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): February 4, 1997
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W. R. GRACE & CO.
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(Exact name of registrant as specified in its charter)
Delaware 1-12139 65-0654331
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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: 561/362-2000
Item 5. Other Events.
On February 4, 1997, W. R. Grace & Co. ("Company") announced its
consolidated results of operations for the quarter and year ended December 31,
1996. The Company's February 4, 1997 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.
The Company's February 4, 1997 press release and accompanying
financial and statistical data are filed as an exhibit hereto.
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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: February 14, 1997
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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 February 4, 1997 and accompanying
financial and statistical data
GRACE NEWS
CONTACT: Chuck Suits or Mary Lou Kromer 561/362-2600 or
800/GRACE99
GRACE REPORTS 82 CENTS FOURTH QUARTER
EARNINGS PER SHARE FROM CONTINUING OPERATIONS,
EXCLUDING SPECIAL CHARGES
BOCA RATON, Fla., February 4, 1997--W. R. Grace & Co. (NYSE: GRA)
today reported 1996 fourth quarter and full year earnings per share from
continuing operations of 82 cents and $2.41, excluding special charges. These
results represent an increase of 22 percent for the fourth quarter and 13
percent for the year over the 1995 periods.
In announcing the company's results, Grace chairman, chief executive
officer and president Albert J. Costello said: "During 1996, we delivered
significant value to our shareholders through the divestment of non-core
businesses, including the tax-free National Medical Care transaction valued at
$4.5 billion. With proceeds from this transaction, as well as from the sales of
Dearborn, Amicon and Agracetus, we significantly reduced debt and have returned
cash to our shareholders by repurchasing more than 24 million Grace shares. In
addition, we completed our program to reduce annual costs by $100 million, and
we instituted more rigorous financial and working capital controls.
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"The new Grace is now focused on profitably growing our three core
businesses of packaging, catalyst and silica products and construction
products, and we have begun implementing additional plans to significantly
increase our operating efficiencies and cash flow.
"Our aggressive efforts to reduce costs company-wide and to increase
sales of new value-added products, led to a 12 percent improvement in operating
earnings in the 1996 fourth quarter compared to 1995.
"We expect to deliver higher profits and cash flow in 1997, as we
continue to reduce expenses and capital spending, and to build on our global
market leadership positions in each of our businesses. We remain confident that
we will achieve our goals of attaining 15 percent operating margins (earnings
before interest and taxes) and free operating cash flow of $200 million by the
end of 1998."
FOURTH QUARTER
Fourth quarter operating income from continuing operations, excluding
special charges, was $118 million, up 12 percent versus 1995. Sales of $851
million were six percent lower than the 1995 quarter, which included sales from
divested units. Excluding divested businesses, sales in the 1996 fourth quarter
increased six percent, and operating income increased 11 percent.
The company recorded special charges of $283 million in the quarter,
related primarily to anticipated future asbestos personal injury litigation and
settlement costs, restructuring activities and asset impairments. Grace
classified its TEC air emissions control business as a discontinued operation,
recognizing
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its fourth quarter results and losses anticipated prior to divestment in 1997.
In addition, Grace reversed $50 million of a reserve related to the soon-to-be
divested Grace Cocoa business, previously classified as a discontinued
operation. As a result of these factors, the company reported a net loss of $57
million, or 70 cents per share, for the fourth quarter of 1996.
FULL YEAR
In 1996, operating income from continuing operations, excluding
special charges, was $419 million, up 14 percent from 1995. Excluding divested
businesses in both years, sales increased three percent to $3.3 billion, and
operating income increased 12 percent.
"Our operating margins from continuing operations for 1996 were 12
percent of sales, just shy of our goal to improve three percentage points over
operating margins of 9.5 percent in 1995," said Costello.
Pretax income from discontinued operations in 1996 was $2,758 million,
including operating income and the gains from the dispositions of National
Medical Care, Agracetus and Amicon, as well as losses associated with TEC.
Including special charges, net earnings per share for 1996 were
$31.06.
SHARE REPURCHASE PROGRAMS
As a result of the company's share repurchase programs, average common
shares outstanding were 81 million in the fourth quarter and 92 million for the
year.
Grace has bought more than 14 million shares under its current program
to repurchase up to 20 percent of the 89 million shares of "new" Grace that
were
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outstanding at the end of the third quarter. The company expects to complete
the program by the end of 1997 first quarter. During the 1996 third quarter,
Grace completed the repurchase of 10 million shares as part of an earlier
program.
