OREANDA-NEWS. W. R. Grace & Co. (NYSE:GRA) announced second quarter income from continuing operations attributable to Grace of $38.1 million, or $0.54 per diluted share. Income from continuing operations attributable to Grace for the prior-year quarter was $32.6 million, or $0.45 per diluted share. Adjusted EBIT increased 17% to $96.1 million, and second quarter Adjusted EPS increased 45% to $0.74 per diluted share.

"We continued to achieve good margin improvement and strong cash flow in the second quarter," said Fred Festa, Grace’s Chairman and Chief Executive Officer. "We closed our polyolefin catalysts acquisition, positioning us for further growth in our specialty catalysts business. We built momentum in the second quarter, and expect accelerating volume growth and business performance in the second half."

Second Quarter Results
Second quarter net sales of $390.5 million decreased 4.1% compared with the prior-year quarter including an unfavorable effect of 1.4% related to the exit of certain product lines earlier in the year and favorable currency translation of 0.6%. Compared with the first quarter, net sales grew 8% sequentially.

Net income from continuing operations was $38.1 million for the second quarter, an increase of 16.9% compared with $32.6 million for the prior-year quarter. Adjusted EBIT of $96.1 million increased 16.6% from the prior-year quarter, and increased approximately 16% at constant currency. Adjusted EBIT margin of 24.6% increased 440 basis points compared with the prior-year quarter.

Adjusted EBIT Return On Invested Capital was 22.7% on a trailing four-quarter basis (26.7% before the effect of the polyolefin catalysts acquisition), compared with 24.3% as of December 31, 2015.

Six Month Results
For the six months ended June 30, 2016, net sales of $753.3 million decreased 6.3% compared with the prior-year period, including the unfavorable effects of 0.7% related to the exit of certain product lines earlier in the year and 0.8% related to unfavorable currency translation.

Net income from continuing operations was $48.5 million for the six months, a decrease of 22.8% compared with $62.8 million for the prior-year period. Adjusted EBIT of $178.7 million increased 16.1% from the prior-year period, and increased approximately 17% at constant currency. Adjusted EBIT margin of 23.7% increased 460 basis points compared with the prior-year period.

Grace Catalysts Technologies
Second quarter sales for Catalysts Technologies, which includes catalysts and additives for refinery, plastics, and other chemical process applications, as well as polypropylene process technology, were $278.4 million, a decrease of 3.8% compared with the prior-year quarter.

Gross margin was 46.2% compared with 43.3% in the prior-year quarter, an increase of 290 basis points. Gross margin increased as lower manufacturing costs and improved productivity more than offset the decrease in sales volumes.

Operating income of $87.5 million increased 1.0% compared with the prior-year quarter. Operating margin was 31.4%, an increase of 150 basis points compared with the prior-year quarter. The increases were primarily due to higher gross margin. The ART joint venture contributed $2.6 million to operating income compared with $2.3 million in the prior-year quarter.

Grace Materials Technologies
Second quarter sales for Materials Technologies, which includes engineered materials for coatings, consumer, pharmaceutical and chemical process applications, were $112.1 million, a decrease of 4.9% compared with the prior-year quarter, of which 4.7% relates to the exit of certain product lines earlier in the year.

Gross margin was 40.6%, an increase of 270 basis points compared with the prior-year quarter. Gross margin increased primarily due to lower manufacturing costs and improved productivity.

Operating income of $28.0 million increased 17.6% compared with the prior-year quarter, primarily due to improved gross margin and lower operating expenses. Operating margin was 25.0%, an increase of 480 basis points from the prior-year quarter.

Other Expenses in Adjusted EBIT
Total corporate costs were $16.3 million for the second quarter, a decrease of $6.7 million compared with the prior-year quarter, which is accounted for on a discontinued operations basis. Certain costs included in 2015 were either assumed by GCP Applied Technologies Inc. (GCP) at the time of the separation or eliminated through restructuring or other cost reduction actions.

