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Hal Platzkere
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GRACE REPORTS EPS FROM CONTINUING OPERATIONS UP 37.5% TO $0.44
PRODUCTIVITY IMPROVEMENTS DRIVE EARNINGS GROWTH
YEAR-TO-DATE EBIT MARGINS UP 25.50% FOR THE YEAR


COLUMBIA, Maryland, October 25, 1999
- W. R. Grace & Co. (NYSE: GRA) today reported 1999 third quarter income from continuing operations of $32.8 million, up 29.6% or $7.5 million from the third quarter of 1998. Diluted earnings per share (EPS) from continuing operations were $0.44, up 37.5% from the prior-year quarter of $0.32 per share. Sales in the quarter totaled $372.2 million, down 2.1% from the prior year and about flat compared with the prior quarter. Total operating income from business units was $64.4 million, up 17.3% from the 1998 third quarter. Consolidated earnings before interest and taxes (EBIT) were $54.0 million, up from $43.5 million in 1998.

"We are very pleased with Grace's third quarter earnings," said Grace Chairman, President and Chief Executive Officer Paul J. Norris. "All of our businesses have done a great job implementing productivity improvement programs. This is demonstrated in double-digit earnings improvement for each of the operating segments compared to a year ago. In addition, our Six Sigma program was launched during the third quarter, and we are confident it will be a large contributor to continued productivity improvements across Grace."

Net income and the associated diluted EPS for the quarter were $42.0 million and $0.56, increases of 59.7% and 69.7%, respectively, over the year-ago period. Consolidated results include income of $9.2 million from discontinued operations primarily relating to the gain on the sale of substantially all of Grace's interest in Cross Country Staffing -- net of accruals for related taxes and certain retained obligations from other divested businesses. (Prior quarters' and year-ago results have been restated to reclassify Cross Country Staffing as a discontinued operation.) Because of this divestiture, Grace's effective tax rate on income from continuing operations has been reduced from 37% to 36%.

On a year-to-date basis, Grace reported net sales of $1,090.7 million, essentially the same as 1998. Operating income from its businesses was $166.3 million versus $145.7 million in 1998. The year-to-date operating margin from Grace's businesses was 15.2%, up 1.8 percentage points from the prior year. Consolidated EBIT was $138.1 million compared to $110.0 million in 1998, a 25.5% increase. Earnings and diluted EPS from continuing operations were $82.0 million and $1.11 compared to $61.0 million and $0.76, respectively, for the first nine months of 1998, an increase of 46.1% on a per share basis.

BUSINESS PERFORMANCE

GRACE DAVISON

Grace Davison, a leading global supplier of catalysts and silica products, recorded third quarter sales of $178.4 million, down 3.4% from the prior year's quarter. Operating income of $33.2 million was up 13.7% compared to the year-ago quarter. Grace Davison's operating margin of 18.6% was 2.8 percentage points above the 1998 third quarter.

Grace Davison's worldwide sales of refinery catalysts, which include fluid cracking (FCC) and hydroprocessing catalysts and additives, were down 8.0% compared to the 1998 third quarter, primarily attributed to continued softness in FCC sales in North America and Asia Pacific. Polyolefin catalyst sales increased 4.5% over the third quarter of 1998, driven by continued North American volume gains. Sales of silica based products were up 1.6% (up 3.7% before currency translation) over the 1998 quarter, primarily driven by new applications.

Year-to-date, Grace Davison's sales totaled $529.6 million, down 2.1% from 1998, and operating income was $86.3 million, up 5.4% versus 1998. Year-to-date operating margin of 16.3% is 1.2 percentage points better than the prior year.

Said Norris, "Grace Davison has done a tremendous job of implementing its productivity initiatives and has been rewarded with excellent margins in the third quarter. We have been pleased with our effectiveness in accelerating materials management and manufacturing efficiencies thus far as well as the new projects identified for Six Sigma going forward."

