GCP Applied Technologies Reports Third Quarter 2020 Results
GCP Applied Technologies reported 3Q20 net sales of $248.4 million, down 6.9% from last year, attributed to lower demand due to COVID-19. However, income from continuing operations rose significantly to $99.5 million, boosted by the gain from the sale of its Cambridge headquarters. Gross margin increased by 140 basis points to 40.8%. Adjusted EBITDA was $47.0 million, and liquidity remains strong at $860 million. Despite pandemic challenges, management remains focused on sustainable performance and operational efficiency.
- Income from continuing operations attributable to GCP shareholders increased to $99.5 million compared to $17.0 million in 3Q19.
- Gross margin improved to 40.8%, an increase of 140 basis points year-over-year.
- Adjusted EBITDA rose to $47.0 million, up 3.8% from the prior year, driven by lower corporate costs.
- Liquidity levels are strong with approximately $860 million, ensuring financial flexibility.
- Net sales decreased by 6.9% mainly due to lower sales volumes caused by the pandemic.
- Sales in the Specialty Construction Chemicals segment dropped 8.9%.
- Sales in the Specialty Building Materials segment fell by 4.3%.
- 3Q20 Net sales
$248.4 million down7% - Gross Margin
40.8% , an increase of 140 basis points - Selling, general and administrative expenses
$65.2 million , decreased2% - 3Q20 income from continuing operations attributable to GCP shareholders of
$99.5 million including the gain on sale of GCP's Cambridge headquarters; Adjusted EBIT* of$35.1 million - Net cash provided by operating activities from continuing operations of
$59.3 million for nine months ended September 30, 2020
CAMBRIDGE, Mass., Nov. 06, 2020 (GLOBE NEWSWIRE) -- GCP Applied Technologies Inc. (NYSE: GCP), a leading global provider of construction products technologies, today announced results for the third quarter of 2020.
For the three months ended September 30, 2020, GCP reported net sales of
Simon Bates, GCP’s President and Chief Executive Officer, said, "I am excited to have joined GCP. Our team is committed to the safety of our employees and the service to our customers given the challenges created by the global pandemic. Our third quarter results were favorable year over year. As the CEO, my focus will be on sustainable performance over time. A clear benefit is our strong balance sheet, which features significant liquidity of approximately
*Non-GAAP financial measures. See the tables herein for important information regarding these measures and a reconciliation to the most comparable GAAP measures.
NM - Not meaningful.
Total GCP Applied Technologies
($ Millions)
| 3Q 2020 | 3Q 2019 | % Change | |||
| Net sales | (6.9)% | ||||
| Net Sales Constant Currency* | (6.3)% | ||||
| Net Sales Constant Currency Excluding Market Exits* | (5.2)% | ||||
| Gross margin | 140 bps | ||||
| Income from continuing operations attributable to GCP shareholders | NM | ||||
| Income from continuing operations attributable to GCP shareholders as a percentage of net sales | 3,370 bps | ||||
| Diluted EPS from continuing operations attributable to GCP shareholders | NM | ||||
| Adjusted EPS* | |||||
| Adjusted EBIT* | |||||
| Adjusted EBIT Margin* | 110 bps | ||||
| Adjusted EBITDA* | |||||
| Adjusted EBITDA Margin* | 190 bps |
Third Quarter 2020:
- Net sales decreased
6.9% primarily attributable to lower sales volumes in SCC and SBM due to lower overall demand for products in certain countries and construction segments impacted by COVID-19 and its impact on the global economy. - Gross margin increased 140 basis points to
40.8% primarily due to lower logistic costs and improved operational productivity which more than offset the unfavorable impact of lower volumes. - Selling, general and administrative costs of
$65.2 million decreased1.7% for the second quarter primarily due to reduced discretionary spending, benefits from our productivity initiatives and lower employee-related costs resulting from restructuring programs. These favorable impacts were partially offset by increased shareholder activism and other related costs, as well as increased expenses related to our growth initiatives. - Income from continuing operations attributable to GCP shareholders was
$99.5 million compared to$17.0 million for the prior year quarter. The increase was primarily attributable to a gain on sale of corporate headquarters, partially offset by higher income tax expense resulting primarily from the sale. - Adjusted EBIT* of
$35.1 million increased0.9% compared to the prior year quarter primarily due to lower corporate costs, partially offset by lower SCC and SBM operating income. - Adjusted EBITDA* increased
3.8% to$47.0 million with a corresponding Adjusted EBITDA Margin* of18.9% . The increase was due to lower corporate costs and improved SCC operating income after adjusting for depreciation and amortization.