Certain pension costs of $3.1 million decreased $1.9 million compared with the prior-year quarter primarily due to lower service and interest costs.

Restructuring and Repositioning Expenses
Restructuring expenses were $7.9 million for the second quarter, primarily due to workforce reductions and asset impairments related to the exited product lines.

Repositioning expenses were $1.5 million for the second quarter, consisting of employee-related costs primarily in connection with the company’s separation into two independent companies.

Interest Expense
Net interest expense was $19.4 million for the second quarter compared with $24.6 million in the prior-year quarter. The weighted average cash interest rate for the second quarter was 4.6%.

Income Taxes
Income taxes on adjusted pre-tax income were recorded using an annualized global effective tax rate of 33.7%. Income taxes paid in cash, net of refunds, were $24.5 million during the six months ended June 30, 2016. We generally have not had to pay U.S. federal income taxes in recent years due to available tax deductions and credits that fully offset our U.S. tax liability.

Cash Flow
Net cash provided by operating activities from continuing operations for the six months ended June 30, 2016, was $136.8 million compared with a net use of cash of $309.4 million in the prior-year period. In the 2015 first quarter, we paid $490 million to repurchase a warrant issued in connection with our 2014 emergence from bankruptcy.

Adjusted Free Cash Flow was $132.5 million for the six months ended June 30, 2016, a decrease of 9.2% compared with the prior-year period.

Share Repurchase Program
In the second quarter, we spent $20.1 million to repurchase approximately 262,000 shares of our outstanding common stock at an average per share price of $76.67. Through June 30, 2016, we spent $35.1 million to repurchase approximately 472,000 shares under our current $500 million share repurchase authorization.

Dividend
Today Grace is announcing a quarterly cash dividend of $0.17 per share. The dividend is payable September 14, 2016, to shareholders of record at the close of business on August 23, 2016.

2016 Outlook
As of August 1, 2016, we are tightening our outlook for 2016 Adjusted EBIT to be in the range of $400 million to $405 million. We expect 2016 Adjusted EBITDA to be in the range of $500 million to $505 million, and Adjusted EPS to be in the range of $3.05 to $3.10 per share. Our outlook assumes an average 1.10 USD/EUR exchange rate for the year.

We continue to expect 2016 Adjusted Free Cash Flow to be at least $250 million, including a favorable impact to 2016 cash flow of approximately $50 to $60 million due to our low cash tax rate compared with our effective tax rate.

We are unable to estimate the annual mark-to-market pension adjustment or 2016 net income.

Separation into Two Companies
On February 5, 2015, Grace announced a plan to separate into two independent, publicly traded companies. On January 27, 2016, Grace entered into a separation agreement with GCP, then a wholly-owned subsidiary of Grace, pursuant to which Grace agreed to transfer its Grace Construction Products operating segment and the packaging technologies business of its Grace Materials Technologies operating segment to GCP. The separation occurred on February 3, 2016, by means of a pro rata distribution to Grace stockholders of all of the outstanding shares of GCP common stock. As a result of the distribution, GCP is now an independent public company and its common stock is listed under the symbol “GCP” on the New York Stock Exchange.

About Grace
Built on talent, technology, and trust, Grace is a leading global supplier of catalysts and engineered materials. The company’s two industry-leading business segments—Grace Catalysts Technologies and Grace Materials Technologies—provide innovative products, technologies, and services that enhance the products and processes of our customer partners around the world. Grace employs approximately 3,700 people in over 30 countries.

