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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): October 21, 1998
W. R. GRACE & CO.
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(Exact name of registrant as specified in its charter)
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<CAPTION>
Delaware 1-13953 65-0773649
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<S> <C> <C>
(State of Incorporation) (Commission File Number) (IRS Employer Identification No.)
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1750 Clint Moore Road, Boca Raton, Florida 33487
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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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(Former name or former address, if changed since last report.)
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W. R. GRACE & CO.
CURRENT REPORT ON FORM 8-K
ITEM 5. OTHER EVENTS
On October 21, 1998, W. R. Grace & Co. ("Grace") announced its
consolidated results of operations for the quarter ended September 30, 1998.
Grace's October 21, 1998 press release and accompanying financial and
statistical data are filed as an exhibit hereto and are incorporated by
reference herein.
On October 26, 1998, Grace announced that Paul J. Norris has been named
its President and Chief Executive Officer, effective November 2, 1998. Mr.
Norris is expected to assume the title of Chairman in early 1999, when Grace's
current Chairman, President and Chief Executive Officer, Albert J. Costello,
retires. Mr. Norris joins Grace from AlliedSignal Inc., where he has been
Senior Vice President and President of AlliedSignal's specialty chemicals
business since January 1997. Mr. Norris is also chairman of UOP, a joint
venture between AlliedSignal and Union Carbide and a leading provider of
services and technology to the global petroleum and petrochemical industry.
Grace's October 26, 1998 press release regarding this appointment is filed as
an exhibit hereto and is incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) EXHIBITS.
99.1 Grace's Press Release dated October 21, 1998 and accompanying
financial and statistical data.
99.2 Grace's Press Release dated October 26, 1998.
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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 on its behalf by
the undersigned hereunto duly authorized.
W. R. GRACE & CO.
Date: October 27, 1998 By: /s/ David B. Siegel
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David B. Siegel
Senior Vice President, General
Counsel and Secretary
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CURRENT REPORT ON FORM 8-K
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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99.1 Press Release dated October 21, 1998 and accompanying financial
and statistical data.
99.2 Press Release dated October 26, 1998.
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[GRACE NEWS LETTERHEAD]
CONTACT: Media Relations: Investor Relations:
Jane D. McGuinness Susan G. Eccher
(561)362-1343 (561)362-1331
GRACE REPORTS THIRD QUARTER EPS OF $.33 VERSUS $.20 IN 1997;
QUARTERLY OPERATING INCOME UP 12%;
RECORD QUARTER FOR GRACE CONSTRUCTION PRODUCTS
BOCA RATON, Florida, October 21, 1998 -- W. R. Grace & Co. (NYSE: GRA)
reported 1998 third quarter income from continuing operations of $26.3 million,
up from $15.6 million in the 1997 third quarter. Earnings per share (EPS) from
continuing operations were $.33 on a diluted basis versus $.20 per share in the
prior-year quarter.
Sales in the quarter totaled $380 million, up 2% versus the prior year.
Excluding the effect of foreign currency translation, sales increased more than
6%. Total operating income was $54.2 million, up 12% from the 1997 third
quarter. Consolidated earnings before interest and income taxes (EBIT) were
$45.7 million, up from $30.6 million in 1997. Grace's consolidated EBIT margin
(EBIT as a percentage of sales) was 12.0% for the 1998 third quarter.
"We are very pleased with Grace's third quarter earnings, especially in
light of difficult economic conditions in many parts of the world and still
unfavorable currency exchange rates versus last year," said Grace Chairman,
President and Chief Executive Officer Albert J. Costello. "Grace Davison and
Grace Construction Products each delivered strong earnings growth on a 5%
increase in sales. Our continued focus on cost control helped achieve
above-target consolidated earnings improvements. We continue to invest in our
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businesses through targeted R&D expenditures aimed to ensure a steady flow of
new products."
On a year-to-date basis, Grace reported net sales of $1,091 million,
essentially flat with 1997 (excluding a divested business in the prior year)
and up 5% before the effects of currency translation. Consolidated EBIT was
$115.9 million versus $81.2 million (also excluding the divested business). The
year-to-date consolidated EBIT margin was 10.6%. Earnings and diluted EPS from
continuing operations prior to special items were $63.6 million and $.79
compared to $46.8 million and $.61, respectively, for the first nine months of
1997.
Following are highlights of Grace's business unit performance:
GRACE DAVISON
Grace Davison, a leading global supplier of catalysts and silica
products, reported third quarter sales of $185 million, up 5% from the prior
year's quarter (8% before currency translation). Operating income of $29.2
million was up 17% compared to the year-ago quarter. Grace Davison's operating
margin of 15.8% was 1.6 percentage points above the 1997 quarter.