Third Quarter Segment Performance
Specialty Construction Chemicals
($ Millions)
| 3Q 2020 | 3Q 2019 | % Change | |||||
| Net sales | (8.9)% | ||||||
| Net Sales Constant Currency* | (7.3)% | ||||||
| Net Sales Constant Currency Excluding Market Exits* | (5.3)% | ||||||
| Gross margin | 240 bps | ||||||
| Segment operating income | (6.1)% | ||||||
| Segment operating margin | 40 bps | ||||||
- Net sales decreased
8.9% compared with the prior-year quarter due to lower sales volumes in all regions and the unfavorable impact of foreign currency translation. - Gross margin increased 240 basis points to
39.8% primarily due to lower cost resulting from improved operational and logistics productivity which more than offset the unfavorable impact of lower volumes resulting in reduced operating leverage. - Segment operating margin increased 40 basis points primarily due to higher gross margin.
Specialty Building Materials
($ Millions)
| 3Q 2020 | 3Q 2019 | % Change | |||||
| Net sales | (4.3)% | ||||||
| Net Sales Constant Currency* | (5.0)% | ||||||
| Gross margin | 10 bps | ||||||
| Segment operating income | (1.9)% | ||||||
| Segment operating margin | 60 bps | ||||||
- Net sales decreased
4.3% due to lower sales volumes in EMEA and Asia Pacific and lower pricing in North America. The decreases were partially offset by higher sales volumes in North America and the favorable impact of foreign currency translation. - Gross margin of
42.3% increased 10 basis points primarily due to improved logistics productivity, partially offset by lower pricing. - Segment operating margin of
23.1% increased 60 basis points primarily due to lower operating expenses, partially offset by the unfavorable impact of lower sales volumes resulting in reduced operating leverage.
Impact of COVID-19 Pandemic
The Company has been closely monitoring the impact of novel strain of coronavirus ("COVID-19") and managing its effects on its business globally as the situation continues to evolve.
COVID-19 began emerging in the latter half of the first quarter resulting in temporary mandated closures of the Company's manufacturing operations, primarily in China. During the first half of the year, the pandemic spread and intensified throughout the world resulting in mandated and voluntary closures of some of the Company's manufacturing operations and administrative offices which continued, to a lesser extent, during the third quarter. During this time, the Company focused on protecting the health, safety and well-being of its employees in accordance with guidelines issued by national and other health and safety authorities, while seeking to meet the needs of its global customers and suppliers. Responsive measures the Company adopted include working remotely when possible, establishing procedures for deep cleaning of facilities, restricting business travel, providing personal protective equipment, using appropriate social distancing practices, and restricting visitor access to facilities.
COVID-19 has negatively impacted the Company's operating results during the first half of the year and, to a lesser extent during the third quarter, primarily due to periodic closures of its facilities in all regions in which GCP operates, and periodic mandatory halts of construction activity in specific cities and countries around the world by government authorities or voluntary closures due to safety concerns. Some of the GCP customers have experienced similar disruptions as a result of the pandemic. During the third quarter, while construction activity levels remained below those that existed prior to COVID-19, the Company saw business conditions and construction market activity improve as global economies began to slowly reopen. As a result, the revenue volumes in the third quarter increased compared to the second quarter. The impact of COVID-19 on the business varied across different geographies and product lines during the third quarter. GCP has taken actions to preserve our liquidity by reducing discretionary spending and certain planned capital expenditures.
