Jane D. McGuinness
Susan G. Eccher
GRACE REPORTS EPS FROM CONTINUING OPERATIONS UP 36% TO $.43;
GRACE CONSTRUCTION SETS RECORD SALES & EBIT
COLUMBIA, Maryland, July 26, 1999 - W. R. Grace & Co. (NYSE: GRA) today reported second quarter income from continuing operations of $31.4 million, up 23% versus $25.5 million in the 1998 second quarter. Diluted earnings per share (EPS) from continuing operations were $.43, up 36%, versus $.32 in the prior-year quarter.
"We are pleased with the strength of our second quarter earnings, and we continue to be on track to deliver our 1999 earnings commitments," said Grace's Chairman, President and Chief Executive Officer Paul J. Norris. "Grace Davison and Grace Construction generated double-digit earnings growth versus the year-ago quarter, primarily by improving gross margin percentages. These results demonstrate the success of our productivity improvement programs and our efforts to change Grace into an integrated operating company. All of our business units have done a great job improving productivity, and there are more benefits yet to come as we adopt Six Sigma, our next step in driving productivity."
Sales for the quarter totaled $373.0 million, a 1% increase versus the prior year's quarter. Consolidated operating earnings before interest and income taxes (EBIT) for the quarter were $53.9 million, a 20% increase, versus $45.1 million in the year-ago quarter. Grace's consolidated EBIT margin (EBIT as a percentage of sales) for the quarter was 14.5%, a 2.3 percentage point improvement over the prior-year quarter.
Net income and the associated diluted EPS for the quarter were $25.7 million and $.35, increases of 1% and 11%, respectively, over the year-ago period. Grace's consolidated results included a noncash after-tax charge to discontinued operations of $5.7 million associated with lump-sum pension payouts, primarily to employees of its former packaging business.
Year-to-date, Grace reported net sales of $718.5 million, a 1% increase versus 1998. Consolidated EBIT was $88.8 million and EBIT margin was 12.4%, increases of 27% and 2.5 percentage points, respectively, versus the year-ago period. Income and diluted EPS from continuing operations were $51.4 million and $.70, up 38% and 51%, respectively, versus the first six months of 1998.
Grace Davison, a leading global supplier of catalysts and silica products, reported second quarter sales of $179.3 million, essentially flat with the prior year's quarter. Grace Davison's quarterly operating income equaled $31.4 million, an 11% increase versus the year-ago period. Operating margin increased 1.8 percentage points to 17.5%. Year-to-date, sales were $351.2 million, down 1% from 1998, while operating income was $53.1 million, up 1% versus the year-ago period.
Grace Davison's worldwide sales of refinery catalysts, which include fluid catalytic cracking (FCC) and hydroprocessing catalysts, fell 4% versus the prior-year quarter. Sales were impacted primarily by continued weak but improving North American refinery demand for FCCs, offset somewhat by strong European FCC and hydroprocessing catalyst sales. Polyolefin catalyst sales increased 4% versus the 1998 period, driven by continued North American volume gains. Quarterly sales of silicas and adsorbents increased 3% versus the 1998 quarter, due primarily to volume gains in all regions.
GRACE CONSTRUCTION PRODUCTS
Grace Construction Products, a leading global supplier of specialty construction chemicals and building materials, reported 1999 second quarter sales of $134.1 million, up 5% versus the 1998 quarter. Quarterly operating income equaled $24.1 million, a 27% increase versus the year-ago period. Operating margin increased 3.1 percentage points to 18.0%. Year-to-date, sales were $248.6 million, up 8% from 1998, while operating income was $34.3 million, up 44% versus the year-ago period.
Sales of specialty construction chemicals, which include Concrete Products, cement additives and masonry products, were up 6% versus the year-ago quarter. Sales of Concrete Products were particularly strong in North America, driven by the continued success of Grace'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 4% versus the year-ago quarter, driven by strong North American and Asian growth in waterproofing products.
DAREX CONTAINER PRODUCTS
Darex Container Products, a leading global producer of container sealants and closure systems, reported sales of $59.6 million in the quarter, 4% lower than the year-ago quarter. Darex's operating income equaled $7.9 million, a 3% improvement versus last year's quarter, which included a $1.5 million gain from the divestment of a small can forming lubricants business. Darex's operating margin improved 1.0 percentage point to 13.2% versus the prior-year quarter. Year-to-date, sales were $118.7 million, down 4% from 1998, while operating income was $14.5 million, up 1% versus the year-ago period.
Sales for the quarter versus the year-ago quarter were negatively affected by foreign currency translation and the elimination of sales from Darex's former can forming business, which was divested in May 1998.
GRACE TO RECEIVE APPROXIMATELY $96 MILLION
ON CROSS COUNTRY STAFFING DIVESTMENT
As previously announced, Grace signed a definitive agreement to sell substantially all of its interest in Cross Country Staffing for net cash of $96 million. Closing of the transaction is expected to occur during the third quarter of 1999.
GRACE SETTLED WITH SECURITIES AND EXCHANGE COMMISSION
As previously confirmed, Grace reached a settlement of the Securities and Exchange Commission (SEC) charges relating to the accounting treatment of reserves established and adjusted from 1991 to 1995. Under the settlement, Grace consented to a cease and desist order without admitting or denying the SEC's findings. Grace also agreed to establish a $1 million fund for public sector programs that further awareness and education relating to financial statements and generally accepted accounting principles. Grace is a leading global supplier of catalysts and silica products, specialty construction chemicals and building materials, and container protection products. With annual sales of approximately $1.5 billion, Grace has 6,600 employees and operations in nearly 40 countries.
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 heading "Projections and Other Forward-Looking Information" in Grace's current Annual Report on Form 10-K.