GRACE PERFORMANCE CHEMICALS

Grace Performance Chemicals, which includes Grace Construction Products and Darex Container Products, reported third quarter operating income of $31.2 million up 21.4% from the 1998 quarter. Sales were down 0.9%, largely related to Darex product lines and specialty building materials. Year-to-date sales were up 2.0% from 1998, and operating income was up 25.4%. These results are more fully described by operating segments below.

GRACE CONSTRUCTION PRODUCTS

Grace Construction Products, a leading global supplier of specialty construction chemicals and building materials, recorded third quarter sales of $135.1 million, essentially the same as the 1998 third quarter and 0.7% higher than the prior quarter. Operating income of $22.8 million was up 14.6% versus the year-ago quarter, resulting in an operating margin of 16.9%, a 2.2 percentage point improvement versus the 1998 quarter.

Sales of specialty construction chemicals, which include concrete admixtures, cement additives and masonry products, were up 3.3% versus the year-ago quarter driven by the penetration of new and value-added products and sales from the consolidation of a Japanese joint venture. Sales of specialty building materials, which include waterproofing and fire protection products, were down 4.7%, due mainly to project timing and a decline in pipewrap sales to the oil industry.

Year-to-date, Grace Construction Products' sales totaled $383.7 million, up 4.8% compared to 1998. Operating income was $57.1 million year-to-date, up 30.7% versus 1998. The unit's year-to-date operating margin of 14.9% was 3.0 percentage points above last year.

Remarked Norris: "Grace Construction Products continues to have strong earnings growth from its value-added product mix in parallel with its cost reduction programs. New product and value-added upgrade products have grown to represent over 35% of our sales. At the same time, we have held operating costs flat."

DAREX CONTAINER PRODUCTS

Darex Container Products, a leading global producer of container sealants and closure systems, recorded sales of $58.7 million in the quarter, 2.8% lower than the 1998 quarter (1.0% higher before the effect of currency translation). Operating income of $8.4 million was 44.8% higher than that of the third quarter of 1998, inclusive of a gain on the sales of plant assets. Excluding the impact of these gains in the third quarter of 1999 ($1.3 million) and the third quarter of 1998 ($0.7 million), Darex's operating income improved 39.2%

Year-to-date, Darex Container Products' sales totaled $177.4 million, down 3.4% compared to 1998 (flat before currency translation). Operating income was $22.9 million year-to-date for an operating margin of 12.9%, up 2.0 percentage points versus 1998.

"Darex's restructuring and productivity initiatives are being successfully implemented with considerable impact to operating margins. We are committed to continue identifying and implementing significant cost reductions to maximize Darex's profitability and cash flow generation," said Norris.

* * * * *

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 in this announcement. Information concerning 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.

 

W. R. Grace & Co. and Subsidiaries



Consolidated Statement of Operations (Unaudited)

Three Months
Ended

September 30,

Nine Months
Ended

September 30,

AmountsDollars in millions, except earnings per share amounts

1999

1998*

1999

1998*

         

Net sales

$ 372.2

$ 380.3

$1,090.7

$1,091.0

Other income

10.9

7.1

27.7

23.1

 

383.1

387.4

1,118.4

1,114.1

Cost of goods sold and operating expenses

212.6

228.3

635.7

662.1

Selling, general and administrative expenses

81.0

80.8

237.8

240.1

Research and development expenses

10.6

10.9

31.8

31.9

Depreciation and amortization

23.8

22.7

67.8

66.5

Interest expense and related financing costs

3.9

3.9

12.9

15.1

Provision for restructuring

--

--

4.3

--

 

331.9

346.6

990.3

1,015.7

Income from continuing operations before income taxes

51.2

40.8

128.1

98.4

Provision for income taxes

18.4

15.5

46.1

37.4

         