It is difficult for GCP to predict at this time the duration and extent of the impact of COVID-19 on the global construction industry, the Company's business, its financial position, results of operations, or liquidity although the Company expects that managing the impacts of the pandemic will be a part of its ongoing operations for the foreseeable future. Factors the Company is monitoring to assess the potential duration and extent of the impact of COVID-19 on its operations include the health of the global economy and construction industry, specifically on demand drivers for its construction products, as well as operational disruptions including those resulting from government actions, such as mandatory halts of construction activity, travel restrictions, as well as facility and work site closures. The Company will continue to prioritize the health and safety of its employees and serving its customers while minimizing disruption to the extent possible. The Company will also continue to monitor the health of the construction industry in the geographic markets in which the Company operates and respond accordingly.
Capital Allocation and Liquidity
GCP remains committed to maintaining a disciplined approach to capital allocation and preserving the Company's strong balance sheet. GCP's cash balance at the end of the third quarter of 2020 was
Restructuring and Repositioning Plans
GCP's restructuring and repositioning plans are focused on the Company's SCC segment, its global supply chain, as well as its general administration and business support functions. The plans are designed to reduce the Company's complexity, create a more efficient and effective organization, and generate approximately
Investor Call
GCP has scheduled a conference call and webcast at 10:00 a.m. ET today to review its third quarter 2020 results. Those who wish to listen to the conference call webcast should visit the Investors section of the GCP website at www.gcpat.com. The live call can be accessed by dialing +1 (844) 887-9408 in the U.S. or +1 (412) 317-9261 internationally prior to the start of the call. Participants should ask to join the GCP Applied Technologies call. An accompanying slide presentation will also be available on the website.
For those unable to participate in the live conference call, a playback will be available until November 13, 2020. To listen to the playback, please dial +1 (877) 344-7529 in the U.S. or +1 (412) 317-0088 internationally; the access code is 10148717. An audio webcast replay will also be available in the “Events and Presentations” section of the Company's website for approximately three months.
Non-GAAP Financial Measures
In this press release the Company refers to non-GAAP financial measures including: Net Sales Constant Currency, Net Sales Constant Currency Excluding Market Exits, Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBIT, Adjusted EBIT Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Free Cash Flow and Adjusted EPS. These non-GAAP measures do not purport to represent income or liquidity measures as defined under United States generally accepted accounting principles ("GAAP") and should not be considered as alternatives to such measures as an indicator of GCP's performance. These measures are provided to investors and others to improve the period-to-period and peer-to-peer comparability of GCP's financial results and to ensure that investors understand the information GCP uses to evaluate the performance of its businesses.
The Analysis of Operations pages included in this press release provide reconciliations of these non-GAAP financial measures to their most comparable GAAP measures, as well as definitions for each of these non-GAAP financial measures and explanations as to why management finds them useful and believes they are useful to investors, potential investors and others.
| Investor Relations Betsy Cowell T +1 617.498.4568 investors@gcpat.com |
About GCP Applied Technologies
GCP is a leading global provider of construction products technologies that include additives for cement and concrete, the VERIFI® in-transit concrete management system, high-performance waterproofing products, and specialty systems. GCP products have been used to build some of the world’s most renowned structures. More information is available at www.gcpat.com.
