EXHIBIT 99.1
[GRACE NEWS] CORPORATE COMMUNICATIONS
W. R. Grace & Co.
7500 Grace Drive
Columbia, MD 21044
CONTACT: Media Relations: Investor Relations:
Greg Euston Bridget Sarikas
(212) 468-3734 (410) 531-4194
GRACE REPORTS FIRST QUARTER FINANCIAL RESULTS
COLUMBIA, Maryland, April 20, 2004 -- W. R. Grace & Co. (NYSE: GRA) today
reported that 2004 first quarter sales totaled $518.5 million compared with
$444.8 million in the prior year quarter, an increase of 16.6%. Revenue from
improved volume and product mix accounted for over half of the increase, with
favorable currency translation effects from a weaker U.S. dollar and
acquisitions also contributing. Grace reported first quarter net income of $15.8
million, or $0.24 per share, compared with a net loss of ($2.3 million), or
($0.04) per share, in the first quarter of 2003. Pre-tax income from core
operations in the first quarter of 2004 was $38.5 million compared with $13.5
million in the first quarter of 2003, a 185.2% increase, reflecting improved
economic conditions, including stronger construction activity in the U.S., and
cost structure improvements from successful productivity initiatives. "Our first
quarter operating results were very good, with strong sales from each product
line and a record first quarter profit from our Performance Chemicals segment,"
said Grace's Chairman and Chief Executive Officer Paul J. Norris. "Our strategic
and operating initiatives are delivering positive results, allowing us to
capitalize on stronger economic activity worldwide."
CORE OPERATIONS
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DAVISON CHEMICALS
CATALYST AND SILICA PRODUCTS
First quarter sales for the Davison Chemicals segment were $270.9 million, up
13.3% from a prior year quarter that reflected relatively weaker economic
conditions. Excluding the effects of favorable currency translation, sales were
up 6.7% for the quarter. Sales of catalyst products, which include refining
catalysts, polyolefin catalysts and other chemical catalysts, were $187.3
million, up 11.5% compared with the prior year quarter. Most of the
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increase resulted from favorable product mix factors including added revenue to
cover higher metals costs, with the remainder attributable to favorable currency
effects. Sales of silica products were $83.6 million, up 17.6% compared with the
first quarter of 2003, with currency effects of the stronger Euro contributing
about 11.7 percentage points of the increase. Improvement was also attributable
to growth programs in separations applications and from higher volumes into most
consumer segments, showing evidence of a stronger economy in the United States
and Asia Pacific.
Operating income of the Davison Chemicals segment for the first quarter was
$32.0 million, 57.6% higher than the 2003 first quarter; operating margin was
11.8%, higher than the prior year quarter by 3.3 percentage points. The increase
in operating income was driven primarily by improved sales in North America and
in the Asia Pacific region, as well as foreign currency translation effects.
First quarter operating margin was enhanced by a favorable product mix, improved
manufacturing costs and positive results from productivity initiatives.
PERFORMANCE CHEMICALS
CONSTRUCTION CHEMICALS, BUILDING MATERIALS, AND SEALANTS AND COATINGS
First quarter sales for the Performance Chemicals segment were $247.6 million,
up 20.4% from a relatively weak prior year quarter. Favorable currency
translation accounted for 6.9 percentage points of the increase. Sales of
specialty construction chemicals, which include concrete admixtures, cement
additives and masonry products, were $116.4 million, up 28.2% versus the
year-ago quarter (20.6% excluding favorable currency translation impacts).
Revenues from Grace's acquisition in Germany (completed October 1, 2003)
accounted for about one-fifth of the construction chemicals sales increase.
