EXHIBIT 99.1
[GRACE NEWS LOGO OMITTED]
CORPORATE COMMUNICATIONS
W. R. Grace & Co.
7500 Grace Drive
Columbia, MD 21044
CONTACT: Media Relations: Investor Relations:
Greg Euston Bridget Sarikas
(212) 213-7060 (410) 531-4194
GRACE REPORTS FIRST QUARTER FINANCIAL RESULTS
COLUMBIA, Maryland, April 22, 2003 -- W. R. Grace & Co. (NYSE: GRA) today
reported that 2003 first quarter sales totaled $444.8 million compared with
$412.9 million in the prior year quarter, a 7.7% increase. Favorable currency
translation effects from a weaker U.S. dollar accounted for 6.1% of the
increase, with revenue from acquisitions and added volume in certain product
lines also contributing. First quarter net results were a $(2.3) million loss,
or $(0.04) per share, compared with net income of $12.4 million, or $0.19 per
share, in the first quarter of 2002. Pre-tax income from core operations in the
first quarter of 2003 was $13.5 million compared with $33.8 million in the first
quarter of 2002. Operating results were adversely affected by economic weakness,
particularly in U.S. commercial construction, and by higher manufacturing and
petroleum-based raw material costs. The 2003 first quarter also includes higher
environmental litigation costs and, like most industrial companies, added
pension expense to account for poor investment returns in recent years. Chapter
11 related expenses were $2.7 million in the quarter.
"The first quarter presented unique challenges for a global company like
Grace," said Grace Chairman, President and Chief Executive Officer Paul J.
Norris. "The weaker dollar helped our reported sales, but the continued softness
in the economy yielded little in the way of real growth. Our costs and expenses
were adversely affected by war-related uncertainties, added pension costs and
abnormally high manufacturing costs, partially due to the severe winter in the
U.S. Our challenge for the rest of the year is to maximize the benefits from our
productivity and six sigma activities, and to capitalize on what we hope will be
improving economic conditions."
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CORE OPERATIONS
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DAVISON CHEMICALS
CATALYST AND SILICA PRODUCTS
First quarter sales for the Davison Chemicals segment were $239.1 million, up
11.8% from prior year quarter sales of $213.9 million. Excluding favorable
currency translation impacts, sales were up 3.3% for the quarter, primarily
attributable to catalyst acquisitions and volume growth in silica products.
Sales of catalyst products, which include refining catalysts, polyolefin
catalysts and other chemical catalysts, were up 9.7% compared with the prior
year quarter, as a result of currency effects and acquisitions in polyolefin and
hydroprocessing catalyst segments. Sales of silica products were up 16.9%
compared with the first quarter of 2002 (5.9% excluding currency translation
impacts), primarily from growth programs in coatings, digital printing and
separations applications, and added volume in North America and Europe.
Operating income of the Davison Chemicals segment was $20.3 million, 20.7% lower
than the 2002 first quarter; operating margin was 8.5%, about 3.5 percentage
points lower than the prior year quarter. Operating income and margins in the
first quarter of 2003 were negatively affected by higher manufacturing costs,
primarily due to production difficulties and unusual maintenance requirements,
exacerbated by severe weather in the mid-Atlantic region of the United States.
PERFORMANCE CHEMICALS
CONSTRUCTION CHEMICALS, BUILDING MATERIALS, AND SEALANTS AND COATINGS
First quarter sales for the Performance Chemicals segment were $205.7 million,
up 3.4% from the prior year quarter, primarily from favorable currency
translation impacts. Volume gains outside of North America were offset by
weakness in North America, where commercial construction activity was about 10%
lower than last year. Sales of specialty construction chemicals, which include
concrete admixtures, cement additives and masonry products, were up 8.6% versus
the year-ago quarter (4.5% excluding currency translation impacts). Sales were
strong in geographic regions other than North America, reflecting the success of
new product programs and sales initiatives in key economies worldwide. Sales of
specialty building materials, which include waterproofing and fire
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protection products, were down 6.5% (down 8.7% before translation impacts)
compared with a strong first quarter in 2002. The decline reflects softness in
North American construction and re-roofing activity, due partly to severe
weather and partly to the effects of new building codes that permit less fire
protection materials for structural steel used in commercial buildings. Sales of
specialty sealants and coatings, which include container sealants, coatings and
polymers, were up 5.5% compared with the first quarter of 2002 (up 1.5% before
the effect of currency translation), reflecting growth initiatives in coatings
and closure compounds, particularly in Europe and Asia.
