Chapter 11 Information | 6 Months Ended |
Jun. 30, 2014 |
Reorganizations [Abstract] | ' |
Chapter 11 Information | ' |
Chapter 11 and Joint Plan of Reorganization |
On April 2, 2001, Grace and 61 of its United States subsidiaries and affiliates filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code. The cases were consolidated under case number 01-01139 (the "Chapter 11 Cases"). Grace's non-U.S. subsidiaries and certain of its U.S. subsidiaries were not included in the filing. |
In September 2008, Grace and other parties filed the Joint Plan with the Bankruptcy Court to address all pending and future asbestos-related claims and all other pre-petition claims as outlined therein. On January 31, 2011, the Bankruptcy Court issued an order (the "Confirmation Order") confirming the Joint Plan. On January 31, 2012, the United States District Court for the District of Delaware (the "District Court") issued an order affirming the Confirmation Order and confirming the Joint Plan in its entirety. On February 3, 2014 (the "Effective Date"), the U.S. Court of Appeals for the Third Circuit (the "Third Circuit") dismissed the sole remaining appeal challenging the Confirmation Order and the Joint Plan became effective. |
Under the Joint Plan, two asbestos trusts were established and funded under Section 524(g) of the Bankruptcy Code. The Confirmation Order contains a channeling injunction which provides that all pending and future asbestos-related personal injury claims and demands ("PI Claims") have been channeled for resolution to an asbestos personal injury trust (the "PI Trust") and all pending and future asbestos-related property damage claims and demands ("PD Claims"), including PD Claims related to Grace’s former attic insulation product ("ZAI PD Claims"), have been channeled to a separate asbestos property damage trust (the "PD Trust"). Canadian ZAI PD Claims have been channeled to a separate Canadian claims fund. The trusts are the sole recourse for holders of asbestos-related claims; the channeling injunctions prohibit holders of asbestos-related claims from asserting such claims directly against Grace. |
Under the terms of the Joint Plan, claims under the Chapter 11 Cases were satisfied as follows: |
Asbestos-Related Personal Injury Claims Asbestos personal injury claimants allege adverse health effects from exposure to asbestos-containing products formerly manufactured by Grace. |
As of the Filing Date, 129,191 PI Claims were pending against Grace. Grace believes that a substantial number of additional PI Claims would have been received between the Filing Date and the Effective Date had such PI Claims not been stayed by the Bankruptcy Court. |
Under the Joint Plan, all PI Claims were channeled to the PI Trust for resolution. The PI Trust will use specified trust distribution procedures to satisfy allowed PI Claims. |
On the Effective Date, the PI Trust was funded with: |
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• | $557.7 million in cash from Grace (includes $464.1 million of cash from Grace and $93.6 million of cash from insurance proceeds that were held in escrow); | | | | | | | | | | | | | | |
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• | A warrant to acquire 10 million shares of Company common stock at an exercise price of $17.00 per share, expiring one year after the Effective Date (the "PI Warrant") (this obligation is expected to be settled in cash with the PI Trust as discussed below); | | | | | | | | | | | | | | |
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• | Rights to all proceeds under all of Grace's insurance policies that are available for payment of PI Claims; | | | | | | | | | | | | | | |
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• | $42.1 million in cash from a subsidiary of Fresenius AG, pursuant to the terms of a settlement agreement resolving asbestos-related, successor liability and fraudulent transfer claims against Fresenius; and | | | | | | | | | | | | | | |
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• | $856.8 million in cash and 18 million shares of Sealed Air Corporation common stock paid by Cryovac, Inc., a wholly owned subsidiary of Sealed Air, pursuant to the terms of a settlement agreement resolving asbestos-related, successor liability and fraudulent transfer claims against Cryovac and Sealed Air. | | | | | | | | | | | | | | |
Grace is obligated to make deferred payments to the PI Trust of $110 million per year for 5 years beginning in 2019, and $100 million per year for 10 years beginning in 2024, which obligation is secured by the Company's obligation to issue 77,372,257 shares of Company common stock to the asbestos trusts in the event of default, subject to customary anti-dilution provisions. As described in Note 16, Grace has entered into an agreement to settle the deferred payment obligations to the PI Trust in exchange for a cash payment. |
The amounts that Grace will be obligated to pay to the PI Trust under the Joint Plan are fixed amounts. Grace is not obligated to make additional payments to the PI Trust beyond the payments described above. |