Sales were up in all geographic regions, reflecting the success of new product
programs and sales initiatives in key economies worldwide, as well as increased
U.S. construction activity. Sales of specialty building materials, which include
waterproofing and fire protection products, were $59.8 million, up 11.8%
compared with the first quarter of 2003 (up 8.2% excluding favorable currency
translation impacts). The first quarter results reflect strong sales of
waterproofing materials, particularly underlayments for residential re-roofing,
offset by continuing declines in fire protection products caused by changes in
building codes and some weather-related project delays in January. Sales of
specialty sealants and coatings, which include container sealants, coatings and
polymers, were
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$71.4 million, up 16.3% compared with the first quarter of 2003 (up 7.5%
excluding favorable currency translation impacts). Higher sales in coatings and
closure sealants, particularly outside North America, accounted for most of the
increase.
Operating income for the Performance Chemicals segment was $27.6 million,
compared with $12.1 million in the prior year quarter, a 128.1% increase and a
record for the first quarter. Operating margin of 11.1% was 5.2 percentage
points higher than the 2003 first quarter margin. Improved operating income and
margins reflected increased sales volume from all product lines and the success
of productivity and cost containment programs across the business segment.
CORPORATE COSTS
First quarter corporate costs related to core operations were $21.1 million, a
$2.2 million increase from the prior year quarter. The increase is primarily
attributable to performance related compensation. In addition, effective in
March 2004, Grace began accounting for currency fluctuations on a
(eurodollar)292 million intercompany loan between Grace's subsidiaries in the
United States and Germany as a component of operating results instead of as a
component of other comprehensive income. The change was prompted by new tax laws
in Germany and by Grace's cash flow planning for its Chapter 11 reorganization
which indicated that it is no longer reasonable to treat this loan as part of
the permanent capital structure in Germany. The change in currency related to
this loan over the first quarter was $9.8 million unfavorable, $8.5 million of
which is reflected in other comprehensive income and $1.3 million of which is
reflected in Grace's operating statements as part of noncore other (income)
expense.
CASH FLOW AND LIQUIDITY
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Grace's cash flow provided by operating activities was $20.7 million for the
2004 first quarter, compared with $9.7 million for the comparable period of
2003. First quarter 2004 pre-tax income from core operations before depreciation
and amortization was $65.7 million, 72.0% higher than 2003. These results
reflect the higher income from core operations described above. Cash used for
investing activities was $8.3 million during the first quarter of 2004,
primarily for capital replacements.
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At March 31, 2004, Grace had available liquidity in the form of cash ($325.3
million), net cash value of life insurance ($92.9 million) and unused credit
under its debtor-in-possession facility ($216.1 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.
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 part of the Filing. Since the Filing, all motions
necessary to conduct normal business activities have been approved by the
Bankruptcy Court.
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 Grace's recent Securities and Exchange Commission filings for
discussion of noncore liabilities and contingencies.
* * * * *
Grace is a leading global supplier of catalyst and silica products, specialty
construction chemicals, building materials, and sealants and coatings. With
annual sales of approximately $2 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]
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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 2004 2003
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Net sales............................................... $ 518.5 $444.8
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Cost of goods sold, exclusive of depreciation and
amortization shown separately below................ 331.7 296.7
Selling, general and administrative expenses,
exclusive of net pension expense shown
separately below................................... 102.2 91.7
Depreciation and amortization........................... 27.2 24.7
Research and development expenses....................... 12.7 14.1
Net pension expense..................................... 12.3 13.5
Interest expense and related financing costs............ 3.9 4.2
Other (income) expense.................................. (3.2) (5.8)
Provision for environmental remediation................. -- 2.0
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486.8 441.1
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Income before Chapter 11 expenses,
income taxes and minority interest................. 31.7 3.7
Chapter 11 expenses, net................................ (4.5) (2.7)
Provision for income taxes.............................. (10.9) (3.1)
Minority interest in consolidated entities.............. (0.5) (0.2)
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NET INCOME (LOSS) $ 15.8 $ (2.3)
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BASIC EARNINGS (LOSS) PER COMMON SHARE.................. $ 0.24 $ (0.04)
