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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period EndedSeptember 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number1-37533
GCP Applied Technologies Inc.
Delaware47-3936076
(State of Incorporation)(I.R.S. Employer Identification No.)
62 Whittemore Avenue, Cambridge, Massachusetts 02140-1623
(617876-1400
(Address and phone number of principal executive offices)
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 ý    No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 
Yes ý    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
ý 
Accelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No ☒
Securities registered pursuant to Section 12(b) of the Act:
ClassTrading SymbolExchange on which registered
Common Stock, $0.01 par value per shareGCPNew York Stock Exchange
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
ClassOutstanding at October 29, 2020
Common Stock, $0.01 par value per share73,058,299


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TABLE OF CONTENTS

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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 Quarterly Report on Form 10-Q 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 of all of the then-outstanding common stock of GCP to Grace shareholders on February 3, 2016.

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PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
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)2020201920202019
Net sales$248.4 $266.9 $660.5 $755.2 
Cost of goods sold147.0 161.8 400.8 468.9 
Gross profit101.4 105.1 259.7 286.3 
Selling, general and administrative expenses65.2 66.3 199.0 206.7 
Research and development expenses4.5 4.5 13.1 13.8 
Interest expense and related financing costs5.6 5.7 16.3 17.3 
Repositioning expenses0.1 4.4 3.8 15.6 
Restructuring expenses and asset impairments7.7 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 taxes130.3 22.6 133.2 29.8 
(Provision for) benefit from income taxes(30.6)(5.5)(33.2)5.2 
Income from continuing operations99.7 17.1 100.0 35.0 
(Loss) income from discontinued operations, net of income taxes (0.1)(0.4)(0.4)5.9 
Net income99.6 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 shareholders99.5 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 shares73.0 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 shares73.2 72.8 73.1 72.9 
______________________________
(1)Amounts may not sum due to rounding.
(2)Dilutive effect is only applicable to the periods during which GCP generated net income from continuing operations.

The Notes to Consolidated Financial Statements are an integral part of these statements.
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GCP Applied Technologies Inc.
Consolidated Statements of Comprehensive Income (unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2020201920202019
Net income$99.6 $16.7 $99.6 $40.9 
Other comprehensive income (loss):
Defined benefit pension and other postretirement plans, net of income taxes
0.1  0.2  
Currency translation adjustments, net of income taxes
10.8 (14.9)(18.1)(15.5)
(Loss) gain from hedging activities, net of income taxes(0.1)0.1   
Total other comprehensive income (loss) 10.8 (14.8)(17.9)(15.5)
Comprehensive income 110.4 1.9 81.7 25.4 
Less: Comprehensive income attributable to noncontrolling interests
(0.2)(0.1)(0.4)(0.3)
Comprehensive income attributable to GCP shareholders$110.2 $1.8 $81.3 $25.1 

The Notes to Consolidated Financial Statements are an integral part of these statements.
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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 $7.3 million and $7.5 million, respectively
172.8 183.7 
Inventories, net91.3 95.9 
Other current assets39.7 43.7 
Total Current Assets777.2 648.3 
Properties and equipment, net 222.4 245.3 
Operating lease right-of-use assets40.5 29.3 
Goodwill206.0 208.9 
Technology and other intangible assets, net71.9 80.7 
Deferred income taxes9.1 26.1 
Overfunded defined benefit pension plans26.1 25.0 
Other assets37.4 38.0 
Non-current assets held for sale 0.5 
Total Assets$1,390.6 $1,302.1 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current Liabilities  
Debt payable within one year$4.1 $2.7 
Operating lease obligations payable within one year7.9 8.1 
Accounts payable83.3 88.4 
Other current liabilities134.7 113.6 
Total Current Liabilities230.0 212.8 
Debt payable after one year348.8 346.5 
Income taxes payable28.4 41.4 
Deferred income taxes13.5 13.1 
Operating lease obligations25.9 21.6 
Unrecognized tax benefits43.2 42.2 
Underfunded and unfunded defined benefit pension plans57.0 67.5 
Other liabilities15.9 15.9 
Total Liabilities762.7 761.0 
Commitments and Contingencies - Note 11
Stockholders' Equity  
Series A Junior Participating Preferred Stock, par value $0.01; 10,000,000 shares authorized, no shares issued or outstanding (Note 12)
  
Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 73,056,914 and 72,850,268, respectively
0.7 0.7 
Paid-in capital60.4 53.4 
Accumulated earnings709.4 610.2 
Accumulated other comprehensive loss(134.9)(117.0)
Treasury stock(10.0)(8.6)
Total GCP's Shareholders' Equity625.6 538.7 
Noncontrolling interests2.3 2.4 
Total Stockholders' Equity627.9 541.1 
Total Liabilities and Stockholders' Equity$1,390.6 $1,302.1 

The Notes to Consolidated Financial Statements are an integral part of these statements.
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GCP Applied Technologies Inc.
Consolidated Statements of Stockholders' Equity (unaudited)
Common StockTreasury Stock
(In millions)
Number of Shares(1)
Par Value
Number of Shares(1)
CostAdditional Paid-in CapitalAccumulated EarningsAccumulated Other Comprehensive LossNoncontrolling InterestsTotal Stockholders' Equity
Balance, December 31, 201872.4 $0.7 0.2 $(4.8)$39.6 $563.9 $(120.0)$2.0 $481.4 
Net income— — — — — 40.6 — 0.3 40.9 
Issuance of common stock in connection with stock plans(1)
0.3 — — — — — — — — 
Share-based compensation— — — — 7.5 — — 7.5 
Exercise of stock options (1)
0.3 — — — 5.1 — — — 5.1 
Tax benefit related to stock plans— — — — — — — — — 
Share repurchases(3)
— — 0.1 (3.3)— — — — (3.3)
Other comprehensive loss— — — — — — (15.5)— (15.5)
Balance, September 30, 201973.0 $0.7 0.3 $(8.1)$52.2 $604.5 $(135.5)$2.3 $516.1 
Balance, December 31, 201973.2 $0.7 0.3 $(8.6)$53.4 $610.2 $(117.0)$2.4 $541.1 
Net income— — — — — 99.2 — 0.4 99.6 
Issuance of common stock in connection with stock plans(1)
0.2 — — — — — — — — 
Share-based compensation(2)
— — — — 5.9 — — — 5.9 
Exercise of stock options (1)
0.1 — — — 1.1 — — — 1.1 
Share repurchases(3)
— — 0.1 (1.4)— — — — (1.4)
Other comprehensive loss— — — — — — (17.9)— (17.9)
Dividends and other changes in noncontrolling interest — — — — — — — (0.5)(0.5)
Balance, September 30, 202073.5 $0.7 0.4 $(10.0)$60.4 $709.4 $(134.9)$2.3 $627.9 
________________________________
(1)The par value of common shares issued may not be included in the table due to rounding. Total share amounts for common stock and treasury stock may not sum due to rounding.
(2)During the nine months ended September 30, 2020, $1.8 million of the stock-based compensation expense is included in "Restructuring expenses and asset impairments" related to accelerated vesting of stock options and RSUs due to the CEO's departure from the Company effective September 11, 2020 following Board approval.
(3)Refer to Note 15, “Stock Incentive Plans”, for further information.


