<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
Commission File Number 1-13953
W. R. GRACE & CO. SALARIED EMPLOYEES
SAVINGS AND INVESTMENT PLAN
W. R. Grace & Co.
1750 Clint Moore Road
Boca Raton, Florida 33487-2707
<PAGE>
Financial Statements and Exhibits
(a) Financial Statements. Filed as part of this Report on Form 11-K are
the financial statements of the W. R. Grace & Co. Salaried Employees Savings and
Investment Plan, as required by Form 11-K, together with the report thereon of
PricewaterhouseCoopers LLP, independent certified public accountants, dated
June 18, 1999.
(b) Exhibits. The Consent of PricewaterhouseCoopers LLP is being filed
as an exhibit to this Report.
<PAGE>
W.R. GRACE & CO.
SALARIED EMPLOYEES
SAVINGS & INVESTMENT PLAN
DECEMBER 31, 1998 AND 1997
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Participants and Administrative Committee of the
W.R. Grace & Co. Salaried Employees
Savings and Investment Plan
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statements of changes in net assets available for plan
benefits appearing on pages F-2 through F-5 of this report present fairly, in
all material respects, the net assets available for plan benefits of the W.R.
Grace & Co. Salaried Employees Savings and Investment Plan (the "Plan") at
December 31, 1998 and 1997, and the changes in net assets available for plan
benefits for the years then ended, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Plan administrator and/or other plan fiduciaries (the "Plan Fiduciaries"); our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by the
Plan Fiduciaries, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Fund Information in the statements of
net assets available for plan benefits and the statements of changes in net
assets available for plan benefits is presented for purposes of additional
analysis rather than to present the net assets available for plan benefits and
changes in net assets available for plan benefits of each fund. The Fund
Information has been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
PricewaterhouseCoopers LLP
June 18, 1999
F-1
<PAGE>
W.R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMPLOYEE FIDELITY
FIXED STOCK FIDELITY GROWTH &
INCOME GRACE OWNERSHIP BALANCED INCOME
FUND ADS FUND STOCK FUND PLAN FUND FUND
------------- ------------ -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Insurance company contracts,
at contract value $247,982,282 $ - $ - $ - $ - $ -
Commercial paper, at cost 4,964,203 20,596 131,572 549,956 - -
W.R. Grace & Co. common
stock, (cost $95,550,406) - - 14,407,977 74,660,864 - -
FMC ADS
(cost: $2,146,049) - 3,047,164 - - - -
Sealed Air preferred stock
(cost: $6,081,862) - - - - - -
Sealed Air common stock
(cost: $7,073,730) - - - - - -
Fidelity mutual funds
(cost: $152,487,531) - - - - 28,696,167 47,671,388
Participant loans - - - - - -
Contribution receivable 161,396 - 35,466 135,319 27,547 53,191
------------- ------------ -------------- -------------- -------------- --------------
Net assets available for plan benefits $253,107,881 $3,067,760 $14,575,015 $75,346,139 $28,723,714 $47,724,579
------------- ------------ -------------- -------------- -------------- --------------
<CAPTION>
FIDELITY FIDELITY SEALED AIR SEALED AIR
BLUE CHIP FIDELITY OTC PREFERRED COMMON PARTICIPANT
GROWTH FUND CONTRAFUND FUND STOCK FUND STOCK FUND LOANS TOTAL
------------- ------------- ----------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Insurance company contracts,
at contract value $ - $ - $ - $ - $ - $ - $247,982,282
Commercial paper, at cost - - - - 267,600 - 5,933,927
W.R. Grace & Co. common
stock, (cost $95,550,406) - - - - - - 89,068,841
FMC ADS
(cost: $2,146,049) - - - - - - 3,047,164
Sealed Air preferred stock
(cost: $6,081,862) - - - 7,946,183 - - 7,946,183
