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 29, 1996
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W. R. GRACE & CO.
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(Exact name of registrant as specified in its charter)
New York 1-3720 13-3461988
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
One Town Center Road, Boca Raton, Florida 33486-1010
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 407/362-2000
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Item 5. Other Events.
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On July 29, 1996, the Company announced its consolidated results of
operations for the quarter ended June 30, 1996. The Company's July 29, 1996
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.
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The Company's July 29, 1996 press release and accompanying financial
and statistical data are filed as an exhibit hereto.
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<PAGE>
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: August 9, 1996
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<PAGE>
W. R. GRACE & CO.
Current Report on Form 8-K
Exhibit Index
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Exhibit No. Description
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99.1 Press Release dated July 29, 1996 and accompanying financial
and statistical data
#2650
CORPORATE COMMUNICATIONS DIVISION
GRACE NEWS
W. R. Grace & Co.
One Town Center Road
Boca Raton, FL 33486-1010
CONTACT: Chuck Suits or Mary Lou Kromer 407/362-2600 or
800/GRACE99
GRACE REPORTS SECOND QUARTER RESULTS
EARNINGS PER SHARE OF $3.45 INCLUDES DIVESTMENT GAINS
AND OTHER SPECIAL ITEMS
PRE-TAX OPERATING INCOME UP 20 PERCENT
BOCA RATON, FL, July 29, 1996 -- W. R. Grace & Co. (NYSE: GRA) today
reported second quarter earnings per share of $3.45, including $2.67 per share
attributable to special items. Excluding special items, net earnings were $.78
per share compared to $.83 per share in the year-ago quarter. Highlights of
the results are as follows:
o In continuing operations (Packaging and Specialty Chemicals): sales
increased 2% to $949 million; pretax operating earnings increased 20% to
$102 million; and earnings per share (before special items) increased 11%
to $.52 compared to the prior year's second quarter.
o In discontinued operations (Health Care): sales increased 8% to $566
million; and pretax operating earnings (before accounting for "OBRA 93"
and other special charges) rose 16%. Including these items, operating
income declined 23%.
o The Company realized $3.00 per share gains from the divestment of the
Dearborn water treatment and Agracetus transgenic plant businesses and
recorded special charges totaling $.38 per share, principally related to
restructuring the company's European Packaging operations.
"Our second quarter results show progress toward our goal of becoming
a top-quartile performer," said Albert J. Costello, chairman, president and
chief executive officer. "Revenue growth in our largest business, Grace
Packaging, did not meet our expectations, as a number of events simultaneously
impacted that business. Grace Davison delivered on target, and Construction
Products had an outstanding quarter.
<PAGE>
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"The New Grace is distinguished by four key competitive advantages:
technological innovation; customer partnerships founded on that technological
innovation; an unparalleled global presence that enhances those partnerships;
and number one market positions in our key businesses. Over the past 14 months
we have moved aggressively on three fronts to focus Grace on creating value.
First, we eliminated $100 million in overhead for 1996. Second, we are
divesting non-core businesses, including National Medical Care, to focus on
our core franchises. And third, we are managing our capital more efficiently.
Our core strengths, combined with our plans to increase operating efficiencies
in manufacturing and research and development, are the foundation for our
future growth in sales, cash flow and earnings per share."
During the quarter Grace repurchased 5.8 million shares. Since the
repurchase program was initiated, the company has repurchased 7.9 million
shares. A higher effective tax rate in the quarter compared to a year ago
impacted results by eight cents per share.
Packaging and Specialty Chemicals:
- ----------------------------------
The second quarter earnings improvement from continuing operations
compared to the year-ago quarter was primarily driven by reduced overhead
expenses. In addition, results for Construction Products were up sharply,
resulting from revenue gains in all products in all regions as well as lower
operating costs.
Packaging's pretax operating income declined four percent on essentially
flat revenues. Demand for higher margin products for fresh and processed meats
was weak due to the effects of Mad Cow Disease in Europe and Japan, and lower
pork production in North America, driven by steep increases in feed costs.
While these trends are continuing in the second half, the impact on earnings
is expected to be partly offset by cost reductions in Europe and North America
now being implemented. Markets for display films were weak in all regions.
However, Packaging experienced growth in developing markets and improved
demand for lower margin products.
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Catalysts and silicas improved results on the strength of fluid cracking
catalysts ("FCCs") in Europe, silicas and adsorbents in Europe and Latin
America, and polyolefin catalysts worldwide, as well as lower costs. Earnings
from FCCs in North America declined due to continued volume weakness and
resultant pricing pressures.
Container results were modestly higher, as lower costs offset the impact
of unfavorable exchange rates and continued weakness in several Asia Pacific
markets. Subsequent to the end of the second quarter, Container's operations
were merged into the Packaging division to more effectively leverage
technology synergies in the global packaging business.