BUSINESS HIGHLIGHTS
GRACE PACKAGING
Grace Packaging, the global leader in flexible plastic packaging and
container sealants, reported higher sales and earnings in the fourth quarter.
Fourth quarter pretax operating income increased by 11 percent, due to reduced
manufacturing and administrative costs and increased sales of six percent
versus 1995. Sales for 1996 were up two percent compared to 1995, a year in
which sales grew at an unprecedented rate of 18 percent versus 1994. Pretax
operating income increased slightly, as volume increases offset unfavorable
price/mix.
In the fourth quarter, sales increased in all regions, but softness in
the North American pork and European beef market segments continued to impact
the rate of overall sales and earnings growth. The company increased sales in
most of its North American market segments, including beef, processed and
prepared foods and poultry, and laminate sales were exceptionally strong. In
Europe, packaging sales to the beef market continued to recover, and
significant growth in sales of Total Bone Guard (TBG) bags for pork was
realized. Latin American sales were exceptionally strong, due to growing
consumer demand for packaged beef and processed meats and incremental sales
from the Mexican
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container products business acquired in the third quarter. Asia Pacific sales
were up slightly, but the growth in packaging sales were offset largely by
continued weakness in container products sales.
CATALYSTS AND SILICAS
Grace Davison, a leading supplier of catalysts and silica products,
generated record sales of $732 million, and pretax operating earnings increased
15 percent for the year; however, fourth quarter sales and earnings were
essentially flat. Silica products, as well as polyolefin and hydroprocessing
catalysts, experienced strong global sales growth and double-digit pretax
operating income improvements in the quarter and the full year. Volume
increased modestly in 1996 for fluid cracking catalysts (FCC), but income was
down significantly due to intense competitive pricing pressures. Grace
maintained its global FCC leadership position.
During the year, Grace Davison consolidated facilities, centralized
administrative and materials procurement activities, enhanced manufacturing
processes and introduced high-performance, lower-cost products. These efforts
contributed to a modest improvement in operating margins, despite pricing
pressures in the FCC segment and additional expenses associated with the
start-up of a new silicas plant in Malaysia.
GRACE CONSTRUCTION PRODUCTS
Grace Construction Products, a leading global supplier of concrete
additives, cement processing aids, and structural waterproofing and
fireproofing products, reported a three-fold improvement in pretax operating
income and 10 percent sales growth in 1996 versus 1995. In the fourth quarter,
sales of $117
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million were up 16 percent, and pretax operating income improved by 64 percent.
The outstanding earnings improvement for the construction products
business in the fourth quarter and 1996 was due largely to increased global
sales of new value-added and specialty products and ongoing cost reduction
efforts, including consolidated manufacturing facilities, a restructured
research and development organization and improved production efficiencies.
SPECIAL CHARGES
During the quarter, the company recorded special pretax charges of
$283 million for the following:
- - Asbestos litigation - $229 million. The charge resulted primarily from
Grace's estimate of the costs associated with asbestos personal injury claims
expected to be filed against it during the five-year period (1997 through
2001). In 1995, the company had reserved for such expenses based on a
three-year projection.
- - Restructuring and asset impairment - $54 million.
PENDING DIVESTITURES
The company said it remains on schedule to complete the divestment of
its Grace Cocoa business, previously classified as a discontinued operation, to
Archer Daniels Midland Company by the end of the first quarter. It also expects
to announce an agreement to sell its Specialty Polymers business in the near
term.
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COMPANY PROFILE
Grace is a leading global supplier of flexible packaging and specialty
chemicals, with annual sales of approximately $3.3 billion. The company
operates in more than 100 countries.
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W. R. GRACE & CO.