The Notes to Consolidated Financial Statements are an integral part of these statements.
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GCP Applied Technologies Inc.
Consolidated Statements of Cash Flows (unaudited)
Nine Months Ended September 30,
(In millions)20202019
OPERATING ACTIVITIES  
Net income$99.6 $40.9 
Less: (Loss) income from discontinued operations(0.4)5.9 
Income from continuing operations100.0 35.0 
Reconciliation to net cash provided by operating activities:  
Depreciation and amortization34.5 31.6 
Amortization of debt discount and financing costs1.1 1.1 
Stock-based compensation expense3.8 7.3 
Unrealized loss on foreign currency2.7 1.0 
Deferred income taxes21.1 (12.4)
(Gain) loss on disposal of property and equipment(109.7)0.1 
Changes in assets and liabilities, excluding effect of currency translation:
Trade accounts receivable8.6 7.2 
Inventories3.2 (0.3)
Accounts payable(3.9)(13.6)
Pension assets and liabilities, net(12.4)4.1 
Other assets and liabilities, net10.3 (14.6)
Net cash provided by operating activities from continuing operations59.3 46.5 
Net cash used in operating activities from discontinued operations(2.5)(13.0)
Net cash provided by operating activities56.8 33.5 
INVESTING ACTIVITIES  
Capital expenditures(28.0)(46.0)
Proceeds from sale of corporate headquarters, net of transaction costs122.5  
Other investing activities0.4 0.4 
Net cash provided by (used in) investing activities from continuing operations94.9 (45.6)
Net cash used in investing activities from discontinued operations (0.4)
Net cash provided by (used in) investing activities94.9 (46.0)
FINANCING ACTIVITIES  
Borrowings under credit arrangements1.5  
Repayments under credit arrangements (7.6)
Payments on finance lease obligations(0.6)(0.6)
Payments of tax withholding obligations related to employee equity awards(0.4)(3.3)
Proceeds from exercise of stock options1.1 5.1 
Payments of dividends to noncontrolling interests (0.5) 
Other financing activities(0.4)(0.4)
Net cash provided by (used in) financing activities from continuing operations0.7 (6.8)
Effect of currency exchange rate changes on cash and cash equivalents(4.0)(3.0)
Increase (decrease) in cash and cash equivalents 148.4 (22.3)
Cash and cash equivalents, beginning of period325.0 326.1 
Cash and cash equivalents, end of period$473.4 $303.8 
Supplemental disclosures of cash flow information:
Supplemental disclosure of non-cash investing activities:
Property and equipment purchases unpaid and included in accounts payable$4.9 $8.9 