Asbestos-Related Property Damage Claims The plaintiffs in asbestos property damage lawsuits generally seek to have the defendants pay for the cost of removing, containing or repairing the asbestos-containing materials in commercial and public buildings. Various factors can affect the merit and value of PD Claims, including legal defenses, product identification, the amount and type of product involved, the age, type, size and use of the building, the legal status of the claimant, the jurisdictional history of prior cases, the court in which the case is pending, and the difficulty of asbestos abatement, if necessary. |
Several class action lawsuits also were filed on behalf of homeowners alleging damage from ZAI. Based on Grace's investigation of the claims described in these lawsuits, and testing and analysis of this product by Grace and others, Grace believes that ZAI was and continues to be safe for its intended purpose and poses little or no threat to human health. The plaintiffs in the ZAI lawsuits dispute Grace's position on the safety of ZAI. In December 2006 the Bankruptcy Court issued an opinion and order holding that, although ZAI is contaminated with asbestos and can release asbestos fibers when disturbed, there is no unreasonable risk of harm from ZAI. |
At Grace's request, in July 2008, the Bankruptcy Court established a claims bar date for U.S. ZAI PD Claims and approved a related notice program that required any person with a U.S. ZAI PD Claim to submit an individual proof of claim no later than October 31, 2008. Approximately 17,960 U.S. ZAI PD Claims were filed prior to the October 31, 2008, claims bar date and, as of the Effective Date, an additional 1,310 U.S. ZAI PD Claims were filed. |
Under the Joint Plan, all PD Claims have been channeled to the PD Trust for resolution. The PD Trust contains two accounts, the PD Account and the ZAI PD Account. U.S. ZAI PD Claims are to be paid from the ZAI PD Account and non-ZAI PD Claims are to be paid from the PD Account. Canadian ZAI PD Claims are to be paid by a separate fund established in Canada. Each account has a separate trustee and the assets of the accounts may not be commingled. |
PD Account |
On the Effective Date, the PD Account of the PD Trust was funded with $39.9 million in cash from Grace and $111.4 million in cash from Cryovac and Fresenius to pay allowed non-ZAI PD Claims settled as of the Effective Date, and CDN$8.6 million in cash from Grace to fund the Canadian ZAI PD Claims fund. |
Following the Effective Date, unresolved non-ZAI PD Claims are to be litigated in the Bankruptcy Court and any future non-ZAI PD Claims are to be litigated in a federal district court, in each case pursuant to procedures to be approved by the Bankruptcy Court. To the extent any such PD Claims are determined to be allowed claims, they are to be paid in cash by the PD Trust. Grace is obligated to make a payment to the PD Trust every six months in the amount of any non-ZAI PD Claims allowed during the preceding six months plus interest (if applicable) and, except for the first six months, the amount of PD Trust expenses for the preceding six months (the "PD Obligation"). The aggregate amount to be paid under the PD Obligation is not capped and Grace may be obligated to make additional payments to the PD Account in respect of the PD Obligation. Grace has accrued for those unresolved non-ZAI PD Claims that it believes are probable and estimable. Grace has not accrued for other unresolved or unasserted non-ZAI PD Claims, as it does not believe that payment on any such claims is probable. As of June 30, 2014, Grace paid $0.4 million to the PD Trust since the Effective Date to fund the payment of two non-ZAI PD Claims that were filed in the Chapter 11 Cases but not resolved until after the Effective Date. |
On the Effective Date, the PD Trust contributed CDN$8.6 million to a separate Canadian ZAI PD Claims fund through which Canadian ZAI PD Claims are to be resolved. Grace has no continuing or contingent obligations to make additional payments into this fund. |
ZAI PD Account |
On the Effective Date, the ZAI PD Account was funded with $34.4 million in cash from Cryovac and Fresenius. |
Grace is obligated to make a payment of $30 million in cash to the ZAI PD Account on the third anniversary of the Effective Date, and Grace is obligated to make up to 10 contingent deferred payments of $8 million per year to the ZAI PD Account during the 20-year period beginning on the fifth anniversary of the Effective Date, with each such payment due only if the assets of the ZAI PD Account fall below $10 million during the preceding year. The amounts that Grace will be obligated to pay to the ZAI PD Account under the Joint Plan are capped amounts. Grace is not obligated to make additional payments to the PD Trust in respect of the ZAI PD Account beyond the payments described above. Grace has accrued for the $30 million payment due on the third anniversary of the Effective Date, but has not accrued for the 10 additional payments since Grace does not currently believe they are probable. |
The PD Trust is to resolve U.S. ZAI PD Claims that qualify for payment under specified trust distribution procedures by paying 55% of the claimed amount, but in no event is the PD Trust to pay more per claim than $4,125 (as adjusted for inflation each year after the fifth anniversary of the Effective Date). |