Sealed Air common stock
(cost: $7,073,730) - - - - 8,317,962 - 8,317,962
Fidelity mutual funds
(cost: $152,487,531) 76,586,663 43,204,921 14,820,870 - - - 210,980,009
Participant loans - - - - - 3,963,014 3,963,014
Contribution receivable 77,592 55,244 20,848 - - - 566,603
------------- ------------- ----------- ------------ ------------ ------------- ------------
Net assets available for plan benefits $ 76,664,255 $ 43,260,165 $14,841,718 $7,946,183 $8,585,562 $3,963,014 $577,805,985
------------- ------------- ----------- ------------ ------------ ------------- ------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-2
<PAGE>
W.R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMPLOYEE FIDELITY
FIXED STOCK FIDELITY GROWTH &
INCOME GRACE OWNERSHIP BALANCED INCOME
FUND ADS FUND STOCK FUND PLAN FUND FUND
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Insurance company contracts,
at contract value $329,352,449 $ -- $ -- $ -- $ -- $ --
Commercial paper, at cost 5,198,287 172,283 584,960 1,322,376 -- --
W.R. Grace & Co. common stock
(cost $101,544,649) -- -- 48,560,663 166,507,984 -- --
FMC ADS -- -- -- -- -- --
(cost: $4,503,591) -- 5,870,456 -- -- -- --
Fidelity mutual funds
(cost: $178,868,115) -- -- -- -- 32,269,412 47,666,141
Participant loans -- -- -- -- -- --
Contribution receivable 797,037 -- 170,834 613,433 126,112 182,588
------------ ------------ ------------ ------------ ------------ ------------
Net assets available for plan benefits $335,347,773 $ 6,042,739 $ 49,316,457 $168,443,793 $ 32,395,524 $ 47,848,729
------------ ------------ ------------ ------------ ------------ ------------
<CAPTION>
FIDELITY FIDELITY
BLUE CHIP FIDELITY OTC PARTICIPANT
GROWTH FUND CONTRAFUND FUND LOANS TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Investments:
Insurance company contracts,
at contract value $ -- $ -- $ -- $ -- $329,352,449
Commercial paper, at cost -- -- -- -- 7,277,906
W.R. Grace & Co. common stock
(cost $101,544,649) -- -- -- -- 215,068,647
FMC ADS
(cost: $4,503,591) -- -- -- -- 5,870,456
Fidelity mutual funds
(cost: $178,868,115) 74,168,388 46,472,627 15,403,666 -- 215,980,234
Participant loans -- -- -- 8,770,156 8,770,156
Contribution receivable 311,814 236,346 89,766 -- 2,527,930
------------ ------------ ------------ ------------ ------------
Net assets available for plan benefits $ 74,480,202 $ 46,708,973 $ 15,493,432 $ 8,770,156 $784,847,778
------------ ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
W.R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1998
- -------------------------------------------------------------------------------------
<CAPTION>
EMPLOYEE
FIXED STOCK FIDELITY
INCOME GRACE OWNERSHIP BALANCED
FUND ADS FUND STOCK FUND PLAN FUND
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Contributions:
Participants $ 5,551,390 $ -- $ 1,227,563 $ -- $ 957,416
Transfers among funds 4,205,972 (1,392,907) (32,753,093) (14,681,884) (580,312)
Company -- -- -- 4,705,888 --
------------- ------------- ------------- ------------- -------------
Total 9,757,362 (1,392,907) (31,525,530) (9,975,996) 377,104
Income/(loss) from investments:
Interest 19,236,256 -- 49,507 95,750 24,442
Dividends -- -- -- -- 2,907,425
Net realized gain (loss) -- 78,516 1,803,711 4,205,952 805,639
Change in unrealized appreciation -- 246,474 (1,234,290) (21,988,014) 1,830,023
------------- ------------- ------------- ------------- -------------
Total 19,236,256 324,990 618,928 (17,686,312) 5,567,529
Less:
Transfers from the plan 71,157,929 1,442,362 2,993,251 57,605,633 6,831,760
Participant withdrawals 39,973,808 459,233 836,088 7,770,683 2,781,205
Administrative expenses 101,773 5,467 5,501 59,030 3,478
------------- ------------- ------------- ------------- -------------
