<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, 1999
Commission File Number 1-13953
W. R. GRACE & CO. HOURLY EMPLOYEES
SAVINGS AND INVESTMENT PLAN
W. R. Grace & Co.
7500 Grace Drive
Columbia, Maryland 21044
<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. Hourly Employees Savings and
Investment Plan, as required by Form 11-K, together with the report thereon of
PricewaterhouseCoopers LLP, independent accountants, dated June 28, 2000.
(b) Exhibits. The Consent of PricewaterhouseCoopers LLP is being filed as
an exhibit to this Report.
<PAGE>
W. R. GRACE & CO.
HOURLY EMPLOYEES
SAVINGS AND INVESTMENT PLAN
DECEMBER 31, 1999 AND 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrative Committee of the
W. R. Grace & Co. Hourly Employees
Savings and Investment Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
appearing on pages F-2 and F-3 of this report present fairly, in all material
respects, the net assets available for benefits of the W. R. Grace & Co. Hourly
Employees Savings and Investment Plan (the "Plan") at December 31, 1999 and
1998, and the changes in net assets available for benefits for the years then
ended in conformity with accounting principles generally accepted in the United
States. 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
auditing standards generally accepted in the United States, 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.
PricewaterhouseCoopers LLP
Baltimore, Maryland
June 28, 2000
F-1
<PAGE>
W. R. GRACE & CO.
Hourly Employees Savings and Investment Plan
Statements of Net Assets Available for Benefits
--------------------------------------------------------------------------------
DECEMBER 31,
----------------------------
1999 1998
----------- -----------
Assets
Investments (see Note 3) $34,754,482 $31,361,735
Contributions receivable 484,330 394,129
----------- -----------
Net assets available for benefits $35,238,812 $31,755,864
----------- -----------
The accompanying notes are an integral part of these financial statement.
F-2
<PAGE>
W. R. GRACE & CO.
Hourly Employees Savings and Investment Plan
Statements of Changes in Net Assets Available for Benefits
--------------------------------------------------------------------------------
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------
1999 1998
----------- -----------
Additions
Additions to net assets attributable to
Contributions
Participant $ 3,375,008 $ 3,602,868
Employer 1,087,406 1,162,928
----------- -----------
4,462,414 4,765,796
----------- -----------
Investment income
Interest and dividends 1,678,104 1,167,239
Net appreciation (depreciation) (see Note 3) 23,368 (928,124)
----------- -----------
1,701,472 239,115
----------- -----------
Total additions 6,163,886 5,004,911
----------- -----------
Deductions
Deductions from net assets attributable to
Transfers from the plan 280,194 5,487,315
Participant withdrawals 2,360,211 2,644,115
Administrative expenses 40,533 43,409
----------- -----------
Total deductions 2,680,938 8,174,839
----------- -----------
Net increase (decrease) 3,482,948 (3,169,928)
Net assets available for benefits
Beginning of year 31,755,864 34,925,792
----------- -----------
End of year $35,238,812 $31,755,864
----------- -----------
The accompanying notes are an integral part of these financial statement.
F-3
<PAGE>
W. R. GRACE & CO.
HOURLY EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1 DESCRIPTION OF THE PLAN
The following description of the W. R. Grace & Co. Hourly 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
January 1, 1987, 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 hourly 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 ("Cryovac Business") was combined with Sealed Air Corporation
("Sealed Air"). As a result of the Packaging Transaction, for each share of
common stock held, each shareholder of Old Grace common stock received: (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 $5.0 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 ("ESOP")
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 ESOP, were credited to the ESOP. All Sealed Air common
stock and preferred stock credited to the ESOP was sold within 90 days
following the Packaging Transaction, and the proceeds were invested in New
Grace common stock that was credited to the ESOP.
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
F-4
<PAGE>
W. R. GRACE & CO.
HOURLY EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Fund. The Sealed Air preferred stock, received with respect to such shares
of common stock, was credited to a Sealed Air Preferred Stock Fund.