W. R. Grace & Co. and Subsidiaries
Consolidated Statements of Operations (unaudited)

  Three Months Ended June 30,   Six Months Ended June 30,
(In millions, except per share amounts) 2016   2015   2016   2015
Net sales $ 390.5     $ 407.2     $ 753.3     $ 804.2  
Cost of goods sold 217.3     239.4     427.4     489.4  
Gross profit 173.2     167.8     325.9     314.8  
Selling, general and administrative expenses 66.4     73.5     134.4     150.5  
Research and development expenses 12.4     12.3     24.1     24.4  
Equity in earnings of unconsolidated affiliate (2.6 )   (2.3 )   (9.5 )   (8.5 )
Restructuring and repositioning expenses 9.4     4.2     23.0     9.7  
Loss on early extinguishment of debt —     —     11.1     —  
Interest expense and related financing costs 19.8     24.6     41.8     49.3  
Other expense (income), net 8.4     5.0     10.2     (8.8 )
Total costs and expenses 113.8     117.3     235.1     216.6  
Income from continuing operations before income taxes 59.4     50.5     90.8     98.2  
Provision for income taxes (21.5 )   (17.9 )   (42.7 )   (35.4 )
Income from continuing operations 37.9     32.6     48.1     62.8  
Income (loss) from discontinued operations, net of income taxes 0.6     24.8     (9.3 )   47.3  
Net income 38.5     57.4     38.8     110.1  
Less: Net loss attributable to noncontrolling interests 0.2     —     0.4     —  
Net income attributable to W. R. Grace & Co. shareholders $ 38.7     $ 57.4     $ 39.2     $ 110.1  
Amounts Attributable to W. R. Grace & Co. Shareholders:              
Income from continuing operations attributable to W. R. Grace & Co. shareholders $ 38.1     $ 32.6     $ 48.5     $ 62.8  
Income (loss) from discontinued operations, net of income taxes 0.6     24.8     (9.3 )   47.3  
Net income attributable to W. R. Grace & Co. shareholders $ 38.7     $ 57.4     $ 39.2     $ 110.1  
Earnings Per Share Attributable to W. R. Grace & Co. Shareholders              
Basic earnings per share:              
Income from continuing operations $ 0.54     $ 0.45     $ 0.69     $ 0.86  
Income (loss) from discontinued operations, net of income taxes 0.01     0.34     (0.13 )   0.65  
Net income $ 0.55     $ 0.79     $ 0.56     $ 1.51  
Weighted average number of basic shares 70.5     72.6     70.5     72.7  
Diluted earnings per share:              
Income from continuing operations $ 0.54     $ 0.45     $ 0.68     $ 0.86  
Income (loss) from discontinued operations, net of income taxes 0.01     0.33     (0.13 )   0.64  
Net income $ 0.55     $ 0.78     $ 0.55     $ 1.50  
Weighted average number of diluted shares 70.9     73.2     71.0     73.3  
Dividends per common share $ 0.17     $ —     $ 0.17     $ —  
                               