Average number of basic shares.......................... 65.6 65.5
DILUTED EARNINGS (LOSS) PER COMMON SHARE................ $ 0.24 $ (0.04)
Average number of diluted shares........................ 65.8 65.5
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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,
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Amounts in millions 2004 2003 % Change
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NET SALES:
DAVISON CHEMICALS
Catalyst products....................... $187.3 $168.0 11.5%
Silica products......................... 83.6 71.1 17.6%
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TOTAL DAVISON CHEMICALS 270.9 239.1 13.3%
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PERFORMANCE CHEMICALS
Construction chemicals.................. 116.4 90.8 28.2%
Building materials...................... 59.8 53.5 11.8%
Sealants & coatings..................... 71.4 61.4 16.3%
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TOTAL PERFORMANCE CHEMICALS 247.6 205.7 20.4%
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TOTAL GRACE SALES $518.5 $444.8 16.6%
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PRE-TAX OPERATING INCOME (A):
Davison Chemicals.......................... $32.0 $20.3 57.6%
Performance Chemicals...................... 27.6 12.1 128.1%
Corporate costs............................ (21.1) (18.9) (11.6%)
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PRE-TAX INCOME FROM CORE OPERATIONS 38.5 13.5 185.2%
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PRE-TAX LOSS FROM NONCORE ACTIVITIES......... (4.3) (7.0) 38.6%
Interest expense............................. (3.9) (4.2) 7.1%
Interest income.............................. 0.9 1.2 (25.0%)
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INCOME BEFORE CHAPTER 11 EXPENSES
AND INCOME TAXES 31.2 3.5 791.4%
Chapter 11 expenses, net..................... (4.5) (2.7) (66.7%)
Provision for income taxes................... (10.9) (3.1) (251.6%)
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NET INCOME (LOSS) $15.8 ($2.3) NM
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KEY FINANCIAL MEASURES:
Pre-tax income from core operations as a
percentage of sales................... 7.4% 3.0% 4.4pts.
Pre-tax income from core operations before
depreciation and amortization (a)..... $65.7 $38.2 72.0%
As a percentage of sales.............. 12.7% 8.6% 4.1pts.
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NET SALES BY REGION:
North America ............................ $225.2 $204.2 10.3%
Europe.................................... 193.4 154.8 24.9%
Asia Pacific.............................. 72.7 61.4 18.4%
Latin America............................. 27.2 24.4 11.5%
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TOTAL $518.5 $444.8 16.6%
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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.
NM - Not Meaningful
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W. R. GRACE & CO. AND SUBSIDIARIES THREE MONTHS ENDED
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) MARCH 31,
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Amounts in millions 2004 2003
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OPERATING ACTIVITIES
Income before Chapter 11 expenses, income taxes and
minority interest............................................................ $ 31.7 $ 3.7
Reconciliation to net cash provided by operating activities:
Depreciation and amortization ................................................ 27.2 24.7
Interest accrued on pre-petition debt subject to compromise................... 2.7 2.9
Loss on sale of investments and disposals of assets........................... 0.2 0.3
Provision for environmental remediation....................................... -- 2.0
Income from life insurance policies, net...................................... (1.5) (3.1)
Changes in assets and liabilities, excluding effect of businesses
acquired/divested and foreign currency translation:
Working capital items..................................................... (33.2) (17.9)
Contributions to defined benefit pension plans............................ (2.4) (1.1)
Contributions to postretirement benefit plans ............................ (2.6) (3.1)
Expenditures for asbestos-related litigation ............................. (1.9) (2.3)
Proceeds from asbestos-related insurance ................................. 1.6 1.1
Expenditures for environmental remediation ............................... (2.9) (3.1)
Expenditures for retained obligations of discontinued operations.......... (0.4) --
Changes in accruals and other non-cash items.............................. 14.5 13.7
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NET CASH PROVIDED BY OPERATING ACTIVITIES BEFORE INCOME TAXES AND CHAPTER 11
EXPENSES...................................................................... 33.0 17.8
Chapter 11 expenses paid, net ..................................................... (2.0) (3.8)
Income taxes paid, net of refunds.................................................. (10.3) (4.3)
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NET CASH PROVIDED BY OPERATING ACTIVITIES .................................... 20.7 9.7
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INVESTING ACTIVITIES
Capital expenditures .............................................................. (9.1) (18.0)
Investment in life insurance policies ............................................. (4.6) (4.9)
Proceeds from life insurance policies.............................................. 5.3 3.6