Net increase/(decrease) (82,239,892) (2,974,979) (34,741,442) (93,097,654) (3,671,810)
Net assets available for plan benefits:
Beginning of year 335,347,773 6,042,739 49,316,457 168,443,793 32,395,524
------------- ------------- ------------- ------------- -------------
End of year $ 253,107,881 $ 3,067,760 $ 14,575,015 $ 75,346,139 $ 28,723,714
------------- ------------- ------------- ------------- -------------
<CAPTION>
FIDELITY
GROWTH & FIDELITY FIDELITY SEALED AIR
INCOME BLUE CHIP FIDELITY OTC PREFERRED
FUND GROWTH FUND CONTRAFUND FUND STOCK FUND
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Contributions:
Participants $ 1,909,650 $ 2,740,202 $ 1,936,632 $ 730,268 $ --
Transfers among funds 5,340,454 3,733,563 (814,009) 312,720 15,944,858
Company -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Total 7,250,104 6,473,765 1,122,623 1,042,988 15,944,858
Income/(loss) from investments:
Interest 41,541 66,587 40,855 14,866 146
Dividends 2,591,284 3,154,351 3,209,118 752,532 79,519
Net realized gain (loss) 3,173,218 4,260,772 2,695,527 1,771,614 (1,332,218)
Change in unrealized appreciation 6,412,023 14,613,977 5,730,620 2,456,202 (1,356,402)
------------- ------------- ------------- ------------- -------------
Total 12,218,066 22,095,687 11,676,120 4,995,214 (2,608,955)
Less:
Transfers from the plan 15,519,876 20,533,431 11,688,581 5,476,786 4,675,733
Participant withdrawals 4,067,773 5,848,380 4,547,427 1,212,297 713,822
Administrative expenses 4,671 3,588 11,543 833 165
------------- ------------- ------------- ------------- -------------
Net increase/(decrease) (124,150) 2,184,053 (3,448,808) (651,714) 7,946,183
Net assets available for plan benefits:
Beginning of year 47,848,729 74,480,202 46,708,973 15,493,432 --
------------- ------------- ------------- ------------- -------------
End of year $ 47,724,579 $ 76,664,255 $ 43,260,165 $ 14,841,718 $ 7,946,183
------------- ------------- ------------- ------------- -------------
<CAPTION>
SEALED AIR
COMMON PARTICIPANT
STOCK FUND LOANS TOTAL
------------- ------------- -------------
<S> <C> <C> <C>
Contributions:
Participants $ -- $ -- $ 15,053,121
Transfers among funds 18,121,049 2,563,589 --
Company -- -- 4,705,888
------------- ------------- -------------
Total 18,121,049 2,563,589 19,759,009
Income/(loss) from investments:
Interest -- -- 19,569,950
Dividends -- -- 12,694,229
Net realized gain (loss) (947,572) -- 16,515,159
Change in unrealized appreciation (2,309,821) -- 4,400,792
------------- ------------- -------------
Total (3,257,393) -- 53,180,130
Less:
Transfers from the plan 5,562,305 -- 203,487,647
Participant withdrawals 715,789 7,370,731 76,297,236
Administrative expenses -- -- 196,049
------------- ------------- -------------
Net increase/(decrease) 8,585,562 (4,807,142) (207,041,793)
Net assets available for plan benefits:
Beginning of year -- 8,770,156 784,847,778
------------- ------------- -------------
End of year $ 8,585,562 $ 3,963,014 $ 577,805,985
------------- ------------- -------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
W.R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1997
- -------------------------------------------------------------------------------------
<CAPTION>
EMPLOYEE
FIXED STOCK FIDELITY
INCOME GRACE OWNERSHIP BALANCED
FUND ADS FUND STOCK FUND PLAN FUND
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Contributions:
Participants $ 10,650,939 $ -- $ 2,301,944 $ -- $ 1,650,266
Transfers among funds 7,106,961 (4,021,935) (5,436,510) (15,388,919) 162,307
Company -- -- -- 8,213,477 --
------------- ------------- ------------- ------------- -------------
Total 17,757,900 (4,021,935) (3,134,566) (7,175,442) 1,812,573
------------- ------------- ------------- ------------- -------------
Income/(loss) from investments:
Interest 24,676,286 -- 55,485 119,815 40,063
Dividends -- -- -- (*) -- 3,939,582
Net realized gain -- 1,806,038 8,108,020 13,338,128 711,285
Change in unrealized appreciation -- (3,457,906) 13,447,634(*) 48,627,301 1,570,434
------------- ------------- ------------- ------------- -------------
Total 24,676,286 (1,651,868) 21,611,139 62,085,244 6,261,364
------------- ------------- ------------- ------------- -------------
Less:
Participant withdrawals 41,057,623 664,814 2,534,603 10,635,565 3,217,912
Administrative expenses 177,130 11,606 7,131 101,190 5,368
------------- ------------- ------------- ------------- -------------
Net increase/(decrease) 1,199,433 (6,350,223) 15,934,839 44,173,047 4,850,657
------------- ------------- ------------- ------------- -------------
Net assets available for plan benefits:
Beginning of year 334,148,340 12,392,962 33,381,618 124,270,746 27,544,867
------------- ------------- ------------- ------------- -------------
End of year $ 335,347,773 $ 6,042,739 $ 49,316,457 $ 168,443,793 $ 32,395,524
------------- ------------- ------------- ------------- -------------
<CAPTION>
FIDELITY
GROWTH & FIDELITY FIDELITY
INCOME BLUE CHIP FIDELITY OTC PARTICIPANT
FUND GROWTH FUND CONTRAFUND FUND LOANS TOTAL
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Participants $ 2,480,815 $ 4,177,594 $ 3,177,377 $ 1,219,604 $ -- $ 25,658,539
Transfers among funds 8,062,935 3,816,496 1,392,088 3,598,085 708,492 --
Company -- -- -- -- -- 8,213,477
------------- ------------- ------------- ------------- ------------- -------------
Total 10,543,750 7,994,090 4,569,465 4,817,689 708,492 33,872,016
------------- ------------- ------------- ------------- ------------- -------------
Income/(loss) from investments:
Interest 30,813 68,937 44,324 8,780 -- 25,044,503
Dividends 2,100,654 3,622,609 4,450,163 1,031,731 -- 15,144,739
Net realized gain 1,899,844 2,881,590 2,016,408 330,564 -- 31,091,877
Change in unrealized appreciation 5,858,538 8,640,119 1,651,353 (567,662) -- 75,769,811
------------- ------------- ------------- ------------- ------------- -------------
Total 9,889,849 15,213,255 8,162,248 803,413 -- 147,050,930
------------- ------------- ------------- ------------- ------------- -------------
Less:
Participant withdrawals 3,214,583 5,749,750 3,446,191 1,056,057 29,045 71,606,143
Administrative expenses 5,299 4,293 17,356 1,159 -- 330,532
------------- ------------- ------------- ------------- ------------- -------------
Net increase/(decrease) 17,213,717 17,453,302 9,268,166 4,563,886 679,447 108,986,271
------------- ------------- ------------- ------------- ------------- -------------
Net assets available for plan benefits:
Beginning of year 30,635,012 57,026,900 37,440,807 10,929,546 8,090,709 675,861,507
------------- ------------- ------------- ------------- ------------- -------------
End of year $ 47,848,729 $ 74,480,202 $ 46,708,973 $ 15,493,432 $ 8,770,156 $ 784,847,778
------------- ------------- ------------- ------------- ------------- -------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
(*) Dividends received are reinvested in shares of Grace Common Stock and
reflected as part of change in Unrealized appreciation.
F-5
<PAGE>
W.R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF THE PLAN:
The following description of the W.R. Grace & Co. Salaried Employees Savings
and Investment Plan ("Plan") provides only general information. Participants
should refer to the text of the Plan, the Summary Plan Description, and the
Prospectus Supplement for the Plan for more complete information.
GENERAL
The Plan is a defined contribution plan originally adopted effective September
1, 1976, and has been amended from time to time. The Plan is subject to certain
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").