Grace Davison's worldwide sales of refinery catalysts, which
include fluid cracking and hydroprocessing catalysts, increased 7% versus the
1997 third quarter (9% before currency translation), driven by gains in all
geographic areas. Polyolefin catalysts sales also substantially increased over
the third quarter of 1997. Sales of silicas and adsorbents were down 3% (up 2%
before currency translation) over the 1997 quarter, primarily due to continued
weakness in the North American dentifrice and global molecular sieves markets
due to competitive pressures.
Year-to-date, Grace Davison's sales totaled $541 million, 3% over 1997
(7% before currency translation), and operating income was $81.9 million, up
12% versus 1997. Year-to-date operating margin of 15.1% is 1.2 percentage
points better than the prior year.
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Said Costello, "This was Davison's best quarter this year in terms of
both sales and earnings growth, and we expect the positive momentum to continue
in the fourth quarter."
GRACE CONSTRUCTION PRODUCTS
Grace Construction Products, a leading global supplier of specialty
construction chemicals and building materials, reported record third quarter
sales of $135 million, up 5% versus the 1997 quarter. Before currency
translation, sales were 8% above the year-ago quarter. Operating income of
$19.9 million was up 24% versus the year-ago quarter, resulting in an operating
margin of 14.7%, a 2.3 percentage point improvement versus the 1997 quarter.
Sales in North America were up 9% over the 1997 quarter, driven by
concrete, waterproofing and fire protection and the penetration of new and
value-added products. European sales were up 17% versus 1997. Sales in Asia
Pacific were down 25% (down 8% before currency translation), reflecting
depressed construction activity in the region, heightened price competition and
the effect of weaker currencies. Sales continued to grow rapidly in Latin
America.
Year-to-date, Grace Construction Products' sales totaled $366 million,
up 2% compared to 1997 (up 5% before currency translation). Operating income
was $43.7 million year-to-date, up 16% versus 1997. The unit's year-to-date
operating margin of 11.9% was 1.5 percentage points above last year.
"Grace Construction Products has done a great job driving its businesses
for performance. This quarter was a record third quarter in both sales and
operating income. Management has continued to reduce costs and to emphasize
high value-added products, thereby improving margins despite the troubled Asia
Pacific economic conditions," remarked Costello.
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DAREX CONTAINER PRODUCTS
Darex Container Products, a leading global producer of container
sealants and closure systems, reported sales of $60 million in the quarter, 11%
lower than the 1997 quarter (3% lower before the effect of currency
translation). Operating income of $5.8 million was 37% lower than that of the
third quarter of 1997.
Darex results were adversely affected by the global economic troubles
that have reduced demand for customers' end products, particularly in Latin
America and Asia Pacific.
Year-to-date, Darex Container Products' sales totaled $184 million, down
9% compared to 1997 (down 2% before currency translation). Operating income was
$20.1 million year-to-date (operating margin of 11.0%), down 16% versus 1997.
"Darex has been impacted by several negative external factors. We are
continuing to identify and implement significant cost reductions to maximize
Darex's cash flow generation," said Costello.
OTHER HIGHLIGHTS
As previously announced on October 14, Grace terminated its agreement
with Imperial Chemical Industries PLC to acquire their Crosfield catalysts and
silicas business for $455 million. The agreement was terminated because the
parties were unable to obtain U.S. Federal Trade Commission clearance of the
transaction. Grace will now aggressively complete its previously announced 20%
share repurchase program. To date, Grace has repurchased approximately 2.4
million shares under the 15-million share repurchase program announced in
April.
Grace is a leading global supplier of catalysts and silica products,
specialty construction chemicals and building materials, and container sealants
and closure systems.
For more information, visit Grace's Web site at www.grace.com.
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This announcement contains "forward-looking" information. Future results
may differ from those discussed in this announcement. Information concerning
some of the factors that could cause such differences can be found under the
heading "Projections and Other Forward-Looking Information" in Grace's Annual
Report on Form 10-K for 1997.
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W. R. Grace & Co.
