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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 23, 1998
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W. R. GRACE & CO.
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(Exact name of registrant as specified in its charter)
Delaware 1-13953 65-0773649
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
1750 Clint Moore Road, Boca Raton, Florida 33487-2707
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 561/362-2000
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Item 5. Other Events.
On July 23, 1998, W. R. Grace & Co. ("Company") announced its
consolidated results of operations for the quarter ended June 30, 1998. The
Company's July 23, 1998 press release and accompanying financial and
statistical data are filed as an exhibit hereto and are incorporated by
reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
The Company's July 23, 1998 press release and accompanying
financial and statistical data are filed as an exhibit hereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed by the
undersigned, thereunto duly authorized.
W. R. GRACE & CO.
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(Registrant)
By /s/Kathleen A. Browne
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Kathleen A. Browne
Vice President and Controller
Dated: July 28, 1998
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W. R. GRACE & CO.
Current Report on Form 8-K
Exhibit Index
Exhibit No. Description
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99.1 Press Release dated July 23, 1998 and accompanying financial
and statistical data
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[GRACE NEWS LETTERHEAD]
GRACE REPORTS 27% INCREASE IN INCOME
FROM CONTINUING OPERATIONS BEFORE PRIOR YEAR SPECIAL ITEMS;
DILUTED EPS FROM CONTINUING OPERATIONS UP 18% VERSUS 1997
BOCA RATON, Florida, July 23, 1998 -- W. R. Grace & Co. (NYSE: GRA)
reported 1998 second quarter income from continuing operations of $25.5
million, up 27% versus the 1997 second quarter before special items reported in
the year-ago period. Earnings per share (EPS) were $.32 on a diluted basis, up
18% versus $.27 per share before special items in the prior-year quarter.
Sales from Grace Davison, Grace Construction Products and Darex
Container Products were $370 million, essentially even with the year-ago
quarter. Excluding the foreign currency translation effect of the stronger U.S.
dollar, sales for these businesses increased nearly 4%. Sales in North and
Latin America of $223 million were 5% above the prior year. Sales in Europe
totaled $100 million, down 6% from the prior year (down 2% excluding currency
translation). Sales in Asia Pacific were $47 million, down 11%, but up 7%
excluding currency translation.
Operating income from these businesses was $55 million, up 8% from the
1997 second quarter. Consolidated earnings before interest and income taxes
(EBIT) were $45 million, up 33% from 1997, excluding the operating income
generated by the Specialty Polymers business which was divested in May 1997.
Grace's consolidated EBIT margin (EBIT expressed as a percentage of sales) of
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12.2% was 3.1 percentage points higher than the year-ago quarter (also
excluding Specialty Polymers).
"Overall, we are very pleased with the strength of Grace's second
quarter earnings," said Grace Chairman, President and Chief Executive Officer
Albert J. Costello. "Grace Davison's global catalyst businesses and Grace
Construction Products' North American operations in particular generated strong
growth during the quarter. We improved operating margins in both Grace Davison
and Grace Construction Products despite challenging international environments
that put pressure on sales for the quarter. And, we continued to aggressively
reduce corporate overhead, which contributed to the improved overall EBIT
margin."
On a year-to-date basis, Grace reported net sales of $711 million,
down 1% versus 1997 excluding Specialty Polymers, but up 4% before the effects
of currency translation. Consolidated EBIT was $70 million, up 39% excluding
Specialty Polymers; EBIT margin was 9.9%, up 2.8 percentage points versus the
year-ago period. Earnings and diluted EPS from continuing operations prior to
special items were $37.3 million and $.46, up 20% and 13%, respectively, versus
the first six months of 1997.
"The overall trends we saw in the second quarter give us good momentum
to achieve 1998 and 1999 earnings objectives," said Costello.
Following are highlights of Grace's business unit performance:
GRACE DAVISON
Grace Davison, a leading global supplier of catalysts and silica
products, reported second quarter sales of $180 million, up 3% above the prior
year's quarter, but up 7% before currency translation. Operating income of
$28.3 million was up 7% compared to the year-ago quarter. Grace Davison's
operating margin of 15.7% was 0.6 percentage points above the 1997 quarter. On
a year-to-date basis, sales were $356 million, up 2% from 1997 (7% before
currency translation), and operating income was $52.7 million, up 9%.