ELIGIBILITY AND VESTING
Within those units of W.R. Grace & Co., a Delaware corporation ("Grace"), and
its subsidiaries (collectively, the "Company") designated as participating units
in the Plan, any salaried employee (or any salesman paid on a commission basis)
and any other employee in an eligible employment classification who has
completed 12 months of employment (including 1,000 hours of service) is eligible
to participate in the Plan, subject to certain exceptions and special
provisions.
A participant's interest in the Plan is always fully vested.
PACKAGING TRANSACTION
On March 31, 1998, a predecessor of Grace ("Old Grace") completed a transaction
("Packaging Transaction") in which its flexible packaging business was combined
with Sealed Air Corporation ("Sealed Air"). As a result of the Packaging
Transaction, each shareholder of Old Grace common stock received, for each share
of common stock (a) one share of common stock of the "New W.R. Grace & Co."
("New Grace"), (b) .536 shares of common stock of Sealed Air and (c) .475 shares
of convertible preferred stock of Sealed Air. As a result of the Packaging
Transaction, approximately $203.5 million was transferred to the successor
trustee. The common stock of Old Grace was canceled as a result of the Packaging
Transaction.
The Grace Stock Fund and the Grace Employee Stock Ownership Plan were
previously invested in common stock of Old Grace; as noted above, such common
stock was canceled in the Packaging Transaction and was therefore eliminated
from the Plan as a result of the Packaging Transaction.
The New Grace common stock, Sealed Air common stock and Sealed Air preferred
stock, received with respect to the shares of common stock of Old Grace held in
the Employee Stock Ownership Plan, were credited to the Employee Stock Ownership
Plan. All Sealed Air common stock and preferred stock credited to the Employee
Stock Ownership Plan was sold within 90 days following the Packaging
Transaction, and the proceeds were invested in New Grace common stock that was
credited to the Employee Stock Ownership Plan.
The New Grace common stock, received with respect to the shares of common stock
of Old Grace held in the Grace Stock Fund, was credited to the Grace Stock
Fund. The Sealed Air common stock, received with respect to such shares of
common stock, was credited to a Sealed Air Common Stock Fund. The Sealed Air
preferred stock, received with respect to such shares of common stock, was
credited to a Sealed Air Preferred Stock Fund.
F-6
<PAGE>
W.R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
CONTRIBUTIONS TO THE PLAN
Plan participants may elect to contribute to the Plan from 2% to 16% of their
compensation (which, for purposes of the Plan, consists of salary and/or
commissions, incentive compensation, special bonus awards, shift differential
and overtime pay).
Participant contributions may be made from before-tax and/or after-tax income,
as provided under Sections 401(k) and 401(m) of the Internal Revenue Code of
1986, as amended (the "Code"), subject to an annual dollar limit on before-tax
contributions of $10,000 and $9,500 for 1998 and 1997, respectively. Federal
income tax law limited the annual compensation on which tax-qualified plan
benefits may be based to $160,000 and $150,000 for 1998 and 1997, respectively.
A Company contribution equal to 50% of each participant's contribution is made
to the Plan; however, no Company contribution is made with respect to a
participant's contribution in excess of 6% of his compensation. Therefore, the
maximum Company contribution is 3% of each participant's compensation, subject
to the annual dollar limitations noted above.
INVESTMENT OPTIONS
Participants may elect to have their contributions invested in any one or more
of the following funds in which the Plan participates:
FIXED INCOME FUND
-----------------
The Fixed Income Fund is invested in fixed income securities or
obligations, interest-bearing bank accounts or guaranteed income funds
established or maintained by licensed insurance companies. Excess cash
may be invested in short-term fixed income securities.
GRACE STOCK FUND
----------------
The Grace Stock Fund is invested in New Grace common stock. Pending
investment, cash credited to this fund may be invested in short-term
securities.
The Plan also offers the following five Fidelity Mutual Funds to Plan
participants:
FIDELITY BALANCED FUND is invested in both fixed income securities and
----------------------
equity securities at all times.
FIDELITY GROWTH & INCOME FUND is invested in equity securities at all
-----------------------------
times and may be invested in fixed income securities, depending upon
market conditions.