Consolidated Statement of Operations
Quarter Ended September 30
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($ Millions Except Per Share)
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Third Quarter Year-to-Date
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1998 1997 (a) 1998 1997 (a)
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Sales $ 380.3 $ 372.4 $ 1,091.0 $ 1,112.8
Other income 10.2 15.5 31.4 47.2
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Total $ 390.5 $ 387.9 $ 1,122.4 $ 1,160.0
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Cost of goods sold and operating expenses $ 228.5 $ 225.9 $ 662.3 $ 684.1
Selling, general and administrative expenses 80.8 97.4 240.1 282.3
Depreciation and amortization 23.4 22.4 68.7 69.4
Interest expense and related financing costs 3.9 7.8 15.1 18.6
Research and development expenses 10.9 9.9 31.9 31.5
Provision for restructuring - - - 4.0
Gain on sale of Specialty Polymers - - - (103.1)
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Total $ 347.5 $ 363.4 $ 1,018.1 $ 986.8
Income before income taxes $ 43.0 $ 24.5 $ 104.3 $ 173.2
Provision for income taxes 16.7 8.9 40.7 65.9
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Income from continuing operations $ 26.3 $ 15.6 $ 63.6 $ 107.3
Income/(loss) from discontinued operations - 55.5 (2.6) 127.6
Extraordinary item - loss from extinguishment
of debt, net of tax - - (35.2) -
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Net income $ 26.3 $ 71.1 $ 25.8 $ 234.9
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Basic Earnings Per Share
Continuing operations $ 0.35 $ 0.21 $ 0.85 $ 1.45
Net income $ 0.35 $ 0.97 $ 0.34 $ 3.18
Basic average number of shares (millions) 74.6 73.7 75.1 73.9
Diluted Earnings Per Share
Continuing operations $ 0.33 $ 0.20 $ 0.79 $ 1.41
Net income $ 0.33 $ 0.93 $ 0.32 $ 3.08
Diluted average number of shares (millions) 78.5 76.0 80.2 76.2
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(a) Certain amounts have been reclassified to conform to the 1998 presentation.
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W. R. Grace & Co.
Operating Results
Quarter Ended September 30
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($ Millions)
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Percent
1998 1997 (a) Change
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Sales:
Grace Davison $ 184.7 $ 175.9 5.0%
Grace Construction Products 135.2 128.9 4.9
DAREX Container Products 60.4 67.6 (10.6)
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Total sales $ 380.3 $ 372.4 2.1
Operating Income:
Grace Davison $ 29.2 $ 25.0 16.9
Grace Construction Products 19.9 16.0 24.2
DAREX Container Products 5.8 9.2 (36.8)
Other Non-Core (0.7) (1.9) (67.1)
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Total operating income $ 54.2 $ 48.3 12.4
Other expenses / (income):
Interest/financing $ 3.9 $ 7.8 (49.7)
Interest income (1.2) (1.7) (26.2)
Corporate 9.1 23.9 (62.1)
Other (0.6) (6.2) (90.7)
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Total other expenses/(income), net $ 11.2 $ 23.8 (53.0)
Pretax operating income before discontinued operations $ 43.0 $ 24.5 75.9
Provision for income taxes 16.7 8.9 88.4
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Income from continuing operations $ 26.3 $ 15.6 68.7
Income from discontinued operations (net of tax) - 55.5 (100.0)
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Net income $ 26.3 $ 71.1 (63.1)%
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(a) Certain amounts have been reclassified to conform to the 1998
presentation.
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W. R. Grace & Co.
Operating Results
Nine Months Ended September 30
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($ Millions)
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Percent
1998 1997 (a) Change
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Sales:
Grace Davison $ 541.1 $ 526.0 2.9%
Grace Construction Products 366.2 359.7 1.8
DAREX Container Products 183.7 202.2 (9.1)
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Sales before divested business $ 1,091.0 $ 1,087.9 0.3
Specialty Polymers - 24.9 (100.0)
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Total sales $ 1,091.0 $ 1,112.8 (2.0)
Operating Income:
Grace Davison $ 81.9 $ 73.3 11.6
Grace Construction Products 43.7 37.5 16.4
DAREX Container Products 20.1 23.9 (15.6)
Other Non-Core (1.2) 2.4 (147.8)
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Operating income before divested business $ 144.5 $ 137.1 5.4
Specialty Polymers - 3.8 (100.0)
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Total operating income $ 144.5 $ 140.9 2.5
Other expenses / (income):
Interest/financing $ 15.1 $ 18.6 (18.6)
Interest income (3.5) (7.7) (54.3)
Corporate 29.9 61.6 (51.5)
Other (1.3) (5.7) (78.5)
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 $ 40.2 $ (32.3) 225.0
Pretax operating income before discontinued operations
and extraordinary item $ 104.3 $ 173.2 (39.8)
Provision for income taxes 40.7 65.9 (38.3)
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Income from continuing operations $ 63.6 $ 107.3 (40.7)
(Loss) / income from discontinued operations (net of tax) (2.6) 127.6 (102.1)
Loss from early debt retirement (net of tax) (35.2) - ND
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Net income $ 25.8 $ 234.9 (89.0)%
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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
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(Dollars In Millions)
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<CAPTION>
Quarter Ended September 30
Sales
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1998 1997 Incl. Specialty 1997 Excl.