CONSOLIDATED STATEMENT OF OPERATIONS (A)
FOR YEAR ENDED DECEMBER 31, 1996
($ MILLIONS EXCEPT PER SHARE)
FOURTH QUARTER FULL YEAR
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1996 1995 1996 1995
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Sales ................................................. $ 850.8 $ 905.2 $3,454.1 $3,552.6
Other income .......................................... 12.2 28.9 38.9 41.2
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Total ................................................ $ 863.0 $ 934.1 $3,493.0 $3,593.8
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Cost of goods sold and operating expenses ............. $ 508.1 $ 600.2 (d) 2,071.0 $2,151.2 (d)
Selling, general and administrative expenses ......... 165.0 239.7 713.3 913.7 (e)
Depreciation and amortization ......................... 50.2 63.5 184.4 186.1
Interest expense and related financing costs ......... 16.7 19.0 71.6 71.3
Research and development expenses ..................... 18.8 28.5 93.9 111.6
(Gain) on sale of businesses (b) ...................... -- -- (326.4) --
Restructuring cost and asset impairments .............. 53.8 124.7 107.5 169.0
Provision relating to asbestos-related liabilities and
insurance coverage ................................... 229.1 275.0 229.1 275.0
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Total ................................................ $1,041.7 $1,350.6 $3,144.4 $3,877.9
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Income before income taxes ............................ $ (178.7) $ (416.5) $ 348.6 $ (284.1)
Prov. for income taxes ................................ (61.7) (142.6) 134.8 (104.5)
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Income from continuing operations ..................... $ (117.0) $ (273.9) $ 213.8 $ (179.6)
Income from discontinued operations (c) ............... 60.2 (199.9) 2,643.9 (146.3)
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Net Income ........................................... $ (56.8) $ (473.8) $2,857.7 $ (325.9)
========== ============ ========== =============
EARNINGS PER SHARE
Continuing operations ................................ $ (1.44) $ (2.82) $ 2.32 $ (1.87)
Discontinued operations (c) .......................... .74 (2.05) 28.74 (1.53)
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Net Income ........................................... $ (0.70) $ (4.87) $ 31.06 $ (3.40)
========== ============ ========== =============
Average number of shares (millions) ................... 81.4 97.3 92.0 95.8
(a) 1995 results have been restated to reflect the classification of the
health care segment and TEC Systems as discontinued operations.
(b) Includes divestment of Grace Dearborn and Biopesticides.
(c) 1996 includes health care segment operating results and gains on the
dispositions of NMC, Amicon and Agracetus, as well as, operating losses
for TEC Systems.
(d) Includes a pretax charge of $117.5 ($77.1 after-tax) for the fourth
quarter and full year relating to provisions for environmental and
miscellaneous charges.
(e) Includes a pretax charge of $30.0 million ($18.6 after-tax) full year
for matters relating to corporate governance.
W. R. GRACE & CO.
OPERATING RESULTS
QUARTER ENDED DECEMBER 31
($ MILLIONS EXCEPT PER SHARE)
PERCENT
1996 1995 CHANGE
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Continuing Operations:
Sales-Specialty Chemicals ..................... $ 850.8 $ 905.2 (6.0)%
Operating Income .............................. $ 118.4 $ 105.9 11.8
Other Expenses/(Income):
Interest/Financing (a) ....................... $ 16.7 $ 19.0 (12.1)
Other ........................................ (2.5) (13.7) (81.8)
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Total Other Expenses ......................... $ 14.2 $ 5.3 167.9
Pretax Operating Earnings before Special Items $ 104.2 $ 100.6 3.6
Provision for Income Taxes .................... 37.3 35.0 6.6
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Operating Income before Special Items ........ $ 66.9 $ 65.6 2.0
SPECIAL ITEMS--AFTER-TAX
Provision for Asbestos ....................... (148.9) (178.7) (16.7)
Provision for Restructuring .................. (35.0) (110.8) (68.4)
Provision for Environmental .................. -- (50.0) (100.0)
-- --
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Income from Continuing Operations ............. $(117.0) $(273.9) (57.3)
Income from Discontinued Operations ........... 60.2 (199.9) ND
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Net Income .................................... $ (56.8) $(473.8) (88.0)
========== ==========
EARNINGS PER SHARE
From Continuing Operations ................... $ (1.44) $ (2.82) (48.9)%
From Discontinued Operations ................. 0.74 (2.05) ND
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Net Income ................................... $ (0.70) $ (4.87) (85.6)
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EARNINGS PER SHARE--OPERATING EARNINGS (BEFORE SPECIAL ITEMS)
From Operations .............................. $ .82 $ .67 22.4%
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Average Number of Shares (Millions) ........... 81.4 97.3
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(a) After an allocation of interest/financing expenses to discontinued
operations.