FIDELITY BLUE CHIP GROWTH FUND is invested in equity securities of
------------------------------
companies with higher than average earnings growth.
FIDELITY CONTRAFUND is invested in equity securities of companies
-------------------
generally out of favor with the market that are judged by the Fund's
investment manager to be capable of above average growth in value.
F-7
<PAGE>
W.R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
FIDELITY OTC FUND is invested in equity securities of smaller
-----------------
companies traded in the over-the-counter market.
The Plan, as a result of the NMC Transaction in 1996, maintains the following
fund:
ADS FUND
--------
The ADS Fund holds the American Depository Shares of Fresenius Medical
Care AG that were credited to the accounts of each participant who had
a balance in the then-existing Grace Stock Fund immediately prior to
the NMC Transaction in 1996. Participants were able to transfer
balances out of the ADS Fund at any time, but were not permitted to
deposit or transfer any funds into the ADS Fund. The ADS Fund was
eliminated from the Plan during the first quarter of 1999; any balances
remaining in such fund at that time were credited to the Fixed Income
Fund.
The Plan, as a result of the Packaging Transaction maintains the following
funds:
SEALED AIR PREFERRED STOCK FUND
-------------------------------
The Sealed Air Preferred Stock Fund holds the Sealed Air preferred
stock that was credited to the accounts of each participant who had a
balance in the Grace Stock Fund immediately prior to the Packaging
Transaction on March 31, 1998. Participants may transfer balances out
of the Sealed Air Preferred Stock Fund at any time, but may not deposit
or transfer any funds into the Sealed Air Preferred Stock Fund. The
Sealed Air Preferred Stock Fund will be eliminated December 31, 2000,
and any balances remaining in the Fund on that date will be credited to
the Fixed Income Fund.
SEALED AIR COMMON STOCK FUND
----------------------------
The Sealed Air Common Stock Fund holds the Sealed Air common stock that
was credited to the accounts of each participant who had a balance in
the Grace Stock Fund immediately prior to the Packaging Transaction
on March 31, 1998. Participants may transfer balances out of the Sealed
Air Common Stock Fund at any time, but may not deposit or transfer any
funds into the Sealed Air Common Stock Fund. The Sealed Air Common
Stock Fund will be eliminated December 31, 2000, and any balances
remaining in the Fund on that date will be credited to the Fixed Income
Fund.
At December 31, 1998 and 1997, the number of participants in the various Funds
(including former employees whose funds have not yet been distributed and who no
longer contribute to the Plan) was as follows:
F-8
<PAGE>
W.R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
DECEMBER 31,
1998 1997
------ ------
Fixed Income Fund 3,582 6,470
ADS Fund 832 1,729
Grace Stock Fund 1,426 2,432
Employee Stock Ownership Plan 3,815 7,638
Fidelity Balanced Fund 1,374 2,083
Fidelity Growth & Income Fund 1,535 2,315
Fidelity Blue Chip Growth Fund 2,323 3,637
Fidelity Contrafund 1,590 2,562
Fidelity OTC Fund 788 1,392
Sealed Air Preferred Stock Fund 1,209 -
Sealed Air Common Stock Fund 1,199 -
The Plan provides that a statement of each participant's account be sent to the
participant at least once a year. Presently, such statements are sent at the end
of each calendar quarter.
On any business day, participants may allocate their future contributions among
the Funds and transfer the amounts related to their prior contributions in any
of the Funds to other Funds (other than the ADS Fund, Sealed Air Preferred Stock
Fund, and the Sealed Air Common Stock Fund). Transfers may be in whole dollar
amounts or in multiples of 5% of the participant's account balance.
Company contributions are generally credited to the Employee Stock Ownership
Plan ("ESOP"), which is invested in New Grace common stock. The ESOP is an
Employee Stock Ownership Plan, within the meaning of the Code.
Eligible employees (generally, those age 50 and older) may elect to transfer all
or a portion of their Company contributions once each year from the ESOP Fund to
any of the other Funds except the Grace Stock Fund, the ADS Fund, the Sealed Air
Preferred Stock Fund, and the Sealed Air Common Stock Fund. Such transfers may
be in whole dollar amounts or multiples of 5% of the participant's account
balance.