The Notes to Consolidated Financial Statements are an integral part of these statements.
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GCP Applied Technologies Inc.
Notes to Consolidated Financial Statements (unaudited)
1. Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies
GCP is engaged in the production and sale of specialty construction chemicals and specialty building materials through two operating segments. Specialty Construction Chemicals ("SCC") manufactures and markets concrete admixtures and cement additives and supplies in-transit monitoring systems for concrete producers. Specialty Building Materials ("SBM") manufactures and markets sheet and liquid membrane systems that protect structures from water, air and vapor penetration, fireproofing and other products designed to protect the building envelope.
On July 3, 2017 (the "Closing Date"), GCP completed the sale of its Darex Packaging Technologies ("Darex") business to Henkel AG & Co. KGaA (“Henkel”) for $1.06 billion in cash. As discussed further below under "Discontinued Operations," the results of operations for Darex have been excluded from GCP's continuing operations and segment results for all periods presented.
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements are presented on a consolidated basis and include all of the accounts and operations of GCP and its majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The financial statements reflect the financial position, results of operations and cash flows of GCP in accordance with generally accepted accounting principles in the United States ("GAAP") and with the instructions to Form 10-Q and Article 10 of SEC Regulation S-X for interim financial information.
The interim financial statements presented herein are unaudited and should be read in conjunction with the audited Consolidated Financial Statements and notes thereto contained in GCP's Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2019 (the "2019 Annual Report on Form 10-K"). The Consolidated Balance Sheet as of December 31, 2019 was derived from the audited annual consolidated financial statements as of the period then ended. Certain information and footnote disclosures typically included in GCP's annual consolidated financial statements have been condensed or omitted. The unaudited financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. All such adjustments are of a normal recurring nature except for the impacts of adopting new accounting standards discussed below. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results of operations for the year ending December 31, 2020.
Discontinued Operations 
On July 3, 2017, the Company completed the sale of Darex to Henkel. The agreement with Henkel governing the Disposition (the “Amended Purchase Agreement”) provides for a series of delayed closings in certain non-U.S. jurisdictions. In conjunction with this transaction and applicable GAAP, the assets and liabilities related to Darex in the applicable delayed close countries have been reclassified and reflected as held for sale in the accompanying unaudited Consolidated Balance Sheets as of December 31, 2019, as discussed further in Note 19, "Discontinued Operations." Additionally, Darex results of operations and cash flows have been reclassified and reflected as "discontinued operations" in the accompanying unaudited Consolidated Statements of Operations and unaudited Consolidated Statements of Cash Flows for all periods presented.
Unless otherwise noted, the information throughout the Notes to the accompanying unaudited Consolidated Financial Statements pertains only to the continuing operations of GCP.
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Notes to Consolidated Financial Statements (unaudited) - Continued
    Use of Estimates    
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited Consolidated Financial Statements, and the reported amounts of revenues and expenses for the periods presented. The Company assesses the estimates on an ongoing basis and records changes in estimates in the period they occur and become known. GCP's accounting measurements that are most affected by management's estimates of future events are disclosed in its 2019 Annual Report on Form 10-K. Actual results could differ from those estimates.