Grace Davison's quarterly results reflected continued strengthening in
fluid cracking catalyst (FCC) and additives sales, which were up 9% versus the
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1997 second quarter (12% before currency translation), generated by higher
volumes in all regions due to high refinery utilization rates and strong
worldwide catalyst additive sales. FCC catalyst volumes were up 11% over the
1997 quarter. Sales of silicas and adsorbents were down 8% (down 3% before
currency translation) over the 1997 second quarter caused primarily by
competitive market conditions in the global insulated glass sieves business and
weak dentifrice and molecular sieves sales in North and Latin America.
Polyolefin catalyst sales were up 10% (18% before currency translation) versus
the second quarter of 1997 due to continued strength of the global plastics
industry. Hydroprocessing catalyst sales were up 23%, as Grace Davison's new
facility in Louisiana came onstream in the quarter.
Said Costello, "We are encouraged by the continued volume recovery and
stabilizing price environment in the FCC business and the outstanding
performance of our polyolefin catalyst business. While sales of silicas and
adsorbents were off in the quarter, we are optimistic about the second half of
the year. In addition, we continue to reap the benefits of Grace Davison's
ongoing cost management efforts."
GRACE CONSTRUCTION PRODUCTS
Grace Construction Products, a leading global supplier of specialty
construction chemicals and building materials, reported sales for the quarter
of $128 million, essentially even with the 1997 quarter. Before currency
translation, sales were 3% above the year-ago quarter. Operating income of
$19.0 million was up 16% versus a strong 1997 second quarter, resulting in an
operating margin of 14.9%, a 2.1 percentage point improvement versus the 1997
quarter.
Sales in North America were $88 million, up 6% over the 1997 quarter,
driven by a continued healthy construction environment and penetration of new
and value-added products. The quarter's sales in Europe of $22 million were
flat versus 1997, but up 1% before currency translation. Sales in Asia Pacific
were down 26% (down 11% before currency) to $16 million for the quarter,
reflecting a
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slowdown in construction activity in the region and the effect of substantially
weaker currencies there.
Year-to-date, Grace Construction Products sales totaled $231 million,
flat compared to 1997, but up 4% before currency translation. Operating income
was $23.8 million year-to-date (10.3% of sales), up 11% versus 1997.
"Conditions in Asia Pacific are impacting Grace Construction Products
sales growth this year, but we are continuing to drive growth in sales and
profits elsewhere, particularly in North America. We are pleased by the
substantial improvement in operating income," remarked Costello.
DAREX CONTAINER PRODUCTS
Darex Container Products, a leading global producer of container
sealants and closure systems, reported sales of $62 million in the quarter, 9%
lower than the 1997 quarter (3% lower before the effect of currency
translation). Operating income of $7.6 million, which included a one-time $1.5
million gain from the divestment of a small can forming lubricant business,
was 6% lower than that of the second quarter of 1997.
Darex results were adversely affected by a number of market demand
factors, including the economic crisis in Asia Pacific and economic conditions
in certain parts of Latin America. Sales in Asia Pacific were down 13% to $13
million, but up 5% before currency translation. Sales in Latin America of $11
million were down 9% (down 2% before currency translation). North American
sales were off 2% to $16 million and European sales were down 12% (8% before
currency translation) to $22 million.
"The Darex management team continues to work aggressively to take
costs out of the business in the face of a very tough sales environment. We are
also emphasizing the commercialization of our new oxygen-scavenging products to
help restore growth to the top line," said Costello.
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OTHER HIGHLIGHTS
As previously announced, on April 2 Grace entered into a definitive
agreement to acquire the Crosfield catalysts and silicas business of Imperial
Chemical Industries PLC for $455 million. Completion of the transaction is
expected to occur during the third quarter of 1998.
Grace also reported that new asbestos personal injury claims for the
12 months ended June 30, 1998 were down 31% from the previous 12- month period.