W. R. GRACE & CO.
OPERATING RESULTS
FOR YEAR ENDED DECEMBER 31
($ MILLIONS EXCEPT PER SHARE)
PERCENT
1996 1995 CHANGE
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CONTINUING OPERATIONS:
Sales ......................................... $3,454.1 $3,552.6 (2.8) %
Operating Income .............................. $ 419.4 $ 367.4 14.2
OTHER EXPENSES/(INCOME):
Interest/Financing(a) ...................... $ 71.6 $ 71.3 0.4
Other ...................................... (11.0) (11.3) (2.7)
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Total Other Expenses ....................... $ 60.6 $ 60.0 1.0
Pretax Operating Earnings before Special Items $ 358.8 $ 307.4 16.7
Provision for Income Taxes .................... 136.3 101.7 34.0
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Operating Income before Special Items ........ $ 222.5 $ 205.7 8.2
SPECIAL ITEMS--AFTER-TAX
Provision for Asbestos ..................... (148.9) (178.7) (16.7)
Provision for Corporate Governance ......... -- (18.6) (100.0)
Gain on Sale of Dearborn/Biopesticides ..... 210.1 -- ND
Provision for Restructuring ................ (69.9) (138.0) (49.3)
Provision for Environmental ................ -- (50.0) (100.0)
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Income from Continuing Operations ............. $ 213.8 $ (179.6) ND
Income from Discontinued Operations ........... 2,564.5 (b) (146.3) ND
Gain on Sale of Agracetus (after-tax) ........ 79.4 -- ND
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Net Income .................................... $2,857.7 $ (325.9) ND
============ ==========
EARNINGS PER SHARE
From Continuing Operations ................. $ 2.32 $ (1.87) ND
From Discontinued Operations ............... 28.74 (b) (1.53) ND
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Net Income ................................. $ 31.06 $ (3.40) ND
============ ==========
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EARNINGS PER SHARE--OPERATING EARNINGS (BEFORE SPECIAL ITEMS)
From Operations ............................ $ 2.41 $ 2.14 12.6 %
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Average Number of Shares (Millions) ........... 92.0 95.8
(a) After an allocation of interest/financing expenses to discontinued
operations.
(b) Includes health care segment operating results and gains on the
dispositions of NMC and Amicon, as well as, operating losses for TEC
Systems.
W. R. GRACE & CO.
1996 SALES AND PERCENT CHANGE VERSUS PRIOR PERIOD
(DOLLARS IN MILLIONS)
QUARTER ENDED DECEMBER 31
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AMOUNT OF INC./(DEC) DUE TO:
SALES (A) ----------------------------
--------------------- PRICE/
1996 1995 VOL. MIX TOTAL
-------- -------- ------ ----- -------
Packaging $ 468.4 $ 440.6 5.9 0.3 6.2 %
Container 67.2 64.4 6.7 (2.4) 4.3
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Total Packaging $ 535.6 $ 505.0 6.0 0.1 6.1
Catalysts/Silicas 178.6 180.3 8.8 (9.7) (0.9)
Construction/Other 136.7 121.1 13.4 (0.5) 12.9
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$ 850.9 $ 806.4 7.7 (2.2) 5.5%
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YEAR ENDED DECEMBER 31
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AMOUNT OF INC./(DEC) DUE TO:
SALES (A) ----------------------------
--------------------- PRICE/
1996 1995 VOL. MIX TOTAL
---------- ---------- ------ ----- -------
Packaging $ 1,735.4 $ 1,692.1 3.9 (1.4) 2.5 %
Container 274.7 279.9 1.0 (2.9) (1.9)
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Total Packaging $ 2,010.1 $ 1,972.0 3.5 (1.5) 2.0
Catalysts/Silicas 732.2 699.9 7.2 (2.6) 4.6
Construction/Other 509.9 479.0 6.3 0.1 6.4
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$ 3,252.2 $ 3,150.9 4.7 (1.5) 3.2 %
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(a) Excludes divested units.
W. R. GRACE & CO.
GEOGRAPHIC DATA
(DOLLARS IN MILLIONS)
QUARTER ENDED DECEMBER 31
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PRETAX EARNINGS BEFORE
INTEREST, TAX, AND
SALES SPECIAL CHARGES
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1996 1995 1996 1995
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North America $425 $439 $ 69 $ 62
Europe 244 282 25 20
Latin America 60 66 10 7
Asia Pacific 122 118 14 17
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Total $851 $905 $118 $106
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YEAR ENDED DECEMBER 31
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PRETAX EARNINGS BEFORE
INTEREST, TAX, AND
SALES SPECIAL CHARGES
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1996 1995 1996 1995
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North America $1,690 $1,735 $223 $191
Europe 1,056 1,120 104 95
Latin America 240 253 32 17
Asia Pacific 468 445 60 64
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Total $3,454 $3,553 $419 $367
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