Divested Business Polymers Divested Business
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North America $ 213 $ 204 $ - $ 204
Europe 104 100 - 100
Latin America 17 16 - 16
Asia Pacific 46 53 - 53
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Total $ 380 $ 373 $ - $ 373
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Nine Months Ended September 30
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1998 1997 Incl. Specialty 1997 Excl.
Divested Business Polymers Divested Business
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North America $ 605 $ 586 $ 12 $ 574
Europe 297 315 6 309
Latin America 48 49 - 49
Asia Pacific 141 163 7 156
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Total $ 1,091 $ 1,113 $ 25 $ 1,088
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</TABLE>
<PAGE>
[GRACE NEWS LETTERHEAD]
CONTACT: Media Relations: Investor Relations:
Jane D. McGuinness Susan G. Eccher
(561)362-1343 (561)362-1331
GRACE ELECTS NORRIS PRESIDENT AND CEO
BOCA RATON, Fla., October 26, 1998 -- W. R. Grace & Co. (NYSE: GRA)
today announced that Paul J. Norris has been named president and chief
executive officer, effective November 2, 1998. Norris is expected to assume the
title of chairman in early 1999, following the retirement of current chairman,
president and CEO, Albert J. Costello.
Norris, 51, joins Grace from AlliedSignal Incorporated, where he has
been senior vice president and president of AlliedSignal's $1.6 billion
specialty chemicals business since January 1997. He is also chairman of UOP, a
50/50 joint venture between AlliedSignal and Union Carbide. UOP is one of the
world's leading providers of services and technology to the global petroleum
and petrochemical industry.
"Norris is an excellent choice to lead Grace's continued global growth.
He brings to Grace nearly three decades of operating experience in the
specialty chemicals industry, including 10 years early on in his career at our
own Grace Davison. He is a seasoned operating manager with a track record for
achieving significant top- and bottom-line growth," said Costello.
Since Costello took over the top post at Grace in May 1995, he has
refocused the organization on core specialty chemicals while continually
generating increased shareholder value. Value was created both by innovative
and strategic transactions and through aggressive cost management leading to
improved operating profitability. Costello has been an avid proponent of
research and development to promote new products and manufacturing process
technology to further improve operating performance. Through these efforts, he
has well-positioned Grace's businesses for long-term growth.
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"Al Costello very successfully navigated Grace through one of the most
significant transitions in the recent history of this nearly 150-year old
company. He unlocked a great deal of hidden value for Grace's shareholders,
while creating a highly focused specialty chemicals company known for
innovative technology and a strong customer service culture," said Norris. "I
am looking forward to working with a strong operating team to drive growth and
productivity in this premier specialty chemicals company."
As president of AlliedSignal's specialty chemicals business, Norris
organized five independent businesses into three globally integrated
enterprises focused around customers and markets to drive growth. Revenues from
these businesses increased more than 50% over the last two years. Norris has
been a leader in the implementation of AlliedSignal's Total Quality Management
and Six Sigma productivity processes. The businesses he has led over the last
four years have averaged 6% productivity gains annually and generated more than
$200 million in productivity improvements during that same time.
Norris joined AlliedSignal in 1989 as president of its chemicals and
catalysts business, where he led AlliedSignal's successful transition from
being a manufacturer of chlorofluorocarbons (CFCs) to being one of the world's
leading producers of environmentally safer CFC substitutes. He became president
of AlliedSignal Polymers in 1994. Under his leadership, the business
significantly expanded its industrial polyester segment through establishment
of a manufacturing joint venture in China and the acquisition of an additional
manufacturing site in the U.S. He also expanded its engineering plastics
business through the acquisition of a manufacturing facility in Germany to
better serve European-based customers.
From 1981 to 1989, Norris served in various executive capacities with
Engelhard Corporation, including president of catalysts and chemicals, senior
vice president and general manager of catalysts, and vice president and
business director for petroleum catalysts.
Norris started his career with Grace in 1971, where he honed his
marketing and business development skills in Grace Davison's catalysts and
silica products business.
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Norris is a graduate of Mt. St. Mary's College in Emmitsburg, Maryland
and holds an M.B.A. from the University of Maryland.
Currently residing in New Jersey, Norris and his wife will be relocating
to the Boca Raton area in the near future.
Grace is a leading global supplier of catalysts and silica products,
specialty construction chemicals and building materials, and container sealants
and closure systems. With annual sales of approximately $1.5 billion, Grace has
6,300 employees and operations in nearly 40 countries.
For more information, visit Grace's Web site at www.grace.com.
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