Additionally, two property damage cases were disposed of during the quarter,
reducing the total number of outstanding cases to 16 as of June 30, 1998. Since
the end of the quarter, one new asbestos property damage claim has been filed
against Grace.
Grace is a leading global supplier of catalysts and silica products,
specialty construction chemicals and building materials, and container sealants
and closure systems.
For more information, visit Grace's Web site at www.grace.com.
This announcement contains "forward-looking" information. Future
results may differ from those discussed in this announcement. Information
concerning some of the factors that could cause such differences can be found
under the heading "Projections and Other Forward-Looking Information" in
Grace's Annual Report on Form 10-K for 1997.
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W. R. GRACE & CO.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR QUARTER ENDED JUNE 30
($ MILLIONS EXCEPT PER SHARE)
<TABLE>
<CAPTION>
SECOND QUARTER YEAR-TO-DATE
-------------------------- -------------------------
1998 1997 (a) 1998 1997 (a)
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 369.9 $ 378.6 $ 710.7 $ 740.4
Other income 13.4 25.9 21.2 31.7
------- -------- ------- --------
Total $ 383.3 $ 404.5 $ 731.9 $ 772.1
------- -------- ------- --------
Cost of goods sold and operating expenses $ 224.2 $ 235.2 $ 433.8 $ 458.2
Selling, general and administrative expenses 78.7 98.3 159.3 184.9
Depreciation and amortization 23.6 23.5 45.4 47.0
Interest expenses and related financing costs 4.4 4.4 11.2 10.8
Research and development expenses 10.6 11.0 21.0 21.6
Provision for restructuring -- 4.0 -- 4.0
Gain on sale of Specialty Polymers -- (103.1) -- (103.1)
-------- --------- -------- ---------
Total $ 341.5 $ 273.3 $ 670.7 $ 623.4
Income before income taxes $ 41.8 $ 131.2 $ 61.2 $ 148.7
Provision for income taxes 16.3 50.6 23.9 57.0
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Income from continuing operations $ 25.5 $ 80.6 $ 37.3 $ 91.7
Income/(loss) from discontinued operations -- 36.8 ( 2.6) 72.1
Extraordinary item - loss from extinguishment
of debt, net of tax -- -- ( 35.2) --
-------- --------- -------- ---------
Net income/(loss) $ 25.5 $ 117.4 $ (0.5) $ 163.8
======== ========= ======== =========
Basic Earnings Per Share
Continuing operations $ 0.34 $ 1.11 $ 0.50 $ 1.24
Net income/(loss) $ 0.34 $ 1.61 $ (0.01) $ 2.21
Basic average number of shares (millions) 75.7 72.8 75.4 74.0
Diluted Earnings Per Share
Continuing operations $ 0.32 $ 1.08 $ 0.46 $ 1.20
Net income/(loss) $ 0.32 $ 1.57 $ (0.01) $ 2.15
Diluted average number of shares (millions) 80.5 74.8 81.1 76.3
</TABLE>
(a) Certain amounts have been reclassified to conform to the 1998 presentation.
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W. R. GRACE & CO.
OPERATING RESULTS
QUARTER ENDED JUNE 30
($ MILLIONS EXCEPT PER SHARE)
<TABLE>
<CAPTION>
PERCENT
1998 1997 (a) CHANGE
----------- ----------- -------------
<S> <C> <C> <C>
Sales:
Grace Davison $ 180.2 $ 175.5 2.7%
Grace Construction Products 127.7 127.8 (0.1)
Darex Container Products 62.0 68.5 (9.3)
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Sales before divested business $ 369.9 $ 371.8 (0.5)
Specialty Polymers -- 6.8 (100.0)
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Total sales $ 369.9 $ 378.6 (2.3)
Operating income:
Grace Davison $ 28.3 $ 26.4 7.0
Grace Construction Products 19.0 16.4 16.1
Darex Container Products 7.6 8.1 (6.0)
Other 0.5 4.1 (88.2)
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Operating income before divested business $ 55.4 $ 55.0 0.8
Specialty Polymers -- 1.2 (100.0)
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Total operating income $ 55.4 $ 56.2 (1.4)
Other expenses / (income):
Interest/financing $ 4.4 $ 4.4 (0.6)
Interest income (1.2) ( 1.3) (13.4)
Corporate 10.8 21.9 (50.9)
Other (0.4) ( 0.9) (57.2)
Provision for restructuring -- 4.0 (100.0)
Gain on sale of Specialty Polymers -- (103.1) (100.0)
-------- --------
Total other expenses, net 13.6 ( 75.0) (118.2)
Pretax income before discontinued operations $ 41.8 $ 131.2 (68.1)
Provision for income taxes 16.3 50.6 (67.8)
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Income from continuing operations $ 25.5 $ 80.6 (68.4)
Income from discontinued operations (net of tax) -- 36.8 (100.0)
-------- --------
Net income $ 25.5 $ 117.4 (78.3)%
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</TABLE>
(a) Certain amounts have been reclassified to conform to the 1998 presentation.