Health Care:
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Pretax operating earnings from health care rose 16 percent in the second
quarter, excluding $20 million of 1995 second quarter earnings related to
reimbursement no longer allowed under federal budget (OBRA `93) legislation,
and excluding $9 million of special charges in the current quarter. Including
these items, operating income declined 23 percent. The higher earnings
primarily came from medical products, which increased sharply on higher sales
volume and lower costs for renal products. Earnings for dialysis services
declined modestly despite 7.8 percent higher domestic treatments and a nearly
50 percent increase in international treatments. Earnings for homecare
declined due to continued margin pressures from managed care pricing.
Grace is a leading global supplier of flexible packaging and specialty
chemicals, and a leading provider of specialized health care services.
###
<PAGE>
W. R. Grace & Co.
Consolidated Statement of Operations (a)
For Quarter Ended June 30
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($ Millions Except Per Share)
<TABLE>
<CAPTION>
Second Quarter Year-To-Date
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales $ 948.9 $ 932.3 $1,834.9 $1,785.7
Other income 14.1 4.5 17.9 8.8
Total $ 963.0 $ 936.8 $1,852.8 $1,794.5
Cost of goods sold and operating expenses $ 572.0 $ 551.0 $1,103.8 $1,052.2
Selling, general and administrative expenses 206.4 229.1 405.7 468.2(c)
Depreciation and amortization 46.4 40.2 91.9 78.4
Interest expense and related financing costs 18.3 18.7 36.7 34.5
Research and development expenses 29.0 33.0 57.8 65.0
(Gain) on sale of businesses (b) (326.4) - (326.4) -
Restructuring 53.7 - 53.7 -
Total $ 599.4 $ 872.0 $1,423.2 $1,698.3
Income before income taxes $ 363.6 $ 64.8 $ 429.6 $ 96.2
Provision for income taxes 130.5 19.8 154.9 28.3
Income from continuing operations $ 233.1 $ 45.0 $ 274.7 $ 67.9
Income from discontinued operations 100.8 33.7 122.8 58.3
Net Income $ 333.9 $ 78.7 $ 397.5 $ 126.2
Earnings per share
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Continuing operations $ 2.41 $ .47 $ 2.82 $ .71
Discontinued operations 1.04 .36 1.27 .62
Net Income $ 3.45 $ .83 $ 4.09 $ 1.33
Average number of shares (millions) 96.6 95.1 97.3 94.6
</TABLE>
(a) 1995 results have been restated to reflect the classification of the
health care segment as a discontinued operation in the second quarter
of 1995.
(b) Includes divestment of Grace Dearborn and Biopesticides.
(c) Includes a $20.0 million pretax charge ($12.5 after-tax) for matters
relating to corporate governance.
<PAGE>
W. R. Grace & Co.
Operating Results
Quarter Ended June 30
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($ Millions Except Per Share)
<TABLE>
<CAPTION>
Percent
1996 1995 Change
<S> <C> <C> <C>
Sales - Specialty Chemicals $ 948.9 $ 932.3 1.8 %
Operating Income - Specialty Chemicals $ 102.1 $ 85.3 19.7
Other Expenses / (Income):
Interest/Financing (a) $ 18.3 $ 18.7 (2.1)
Other (7.0)(c) 1.8 ND
Total Other Expenses $ 11.3 $ 20.5 (44.9)
Pretax Operating Earnings $ 90.8 $ 64.8 40.1
Provision for Income Taxes 35.4 19.8 78.8
Net Operating Income before Special Items $ 55.4 $ 45.0 23.1 %
Special Items - after-tax - Chemicals / Corporate:
Restructuring (32.4) - ND
Gain on Sale of Dearborn 210.1 - ND
Net Income from Continuing Operations $ 233.1 $ 45.0 418.0
Net Income from Discontinued Operations - Health Care (b) 21.4 33.7 (36.5)
Gain on Sale of Agracetus (after-tax) 79.4 - ND
Net Income $ 333.9 $ 78.7 324.3 %
Earnings Per Share
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From Continuing Operations $ 2.41 $ .47 412.8 %
From Discontinued Operations 1.04 .36 188.9
Net Income $ 3.45 $ .83 315.7 %
Earnings Per Share (before special and one-time items)
- ------------------------------------------------------
From Operations - Specialty Chemicals $ .52 $ .47 10.6 %
From Discontinued Operations - Health Care .26 .36 (27.8)
Operating Earnings $ .78 $ .83 (6.0)%
Average Number of Shares (Millions) 96.6 95.1
(a) After an allocation of interest/financing expenses to discontinued operations.
(b) Discontinued Operations - Health Care
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Sales $ 565.5 $ 523.5 8.0 %
Operating Income $ 63.3 (d) $ 81.7 (22.5)
Interest/Financing Expenses 24.4 21.6 13.0
Pretax Operating Earnings 38.9 60.1 (35.3)
Provision for Income Taxes 17.5 26.4 (33.7)
Net Income from Discontinued operations $ 21.4 $ 33.7 (36.5)%
(c) Includes $7.5 ($4.6 after-tax) of non-operating interest income.
(d) Includes $8.5 ($3.9 after-tax) of one-time charges.