On March 11, 2020, the World Health Organization declared the outbreak of the novel strain of coronavirus ("COVID-19") a global pandemic and recommended a number of restrictive measures to contain the spread. Many governments in the regions where GCP generates the majority of its revenue have adopted such policies, including social distancing and restrictions on construction activities deemed non-essential. GCP has been closely monitoring the impact of COVID-19 and working to manage the effects on its business globally. While certain restrictive measures in some of the regions where GCP operates have been lifted by government authorities, it is difficult to estimate with reasonable certainty at this time the duration and extent of the impact of the pandemic on the global economy, the Company's business, financial position and results of operations. GCP has made certain estimates within its financial statements related to the impact of COVID-19, including allowances for credit losses related to the estimated amount of receivables not expected to be collected and excess, obsolete or damaged inventories, future expected cash flows related to impairment assessments of goodwill and long-lived assets, incentive compensation accruals, contingent liabilities, and sales allowances related to volume rebates recognized based on anticipated sales volume. There may be changes to the Company's estimates in future periods due to uncertainty associated with the impact of COVID-19, the extent of which will depend largely on future developments, including new information which may emerge concerning the severity, duration and resurgence of the pandemic, additional and unanticipated actions by government authorities to further contain the spread of COVID-19 or address its impact, as well as the timing of development of an antiviral vaccine or a medical treatment to prevent further spread of the virus and facilitate recovery, among other things.

Income Tax    
As a global enterprise, GCP is subject to a complex array of tax regulations and needs to make assessments of applicable tax law and judgments in estimating its ultimate income tax liability. Income tax expense and income tax balances represent GCP’s federal, state and foreign income taxes as an independent company. GCP files a U.S. consolidated income tax return, along with foreign and state corporate income tax filings, as required. Please refer to Note 8, "Income Taxes," for details regarding estimates used in accounting for income tax matters, including unrecognized tax benefits.
Foreign Currency Transactions and Translation
Certain transactions of the Company and its subsidiaries are denominated in currencies other than their functional currency. Foreign currency exchange gains (losses) generated from the settlement and remeasurement of these transactions are recognized in earnings and presented within “Other income, net” in the Company’s accompanying unaudited Consolidated Statements of Operations. Net foreign currency transaction and remeasurement gains (losses) reflected in “Other income, net” were $0.9 million and $1.7 million for the three and nine months ended September 30, 2020. Net foreign currency transaction and remeasurement gains (losses) were immaterial for the three and nine months ended September 30, 2019.
GCP continues to account for its operations in Argentina as a highly inflationary economy. Losses related to the remeasurement of the monetary assets and liabilities of the subsidiary operating in Argentina are included in "Other income, net" in the accompanying unaudited Consolidated Statements of Operations and were immaterial during the three and nine months ended September 30, 2020. Losses incurred during the three and nine months ended September 30, 2019 were $0.6 million and $0.9 million, respectively.
Reclassifications    
Certain amounts in prior period financial statements have been reclassified to conform to the current period presentation. Such reclassifications have not materially affected previously reported amounts.
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Notes to Consolidated Financial Statements (unaudited) - Continued
Recently Adopted Accounting Standards
Credit Losses
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which applies to most financial assets measured at amortized cost, as well as certain other instruments, including trade receivables, other receivables and other financial assets. Topic 326 replaces the incurred credit loss methodology with the expected credit loss model which requires recognition of an allowance against the assets’ amortized cost to reflect the amount expected to be collected. Expected credit losses are estimated over the contractual life of financial assets and recognized at inception. GCP has adopted Topic 326 effective January 1, 2020 using the modified retrospective approach. The adoption did not have a material impact on its financial position as of September 30, 2020 and results of operations and cash flows for the three and nine months ended September 30, 2020. GCP did not recognize any cumulative effect adjustments to the retained earnings as of January 1, 2020 as a result of the adoption. The adoption of Topic 326 did not result in any significant modifications to the Company's policies related to recognizing allowance for trade receivables not expected to be collected which are disclosed in Note 1, "Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies," to the Company’s Consolidated Financial Statements included in the 2019 Annual Report on Form 10-K. Please refer to Note 3, "Accounts Receivable, Allowance for Credit Losses" for further information on the Company's policies and methodologies resulting from the adoption.