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W. R. GRACE & CO.
OPERATING RESULTS
SIX MONTHS ENDED JUNE 30
($ MILLIONS EXCEPT PER SHARE)
<TABLE>
<CAPTION>
PERCENT
1998 1997(a) CHANGE
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<S> <C> <C> <C>
Sales:
Grace Davison $ 356.4 $ 350.1 1.8%
Grace Construction Products 231.0 230.8 0.1
Darex Container Products 123.3 134.6 (8.3)
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Sales before divested business $ 710.7 $ 715.5 (0.7)
Specialty Polymers -- 24.9 (100.0)
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Total sales $ 710.7 $ 740.4 (4.0)
Operating income:
Grace Davison $ 52.7 $ 48.3 8.9
Grace Construction Products 23.8 21.5 10.6
Darex Container Products 14.3 14.7 (2.4)
Other (0.5) 4.3 (112.6)
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Operating income before divested business $ 90.3 $ 88.8 1.6
Specialty Polymers -- 3.8 (100.0)
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Total operating income $ 90.3 $ 92.6 (2.6)
Other expenses/(income):
Interest/financing $ 11.2 $ 10.8 3.8
Interest income (2.3) (6.0) (61.9)
Corporate 20.8 37.7 (44.8)
Other (0.6) 0.5 (204.3)
Provision for restructuring -- 4.0 (100.0)
Gain on sale of Specialty Polymers -- (103.1) (100.0)
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Total other expenses/(income), net 29.1 (56.1) (151.9)
Pretax income before discontinued operations and
extraordinary items $ 61.2 $ 148.7 (58.9)
Provision for income taxes 23.9 57.0 (58.1)
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Income from continuing operations $ 37.3 $ 91.7 (59.3)
(Loss)/income from discontinued operations (net of
tax) (2.6) 72.1 (103.7)
Loss from early debt retirement (net of tax) (35.2) -- ND
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Net (loss)/income $ (0.5) $ 163.8 (100.3)%
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</TABLE>
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(a) Certain amounts have been reclassified to conform to the 1998 presentation.
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W. R. GRACE & CO.
GEOGRAPHIC SALES DATA
(DOLLARS IN MILLIONS)
Quarter Ended June 30
<TABLE>
<CAPTION>
SALES
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1997 INCL. SPECIALTY 1997 EXCL.
1998 DIVESTED BUSINESS POLYMERS DIVESTED BUSINESS
------ ------------------- ----------- ------------------
<S> <C> <C> <C> <C>
North America $207 $199 $ 3 $196
Europe 100 109 2 107
Latin America 16 15 -- 15
Asia Pacific 47 55 2 53
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Total $370 $378 $ 7 $371
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</TABLE>
Six Months Ended June 30
<TABLE>
<CAPTION>
1997 INCL. SPECIALTY 1997 EXCL.
1998 DIVESTED BUSINESS POLYMERS DIVESTED BUSINESS
------ ------------------- ----------- ------------------
<S> <C> <C> <C> <C>
North America $392 $382 $12 $370
Europe 193 215 6 209
Latin America 31 33 -- 33
Asia Pacific 95 110 7 103
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Total $711 $740 $25 $715
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</TABLE>
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