Proceeds from sales of investments and disposals of assets......................... 0.1 0.7
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NET CASH USED FOR INVESTING ACTIVITIES ....................................... (8.3) (18.6)
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FINANCING ACTIVITIES
Net payments of loans secured by cash value of life insurance policies............. (1.3) (0.9)
Borrowings under credit facilities, net of repayments ............................. 8.9 (0.6)
Borrowings under debtor-in-possession facility, net of fees........................ (0.5) (2.2)
Repayment of borrowings under debtor-in-possession facility ....................... -- --
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NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES ......................... 7.1 (3.7)
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Effect of currency exchange rate changes on cash and cash equivalents ............. (3.4) 4.4
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............................. 16.1 (8.2)
Cash and cash equivalents, beginning of period .................................... 309.2 283.6
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Cash and cash equivalents, end of period .......................................... $ 325.3 $ 275.4
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W. R. GRACE & CO. AND SUBSIDIARIES MARCH 31, DECEMBER 31,
CONSOLIDATED BALANCE SHEET (UNAUDITED) 2004 2003
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Amounts in millions
ASSETS
CURRENT ASSETS
Cash and cash equivalents ......................................................... $ 325.3 $ 309.2
Accounts and other receivables, net ............................................... 353.8 347.5
Inventories ....................................................................... 226.2 214.6
Deferred income taxes ............................................................. 29.4 29.8
Other current assets............................................................... 27.4 27.8
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TOTAL CURRENT ASSETS ......................................................... 962.1 928.9
Properties and equipment, net...................................................... 635.1 656.6
Goodwill .......................................................................... 84.2 85.2
Cash value of life insurance policies, net of policy loans......................... 92.9 90.8
Deferred income taxes ............................................................. 591.8 587.1
Asbestos-related insurance expected to be realized after one year.................. 267.8 269.4
Other assets ...................................................................... 257.6 256.2
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TOTAL ASSETS ................................................................. $ 2,891.5 $ 2,874.2
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LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
LIABILITIES NOT SUBJECT TO COMPROMISE
CURRENT LIABILITIES
Debt payable within one year ...................................................... $ 15.9 $ 6.8
Accounts payable .................................................................. 110.1 101.8
Income taxes payable .............................................................. 19.9 16.6
Other current liabilities ......................................................... 131.0 149.0
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TOTAL CURRENT LIABILITIES .................................................... 276.9 274.2
Deferred income taxes ............................................................. 35.1 35.3
Other liabilities ................................................................. 304.4 296.0
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TOTAL LIABILITIES NOT SUBJECT TO COMPROMISE .................................. 616.4 605.5
LIABILITIES SUBJECT TO COMPROMISE
Pre-petition debt plus accrued interest............................................ 555.2 552.7
Accounts payable................................................................... 31.6 31.9
Income taxes payable............................................................... 218.6 217.9
Asbestos-related liability......................................................... 990.3 992.3
Other liabilities.................................................................. 652.0 657.5
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TOTAL LIABILITIES SUBJECT TO COMPROMISE....................................... 2,447.7 2,452.3
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TOTAL LIABILITIES............................................................. 3,064.1 3,057.8
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SHAREHOLDERS' EQUITY (DEFICIT)
Common stock....................................................................... 0.8 0.8
Paid-in capital ................................................................... 431.6 432.1
Accumulated deficit................................................................ (155.1) (170.9)
Treasury stock, at cost............................................................ (135.2) (135.9)
Accumulated other comprehensive loss .............................................. (314.7) (309.7)
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TOTAL SHAREHOLDERS' EQUITY (DEFICIT).......................................... (172.6) (183.6)
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) ......................... $ 2,891.5 $ 2,874.2
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