PARTICIPANT LOANS
Participants may borrow up to one-half of the value of their account balance up
to $50,000. Loans may be for a term of one to five years for a general purpose
loan and up to twenty years for a loan to purchase a principal residence. The
interest rate for the loans is fixed for the term of the loan and the loans are
repaid in periodic installments, depending on the loan provisions. Participants
can repay the outstanding loan balance in full at any time without penalty.
Loans are considered to be in default and treated as a distribution for tax
purposes if no payment is received for ninety days. If employment with the
Company ends, any outstanding loan balance will be considered a distribution if
not repaid within ninety days.
F-9
<PAGE>
W.R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
Interest paid on loans is credited to the individual funds from which the loan
was taken and is shown as interest income within those funds.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accounts of the Plan are maintained on the accrual basis of accounting,
which is acceptable under U.S. Department of Labor Regulations and is in
accordance with generally accepted accounting principles ("GAAP").
Investments in publicly traded securities are valued at the last reported sales
price on the last day of the year. Investments in the Fidelity Mutual Funds are
valued at their respective market prices quoted at year-end, which represent the
net asset value of the securities held in such Funds. Investments in commercial
paper, U.S. Treasury bills and U.S. government securities mutual funds are
valued at cost, which approximates market value. Investments in insurance
company contracts are stated at contract value, which represents contributions
made under the contract plus interest at the contract rate, less funds used for
withdrawals. Participant loans are valued at cost, which approximates fair
value.
The assets of the Plan are commingled in the Trust Fund of the W.R. Grace & Co.
Profit Sharing and Savings and Investments Plans ("Trust Fund") with the assets
of other tax-qualified profit sharing and savings and investment plans
maintained by the Company. The Trust Fund is administered by The Fidelity
Management Trust Company ("Trustee"). For each Fund, assets and investment
returns are allocated to each plan pro rata, based upon each Plan's daily net
asset balance in the Fund and the Trust Fund's daily total net asset balance
attributable to the Fund.
The following tables present the fair values of investments and investment
income for the Trust Fund:
DECEMBER 31,
1998 1997
------------- -------------
INVESTMENTS AT FAIR VALUE:
Guaranteed investment contracts $ 256,745,670 $ 339,227,904
Commercial paper 6,220,838 7,576,304
W.R. Grace & Co. Common Stock 99,867,486 229,580,586
Fresenius Medical Care ADS 3,314,806 6,337,059
Fidelity mututal funds 219,330,332 224,084,198
Sealed Air Preferred Stock 8,675,144 -
Sealed Air Common Stock 9,087,593 -
------------- -------------
$ 603,241,869 $ 806,806,051
------------- -------------
DECEMBER 31,
1998 1997
------------- -------------
INVESTMENT INCOME:
Interest $20,229,833 $25,789,788
Dividends 13,201,585 15,748,378
Net realized gain 17,135,061 32,937,076
Change in unrealized appreciation 2,854,450 80,093,404
------------- -------------
$53,420,929 $ 154,568,646
------------- -------------
F-10
<PAGE>
W.R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
Income of each Fund is reinvested in that Fund, except that dividends paid on
shares of Grace Common Stock held in the ESOP Fund are paid to participants
within 90 days after the end of the calendar year in which the dividends are
received. The ESOP Fund dividends are not treated as income to the Plan or as
distributions to participants. The Trustee manages the Grace Stock Fund and the
ESOP Fund by purchasing shares of Grace Common Stock and by selling shares to
the extent necessary to obtain cash for disbursements and transfers from the
Funds. Investment management of the Fixed Income Fund and investment oversight
of the Fidelity Mutual Funds is the responsibility of the Investment and
Benefits Committee appointed by the Grace Board of Directors, or as delegated by
that Committee.
The Plan recognizes benefits when paid.
The Plan recognizes a gain or loss on Grace Common Stock distributed to
participants in an amount equal to the difference between the market value at
the distribution date and the average cost of the shares distributed. The cost
of securities sold is determined on the basis of average cost, and a gain or
loss is recorded equal to the difference between average cost and the proceeds
from the sale.