Operating income for the Performance Chemicals segment was $12.1 million,
compared with $18.6 million in the prior year quarter. Operating margin of 5.9%
was well below the 2002 first quarter margin of 9.3%, reflecting higher costs
and an unfavorable regional product mix. Operating income, although favorably
impacted by sales growth in construction chemicals (outside North America) and
sealants and coatings, was adversely affected by lower sales of building
materials. Other factors causing lower margins were higher costs of
petroleum-based raw materials, transportation fuels and related operating costs.
CORPORATE COSTS
First quarter corporate costs related to core operations increased $8.5 million,
totaling $18.9 million for the quarter. The increase is primarily attributable
to added costs for pensions, largely related to negative economic factors
impacting equity markets and interest rates in recent years.
CHAPTER 11 PROCEEDINGS
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On April 2, 2001 Grace and 61 of its United States subsidiaries and affiliates,
including its primary U.S. operating subsidiary W. R. Grace & Co.-Conn., filed
voluntary petitions for reorganization under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware (the "Filing"). Grace's non-U.S. subsidiaries and certain of its U.S.
subsidiaries were not a part of the Filing. Since the Filing, all motions
necessary to conduct normal business activities have been approved by the
Bankruptcy Court.
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The Bankruptcy Court had established a bar date of March 31, 2003 for claims of
general unsecured creditors, asbestos property damage claims and medical
monitoring claims related to asbestos. The bar date did not apply to
asbestos-related bodily injury claims or claims related to Zonolite(R) Attic
Insulation, which will be dealt with separately. Claims submitted by the bar
date are being catalogued and evaluated. It will likely take several months to
assess the validity of the claims filed and to develop a plan to address these
claims through the bankruptcy process.
CASH FLOW AND LIQUIDITY
- -----------------------
Grace's cash flow provided by operating activities was $9.4 million for the
first quarter of 2003, compared with $6.9 million for the first quarter of 2002.
Pre-tax income from core operations before depreciation and amortization was
32.6% lower than 2002. This decline was more than offset by working capital
improvements relative to the prior year. Cash used for investing activities was
$18.6 million for the quarter, primarily for construction of a new catalyst
facility in Lake Charles, Louisiana, and for capital replacements.
At March 31, 2003, Grace had available liquidity in the form of cash ($275.0
million), net cash value of life insurance ($87.7 million) and unused credit
under its debtor-in-possession facility ($225.4 million). Grace believes that
these sources and amounts of liquidity are sufficient to support its strategic
initiatives and Chapter 11 proceedings for the foreseeable future. The term of
Grace's $250 million debtor-in-possession credit facility was extended for up to
three years through April 2006.
NONCORE LIABILITIES AND CONTINGENCIES
- -------------------------------------
Most of Grace's noncore liabilities and contingencies (including
asbestos-related litigation, environmental remediation claims, tax disputes and
other potential obligations), are subject to compromise under the Chapter 11
process. The Chapter 11 proceedings, including litigation and the claims
resolution process, could result in allowable claims that differ materially from
recorded amounts. Grace will adjust its estimates of allowable claims as facts
come to light during the Chapter 11 process that justify a change, and as
Chapter 11 proceedings establish court-accepted measures of Grace's noncore
liabilities. See
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Grace's recent Securities and Exchange Commission filings for discussion of
noncore liabilities and contingencies.