Additionally, as part of the Packaging Transaction, all balances will be
required to be transferred out of the Sealed Air Common Stock Fund and the
Sealed Air Preferred Stock Fund and into other Plan investment options by
December 31, 2000. Any remaining balances not transferred by December 31,
2000 will be liquidated and transferred to the Fixed Income Fund.
CONTRIBUTIONS
Each year, participants may elect to contribute to the Plan 2% to 16% of
their compensation (which, for purposes of the Plan, consists of regular
wages, 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 for 1999 and 1998. Federal
income tax law limited the annual compensation on which tax-qualified plan
benefits may be based to $160,000 for 1999 and 1998.
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.
Company contributions are generally credited to the 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 to any of the other Funds except the Sealed Air Preferred
Stock Fund and the Sealed Air Common Stock Fund. During the year ended
December 31, 1998, there also existed the ADS Fund. Eligible employees were
not allowed to transfer to this fund. Such transfers may be in whole dollar
amounts or multiples of 5% of the participant's account balance.
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 participant-directed investment options (Funds) and transfer the
amounts related to their prior contributions in any of the Funds to other
Funds. All investment options are participant-directed except for the ESOP,
the ADS Fund (for 1998 only), the 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.
F-5
<PAGE>
W. R. GRACE & CO.
HOURLY EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contribution,
the applicable allocation of the Company's contribution and an allocation
of Plan earnings and charged with an allocation of administrative expenses.
Allocations are based on participant account balances, as defined. The
benefit to which a participant is entitled is the benefit that can be
provided from the participant's account.
Transfers between the W. R. Grace & Co. Hourly Savings and Investment Plan
and the W. R. Grace & Co. Salaried Savings and Investment Plan occur from
time to time when the participant classification changes from hourly to
salaried and vice versa.
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.
Interest paid on loans is credited to the individual investment options
from which the loan was taken.
PAYMENT OF BENEFITS
Upon disability, retirement, or other termination of service, an individual
may elect to receive his/her vested benefit in the form of a single lump
sum payment or annual or quarterly installment payments if the vested
balance exceeds $5,000. For amounts less than $5,000, a single lump sum
payment is made.
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 accounting principles generally accepted in the United
States ("GAAP").
INVESTMENT VALUATION AND INCOME RECOGNITION
Investments in publicly traded securities are valued at the last reported
sales price on the last day of the year. Shares of mutual funds are valued
at the net asset value of shares held by the Plan at year end. Investments
in guaranteed investment contracts (see Note 5) 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.
F-6
<PAGE>
W. R. GRACE & CO.
HOURLY EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Purchases and sales of publicly traded securities are recorded on a
trade-date basis. Dividends are recorded on the ex-dividend date.
The assets of the Plan are commingled in the W. R. Grace & Co. Savings Plan
Master Trust ("Master Trust") with the assets of other tax-qualified profit
sharing and savings and investment plans maintained by the Company. The
Master Trust is administered by The Fidelity Management Trust Company
("Trustee"). The participating plans have a specific interest in the Master
Trust's net assets.
Income of each fund is reinvested in that fund, except that dividends paid
on shares of Grace Common Stock held in the ESOP are paid to participants
in cash within 90 days after the end of the calendar year in which the
dividends are received. The ESOP dividends are not treated as income to the
Plan or as distributions to participants. The Trustee manages the Grace
Stock Fund and the ESOP by purchasing shares of Grace Common Stock and by
selling shares to the extent necessary to obtain cash for disbursements and
transfers from the other 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 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.
The Plan presents in the Statement of Changes in Net Assets Available for
Benefits the net appreciation (depreciation) in the fair value of its
investments which consists of the realized gains or losses and the
unrealized appreciation (depreciation) on those investments.
PAYMENT OF BENEFITS
The Plan recognizes benefits when paid.
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.
USE OF ESTIMATES
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.
RECLASSIFICATIONS
Certain amounts in prior years' financial statements have been reclassified
to conform to the current year presentation.
