analysts or the expectations of shareholders or changes by securities analysts in their estimates of our future earnings; • announcements made by us or our customers, suppliers or competitors; • changes in laws or regulations which adversely affect us or our industry; • changes in accounting standards, policies, guidance, interpretations or principles; • general economic, industry and stock market conditions; • future sales of company common stock by shareholders; • future issuances of our common stock by us; and • the other factors described in these “Risk Factors” and other parts of this Annual Report on Form 10- K. 25


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    A large number of the Company’s shares are or will be eligible for future sale, which may cause the market price for company common stock to decline. Upon completion of the Separation and distribution, we had outstanding an aggregate of 70,538,445 shares of common stock. Virtually all of those shares were freely tradeable without restriction or registration under the Securities Act of 1933, as amended. We are unable to predict whether large amounts of our 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 have sold or will sell the shares of company common stock they received in the distribution for various reasons. For example, such shareholders may not believe that our business profile or our level of market capitalization as an independent company fits their investment objectives. The sale of significant amounts of our common stock or the perception in the market that this will occur may lower the market price of our 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 in our certificate of incorporation, our bylaws and of Delaware law could discourage, delay or prevent a change in control of the Company that a shareholder may consider favorable. These include provisions: • authorization of a large number of shares of common stock that are not yet issued, which may permit our 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; • prohibition on shareholders calling special meetings and taking action by written consent; • advance notice requirements for nominations of candidates for election to the Company's Board of Directors and for proposing matters to be acted on by shareholders at the annual shareholder meetings; • the temporary classification of our Board of Directors; and • supermajority voting requirements for certain amendments to the Company’s certificate of incorporation or shareholder proposals for amendments to the Company’s bylaws. In addition, since the Separation, the Company has been and is 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 company common stock. We believe these provisions protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our Board of Directors and by providing the Board of Directors with more time to assess any acquisition proposal as compared to its long term plan as a standalone company. However, these provisions apply even if a proposal may be considered beneficial by some shareholders and could delay or prevent an acquisition that our Board of Directors determines is not in the best interests of GCP and our shareholders. 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). The Company may not be able to engage in desirable strategic or capital-raising 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 company common stock. Our certificate of incorporation authorizes it to issue, without the approval of our 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 our common stock respecting dividends and 26


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    distributions, as our 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 company common stock. For example, we 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 we could assign to holders of preferred stock could affect the residual value of the common stock. The Company does not expect to pay any cash dividends for the foreseeable future. We currently intend to retain future earnings to finance our business. As a result, GCP does not expect to pay any cash dividends for the foreseeable future. All decisions regarding the payment of dividends by GCP will be made by our Board of Directors from time to time in accordance with applicable law. There can be no assurance that we 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, increases in reserves or other currently unknown reasons. If we do not pay dividends, the price of our common stock must appreciate in order 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 our common stock in order to generate cash flow from your investment. 27


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    Item 1B. UNRESOLVED STAFF COMMENTS None. Item 2. PROPERTIES We operate manufacturing plants and other facilities (including offices, warehouses, labs and other service facilities) throughout the world. Some of these plants and facilities are shared among our operating segments. We consider our major operating properties to be in good operating condition and suitable for their current use. We believe that, after taking planned expansion into account, the productive capacity of our plants and other facilities is generally adequate for current operations. The tables below summarize our primary facilities by operating segment and region as of December 31, 2015: Number of Facilities* Europe Middle East Africa North America (EMEA) Asia Pacific Latin America Total Specialty Construction Chemicals 13 7 22 11 53 Specialty Building Materials 5 4 5 — 14 Darex Packaging Technologies 2 6 5 7 20 ___________________________________________________________________________________________________________________ * Shared facilities are counted in all applicable operating segments. The total number of facilities included in the above table, without regard to sharing amongst operating segments, is 65. Number of Facilities—Leased* Europe Middle East Africa North America (EMEA) Asia Pacific Latin America Total Specialty Construction Chemicals 4 3 18 7 32 Specialty Building Materials — 3 4 — 7 Darex Packaging Technologies — 1 2 4 7 ___________________________________________________________________________________________________________________ * Shared facilities are counted in all applicable operating segments. Number of Facilities—Owned* Europe Middle East Africa North America (EMEA) Asia Pacific Latin America Total Specialty Construction Chemicals 9 4 4 4 21 Specialty Building Materials 5 1 1 — 7 Darex Packaging Technologies 2 5 3 3 13 ___________________________________________________________________________________________________________________ * Shared facilities are counted in all applicable operating segments. We own our principal facilities. With respect to our other facilities, we either own, lease or hold them under a land lease arrangement. Our corporate headquarters is in Cambridge, Massachusetts, and we also lease and operate a shared services facility in Manila, Philippines. Our largest facilities are located in Chicago, Illinois; Cambridge, Massachusetts; and Mount Pleasant, Tennessee. We also have numerous smaller locations around the world. SCC requires a greater number of facilities to service its customers than SBM or Darex as many of its products are water-based and are delivered to numerous distributors, concrete production locations, cement production locations, and job sites. See Note 3 to the annual Combined Financial Statements. In connection with the prior W. R. Grace & Co. credit agreement, Grace entered into security agreements with respect to our Mount Pleasant, Tennessee, facility. We have entered into security agreements with respect to our United States facilities in Cambridge, Massachusetts, and Mount Pleasant, Tennessee. For a description of our credit agreement see Item 8 Financial Statements and Supplementary Data, Note 16 (Subsequent Event) to the Combined Financial Statements. 28