* * * * *
Grace is a leading global supplier of catalysts and silica products, specialty
construction chemicals, building materials, and sealants and coatings. With
annual sales of approximately $1.8 billion, Grace has over 6,000 employees and
operations in nearly 40 countries. For more information, visit Grace's Web site
at www.grace.com.
* * *
This announcement contains forward-looking statements that involve risks and
uncertainties, as well as statements that are preceded by, followed by or
include the words "believes," "plans," "intends", "targets", "will," "expects,"
"anticipates," or similar expressions. For such statements, Grace claims the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995. Actual results may differ
materially from the results predicted, and reported results should not be
considered as an indication of future performance. Factors that could cause
actual results to differ from those contained in the forward-looking statements
include those factors set forth in Grace's most recent Annual Report on Form
10-K and quarterly reports on Form 10-Q, which have been filed with the SEC.
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[GRACE NEWS LOGO OMITTED]
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W.R. GRACE & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED
(UNAUDITED) MARCH 31,
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Amounts in millions, except per share amounts 2003 2002
- ------------------------------------------------------------------------ --------------------- ---------------------
Net sales $ 444.8 $ 412.9
Other income 5.8 6.1
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450.6 419.0
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Cost of goods sold, exclusive of depreciation and amortization
shown separately below 296.6 259.7
Selling, general and administrative expenses, exclusive of net
pension expense shown separately below 91.8 83.5
Depreciation and amortization 24.7 22.9
Research and development expenses 14.1 12.8
Net pension expense 13.5 5.1
Interest expense and related financing costs 4.2 4.8
Provision for environmental remediation 2.0 3.8
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446.9 392.6
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Income before Chapter 11 expenses, income taxes,
and minority interest 3.7 26.4
Chapter 11 expenses, net (2.7) (4.4)
Provision for income taxes (3.1) (10.1)
Minority interest in consolidated entities (0.2) 0.5
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NET (LOSS) INCOME $ (2.3) $ 12.4
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BASIC (LOSS) EARNINGS PER COMMON SHARE $ (0.04) $ 0.19
Average number of basic shares 65.5 65.4
DILUTED (LOSS) EARNINGS PER COMMON SHARE $ (0.04) $ 0.19
Average number of diluted shares 65.5 65.4
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Note: The amounts in these financial statements are unaudited and are subject to
change prior to the filing of Grace's Quarterly Report on Form 10-Q. Any changes
not deemed to be material will be reflected in the Form 10-Q. Any changes deemed
to be material will be promptly disclosed.
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W.R. GRACE & CO. AND SUBSIDIARIES
CONTINUING OPERATIONS SEGMENT BASIS THREE MONTHS ENDED
(UNAUDITED) MARCH 31,
================================================ ================================================================
%
Amounts in millions 2003 2002 Change
- ------------------------------------------------ -------------------- -------------------- ----------------------
NET SALES:
DAVISON CHEMICALS
Catalyst products.......................... $ 168.0 $ 153.1 9.7%
Silica products............................ 71.1 60.8 16.9%
- ------------------------------------------------ -------------------- -------------------- ----------------------
TOTAL DAVISON CHEMICALS 239.1 213.9 11.8%
- ------------------------------------------------ -------------------- -------------------- ----------------------
PERFORMANCE CHEMICALS
Construction chemicals..................... 90.8 83.6 8.6%
Building materials......................... 53.5 57.2 (6.5%)
Sealants and coatings..................... 61.4 58.2 5.5%
- ------------------------------------------------ -------------------- -------------------- ----------------------
TOTAL PERFORMANCE CHEMICALS 205.7 199.0 3.4%
- ------------------------------------------------ -------------------- -------------------- ----------------------
TOTAL GRACE SALES $ 444.8 $ 412.9 7.7%
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PRE-TAX OPERATING INCOME (a)(b):
Davison Chemicals............................. $ 20.3 $ 25.6 (20.7%)
Performance Chemicals......................... 12.1 18.6 (34.9%)
Corporate costs............................... (18.9) (10.4) (81.7%)
- ------------------------------------------------ -------------------- -------------------- ----------------------
PRE-TAX INCOME FROM CORE OPERATIONS 13.5 33.8 (60.1%)
- ------------------------------------------------ -------------------- -------------------- ----------------------
PRE-TAX (LOSS) FROM NONCORE ACTIVITIES.......... (7.0) (2.9) NM
- ------------------------------------------------ -------------------- -------------------- ----------------------