All payments to the PD Trust required after the Effective Date are secured by the Company's obligation to issue 77,372,257 shares of Company common stock to the asbestos trusts in the event of default, subject to customary anti-dilution provisions. Grace has the right to conduct annual audits of the books, records and claim processing procedures of the PD Trust. |
Asbestos-Related Liability The recorded asbestos-related liability as of December 31, 2013, was $2,092.4 million, and was included in "liabilities subject to compromise" in the accompanying Consolidated Balance Sheets. The asbestos-related liability was settled at the recorded amount on the Effective Date, including payment of cash of $499.5 million at the Effective Date, issuance of deferred payment obligations of $594.5 million and the warrant of $490.0 million, and transfer of all cash and rights with respect to Grace's insurance policies that provide coverage for asbestos-related claims. |
The PI Trust deferred payment obligation of $110 million per year for 5 years beginning January 2, 2019, and of $100 million per year for 10 years beginning January 2, 2024, was recorded at fair value of $567 million on the Effective Date. The value of the deferred payment obligation was estimated based on (i) interest rates; (ii) the Company's credit standing and the payment period of the deferred payments; (iii) restrictive covenants and terms of the Company's other credit facilities; (iv) assessment of the risk of a default, which if default were to occur would require Grace to issue shares of Company common stock; and (v) the subordination provisions of the deferred payment agreement. |
Grace also recorded a deferred payment obligation of $27.5 million representing the present value of the $30 million payment due to the ZAI PD Account on February 3, 2017. |
The warrant to acquire 10 million shares of the Company's common stock for $17.00 per share was recorded at its estimated value of $490 million on the Effective Date based on the current trading range of Company common stock and other valuation factors. |
PI Warrant Settlement In October 2012, Grace entered into an agreement with interested parties to settle the PI Warrant in cash during the one-year period after the Effective Date. Under the terms of the settlement agreement, Grace will repurchase the PI Warrant for a price equal to the average of the daily closing prices of Company common stock during the period commencing one day after the Effective Date and ending on the day prior to the date the PI Trust elects to sell the PI Warrant back to Grace, multiplied by 10 million (the number of shares issuable under the PI Warrant), less $170 million (the aggregate exercise price of the PI Warrant), provided that if the average of the daily closing prices is less than $54.50 per share, then the repurchase price would be $375 million, and if the average of the daily closing prices exceeds $66.00 per share, then the repurchase price would be $490 million. The settlement agreement is terminable by the PI Trust in the event a tender offer, or other proposed transaction that would result in a change in control of the Company, is announced during the one-year period after the Effective Date. In such event, the PI Warrant would be settled in shares of Company common stock. |
Other Claims As provided for in the Joint Plan, Grace paid substantially all other allowed pre-petition claims in full on or within 10 days after the Effective Date. All allowed administrative claims and all allowed priority claims were paid in cash with interest as provided in the Joint Plan. Secured claims were paid in cash with interest or by reinstatement. Allowed general unsecured claims were paid in cash, including post-petition interest in accordance with the Joint Plan. The Joint Plan further provided that Grace, subject to certain non-bankruptcy limitations, satisfy all pension, retirement medical, and similar employee-related obligations and pay workers’ compensation claims. |
Unresolved Claims The Bankruptcy Court established a claims bar date of March 31, 2003, for claims of general unsecured creditors, PD Claims (other than ZAI PD Claims) and medical monitoring claims related to asbestos. The bar date did not apply to PI Claims or claims related to ZAI PD Claims. Unresolved claims are to be addressed through the claims objection process and the dispute resolution procedures approved by the Bankruptcy Court. Medical monitoring claims have been channeled to the PI Trust. |
Grace believes that its recorded liabilities for unresolved claims represent a reasonable estimate of the ultimate allowable amount for such claims, where sufficient information is available to determine whether liability is probable and estimable. If it is ultimately determined that any amounts are owed on these claims, they are to be paid in full, with interest as required. While the ultimate outcome of these claims cannot be predicted with certainty, Grace believes that the resolution of these matters will not have a material adverse effect on its consolidated financial position, results of operations, or cash flows. |