This announcement contains “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statement and generally arise when GCP or its management is discussing its beliefs, estimates or expectations. Such statements generally include the words “believes,” “plans,” “intends,” “targets,” “will,” “expects,” “estimates,” “suggests,” “anticipates,” “outlook,” “continues,” or similar expressions. These statements are not historical facts or guarantees of future performance but instead represent only the beliefs of GCP and its management at the time the statements were made regarding future events which are subject to certain risks, uncertainties and other factors, many of which are outside GCP’s control. Actual results and outcomes may differ materially from what is expressed or forecast in such forward-looking statements. Forward-looking statements include, without limitation, statements about expected financial positions; results of operations; cash flows; financing plans; business strategy; operating plans; strategic alternatives; capital and other expenditures; competitive positions; growth opportunities for existing products; benefits from new technology and cost reduction initiatives, plans and objectives; and markets for securities. Like other businesses, we are subject to risks and uncertainties that could cause our actual results to differ materially from our projections or that could cause other forward-looking statements to prove incorrect. Factors that could cause actual results to materially differ from those contained in the forward-looking statements, or that could cause other forward-looking statements to prove incorrect, include, without limitation, risks related to: the cyclical and seasonal nature of the industries that GCP serves; foreign operations, especially in emerging regions; changes in currency exchange rates; business disruptions due to public health or safety emergencies, such as the novel strain of coronavirus ("COVID-19") pandemic; the cost and availability of raw materials and energy; the effectiveness of GCP’s research and development, new product introductions and growth investments; acquisitions and divestitures of assets and gains and losses from dispositions; developments affecting GCP’s outstanding liquidity and indebtedness, including debt covenants and interest rate exposure; developments affecting GCP’s funded and unfunded pension obligations; warranty and product liability claims; legal proceedings; the inability to establish or maintain certain business relationships and relationships with customers and suppliers or the inability to retain key personnel; the handling of hazardous materials and the costs of compliance with environmental regulations; extreme weather events and natural disasters. These and other factors are identified and described in more detail in GCP's Annual Report on Form 10-K, which has been filed with the U.S. Securities and Exchange Commission and is available online at www.sec.gov, and subsequent quarterly reports. Readers are cautioned not to place undue reliance on GCP’s projections and other forward-looking statements, which speak only as of the date thereof. GCP undertakes no obligation to publicly release any revision to its projections and other forward-looking statements contained in this announcement, or to update them to reflect events or circumstances occurring after the date of this announcement.
GCP Applied Technologies Inc.
Consolidated Statements of Operations (unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||
| (In millions, except per share amounts) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
| Net sales | $ | 248.4 | $ | 266.9 | $ | 660.5 | $ | 755.2 | |||||||||||
| Cost of goods sold | 147.0 | 161.8 | 400.8 | 468.9 | |||||||||||||||
| Gross profit | 101.4 | 105.1 | 259.7 | 286.3 | |||||||||||||||
| Selling, general and administrative expenses | 65.2 | 66.3 | 199.0 | 206.7 | |||||||||||||||
| Research and development expenses | 4.5 | 4.5 | 13.1 | 13.8 | |||||||||||||||
| Interest expense and related financing costs | 5.6 | 5.7 | 16.3 | 17.3 | |||||||||||||||