Income from continuing operations

32.8

25.3

82.0

61.0

Income from discontinued operations, net of tax

9.2

1.0

5.7

--

Income before extraordinary item

42.0

26.3

87.7

61.0

Extraordinary item - loss from early extinguishment of
debt, net of tax

--

--

--

(35.2)

Net income

$ 42.0

$ 26.3

$ 87.7

$ 25.8

         

Basic earnings per share:

       

Continuing operations

$ 0.46

$ 0.34

$ 1.16

$ 0.81

Net income

$ 0.59

$ 0.35

$ 1.24

$ 0.34

         

Average number of basic shares

71.2

74.6

70.8

75.1

         

Diluted earnings per share:

       

Continuing operations

$ 0.44

$ 0.32

$ 1.11

$ 0.76

Net income

$ 0.56

$ 0.33

$ 1.18

$ 0.32

         

Average number of diluted shares

74.6

78.5

74.1

80.2

* Results have been restated for the reclassification of Cross Country Staffing as a discontinued operation.

 

W. R. Grace & Co. and Subsidiaries

Continuing Operations – Segment Basis (Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

(Dollars in millions)

1999

1998(a)

% Change

1999

1998(a)

% Change

Net Sales:

Grace Davison

$ 178.4

$184.7

(3.4%)

$ 529.6

$541.1

(2.1%)

Grace Construction Products

135.1

135.2

(0.1%)

383.7

366.2

4.8%

Darex Container Products

58.7

60.4

(2.8%)

177.4

183.7

(3.4%)

Grace Performance Chemicals

193.8

195.6

(0.9%)

561.1

549.9

2.0%

Total

$ 372.2

$380.3

(2.1%)

$1,090.7

$1,091.0

0.0%

Operating Income:

Grace Davison

$ 33.2

$ 29.2

13.7%

$ 86.3

$ 81.9

5.4%

Grace Construction Products

22.8

19.9

14.6%

57.1

43.7

30.7%

Darex Container Products

8.4

5.8

44.8%

22.9

20.1

13.9%

Grace Performance Chemicals

31.2

25.7

21.4%

80.0

63.8

25.4%

Total

64.4

54.9

17.3%

166.3

145.7

14.1%

Interest/financing expense

(3.9)

(3.9)

0.0%

(12.9)

(15.1)

(14.6%)

Investment income

1.1

1.2

(8.3%)

2.9

3.5

(17.1%)

Corporate expenseand general expense

(16.4)

(9.1)

80.2%

(41.4)

(29.9)

38.5%

Other, income(expense) net

6.0

(2.3)

NM

13.2

(5.8)

NM

Income from continuing operations before income taxes

51.2

40.8

25.5%

128.1

98.4

30.2%

Provision for income taxes

(18.4)

(15.5)

18.7%

(46.1)

(37.4)

23.3%

Income from continuing operations

$ 32.8

$25.3

29.6%

$82.0

$ 61.0

34.4%

Key Financial Measures:

Operating margin

17.3%

14.4%

2.9 pts

15.2%

13.4%

1.8 pts

Consolidated EBIT(b) Grace Construction Products

$54.0

$43.5

24.1%

$138.1

$110.0

25.5%

Consolidated EBIT margin Darex Container Products

14.5%

11.4%

3.1 pts

12.7%

10.1%

2.6 pts

Consolidated EBITDA(c)

$77.8

$66.2

17.5%

$205.9

$176.5

16.7%

Consolidated EBITDA margin

20.9%

17.4%

3.5 pts

18.9%

16.2%

2.7 pts

NM = Not meaningful

  1. Results have been restated for the reclassification of Cross Country Staffing as a discontinued operation.
  2. EBIT = Earnings from continuing operations before interest expense, investment income and provision for income taxes.
  3. EBITDA = EBIT after adding back depreciation and amortization.

Note: Neither EBIT nor EBITDA purport to represent income or cash flow as defined under generally accepted accounting principles, and should not be considered an alternative to such measures as an indicator of the Company’s performance.


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