After the Effective Date, all persons and entities generally are forever barred from asserting against Grace any claims or demands that are based upon any act or omission, transaction, or other activity, event or occurrence that occurred prior to the Effective Date, except as expressly provided in the Joint Plan. |
Effect on Company Common Stock Under the Joint Plan holders of Company common stock as of the Effective Date retained their shares, but the interests of shareholders are subject to dilution in the event of default with respect to the deferred payment obligations to the PI Trust or the PD Trust under the Company's security obligation. As described in Note 16, Grace has entered into an agreement to settle the deferred payment obligations to the PI Trust in exchange for a cash payment. |
Debt Capital As of December 31, 2013, all of the Debtors' pre-petition debt was in default due to the Filing. The accompanying December 31, 2013, Consolidated Balance Sheet reflects the classification of the Debtors' pre-petition debt within "liabilities subject to compromise." All debt subject to compromise was paid in full on the Effective Date. See Note 4 for a discussion of Grace's exit financing. |
Accounting Impact The accompanying Consolidated Financial Statements have been prepared in accordance with ASC 852 "Reorganizations." ASC 852 requires that financial statements of debtors-in-possession be prepared on a going concern basis, which contemplates continuity of operations and realization of assets and liquidation of liabilities in the ordinary course of business. |
Pursuant to ASC 852, Grace's pre-petition and post-petition liabilities that were subject to compromise were required to be reported separately on the balance sheet at an estimate of the amount that would ultimately be allowed by the Bankruptcy Court. As of December 31, 2013, such pre-petition liabilities included fixed obligations (such as debt and contractual commitments), as well as estimates of costs related to contingent liabilities (such as asbestos-related litigation, environmental remediation and other claims). Obligations of Grace subsidiaries not covered by the Filing were required to be classified on the Consolidated Balance Sheets based upon maturity dates or the expected dates of payment. ASC 852 also requires separate reporting of certain expenses, realized gains and losses, and provisions for losses related to the Filing as reorganization items. Grace presents reorganization items as "Chapter 11 expenses, net of interest income," a separate caption in its Consolidated Statements of Operations. |
Grace's December 31, 2013, Consolidated Balance Sheet separately identifies the liabilities that were "subject to compromise" as a result of the Chapter 11 proceedings. In Grace's case, "liabilities subject to compromise" represented both pre-petition and post-petition liabilities as determined under U.S. GAAP. Changes to pre-petition liabilities subsequent to the Filing Date reflect: (1) cash payments under approved court orders; (2) the terms of the Joint Plan, as discussed above, including the accrual of interest on pre-petition debt and other fixed obligations; (3) accruals for employee-related programs; and (4) changes in estimates related to other pre-petition contingent liabilities. |
The table below sets forth the components of liabilities subject to compromise as of December 31, 2013: |
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(In millions) | December 31, | | | | | | | | | | | | |
2013 | | | | | | | | | | | | |
Asbestos-related contingencies | $ | 2,092.40 | | | | | | | | | | | | | |
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Pre-petition bank debt plus accrued interest | 1,100.00 | | | | | | | | | | | | | |
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Environmental contingencies | 134.5 | | | | | | | | | | | | | |
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Unfunded special pension arrangements | 129.4 | | | | | | | | | | | | | |
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Income tax contingencies | 76.6 | | | | | | | | | | | | | |
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Postretirement benefits other than pension | 57.2 | | | | | | | | | | | | | |
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Drawn letters of credit plus accrued interest | 37.8 | | | | | | | | | | | | | |
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Accounts payable | 34.3 | | | | | | | | | | | | | |
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Retained obligations of divested businesses | 29.9 | | | | | | | | | | | | | |
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Other accrued liabilities | 94.3 | | | | | | | | | | | | | |
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Reclassification to current liabilities(1) | (10.3 | ) | | | | | | | | | | | | |
Total Liabilities Subject to Compromise | $ | 3,776.10 | | | | | | | | | | | | | |
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_______________________________________________________________________________ |
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-1 | As of December 31, 2013, $10.3 million of certain pension and postretirement benefit obligations subject to compromise have been presented in "other current liabilities" in the accompanying Consolidated Balance Sheets in accordance with ASC 715 "Compensation—Retirement Benefits." | | | | | | | | | | | | | | |