</TABLE>
<PAGE>
W. R. Grace & Co.
Operating Results
Six Months Ended June 30
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($ Millions Except Per Share)
<TABLE>
<CAPTION>
Percent
1996 1995 Change
<S> <C> <C> <C>
Sales - Specialty Chemicals $ 1,834.9 $ 1,785.7 2.8 %
Operating Income - Specialty Chemicals $ 186.0 $ 153.7 21.0
Other Expenses / (Income):
Interest/Financing (a) $ 36.7 $ 34.5 6.4
Other (7.5)(c) 3.0 ND
Total Other Expenses $ 29.2 $ 37.5 (22.1)
Pretax Operating Earnings $ 156.8 $ 116.2 34.9
Provision for Income Taxes 59.8 35.8 67.0
Net Operating Income before Special Items $ 97.0 $ 80.4 20.6 %
Special Items - after-tax - Chemicals / Corporate:
Restructuring (32.4) -- ND
Gain on Sale of Dearborn 210.1 -- ND
Corporate Governance -- (12.5) 100.0
Net Income from Continuing Operations $ 274.7 $ 67.9 304.6
Net Income from Discontinued Operations - Health Care (b) 43.4 58.3 (25.6)
Gain on Sale of Agracetus (after-tax) 79.4 -- ND
Net Income $ 397.5 $ 126.2 215.0 %
Earnings Per Share
- ------------------
From Continuing Operations $ 2.82 $ .71 297.2 %
From Discontinued Operations 1.27 .62 104.8
Net Income $ 4.09 $ 1.33 207.5 %
Earnings Per Share (before special and one-time items)
- ------------------------------------------------------
From Operations - Specialty Chemicals $ .95 $ .85 11.8 %
From Discontinued Operations - Health Care .48 .62 (22.6)
Operating Earnings $ 1.43 $ 1.47 (2.7)%
Average Number of Shares (Millions) 97.3 94.6
(a) After an allocation of interest/financing expenses to discontinued operations.
(b) Discontinued Operations - Health Care
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Sales $ 1,105.2 $ 1,015.3 8.9 %
Operating Income $ 128.3 (d) $ 145.8 (12.0)
Interest/Financing Expenses 51.2 41.7 22.8
Pretax Operating Earnings 77.1 104.1 (25.9)
Provision for Income Taxes 33.7 45.8 (26.4)
Net Income from Discontinued operations $ 43.4 $ 58.3 (25.6)%
(c) Includes $7.5 ($4.6 after-tax) of non-operating interest income.
(d) Includes $8.5 ($3.9 after-tax) of one-time charges.
</TABLE>
<PAGE>
W. R. Grace & Co.
Specialty Chemicals
Geographic Data
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(Dollars In Millions)
QUARTER ENDED JUNE 30
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Pretax
Sales Operating Income
1996 1995 1996 1995
SPECIALTY CHEMICALS
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North America $ 464 $ 468 $ 56 $ 42
Europe 299 289 24 21
Latin America 68 63 8 5
Asia Pacific 118 112 14 17
Total Specialty Chemicals $ 949 $ 932 $ 102 $ 85
SIX MONTHS ENDED JUNE 30
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Pretax
Sales Operating Income
1996 1995 1996 1995
SPECIALTY CHEMICALS
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North America $ 886 $ 889 $ 91 $ 69
Europe 584 560 50 44
Latin America 132 122 15 7
Asia Pacific 233 215 30 33
Total Specialty Chemicals $ 1,835 $ 1,786 $ 186 $ 153
<PAGE>
W. R. Grace & Co.
Specialty Chemicals Supplemental Data
1996 Sales and Percent Change Versus Prior Period
(Dollars In Millions)
QUARTER ENDED JUNE 30
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<TABLE>
<CAPTION>
Amount of Inc/(Dec) Due to:
Sales Price/
1996 1995 Vol. Mix Exch. Total
<S> <C> <C> <C> <C> <C> <C>
Packaging $ 422.4 $ 423.5 4 % (3)% (1)% -
Catalysts/Silicas 184.3 173.1 6 1 (1) 6
Construction 114.2 104.8 9 1 (1) 9
Container 89.1 94.8 (1) (1) (4) (6)
Water Treatment 103.6 100.8 3 2 (2) 3
Other 35.3 35.3 1 - (1) -
Total $ 948.9 $ 932.3 4 % (1)% (1)% 2 %
</TABLE>
SIX MONTHS ENDED JUNE 30
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<TABLE>
<CAPTION>
Amount of Inc/(Dec) Due to:
Sales Price/
1996 1995 Vol. Mix Exch. Total
<S> <C> <C> <C> <C> <C> <C>
Packaging $ 831.5 $ 814.3 4 % (2)% - 2 %
Catalysts/Silicas 366.5 338.0 6 2 - 8
Construction 198.5 192.0 2 1 - 3
Container 173.1 182.3 (3) - (2) (5)
Water Treatment 201.2 193.9 2 2 - 4
Other 64.1 65.2 (1) (1) - (2)
Total $ 1,834.9 $ 1,785.7 3 % - - 3 %
</TABLE>