Interest expense................................ (4.2) (4.8) 12.5%
Interest income................................. 1.2 0.8 50.0%
- ------------------------------------------------ -------------------- -------------------- ----------------------
INCOME BEFORE CHAPTER 11 EXPENSES AND
INCOME TAXES 3.5 26.9 (87.0%)
Chapter 11 expenses, net........................ (2.7) (4.4) 38.6%
Provision for income taxes...................... (3.1) (10.1) 69.3%
- ------------------------------------------------ -------------------- -------------------- ----------------------
NET (LOSS) INCOME $ (2.3) $ 12.4 (118.5%)
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KEY FINANCIAL MEASURES:
Pre-tax income from core operations as a
percentage of sales...................... 3.0% 8.2% (5.2) pts
Pre-tax income from core operations before
depreciation and amortization (a)........ $ 38.2 $ 56.7 (32.6%)
As a percentage of sales................. 8.6% 13.7% (5.1) pts
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NET SALES BY REGION:
North America ............................... $ 204.2 $ 202.6 0.8%
Europe....................................... 154.8 125.0 23.8%
Asia Pacific................................. 61.4 59.7 2.8%
Latin America................................ 24.4 25.6 (4.7%)
- ------------------------------------------------ -------------------- -------------------- ----------------------
TOTAL $ 444.8 $ 412.9 7.7%
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Note (a): Neither pre-tax income from core operations nor pre-tax income from
core operations before depreciation and amortization purport to represent income
or cash flow as defined under generally accepted accounting principles, and
should not be considered an alternative to such measures as an indicator of the
Company's performance. These measures are provided to distinguish operating
results of Grace's current business base from results and related assets and
liabilities of past businesses, discontinued products and corporate legacies.
Note (b): Pre-tax operating income for all periods presented reflects a
reallocation of the cost of earned pension benefits of active participants from
corporate to the respective business segments.
NM - Not Meaningful
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W.R. GRACE & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED
(UNAUDITED) MARCH 31,
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Amounts in millions 2003 2002
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OPERATING ACTIVITIES
Income before Chapter 11 expenses, income taxes, and minority interest............. $ 3.7 $ 26.4
Reconciliation to net cash provided by operating activities:
Depreciation and amortization ................................................ 24.7 22.9
Interest accrued on pre-petition debt subject to compromise................... 2.9 3.4
Loss on disposal of assets.................................................... 0.3 0.2
Provision for environmental remediation....................................... 2.0 3.8
Net income from life insurance policies....................................... (3.1) (2.9)
Changes in assets and liabilities, excluding effect of businesses
acquired/divested and foreign currency translation:
Increase in working capital items......................................... (18.2) (42.5)
Expenditures for asbestos-related litigation ............................. (2.3) (1.5)
Proceeds from asbestos-related insurance ................................. 1.1 1.0
Expenditures for environmental remediation ............................... (2.8) (3.8)
Expenditures for postretirement benefits ................................. (3.1) (4.6)
Expenditures for retained obligations of discontinued operations.......... (0.3) (1.0)
Changes in accruals and other non-cash items.............................. 12.6 13.0
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NET CASH PROVIDED BY OPERATING ACTIVITIES BEFORE INCOME TAXES AND CHAPTER 11
EXPENSES...................................................................... 17.5 14.4
Chapter 11 expenses paid, net ..................................................... (3.8) (2.9)
Income taxes paid, net of refunds.................................................. (4.3) (4.6)
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NET CASH PROVIDED BY OPERATING ACTIVITIES .................................... 9.4 6.9
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INVESTING ACTIVITIES
Capital expenditures .............................................................. (18.0) (13.2)
Businesses acquired in purchase transactions, net of cash acquired ................ -- (25.0)
Investment in life insurance policies ............................................. (4.9) (12.6)
Proceeds from life insurance policies.............................................. 3.6 6.2
Proceeds from disposals of assets ................................................. 0.7 0.6
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NET CASH USED FOR INVESTING ACTIVITIES ....................................... (18.6) (44.0)
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FINANCING ACTIVITIES
Net payments of loans secured by cash value of life insurance policies............. (0.9) (2.1)