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    Item 3. LEGAL PROCEEDINGS We are the subject of, or a party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. We do not believe that the ultimate resolution of any of these legal actions is likely to be material to GCP’s financial condition or results of operations. Item 4. MINE SAFETY DISCLOSURES Not applicable. PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange ("NYSE") under the ticker symbol "GCP." The high and low market price per share of our common stock as reported by the NYSE for each full quarterly period of fiscal years 2015 and 2014 are not provided as the common stock of GCP Applied Technologies Inc. did not begin "regular way" trading on the NYSE until February 4, 2016. On February 29, 2016, we had 4,993 stockholders of record of our common stock. From February 4, 2016 through February 29, 2016, the highest market price paid for our common stock on the NYSE was $18.03 per share and the lowest market price for our common stock on the NYSE was $15.49 per share. Since the Separation, we have not paid a dividend to holders of our common stock. Further, we currently intend to retain future earnings to finance our business. As a result, we do not expect to pay any cash dividends for the foreseeable future. All decisions regarding the payment of dividends to our shareholders will be made by our Board of Directors from time to time in accordance with applicable law. Recent Sales of Unregistered Equity Securities None Issuer Purchases of Equity Securities None Item 6. SELECTED FINANCIAL DATA The following selected historical combined financial data below should be read in conjunction with Item 7, ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations,’’ our historical combined financial statements and the related notes appearing in Item 8 “Combined Financial Statements and Supporting Data” of this Annual Report on Form 10-K to fully understand factors that may affect the comparability of the information presented below. The selected combined financial data in this section are not intended to replace the combined financial statements and are qualified in their entirety by the combined financial statements and related notes included in this Annual Report on Form 10-K. 29


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    Fiscal Year Ended December 31, (in millions, except per share amounts) 2015 2014 2013 2012 2011 Statement of Operations Net sales $ 1,418.6 $ 1,480.4 $ 1,442.3 $ 1,409.2 $ 1,364.0 Net income 40.9 135.5 111.3 86.3 60.3 Net (income) loss attributable to noncontrolling interests (0.8) (1.2) (1.6) (1.1) 0.6 Net income attributable to GCP 40.1 134.3 109.7 85.2 60.9 Basic and diluted earnings per share (1): Net income attributable to GCP 0.57 1.90 1.56 1.21 0.86 Basic and diluted shares 70.5 70.5 70.5 70.5 70.5 Financial Position Total assets 833.1 981.5 986.4 966.3 900.4 Long-term debt — — 4.5 11.4 0.1 Long-term debt—related party — — 9.3 20.1 8.8 _____________________________________________________________________________ (1) GCP Earnings per share for 2015, 2014 and 2013 were calculated using the shares that were distributed to Grace shareholders immediately following the Separation. For periods prior to the Separation it is assumed that there are no dilutive equity instruments as there were no GCP equity awards outstanding prior to the Separation. 30