The unfunded special pension arrangements reflected above exclude non-U.S. pension plans and qualified U.S. pension plans that became underfunded subsequent to the Filing. |
Upon emergence from bankruptcy, Grace paid $1,340.6 million to settle certain liabilities subject to compromise. All other balances previously classified as liabilities subject to compromise have been reclassified as either current or long term liabilities based on maturity dates or expected dates of payment. |
Chapter 11 Expenses |
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| Three Months Ended June 30, | | Six Months Ended June 30, |
(In millions) | 2014 | | 2013 | | 2014 | | 2013 |
Legal and financial advisory fees | $ | 3 | | | $ | 3.8 | | | $ | 9.2 | | | $ | 8.8 | |
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Interest income | — | | | (0.5 | ) | | (0.1 | ) | | (0.7 | ) |
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Chapter 11 expenses, net of interest income | $ | 3 | | | $ | 3.3 | | | $ | 9.1 | | | $ | 8.1 | |
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Pursuant to ASC 852, interest income earned on the Debtors' cash balances while in bankruptcy was offset against Chapter 11 expenses. |
Condensed Financial Information of the Debtors |
W. R. Grace & Co.—Chapter 11 Filing Entities |
Debtor-in-Possession Statement of Operations |
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(In millions) (Unaudited) | Six Months Ended | | | | | | | | | | | | |
June 30, | | | | | | | | | | | | |
2013 | | | | | | | | | | | | |
Net sales, including intercompany | $ | 720.3 | | | | | | | | | | | | | |
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Cost of goods sold, including intercompany, exclusive of depreciation and amortization shown separately below | 444.1 | | | | | | | | | | | | | |
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Selling, general and administrative expenses | 121 | | | | | | | | | | | | | |
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Depreciation and amortization | 34.6 | | | | | | | | | | | | | |
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Chapter 11 expenses, net of interest income | 8.1 | | | | | | | | | | | | | |
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Research and development expenses | 18.8 | | | | | | | | | | | | | |
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Interest expense and related financing costs | 18.6 | | | | | | | | | | | | | |
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Other income, net | (31.5 | ) | | | | | | | | | | | | |
| 613.7 | | | | | | | | | | | | | |
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Income before income taxes and equity in net income of non-filing entities | 106.6 | | | | | | | | | | | | | |
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Provision for income taxes | (45.3 | ) | | | | | | | | | | | | |
Income before equity in net income of non-filing entities | 61.3 | | | | | | | | | | | | | |
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Equity in net income of non-filing entities | 88.1 | | | | | | | | | | | | | |
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Net income attributable to W. R. Grace & Co. shareholders | $ | 149.4 | | | | | | | | | | | | | |
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W. R. Grace & Co.—Chapter 11 Filing Entities |
Debtor-in-Possession Statement of Cash Flows |
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(In millions) (Unaudited) | Six Months Ended | | | | | | | | | | | | |
June 30, | | | | | | | | | | | | |
2013 | | | | | | | | | | | | |
Operating Activities | | | | | | | | | | | | | |
Net income attributable to W. R. Grace & Co. shareholders | $ | 149.4 | | | | | | | | | | | | | |
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Reconciliation to net cash provided by operating activities: | | | | | | | | | | | | | |
Depreciation and amortization | 34.6 | | | | | | | | | | | | | |
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Equity in net income of non-filing entities | (88.1 | ) | | | | | | | | | | | | |
Provision for income taxes | 45.3 | | | | | | | | | | | | | |
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Income taxes paid, net of refunds | (3.4 | ) | | | | | | | | | | | | |
Defined benefit pension expense | 7.4 | | | | | | | | | | | | | |
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Payments under defined benefit pension arrangements | (52.8 | ) | | | | | | | | | | | | |
Changes in assets and liabilities, excluding the effect of foreign currency translation: | | | | | | | | | | | | | |
Trade accounts receivable | (10.3 | ) | | | | | | | | | | | | |
Inventories | (29.8 | ) | | | | | | | | | | | | |
Accounts payable | 16.8 | | | | | | | | | | | | | |
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All other items, net | 14.4 | | | | | | | | | | | | | |
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Net cash provided by operating activities | 83.5 | | | | | | | | | | | | | |
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Investing Activities | | | | | | | | | | | | | |