Borrowings under credit facilities, net of repayments ............................. (0.1) (0.4)
Borrowings (fees paid) under debtor-in-possession facility......................... (2.2) 20.0
Repayment of borrowings under debtor-in-possession facility ....................... -- (20.0)
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NET CASH USED FOR FINANCING ACTIVITIES ....................................... (3.2) (2.5)
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Effect of currency exchange rate changes on cash and cash equivalents ............. 4.4 (0.6)
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DECREASE IN CASH AND CASH EQUIVALENTS ........................................ (8.0) (40.2)
Cash and cash equivalents, beginning of period .................................... 283.0 191.4
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Cash and cash equivalents, end of period .......................................... $ 275.0 $ 151.2
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W.R. GRACE & CO. AND SUBSIDIARIES MARCH 31, DECEMBER 31,
CONSOLIDATED BALANCE SHEET (UNAUDITED) 2003 2002
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Amounts in millions, except par value and shares
ASSETS
CURRENT ASSETS
Cash and cash equivalents ....................................................... $ 275.0 $ 283.0
Accounts and other receivables, net ............................................. 313.2 311.3
Inventories ..................................................................... 191.7 172.4
Deferred income taxes .......................................................... 27.5 28.0
Other current assets............................................................. 25.2 35.7
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TOTAL CURRENT ASSETS ....................................................... 832.6 830.4
Properties and equipment, net.................................................... 620.6 620.8
Goodwill ........................................................................ 65.9 65.2
Cash value of life insurance policies, net of policy loans....................... 87.7 82.4
Deferred income taxes ........................................................... 573.6 566.7
Asbestos-related insurance expected to be realized after one year................ 281.6 282.6
Other assets .................................................................... 249.7 239.6
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TOTAL ASSETS ............................................................... $ 2,711.7 $ 2,687.7
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LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
LIABILITIES NOT SUBJECT TO COMPROMISE
CURRENT LIABILITIES
Debt payable within one year .................................................... $ 3.4 $ 3.4
Accounts payable ................................................................ 118.6 98.2
Income taxes payable ............................................................ 11.8 11.4
Other current liabilities ....................................................... 112.1 130.3
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TOTAL CURRENT LIABILITIES .................................................. 245.9 243.3
Deferred income taxes ........................................................... 31.2 30.5
Other liabilities ............................................................... 313.8 301.3
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TOTAL LIABILITIES NOT SUBJECT TO COMPROMISE ................................ 590.9 575.1
LIABILITIES SUBJECT TO COMPROMISE
Pre-petition debt plus accrued interest.......................................... 541.7 538.8
Accounts payable................................................................. 32.1 32.4
Income taxes payable............................................................. 232.6 227.8
Asbestos-related liability....................................................... 970.9 973.2
Other liabilities................................................................ 558.4 562.5
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TOTAL LIABILITIES SUBJECT TO COMPROMISE..................................... 2,335.7 2,334.7
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TOTAL LIABILITIES........................................................... 2,926.6 2,909.8
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SHAREHOLDERS' EQUITY (DEFICIT)
Common stock..................................................................... 0.8 0.8
Paid-in-capital ................................................................. 432.2 433.0
Accumulated deficit.............................................................. (118.0) (115.7)
Treasury stock, at cost.......................................................... (136.1) (137.0)
Accumulated other comprehensive loss ............................................ (393.8) (403.2)
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TOTAL SHAREHOLDERS' EQUITY (DEFICIT)........................................ (214.9) (222.1)
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) ....................... $ 2,711.7 $ 2,687.7
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