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    Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS See "Analysis of Operations" for a discussion of our non-GAAP performance measures. Our references to "advanced economies" and "emerging regions" refer to classifications established by the International Monetary Fund. Separation from Grace On February 5, 2015, W. R. Grace & Co. announced its intent to separate the business, assets and liabilities associated with the Grace Construction Products operating segment and the Darex Packaging Technologies business (collectively, "GCP") into an independent publicly-traded company. Subject to satisfaction of specified conditions, the Separation was accomplished by way of the distribution to holders of shares of W. R. Grace & Co. common stock of all of the shares of common stock of GCP Applied Technologies Inc., a Delaware corporation (the "Company"). As used in these notes, the term "Grace" refers to W. R. Grace & Co. and/or one or more of its subsidiaries and, in certain cases, their respective predecessors. On January 27, 2016, we entered into a separation agreement pursuant to which Grace agreed to transfer its Grace Construction Products operating segment and the packaging technologies business, operated under the “Darex” name, of its Grace Materials Technologies operating segment to GCP (the "Separation"). The Separation occurred on February 3, 2016, by means of a pro rata distribution to Grace stockholders of all of the outstanding shares of our common stock (the "Distribution"). Under the Distribution, one share of our common stock was distributed for each share of Grace common stock held as of the close of business on January 27, 2016. No fractional shares were distributed. As a result of the Distribution, GCP is now an independent public company and its common stock is listed under the symbol “GCP” on the New York Stock Exchange. 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 Annual Report on Form 10-K 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; 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. 31


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    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. 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 2015 Performance Summary Following is a summary of our financial performance for the year ended December 31, 2015 compared with the prior year. • Net sales decreased 4.2% to $1,418.6 million. • Adjusted Gross Margin increased 250 basis points to 37.9%. • Gross profit margin increased 60 basis points to 36.4%. • Adjusted EBIT increased 16.0% to $226.7 million or 16.0% of sales. • Net income decreased 70.1% to $40.1 million. 2014 Performance Summary Following is a summary of our financial performance for the year ended December 31, 2014 compared with the prior year. • Net sales increased 2.6% to $1,480.4 million. • Adjusted Gross Margin increased 10 basis points to 35.4%. • Gross profit margin increased 100 basis points to 35.8%. 32


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    • Adjusted EBIT increased 0.3% to $195.4 million or 13.2% of sales. • Net income increased 22.4% to $134.3 million. 33


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    Analysis of Operations for 2015, 2014, and 2013 We have set forth in the table below our key operating statistics with percentage changes for the years ended December 31, 2015, 2014, and 2013. 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) 2015 2014 % Change 2013 % Change Net sales: Specialty Construction Chemicals $ 694.3 $ 726.3 (4.4)% $ 688.1 5.6 % Specialty Building Materials 398.1 379.3 5.0 % 370.1 2.5 % Darex Packaging Technologies 326.2 374.8 (13.0)% 384.1 (2.4)% Total GCP net sales $ 1,418.6 $ 1,480.4 (4.2)% $ 1,442.3 2.6 % Net sales by region: North America $ 538.2 $ 503.9 6.8 % $ 488.2 3.2 % Europe Middle East Africa (EMEA) 341.1 396.0 (13.9)% 385.2 2.8 % Asia Pacific 329.6 349.7 (5.7)% 335.6 4.2 % Latin America 209.7 230.8 (9.1)% 233.3 (1.1)% Total net sales by region $ 1,418.6 $ 1,480.4 (4.2)% $ 1,442.3 2.6 % Profitability performance measures: Adjusted EBIT(A): Specialty Construction Chemicals segment operating income $ 83.7 $ 72.4 15.6 % $ 62.8 15.3 % Specialty Building Materials segment operating income 99.6 75.7 31.6 % 76.9 (1.6)% Darex Packaging Technologies segment operating income 72.8 74.1 (1.8)% 79.6 (6.9)% Corporate costs (24.3) (19.3) (25.9)% (19.1) (1.0)% Certain pension costs(B) (5.1) (7.5) 32.0 % (5.3) (41.5)% Adjusted EBIT 226.7 195.4 16.0 % 194.9 0.3 % Pension MTM adjustment and other related costs, net (15.0) 18.6 (14.4) Restructuring expenses and asset impairments (11.6) (18.3) (7.4) Currency and other financial losses in Venezuela (73.2) (1.0) (6.9) Interest expense, net (2.5) (4.8) 47.9 % (4.9) 2.0 % Provision for income taxes (84.3) (55.6) (51.6)% (51.6) (7.8)% Net income attributable to GCP $ 40.1 $ 134.3 (70.1)% $ 109.7 22.4 % 34