Goodwill
In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350). The amendments in this update eliminate the requirement to calculate the implied fair value of goodwill (Step 2) when measuring a goodwill impairment loss which is based on the excess of a reporting unit’s carrying amount over its fair value. The standard is effective for the Company for its annual or any interim goodwill impairment tests to be performed beginning on or after January 1, 2020. GCP adopted the standard effective January 1, 2020. The adoption did not have a material impact on its financial position, results of operations and cash flows upon adoption.
    Other
    During the three and nine months ended September 30, 2020, except as discussed above, there were no material changes to the Company's significant accounting and financial reporting policies from those reflected in the Annual Report on Form 10-K for the year ended December 31, 2019. For further information with regard to the Company’s Significant Accounting Policies, please refer to Note 1, "Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies," to the Company’s Consolidated Financial Statements included in the 2019 Annual Report on Form 10-K.
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Notes to Consolidated Financial Statements (unaudited) - Continued
2. Revenue from Lessor Arrangements and Contracts with Customers
The majority of the Company’s revenue is generated from short-term arrangements associated with the production and sale of concrete admixtures and cement additives within its SCC operating segment, as well as sheet and liquid membrane systems and other specialty products designed to protect the building envelope within its SBM operating segment. For such arrangements, the transfer of control takes place at a point in time when products are shipped to the customer.
Short-term arrangements within its SCC operating segment involve selling concrete admixtures and providing dispensers to customers. Such arrangements contain a lease element due to the customer's right to control the use of dispensers over a period of time in exchange for consideration. Dispenser leases have a non-cancelable lease term of thirty days or less. The Company classifies leases as operating and recognizes revenue on a straight line basis over the lease term. Revenue for concrete admixtures is recognized at the point of time when control is transferred to the customer.
The Company generates revenue from long-term arrangements within its SCC operating segment, which generally consist of VERIFI® and Ductilcrete sales arrangements.
VERIFI® sales arrangements involve installing equipment on the customers’ trucks and at their plants, as well as performing slump management and truck location tracking services. The installed equipment represents a lease since the customer has the right to control its use over a period of time in exchange for consideration. Slump management and truck location tracking services represent a separate performance obligation for which revenue is recognized over the performance period. The Company classifies these leases as operating leases and recognizes revenue on a straight line basis over the lease term. The transaction price in VERIFI® sales arrangements consists of fixed installation fees and other fixed payments included in the contract consideration, as well as slump management fees which are dependent on the quantity of material poured and represent variable consideration. The Company allocates the contract consideration and the variable consideration between the lease element and the services based on their relative stand-alone selling prices. Revenue related to variable consideration is recorded at the time the services are performed and constrained by the amount for which a significant revenue reversal is not probable to occur. Revenue generated from VERIFI® sales arrangements represented less than 10% of the Company's consolidated revenue during the three and nine months ended September 30, 2020 and 2019.
The following table summarizes the revenue recognized for these sales arrangements for the three and nine months ended September 30, 2020 and 2019 and distinguishes between the lease and the service revenue:
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Notes to Consolidated Financial Statements (unaudited) - Continued
Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2020201920202019
Lease revenue(1):
Lease payments revenue$7.1 $6.5 $20.9 $19.7 
Variable lease revenue2.8 2.1 7.5 5.6 
Total lease revenue$9.9 $8.6 $28.4 $25.3 
Service revenue(2):
Fixed fee revenue$0.4 $ $0.8 $0.1 
Variable fee revenue1.7 1.4 4.6 3.4 
Total service revenue$2.1 $1.4 $5.4 $3.5 
Total revenue$12.0 $10.0 $33.8 $28.8 
________________________________
(1)Lease revenue consists of dispenser lease revenue, as well as an allocated portion of VERIFI® fixed fees and variable slump management fees. Lease revenue is included within "Net Sales" in the accompanying unaudited Consolidated Statements of Operations.
(2)Service revenue consists of an allocated portion of VERIFI® fixed fees and variable slump management fees. Service revenue is included within "Net Sales" in the accompanying unaudited Consolidated Statements of Operations.
As of September 30, 2020 and December 31, 2019, the Company’s total trade accounts receivable balance was $172.8 million and $183.7 million, respectively, of which $5.9 million and $5.6 million, respectively, was related to trade accounts receivable associated with lease revenue generated from certain SCC contracts. The future minimum lease payments receivable under the operating leases were not material as of September 30, 2020.
Revenue generated from Ductilcrete sales arrangements represented less than 10% of the Company's consolidated revenue during the three and nine months ended September 30, 2020 and 2019.
The Company’s revenue is principally recognized as goods and services are delivered and performance obligations are satisfied upon delivery. The Company has certain long-term arrangements resulting in remaining obligations for which the work has not been performed or has been partially performed. As of September 30, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $9.5 million, including the estimated transaction price to be earned as revenue over the remaining term of these contracts, which is generally one to five years. The Company’s contract assets and liabilities resulting from its contracts in the SCC or SBM operating segments were not material as of September 30, 2020 and December 31, 2019. Additionally, the amounts recorded in the accompanying unaudited Consolidated Statements of Operations during the three and nine months ended September 30, 2020 and 2019 related to changes in the contract assets and liabilities were not material.
For further information on revenue recognition related to product sale arrangements, please refer to Note 2, "Revenue from Lessor Arrangements and Contracts with Customers", to the Company’s Consolidated Financial Statements included in the 2019 Annual Report on Form 10-K.
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Notes to Consolidated Financial Statements (unaudited) - Continued
3. Accounts Receivable, Allowance for Credit Losses
Trade accounts receivable are amounts due from customers for products sold or services performed in the ordinary course of business and are stated at their estimated net realizable value representing amounts expected to be collected. Allowance for credit losses is recorded upon the initial recognition of trade accounts receivable and reviewed during each reporting period over their contractual life. Allowance for credit losses is measured based on historical loss rates and the impact of current and future conditions, including an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables and collateral to the extent applicable. The Company evaluates the allowance for credit losses for the entire portfolio of trade accounts receivable on an aggregate basis due to similar risk characteristics of its customers based on similar industry and historical loss patterns. Accounts receivable balances are written off against the allowance for credit losses when the Company determines that the balances are not recoverable. Provisions for expected credit losses are recorded in "Selling, general and administrative expenses" in the accompanying unaudited Consolidated Statements of Operations. As of September 30, 2020 and December 31, 2019, allowance for credit losses was $7.3 million and $7.5 million, respectively.
The following table summarizes the activity for the allowance for credit losses during the three and nine months ended September 30, 2020 and 2019:

(In millions)Three months ended September 30,Nine months ended September 30,
2020201920202019
Beginning balance$7.3 $6.3 $7.5 $5.8 
Provision for expected credit losses0.3 0.6 1.0 2.1 
Write offs(0.4)(0.2)(0.9)(1.2)
Foreign currency translation adjustments0.1 (0.2)(0.3)(0.2)
Ending balance$7.3 $6.5 $7.3 $6.5 

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Notes to Consolidated Financial Statements (unaudited) - Continued
4. Inventories, net
The following is a summary of inventories presented in the accompanying unaudited Consolidated Balance Sheets at September 30, 2020 and December 31, 2019:
(In millions)September 30,
2020
December 31,
2019
Raw materials$39.3 $40.0 
In process4.6 4.0 
Finished products and other47.4 51.9 
Total inventories, net$91.3 $95.9 
The "Finished products and other" category presented in the table above includes "other" inventories, which consist of finished products purchased rather than produced by GCP of $9.6 million and $10.6 million, respectively, as of September 30, 2020 and December 31, 2019.
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Notes to Consolidated Financial Statements (unaudited) - Continued
5. Derivative Instruments
The Company uses derivative instruments to partially offset its business exposure to foreign currency risk on net investments in certain foreign subsidiaries. The Company enters into foreign currency forward contracts to offset a portion of the changes in the carrying amounts of its net investments in foreign operations due to fluctuations in foreign currency exchange rates. As of September 30, 2020, the Company was a party to four forward contracts with an aggregate notional amount of €40.0 million to hedge foreign currency exposure on net investments in certain of its European subsidiaries whose functional currency is the Euro. These forward contracts are designated as hedging instruments and recognized at fair value as assets or liabilities in the accompanying unaudited Consolidated Balance Sheets. Each contract has a notional amount of €10.0 million and matures annually starting on June 14, 2021 through June 17, 2024. During the nine months ended September 30, 2020, GCP settled one contract with a notional amount of €10.0 million upon its maturity and entered into a new contract with a notional amount of €10.0 million maturing on June 17, 2024. The forward contracts are designated and qualify as net investment hedges for which effectiveness is assessed based on the spot rate method. Please refer to Note 4, "Derivative Instruments", to the Company’s Consolidated Financial Statements included in the 2019 Annual Report on Form 10-K for further information on net investment hedges.
    The following table summarizes the fair value of the Company’s derivative instruments designated as net investment hedges as of September 30, 2020 and December 31, 2019:
(In millions)September 30, 2020December 31, 2019
Derivative assets(1):
Foreign exchange forward contracts$0.7 $1.1 
Derivative liability(1):
Foreign exchange forward contracts$(0.6)$ 
__________________________
(1)The fair value of derivative instruments is measured based on expected future cash flows discounted at market interest rates using observable market inputs and classified as Level 2 within the fair value hierarchy. As of September 30, 2020, fair value of derivative assets of $0.1 million and $0.6 million, respectively, is recorded within "Other Current Assets" and "Other Assets" in the accompanying unaudited Consolidated Balance Sheets, and fair value of derivative liability is recorded within "Other Liabilities" in the accompanying unaudited Consolidated Balance Sheets. As of December 31, 2019, fair value of derivative assets of $0.3 million and $0.8 million, respectively, is recorded within "Other Current Assets" and "Other Assets" in the accompanying unaudited Consolidated Balance Sheets.
The following table summarizes the amounts recorded in the Company's accompanying unaudited Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income (Loss) related to forward contracts designated as net investment hedges for the three and nine months ended September 30, 2020 and 2019:
(In millions)Three Months Ended September 30, 2020Three Months Ended September 30, 2019
Other Income, net
Cumulative Translation Adjustments(1)
Other Income, net
Cumulative Translation Adjustments(1)
Gains (losses) on foreign exchange forward contracts$0.2 $(1.5)$0.2 $1.5 

(In millions)Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
Other Income, net
Cumulative Translation Adjustments(1)
Other Income, net
Cumulative Translation Adjustments(1)
Gains (losses) on foreign exchange forward contracts$0.8 $(1.0)$0.3 $1.3 
__________________________
(1)The amounts are presented net of tax benefit of $0.5 million and $0.3 million, respectively, for the three and nine months ended September 30, 2020. The amounts are presented net of tax liability of $0.5 million and $0.4 million, respectively, for the three and nine months ended September 30, 2019.
16