Capital expenditures | (39.9 | ) | | | | | | | | | | | | |
Transfer to short-term investments | (500.0 | ) | | | | | | | | | | | | |
Transfer to restricted cash and cash equivalents | 5.1 | | | | | | | | | | | | | |
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Net cash used for investing activities | (534.8 | ) | | | | | | | | | | | | |
Financing Activities | | | | | | | | | | | | | |
Borrowings under credit arrangements | — | | | | | | | | | | | | | |
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Repayments under credit arrangements | (0.4 | ) | | | | | | | | | | | | |
Proceeds from exercise of stock options | 25.2 | | | | | | | | | | | | | |
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Net cash provided by financing activities | 24.8 | | | | | | | | | | | | | |
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Net decrease in cash and cash equivalents | (426.5 | ) | | | | | | | | | | | | |
Cash and cash equivalents, beginning of period | 1,064.20 | | | | | | | | | | | | | |
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Cash and cash equivalents, end of period | $ | 637.7 | | | | | | | | | | | | | |
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W. R. Grace & Co.—Chapter 11 Filing Entities |
Debtor-in-Possession Balance Sheet |
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(In millions) (Unaudited) | 31-Dec-13 | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | |
Current Assets | | | | | | | | | | | | | |
Cash and cash equivalents | $ | 585.1 | | | | | | | | | | | | | |
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Restricted cash and cash equivalents | 340.5 | | | | | | | | | | | | | |
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Trade accounts receivable, net | 149.7 | | | | | | | | | | | | | |
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Receivables from non-filing entities, net | 173 | | | | | | | | | | | | | |
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Inventories | 138.9 | | | | | | | | | | | | | |
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Other current assets | 69.3 | | | | | | | | | | | | | |
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Total Current Assets | 1,456.50 | | | | | | | | | | | | | |
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Properties and equipment, net | 484.5 | | | | | | | | | | | | | |
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Goodwill | 279.9 | | | | | | | | | | | | | |
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Technology and other intangible assets, net | 249.1 | | | | | | | | | | | | | |
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Deferred income taxes | 817.3 | | | | | | | | | | | | | |
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Asbestos-related insurance | 500 | | | | | | | | | | | | | |
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Loans receivable from non-filing entities, net | 283.8 | | | | | | | | | | | | | |
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Investment in non-filing entities | 531.3 | | | | | | | | | | | | | |
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Investment in unconsolidated affiliate | 96.2 | | | | | | | | | | | | | |
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Other assets | 16.5 | | | | | | | | | | | | | |
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Total Assets | $ | 4,715.10 | | | | | | | | | | | | | |
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LIABILITIES AND EQUITY | | | | | | | | | | | | | |
Liabilities Not Subject to Compromise | | | | | | | | | | | | | |
Current liabilities | $ | 247.4 | | | | | | | | | | | | | |
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Underfunded defined benefit pension plans | 52.2 | | | | | | | | | | | | | |
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Other liabilities | 78.7 | | | | | | | | | | | | | |
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Total Liabilities Not Subject to Compromise | 378.3 | | | | | | | | | | | | | |
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Liabilities Subject to Compromise | 3,776.10 | | | | | | | | | | | | | |
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Total Liabilities | 4,154.40 | | | | | | | | | | | | | |
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Total W. R. Grace & Co. Shareholders' Equity | 560.6 | | | | | | | | | | | | | |
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Noncontrolling interests in Chapter 11 filing entities | 0.1 | | | | | | | | | | | | | |
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Total Equity | 560.7 | | | | | | | | | | | | | |
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Total Liabilities and Equity | $ | 4,715.10 | | | | | | | | | | | | | |
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This summary of the terms of various agreements does not purport to be complete and is qualified in its entirety by reference to the Joint Plan, the Confirmation Order, the Asbestos Trust Agreements, the Asbestos Insurance Transfer Agreement, the Deferred Payment Agreements, the Guarantee Agreements, the Share Issuance Agreement, the Warrant Agreement, the Warrant Implementation Letter, and the Warrant Registration Rights Agreement, which have been filed with the SEC. |