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    Analysis of Operations (In millions) 2015 2014 % Change 2013 % Change Adjusted profitability performance measures: Adjusted Gross Margin: Specialty Construction Chemicals 35.2 % 33.7% 1.5 pts 33.0 % 0.7 pts Specialty Building Materials 45.1 % 41.7% 3.4 pts 42.0 % (0.3) pts Darex Packaging Technologies 34.9 % 32.3% 2.6 pts 32.8 % (0.5) pts Adjusted Gross Margin 37.9 % 35.4% 2.5 pts 35.3 % 0.1 pts Loss in Venezuela (1.0)% —% NM —% 0.0 pts Pension costs in cost of goods sold (0.5)% 0.4% (0.9) pts (0.5)% 0.9 pts Total GCP 36.4 % 35.8% 0.6 pts 34.8 % 1.0 pts Adjusted EBIT: Specialty Construction Chemicals $ 83.7 $ 72.4 15.6 % $ 62.8 15.3 % Specialty Building Materials 99.6 75.7 31.6 % 76.9 (1.6)% Darex Packaging Technologies 72.8 74.1 (1.8)% 79.6 (6.9)% Corporate (29.4) (26.8) (9.7)% (24.4) (9.8)% Total GCP 226.7 195.4 16.0 % 194.9 0.3 % Depreciation and amortization: Specialty Construction Chemicals $ 18.0 $ 18.5 (2.7)% $ 19.9 (7.0)% Specialty Building Materials 7.8 8.6 (9.3)% 8.1 6.2 % Darex Packaging Technologies 4.8 5.5 (12.7)% 5.1 7.8 % Corporate 1.2 1.4 (14.3)% 1.6 (12.5)% Total GCP 31.8 34.0 (6.5)% 34.7 (2.0)% Adjusted EBITDA: Specialty Construction Chemicals $ 101.7 $ 90.9 11.9 % $ 82.7 9.9 % Specialty Building Materials 107.4 84.3 27.4 % 85.0 (0.8)% Darex Packaging Technologies 77.6 79.6 (2.5)% 84.7 (6.0)% Corporate (28.2) (25.4) (11.0)% (22.8) (11.4)% Total GCP 258.5 229.4 12.7 % 229.6 (0.1)% Adjusted EBIT margin: Specialty Construction Chemicals 12.1 % 10.0% 2.1 pts 9.1 % 0.9 pts Specialty Building Materials 25.0 % 20.0% 5.0 pts 20.8 % (0.8) pts Darex Packaging Technologies 22.3 % 19.8% 2.5 pts 20.7 % (0.9) pts Total GCP 16.0 % 13.2% 2.8 pts 13.5 % (0.3) pts Adjusted EBITDA margin: Specialty Construction Chemicals 14.6 % 12.5% 2.1 pts 12.0 % 0.5 pts Specialty Building Materials 27.0 % 22.2% 4.8 pts 23.0 % (0.8) pts Darex Packaging Technologies 23.8 % 21.2% 2.6 pts 22.1 % (0.9) pts Total GCP 18.2 % 15.5% 2.7 pts 15.9 % (0.4) pts 35


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    Analysis of Operations (In millions) 2015 2014 2013 Calculation of Adjusted EBIT Return On Invested Capital (trailing four quarters): Adjusted EBIT $ 226.7 $ 195.4 $ 194.9 Invested Capital: Trade accounts receivable 203.6 225.8 240.3 Inventories 105.3 122.9 104.7 Accounts payable (109.0) (112.3) (118.3) 199.9 236.4 226.7 Other current assets (excluding income taxes) 34.5 38.6 34.1 Properties and equipment, net 197.1 197.5 211.5 Goodwill 102.5 114.0 128.6 Technology and other intangible assets, net 33.3 44.0 54.1 Other assets 10.1 8.5 19.8 Other current liabilities (excluding income taxes, restructuring and accrued interest) (96.9) (95.0) (93.1) Other liabilities (8.6) (9.1) (8.0) Total invested capital $ 471.9 $ 534.9 $ 573.7 Adjusted EBIT Return On Invested Capital 48.0% 36.5% 34.0% ___________________________________________________________________________________________________________________ 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 36