F-7
<PAGE>
W. R. GRACE & CO.
HOURLY EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
3. INVESTMENTS
The following presents investments that represent 5 percent or more of the
Plan's net assets included in the Master Trust.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1999 1998
---- ----
<S> <C> <C>
Fixed Income Fund, 10,296,438 and 8,938,112
shares, respectively $ 10,296,438 $ 8,938,112
Grace Common Stock Fund - W. R. Grace & Co. common
stock, 518,860 and 422,620 shares, respectively 3,720,224 3,452,804
Employee Stock Ownership Plan - W. R. Grace &
Co. common stock, 1,012,833 and 980,850
shares, respectively 6,796,448* 7,434,841*
Fidelity Management Trust Company
Fidelity Contrafund, 50,031 and 38,315 shares,
respectively 3,002,869 2,175,937
Fidelity Blue Chip Fund, 70,821 and 64,787 shares,
respectively 4,257,061 3,264,602
</TABLE>
* Nonparticipant-directed
During 1999 and 1998, the Plan's investments held in the Master Trust
(including gains and losses on investments bought and sold, as well as held
during the year) appreciated/(depreciated) in value by $23,368 and
($928,124) as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------
1999 1998
---- ----
<S> <C> <C>
Mutual Funds $ 1,225,185 $ 1,693,607
Common Stocks (1,197,042) (2,404,761)
Preferred Stock (4,775) (216,970)
-------------- ---------------
$ 23,368 $ (928,124)
-------------- ---------------
</TABLE>
F-8
<PAGE>
W. R. GRACE & CO.
HOURLY EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
4. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed investments
is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1999 1998
---- ----
<S> <C> <C>
Net assets
Common Stocks $ 7,551,550 $ 8,594,935
Preferred Stock 568,255 725,579
------------ ------------
$ 8,119,805 $ 9,320,514
------------ ------------
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------
1999 1998
---- ----
<S> <C> <C>
Changes in net assets
Contributions $ 1,087,271 $1,162,928
Interest and dividends 28,628 11,484
Net appreciation (depreciation) (896,218) (2,215,796)
Benefits paid to participants (734,285) (1,010,447)
Transfers to participant-directed investments (662,085) (393,275)
Administrative Expenses (24,019) (25,379)
------------- ----------
$ (1,200,709) $(2,470,485)
------------- ----------
</TABLE>
5. GUARANTEED INVESTMENT CONTRACTS
Investments in the participant-directed Fixed Income Fund consist primarily
of benefit-responsive 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 earnings, less benefit payments and
administrative expenses. Listed below is the Plan's specific interest in
the investments in GICs held in the Master Trust:
<TABLE>
<CAPTION>
VALUE AT DECEMBER 31,
---------------------
ISSUER RATE 1999 1998 MATURITY DATE
------ ---- ---- ---- -------------
<S> <C> <C> <C> <C>
Metropolitan Life Insurance Co. 6.94% $1,133,483 $1,646,108 Mar-2003
AEGON Institutional Markets 6.87% 1,427,676 1,107,863 Dec-2001
6.40% 741,397 577,843 Dec-2002
6.13% 541,760 423,315 Mar-2003
Prudential Life Insurance Co. 9.13% 980,270 1,081,128 Jun-2000
</TABLE>
F-9
<PAGE>
W. R. GRACE & CO.
HOURLY EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE AT DECEMBER 31,
---------------------
ISSUER RATE 1999 1998 MATURITY DATE
------ ---- ---- ---- -------------
<S> <C> <C> <C> <C>
New York Life Insurance Co. 5.91% - 644,373 Dec-1999
6.63% 755,216 587,356 Jun-2003
5.84% 223,167 276,215 Jun-2001
John Hancock Mutual Life Ins. Co. 6.01% 405,234 316,996 Jun-2000
7.02% 934,988 724,496 Jun-2001
Pacific Mutual Life Insurance Co. 6.87% 587,027 455,509 Jun-2002
Dec-2001, Jun-2002,
6.09% 733,503 573,353 Dec-2003
State Street Bank and Transaction Co. 6.89% 678,586 - various
Massachusetts Mutual 6.98% 205,569 - Dec-2003
SEI Financial Management 6.47% 332,603 - various
Principal Life Insurance Co. 6.10% 446,272 348,833 Sep-2003
------------- -------------
Total Contracts 10,126,751 8,763,388
Commercial Paper 169,687 174,724
------------- -------------
Total Fixed Income Fund $10,296,438 $8,938,112
------------- -------------
</TABLE>
6. MASTER TRUST
The Plan's investments are held in the Master Trust, which was established
for the investment of assets of the W.R. Grace & Co. Salaried Employees
Savings and Investment Plan and the Hourly Employees Savings and Investment
Plan. Each participating retirement plan has a specific interest in the
Master Trust. The assets of the Master Trust are held by the Trustee. At
December 31, 1999 and 1998, the Plan's interest in the net assets of the
Master Trust was approximately 6% and 5%, respectively.
Contributions and benefit payments are specifically allocated to the
operation of the appropriate plan. However, other plan income and expenses
are allocated to the respective plans' participants using methods outlined
in the Master Trust agreement. The record keeper of the Master Trust
allocates trust income and expenses between the participants of the
participating plans on a monthly basis in relation to the market value of
each participant's account at the beginning of the month for each Master
Trust investment account. The financial statements reflect the Plan's share
of the Master Trust assets and activities using this allocation method.
F-10
<PAGE>
W. R. GRACE & CO.
HOURLY EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The following tables present the fair values of investments and investment
income for the Master Trust Fund:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1999 1998
---- ----
<S> <C> <C>
Investments at contract value
Guaranteed Investment Contracts $ 251,136,194 $ 261,884,597
Investments at cost
Participant Loans 5,245,536 5,359,248
Investments at fair value
W. R. Grace & Co. Common Stock 88,751,062 100,639,541
Mutual Funds 253,228,460 219,330,332
ADS Common Stock - 3,337,211
Sealed Air Preferred Stock 6,595,475 8,671,762
Sealed Air Common Stock 7,198,192 9,378,426
--------------- ---------------
$ 612,154,919 $ 608,601,117
--------------- ---------------
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------
1999 1998
---- ----
<S> <C> <C>
Investment income
Interest and dividends $ 38,897,957 $ 33,494,376
Net (depreciation) appreciation in fair value
of investments
W.R. Grace & Co. Common Stock (9,717,430) (20,216,628)
Mutual Funds 28,235,974 45,443,223
ADS Common Stock (316,448) 364,130
Sealed Air Preferred Stock 15,590 (2,097,940)
Sealed Air Common Stock 416,653 (3,504,959)
-------------- --------------
$ 57,532,296 $ 53,482,202
-------------- --------------
</TABLE>
7. RELATED PARTY
Certain plan investments are shares of mutual funds managed by the Fidelity
Management Trust Company. Fidelity is the trustee as defined by the Plan,
and, therefore, these transactions qualify as party-in-interest
transactions. Fees paid by the Plan for the investment management services
amounted to $40,533 and $43,409 for the years ended December 31, 1999 and
1998, respectively.
W. R. Grace & Co., as plan sponsor, is also a related party. Investments
include shares of W. R. Grace common stock. Purchases of $20,512,796 and
$15,111,191 and sales of $6,072,339 and $1,580,173 of W. R. Grace common
stock were made during 1999 and 1998, respectively.
F-11
<PAGE>
W. R. GRACE & CO.
HOURLY EMPLOYEES SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
8. 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.
9. 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.
<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.
HOURLY EMPLOYEES
SAVINGS AND INVESTMENT PLAN
By: /s/ Brenda Gottleib
--------------------------
Brenda Gottleib
Chairman, Administrative
Committee
Date: June 28, 2000