W. R. Grace & Co. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)

  Six Months Ended June 30,
(In millions) 2016   2015
OPERATING ACTIVITIES      
Net income $ 38.8     $ 110.1  
Less: loss (income) from discontinued operations 9.3     (47.3 )
Income from continuing operations 48.1     62.8  
Reconciliation to net cash provided by (used for) operating activities from continuing operations:      
Depreciation and amortization 46.8     50.2  
Equity in earnings of unconsolidated affiliate (9.5 )   (8.5 )
Dividends received from unconsolidated affiliate 16.8     11.8  
Cash paid for Chapter 11, and legacy product and environmental (6.0 )   (498.2 )
Provision for income taxes 42.7     35.4  
Cash paid for income taxes, net of refunds (24.5 )   (8.7 )
Loss on early extinguishment of debt 11.1     —  
Cash paid for interest on credit arrangements (40.6 )   (44.9 )
Defined benefit pension expense 5.3     14.5  
Cash paid under defined benefit pension arrangements (8.0 )   (7.7 )
Cash paid for restructuring (10.7 )   (3.4 )
Changes in assets and liabilities, excluding effect of currency translation and acquisitions:      
Trade accounts receivable 37.2     17.1  
Inventories (7.7 )   0.5  
Accounts payable 7.0     16.2  
All other items, net 28.8     53.5  
Net cash provided by (used for) operating activities from continuing operations 136.8     (309.4 )
INVESTING ACTIVITIES      
Capital expenditures (57.3 )   (57.2 )
Business acquired (245.1 )   —  
Proceeds from sale of product lines 11.3     —  
Other investing activities (0.6 )   (0.2 )
Net cash used for investing activities from continuing operations (291.7 )   (57.4 )
FINANCING ACTIVITIES      
Borrowings under credit arrangements 16.0     278.2  
Repayments under credit arrangements (609.4 )   (40.2 )
Cash paid for repurchases of common stock (35.1 )   (108.7 )
Proceeds from exercise of stock options 9.2     21.8  
Dividends paid to shareholders (12.0 )   —  
Distributions from GCP 750.0     —  
Other financing activities (2.7 )   (1.9 )
Net cash provided by financing activities from continuing operations 116.0     149.2  
Effect of currency exchange rate changes on cash and cash equivalents 1.9     (1.5 )
Decrease in cash and cash equivalents from continuing operations (37.0 )   (219.1 )
Cash flows from discontinued operations      
Net cash provided by operating activities 23.9     65.3  
Net cash used for investing activities (9.5 )   (16.5 )
Net cash provided by (used for) financing activities 31.4     (10.4 )
Effect of currency exchange rate changes on cash and cash equivalents (1.0 )   (9.9 )
Increase in cash and cash equivalents from discontinued operations 44.8     28.5  
Net increase (decrease) in cash and cash equivalents 7.8     (190.6 )
Less: cash and cash equivalents of discontinued operations (143.4 )   —  
Cash and cash equivalents, beginning of period 329.9     557.5  
Cash and cash equivalents, end of period $ 194.3     $ 366.9  
               

W. R. Grace & Co. and Subsidiaries
Consolidated Balance Sheets (unaudited)

(In millions, except par value and shares) June 30,
2016		   December 31, 2015
ASSETS      
Current Assets      
Cash and cash equivalents $ 194.3     $ 231.3  
Restricted cash and cash equivalents 9.7     9.4  
Trade accounts receivable, less allowance of $1.9 (2015—$1.4) 216.5     254.5  
Inventories 233.8     198.8  
Other current assets 55.8     44.1  
Assets of discontinued operations —     446.4  
Total Current Assets 710.1     1,184.5  
Properties and equipment, net of accumulated depreciation and amortization of $1,313.7 (2015—$1,287.4) 729.0     624.9  
Goodwill 403.7     336.5  
Technology and other intangible assets, net 267.6     227.5  
Deferred income taxes 736.4     714.3  
Investment in unconsolidated affiliate 99.0     103.2  
Other assets 35.8     33.9  
Assets of discontinued operations —     420.9  
Total Assets $ 2,981.6     $ 3,645.7  
LIABILITIES AND EQUITY      
Current Liabilities      
Debt payable within one year $ 80.2     $ 58.8  
Accounts payable 163.8     157.8  
Other current liabilities 211.1     234.4  
Liabilities of discontinued operations —     256.4  
Total Current Liabilities 455.1     707.4  
Debt payable after one year 1,508.8     2,114.0  
Deferred income taxes 2.6     1.2  
Unrecognized tax benefits 9.5     9.8  
Underfunded and unfunded defined benefit pension plans 378.1     377.5  
Other liabilities 138.5     115.9  
Liabilities of discontinued operations —     107.4  
Total Liabilities 2,492.6     3,433.2  
Equity      
Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 70,417,806 (2015—70,533,515) 0.7     0.7  
Paid-in capital 492.7     496.0  
Retained earnings 595.7     436.3  
Treasury stock, at cost: shares: 7,038,819 (2015—6,923,110) (663.7 )   (658.4 )
Accumulated other comprehensive income (loss) 60.4     (66.8 )
Total W. R. Grace & Co. Shareholders' Equity 485.8     207.8  
Noncontrolling interests 3.2     4.7  
Total Equity 489.0     212.5  
Total Liabilities and Equity $ 2,981.6     $ 3,645.7  
               