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    GCP Overview Following is an overview of our financial performance for the years ended December 31, 2015, 2014, and 2013. During these periods, we benefited from increased construction spending in North America, and to a lesser extent, increased construction spending in Asia Pacific. Sales volumes in Europe and Latin America have been weaker, particularly in Latin America where sales volumes have decreased most recently. We also benefited from relatively stable raw material costs through 2014, and from declining raw material costs in 2015, which contributed to the increase in gross margin in 2015. Currency changes, particularly the stronger U.S. dollar and weaker emerging region currencies, have had a significant negative effect on sales and earnings during this time period. We generally expect these demand trends to continue through 2016. We also expect currency changes, particularly in the emerging regions, to continue to have a negative effect on sales and earnings through 2016. Net Sales and Adjusted Gross Margin The following tables identify the year-over-year increase or decrease in sales attributable to changes in sales volume and/or mix, product price, and the impact of currency translation. 2015 as a Percentage Increase (Decrease) from 2014 Currency Net Sales Variance Analysis Volume Price Translation Total SCC 3.6 % 4.7 % (12.7)% (4.4)% SBM 8.5 % 1.1 % (4.6)% 5.0 % Darex (4.0)% 3.9 % (12.9)% (13.0)% Net sales 2.9 % 3.2 % (10.3)% (4.2)% By Region: North America 7.8 % (0.2)% (0.8)% 6.8 % Europe Middle East Africa (EMEA) (0.1)% —% (13.8)% (13.9)% Asia Pacific 1.6 % (0.2)% (7.1)% (5.7)% Latin America (0.2)% 21.2 % (30.1)% (9.1)% Sales for 2015 decreased 4.2% overall compared with the prior year. The sales decrease was due to unfavorable currency translation (-10.3%) partially offset by improved pricing (+3.2%) and higher sales volumes (+2.9%). Unfavorable currency translation against the dollar, primarily in Europe, impacted all operating segments. Higher sales volumes in SCC and SBM were mostly offset by lower sales volumes in Darex. Pricing improved primarily in Venezuela in response to the weakening of the bolivar against the U.S. dollar and the euro. 37


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    We expect that continued strength of the U.S. dollar against the other currencies in which we do business will have an unfavorable impact on sales in the 2016 first quarter. 2014 as a Percentage Increase (Decrease) from 2013 Currency Net Sales Variance Analysis Volume Price Translation Total SCC 6.3 % 2.7% (3.4)% 5.6 % SBM 0.8 % 2.0% (0.3)% 2.5 % Darex (1.4)% 1.1% (2.1)% (2.4)% Net sales 2.8 % 2.1% (2.3)% 2.6 % By Region: North America 2.6 % 1.0% (0.4)% 3.2 % Europe Middle East Africa (EMEA) 2.0 % 1.3% (0.5)% 2.8 % Asia Pacific 7.1 % 0.3% (3.2)% 4.2 % Latin America (1.4)% 8.2% (7.9)% (1.1)% Sales for 2014 increased 2.6% overall compared with the prior year. The sales increase was due to higher sales volumes (+2.8%) and improved pricing (+2.1%), partially offset by unfavorable currency translation (-2.3%). Sales volume growth was strongest in SCC due to increased demand in North America and Asia Pacific. SBM experienced sales volume growth in the building envelope and specialty construction product groups. Sales volumes declined in the residential building products group in North America during a transition in our channel partner strategy and business model during the year. Sales volumes declined in Darex in the coatings and sealants product groups due to weaker Asia Pacific and Latin America demand. Pricing improved in all three operating segments, particularly in Latin America. Improved pricing in Latin America offset the effects of unfavorable currency translation in the region. Adjusted Gross Margin was 37.9% for 2015 compared with 35.4% for the prior year, an improvement of 250 basis points. The increase was primarily due to improved pricing, lower raw material costs in SCC, SBM and Darex partially offset by lower sales volume in Darex. Gross profit margin was 36.4% for 2015 compared with 35.8% for the prior year, an improvement of 60 basis points. The increase was primarily due to improved pricing and lower raw material costs in SCC, SBM and Darex, partially offset by lower sales volume in Darex, higher pension-related costs and a $13.6 million loss in Venezuela recorded in cost of goods sold. 38