| Repositioning expenses | 0.1 | 4.4 | 3.8 | 15.6 | |||||||||||||||
| Restructuring expenses and asset impairments | 7.7 | 3.8 | 11.2 | 8.8 | |||||||||||||||
| Gain on sale of corporate headquarters | (110.2 | ) | — | (110.2 | ) | — | |||||||||||||
| Other income, net | (1.8 | ) | (2.2 | ) | (6.7 | ) | (5.7 | ) | |||||||||||
| Total costs and expenses | (28.9 | ) | 82.5 | 126.5 | 256.5 | ||||||||||||||
| Income from continuing operations before income taxes | 130.3 | 22.6 | 133.2 | 29.8 | |||||||||||||||
| (Provision for) benefit from income taxes | (30.6 | ) | (5.5 | ) | (33.2 | ) | 5.2 | ||||||||||||
| Income from continuing operations | 99.7 | 17.1 | 100.0 | 35.0 | |||||||||||||||
| (Loss) income from discontinued operations, net of income taxes | (0.1 | ) | (0.4 | ) | (0.4 | ) | 5.9 | ||||||||||||
| Net income | 99.6 | 16.7 | 99.6 | 40.9 | |||||||||||||||
| Less: Net income attributable to noncontrolling interests | (0.2 | ) | (0.1 | ) | (0.4 | ) | (0.3 | ) | |||||||||||
| Net income attributable to GCP shareholders | $ | 99.4 | $ | 16.6 | $ | 99.2 | $ | 40.6 | |||||||||||
| Amounts Attributable to GCP Shareholders: | |||||||||||||||||||
| Income from continuing operations attributable to GCP shareholders | 99.5 | 17.0 | 99.6 | 34.7 | |||||||||||||||
| (Loss) income from discontinued operations, net of income taxes | (0.1 | ) | (0.4 | ) | (0.4 | ) | 5.9 | ||||||||||||
| Net income attributable to GCP shareholders | $ | 99.4 | $ | 16.6 | $ | 99.2 | $ | 40.6 | |||||||||||
| Earnings (Loss) Per Share Attributable to GCP Shareholders | |||||||||||||||||||
| Basic earnings (loss) per share:(2) | |||||||||||||||||||
| Income from continuing operations attributable to GCP shareholders | $ | 1.36 | $ | 0.23 | $ | 1.37 | $ | 0.48 | |||||||||||
| (Loss) income from discontinued operations, net of income taxes | $ | — | $ | (0.01 | ) | $ | (0.01 | ) | $ | 0.08 | |||||||||
| Net income attributable to GCP shareholders(1) | $ | 1.36 | $ | 0.23 | $ | 1.36 | $ | 0.56 | |||||||||||
| Weighted average number of basic shares | 73.0 | 72.7 | 72.9 | 72.5 | |||||||||||||||
| Diluted earnings (loss) per share:(2) | |||||||||||||||||||
| Income from continuing operations attributable to GCP shareholders | $ | 1.36 | $ | 0.23 | $ | 1.36 | $ | 0.48 | |||||||||||
| (Loss) income from discontinued operations, net of income taxes | $ | — | $ | (0.01 | ) | $ | (0.01 | ) | $ | 0.08 | |||||||||
| Net income attributable to GCP shareholders(1) | $ | 1.36 | $ | 0.23 | $ | 1.36 | $ | 0.56 | |||||||||||
| Weighted average number of diluted shares | 73.2 | 72.8 | 73.1 | 72.9 | |||||||||||||||
______________________________
(1) Amounts may not sum due to rounding.
(2) Dilutive effect only applicable to the periods during which GCP generated net income from continuing operations.
GCP Applied Technologies Inc.
Consolidated Balance Sheets (unaudited)
| (In millions, except par value and shares) | September 30, 2020 | December 31, 2019 | |||||||
| ASSETS | |||||||||
| Current Assets | |||||||||
| Cash and cash equivalents | $ | 473.4 | $ | 325.0 | |||||
| Trade accounts receivable, net of allowance for credit losses of | 172.8 | 183.7 | |||||||
| Inventories, net | 91.3 | 95.9 | |||||||
| Other current assets | 39.7 | 43.7 | |||||||
| Total Current Assets | 777.2 |
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FAQ
What were GCP's 3Q20 net sales figures?
GCP reported 3Q20 net sales of $248.4 million, a decrease of 6.9% from the previous year.
How did GCP's income from continuing operations change in 3Q20?
Income from continuing operations attributable to GCP shareholders rose to $99.5 million in 3Q20 from $17.0 million in 3Q19.
What is GCP's gross margin for 3Q20?
GCP's gross margin for 3Q20 is 40.8%, up 140 basis points from the prior year.
What impact did COVID-19 have on GCP's sales?
COVID-19 negatively impacted GCP's sales due to lower demand and temporary closures of manufacturing operations.
What liquidity position does GCP have as of 3Q20?
GCP has a strong liquidity position with approximately $860 million available as of September 30, 2020.
GCP
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