Amounts transferred to successor trustees are deducted from the Plan's net
assets upon the divestiture of, or discontinuance of participation by, a
participating business unit.
The preparation of financial statements in conformity with GAAP requires the
Plan Fiduciaries to make estimates and assumptions that affect the reported
amounts of assets and liabilities on the date of the financial statements.
Actual amounts may differ from the estimates used.
NOTE 3 - GUARANTEED INVESTMENT CONTRACTS:
Investments in the Fixed Income Fund consist primarily of guaranteed investment
contracts ("GICs") issued by various insurance companies. The Plan's GICs are
stated at contract value, which may or may not equal fair value, in accordance
with GAAP. Contract value includes principal invested, plus interest credited,
less benefit payments and administrative expenses. Listed below are the Plan's
investments in GICs:
F-11
<PAGE>
W.R. GRACE & CO.
SALARIED EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE AT DECEMBER 31,
---------------------------------
ISSUER RATE 1998 1997 MATURITY
- ---------------------------------- ------------ -------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Metropolitan Life Insurance Co. 6.88% $ - $ 19,986,014 Jun-2002
7.00% - 51,106,892 Dec-2000
6.99% 45,767,802 - Jun-2002
Monumental Life Insurance Co. 6.92% 31,476,330 37,002,452 Dec-2001
6.45% 16,417,535 12,309,697 Dec-2002
Prudential Life Insurance Co. 9.15% 30,716,762 85,563,609 Jun-2000
New York Life Insurance Co. 5.96% 18,307,778 21,717,053 Dec-1999
6.68% 16,687,822 19,661,763 Jun-2003
5.89% 7,847,744 - Jun-2001
John Hancock Mutual Life Ins. Co. 6.06% 9,006,416 21,347,025 Jun-1998, Jun-2000
7.04% 20,584,207 24,164,144 Jun-2001
7.85% - 21,279,854 Feb-1998
Pacific Mutual Life Insurance Co. 6.92% 12,941,822 15,213,946 Jun-2002
6.14% 16,289,981 - Dec-2001, Jun-2002,
Dec-2003
Transamerica Life Insurance Co. 6.18% 12,027,123 - Mar-2002, Sep-2002
Principal Life Insurance Co. 6.10% 9,910,960 - Sep-1999
-------------- ----------------
TOTAL CONTRACTS $247,982,282 $329,352,449
-------------- ----------------
</TABLE>
NOTE 4 - FEDERAL INCOME TAXES:
On July 13, 1995, the Internal Revenue Service issued a letter stating that the
Plan, as then in effect, was in compliance with the applicable requirements of
the Code. The Plan has been amended since the issuance of this determination
letter. However, the Plan Fiduciaries believe that the Plan is currently
designed and is currently being operated in compliance with the applicable
requirements of the Code. Therefore, the Plan Fiduciaries believe the Plan
continues to be qualified, and the related Trust continues to be tax exempt.
NOTE 5 - PLAN TERMINATION:
Grace anticipates that the Plan will continue indefinitely, but reserves the
right to amend or discontinue the Plan at any time. A participating business
unit may terminate its participation in the Plan with the approval of Grace's
Board of Directors.
F-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Administrative Committee has duly caused this annual report to be signed on
its behalf by the undersigned thereunto duly authorized.
W. R. GRACE & CO.
SALARIED EMPLOYEES
SAVINGS AND INVESTMENT PLAN
By: /s/ P. C. DONAYRI
-----------------------------
P. C. Donayri
Chairman, Administrative
Committee
Date: June 28, 1999
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 (No. 333-49703) of
W. R. Grace & Co. of our report dated June 18, 1999 appearing on page F-1 of the
Annual Report of the W. R. Grace & Co. Salaried Employees Savings and Investment
Plan on Form 11-K for the year ended December 31, 1998.
PRICEWATERHOUSECOOPERS LLP
/s/ PRICEWATERHOUSECOOPERS LLP
Ft. Lauderdale, Florida
June 28, 1999
