Jane D. McGuinness
Susan G. Eccher
GRACE REPORTS FIRST QUARTER EPS OF $0.27
RECORD FIRST QUARTER FOR GRACE CONSTRUCTION PRODUCTS
BOCA RATON, Florida, April 29, 1999 - W. R. Grace & Co. (NYSE: GRA) reported income from continuing operations of $20.0 million, or $0.27 per diluted share (EPS) for the first quarter of 1999 versus $0.15 in the prior-year quarter. Included in the first quarter results was a $2.7 million after-tax gain ($0.04 per diluted share) on the sale of the company's corporate aircraft.
"We are pleased with the progress we made in the first quarter, and we are on track to deliver our 1999 earnings commitments," said Grace's Chairman, President and Chief Executive Officer Paul J. Norris. "Grace Construction Products had a record first quarter in both sales and earnings. Grace Davison experienced a tough environment for fluid catalytic cracking catalysts, especially in North America, but reported solid gains elsewhere in the business. And we improved our margins in Darex Container Products, while positioning the business for further earnings growth going forward. We now have our initial productivity programs in place and have established a company-wide process to identify and capitalize on top-line growth opportunities."
Sales for the quarter totaled $345.4 million, a 1% increase versus the prior year's quarter. Consolidated operating earnings before interest and income taxes (EBIT) for the quarter were $34.9 million versus $25.1 million in the year-ago quarter. In addition to the gain on the sale of the corporate aircraft, 1999 EBIT included a $4.3 million charge for severance related to the productivity initiatives previously announced. The 1998 EBIT included a $1.0 million charge to restructure Grace Construction Products' manufacturing and sales organization in Europe. Grace's consolidated EBIT margin (EBIT as a percentage of sales) for the quarter was 10.1%, a 2.7 point improvement over the prior-year quarter.
Grace Davison, a leading global supplier of catalysts and silica products, reported first quarter sales of $171.9 million, down 2% from the prior year's quarter. Excluding $0.9 million in restructuring charges, Grace Davison's operating income equaled $22.6 million, an 8% decrease versus the year-ago period. On the same basis, operating margin declined 0.7 percentage points to 13.1%.
Grace Davison's worldwide sales of refinery catalysts, which include fluid catalytic cracking (FCC) and hydroprocessing catalysts, fell 8% versus the prior-year quarter. Sales were impacted by weak refinery demand for FCCs, primarily in North America and Asia Pacific, while hydroprocessing catalyst sales were up substantially during the period. Polyolefin catalysts sales, driven by strong North American volume gains, increased strongly versus the 1998 period. Sales of silicas and adsorbents increased slightly versus the 1998 quarter due to volume gains in North America, Europe and Asia Pacific, partially offset by lower sales of molecular sieve products.
Commented Norris, "Refinery activity in North America was slower than expected in the first quarter and this negatively affected Davison's sales of FCC catalysts and additives. We are optimistic that this situation will improve as we go into the peak gasoline demand period in the second and third quarters. For the Davison business, excluding North American FCC products, sales and profits were up quite strongly."
GRACE CONSTRUCTION PRODUCTS
Grace Construction Products (GCP), a leading global supplier of specialty construction chemicals and building materials, reported 1999 first quarter sales of $114.4 million, up 11% versus the 1998 quarter. GCP's operating income equaled $10.2 million versus $4.8 million in the year-ago quarter. GCP's operating margin improved 4.3 percentage points to 8.9%. The first quarter is a seasonally soft period for this business. Excluding $0.3 million in restructuring charges in 1999 and a $1.0 million restructuring charge in 1998, operating income increased $4.7 million to $10.5 million.
Sales of specialty construction chemicals, which include Concrete Products, cement additives and masonry products, were up 11% versus the year-ago quarter. Sales were particularly strong in North America and Europe, driven by the continued success of GCP's new and value-added products and by strong construction activity. Sales of specialty building materials, which include waterproofing and fire protection products, were up 10% versus the year-ago quarter, driven by strong growth in value-added waterproofing products in North America, Europe and Asia and continued gains in fire protection products in North America and Europe.
Norris said, "Grace Construction Products delivered another excellent quarter. Our strategy of growth through new products continues to drive the top and bottom line in this unit."
DAREX CONTAINER PRODUCTS
Darex Container Products, a leading global producer of container sealants and closure systems, reported sales of $59.1 million in the quarter, 4% lower than the year-ago quarter. Excluding $0.3 million in restructuring charges, Darex's operating income equaled $6.9 million, an improvement of 3% versus last year. On the same basis, Darex's operating margin improved 0.7 percentage points to 11.7% versus the prior year's quarter.
Sales for the quarter were primarily affected by reduced demand for beer/beverage can sealant compounds in parts of Asia and Europe and in Brazil, coupled with the effects of lower sales volumes due to customer consolidations in North America.
Grace also reported that it repurchased 2.1 million shares during the quarter. At March 31, there were approximately 70.7 million shares outstanding. Since the end of the quarter, the company repurchased an additional 2.2 million shares, bringing to 9.4 million the total shares repurchased under its previously announced 15 million share repurchase program approved by Grace's Board of Directors in April 1998.
Grace is a leading global supplier of catalysts and silica products, specialty construction chemicals and building materials, and container sealants and closure systems.For more information, visit Grace's Web site at www.grace.com.
This announcement contains "forward-looking" information. Future results may differ from those discussed here. Some of the factors that could cause such differences can be found under the headings "Projections and Other Forward-Looking Information" in Grace's Annual Report on Form 10-K for 1998.