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    Adjusted EBIT Adjusted EBIT was $226.7 million for 2015, an increase of 16.0% compared with the prior year primarily due to higher sales volume, lower manufacturing costs, cost savings from our restructuring initiatives and improved pricing which more than offset unfavorable currency translation. Adjusted EBIT margin was 16.0% for 2015, an increase compared with 13.2% for the prior year. The increase was primarily due to higher coatings demand in Europe and North America from new product technology offset by adverse currency translation in Venezuela and lower demand for our coatings and closure products in Asia Pacific and Latin America. Adjusted EBIT was $195.4 million for 2014, an increase of 0.3% compared with the prior year. The increase was primarily due to improved SCC sales and profitability, partially offset by lower earnings in SBM and Darex. Adjusted EBIT margin was 13.2% for 2014, a decrease compared with 13.5% for the prior year. The transition in our channel partner strategy and business model in the SBM residential building products group in North America negatively affected our results for the year. Since completing the transition in 2014, sales volumes and gross margins in the residential building products group have improved significantly. Net Income Net income was $40.1 million for 2015, a decrease of 70.1% compared with $134.3 million for the prior year. The decrease was primarily due to a pretax charge of $73.2 million in the third quarter of 2015 associated with our subsidiary in Venezuela, increased income taxes, and an unfavorable mark-to-market pension adjustment in 2015. Net income was $134.3 million for 2014, an increase of 22.4% compared with $109.7 million for the prior year. The increase was primarily due to a favorable mark-to-market pension adjustment in 2014. 39


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    Adjusted EBIT Return On Invested Capital Adjusted EBIT Return On Invested Capital for 2015 was 48.0% on a trailing four quarters basis, an increase from 36.5% on the same basis for 2014 and an increase from 34.0% for 2013. The increase in Adjusted EBIT Return on Invested Capital from 2014 to 2015 was due to increases in Adjusted EBIT offset by decreases in invested capital due in part to foreign currency translation. We manage our operations with the objective of maximizing sales, earnings and cash flow over time. Doing so requires that we successfully balance our growth, profitability and working capital and other investments to support sustainable, long-term financial performance. We use Adjusted EBIT Return On Invested Capital as a performance measure in evaluating our operating results, in making operating and investment decisions and in balancing the growth and profitability of our operations. Generally, we favor those businesses and investments that provide a high return on invested capital. Operating Segment Overview—Specialty Construction Chemicals (SCC) Following is an overview of the financial performance of SCC for the years ended December 31, 2015, 2014, and 2013. Net Sales—SCC 40


  • Page 48

    Sales were $694.3 million for 2015, a decrease of 4.4% compared with the prior year. The sales decrease was primarily due to unfavorable currency translation (-12.7%) partially offset by improved pricing (+4.7%) and higher sales volumes (+3.6%). Unfavorable currency translation affected sales of both the Cement and Concrete product groups with the largest effects in Europe and Latin America as the dollar strengthened against the euro, the real, the bolivar and other currencies. Sales volumes increased in both product groups in North America and Asia Pacific and in Europe, due to increased demand. Cement volumes decreased in Europe due to weaker demand and sales decline in Eastern Europe and the Baltics. Pricing improvements in Venezuela partially offset unfavorable currency translation in that country. Sales in the emerging regions which represented approximately 44% of sales for 2015 decreased 4.3% due to lower sales in Eastern Europe and Latin America, primarily due to unfavorable currency translation. Excluding the impact of currency, sales increased double digits in the Middle East and emerging Asia. Sales were $726.3 million for 2014, an increase of 5.6% compared with the prior year. The sales increase was due to higher sales volumes (+6.3%) and improved pricing (+2.7%), partially offset by unfavorable currency translation (-3.4%). Sales volumes benefited from increased concrete and cement demand primarily in North America and Asia Pacific. Concrete admixtures sales volumes increased 6.0%, driven by increased demand in Asia Pacific, North America and Latin America. Cement additives sales volumes increased 6.9%, primarily due to increased demand in North America, Europe and Asia Pacific. Prices improved in Latin America, offsetting unfavorable currency movements, and to a lesser extent in other regions. We generally are able to increase prices over time to reflect improved value of our products and in response to higher raw materials costs or unfavorable currency movements. Segment Operating Income (SOI) and Margin—SCC Gross profit was $244.3 million for 2015, a decrease of 0.2% compared with the prior year. Adjusted Gross Margin was 35.2% compared with 33.7% for the prior year, primarily due to improved pricing in Venezuela, sales growth due to increased demand in North America and Asia Pacific and lower raw material costs. Segment operating income was $83.7 million for 2015, an increase of 15.6% compared with the prior year. Segment operating margin increased to 12.1%, an improvement of 210 basis points compared with the prior year. These increases primarily resulted from volume growth in North America, Asia Pacific and Europe in addition to lower raw material costs, productivity gains and lower operating expenses. Gross profit was $244.8 million for 2014, a decrease of 7.7% compared with the prior year. Adjusted Gross Margin was 33.7% compared with 33.0% for the prior year. During 2014 we integrated our concrete production management systems product line into the SCC operating segment and reclassified the cost of certain of its employees from cost of goods sold to operating expenses to be consistent with the classification of similar employee costs in the SCC operating segment. This change increased Adjusted Gross Margin by approximately 60 basis points, decreased segment operating expenses by the same amount, and had no effect on segment operating income. 41


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    Segment operating income was $72.4 million for 2014, an increase of 15.3% compared with the prior year. Segment operating margin for 2014 increased to 10.0%, an improvement of 90 basis points compared with the prior year. This increase was primarily due to improved operating leverage and good expense control. Operating Segment Overview—Specialty Building Materials (SBM) Following is an overview of the financial performance of SBM for the years ended December 31, 2015, 2014, and 2013. Net Sales—SBM Sales were $398.1 million for 2015, an increase of 5.0% compared with the prior year. The sales increase was due to higher sales volumes (+8.5%) and improved pricing (+1.1%), partially offset by unfavorable currency translation (-4.6%). Sales volumes increased primarily due to increases in the residential building and specialty construction product groups, driven by favorable market conditions in North America. The specialty construction product group continued to expand its distribution in emerging regions but the emerging regions' increased sales volumes were offset by weakness in China and Mexico. Sales volumes in building envelope increased (+4.0%) but were more than offset by unfavorable currency translation (-5.1%). Building envelope experienced sales volume growth in North America, Eastern Europe and the Middle East. Sales were $379.3 million for 2014, an increase of 2.5% compared with the prior year. The sales increase was due to improved pricing (+2.0%) and higher sales volumes (+0.8%), partially offset by unfavorable currency translation (-0.3%). Sales volumes increased primarily due to strong commercial waterproofing demand and increased fire protection sales as a result of improved distribution of our fire protection products in the emerging regions. Sales volumes declined approximately 15% in the residential building products group in North America during a transition in our channel partner strategy and business model during the year. We added new channel partners, revised the design of our channel partner compensation program and made other changes to our channel marketing program. Since completing these changes, sales volumes in the residential building products group have improved significantly. 42


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    Segment Operating Income (SOI) and Margin—SBM Gross profit was $179.5 million for 2015, an increase of 13.6% compared with the prior year. Adjusted Gross Margin was 45.1% compared with 41.7% for the prior year, primarily due to improved product mix, improved pricing and lower raw material costs. Segment operating income was $99.6 million for 2015, an increase of 31.6% compared with the prior year. Segment operating margin for 2015 increased to 25.0%, an improvement of 500 basis points compared to prior year. These increases were primarily due to the revenue growth driven by the residential building product group (+34%) and specialty construction product line (+13%) in addition to lower raw material costs, productivity gains and lower operating costs. Gross profit was $158.0 million for 2014, an increase of 1.7% compared with the prior year. Adjusted Gross Margin was 41.7% compared with 42.0% for the prior year. The decline in Adjusted Gross Margin was due to lower margins in certain growth markets, partially offset by improved Adjusted Gross Margin in North America. Segment operating income was $75.7 million for 2014, a decrease of 1.6% compared with the prior year. Segment operating margin for 2014 decreased to 20.0%, a decrease of 80 basis points. The decrease in segment operating income was primarily due to the transition in our channel partner strategy and business model in the residential building products group in North America, partially offset by growth in our building envelope and specialty construction product groups. 43

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