W. R. Grace & Co. and Subsidiaries
Analysis of Operations (unaudited)

  Three Months Ended June 30,   Six Months Ended June 30,
(In millions, except per share amounts) 2016   2015   % Change   2016   2015   % Change
Net sales:                      
Catalysts Technologies $ 278.4     $ 289.3     (3.8 )%   $ 539.0     $ 570.3     (5.5 )%
Materials Technologies 112.1     117.9     (4.9 )%   214.3     233.9     (8.4 )%
Total Grace net sales $ 390.5     $ 407.2     (4.1 )%   $ 753.3     $ 804.2     (6.3 )%
Net sales by region:                      
North America $ 124.0     $ 129.4     (4.2 )%   $ 242.9     $ 245.7     (1.1 )%
Europe Middle East Africa 158.4     150.7     5.1 %   300.8     305.5     (1.5 )%
Asia Pacific 83.1     98.9     (16.0 )%   155.2     196.7     (21.1 )%
Latin America 25.0     28.2     (11.3 )%   54.4     56.3     (3.4 )%
Total net sales by region $ 390.5     $ 407.2     (4.1 )%   $ 753.3     $ 804.2     (6.3 )%
Profitability performance measures:                      
Adjusted EBIT(A)(B):                      
Catalysts Technologies segment operating income $ 87.5     $ 86.6     1.0 %   $ 165.8     $ 160.3     3.4 %
Materials Technologies segment operating income 28.0     23.8     17.6 %   48.6     47.7     1.9 %
Corporate costs (16.3 )   (23.0 )   29.1 %   (29.5 )   (43.8 )   32.6 %
Certain pension costs(C) (3.1 )   (5.0 )   38.0 %   (6.2 )   (10.3 )   39.8 %
Adjusted EBIT 96.1     82.4     16.6 %   178.7     153.9     16.1 %
Restructuring and repositioning expenses (9.4 )   (4.2 )       (23.0 )   (9.7 )    
(Costs) benefit related to Chapter 11, and legacy product and environmental, net (6.7 )   (2.8 )       (11.1 )   6.8      
Third-party acquisition-related costs (2.5 )   —         (2.5 )   —      
Gain on sale of product line 0.7     —         0.7     —      
Income and expense items related to divested businesses 0.1     (0.3 )       (0.2 )   0.5      
Pension MTM adjustment and other related costs, net 0.7     —         0.9     (4.2 )    
Loss on early extinguishment of debt —     —         (11.1 )   —      
Interest expense, net (19.4 )   (24.6 )   21.1 %   (41.2 )   (49.1 )   16.1 %
Provision for income taxes (21.5 )   (17.9 )   (20.1 )%   (42.7 )   (35.4 )   (20.6 )%
Income from continuing operations attributable to W. R. Grace & Co. shareholders $ 38.1     $ 32.6     16.9 %   $ 48.5     $ 62.8     (22.8 )%
Diluted EPS from continuing operations (GAAP) $ 0.54     $ 0.45     20.0 %   $ 0.68     $ 0.86     (20.9 )%
Adjusted EPS (non-GAAP) $ 0.74     $ 0.51     45.1 %   $ 1.35     $ 0.92     46.7 %
                                           

W. R. Grace & Co. and Subsidiaries
Analysis of Operations (unaudited) (continued)

  Three Months Ended June 30,   Six Months Ended June 30,
(In millions) 2016   2015   % Change   2016   2015   % Change
Adjusted profitability performance measures (A)(B)(C):                    
Gross Margin:                      
Catalysts Technologies 46.2 %   43.3 %   2.9 pts   44.9 %   41.1 %   3.8 pts
Materials Technologies 40.6 %   37.9 %   2.7 pts   40.0 %   38.1 %   1.9 pts
Adjusted Gross Margin 44.6 %   41.8 %   2.8 pts   43.5 %   40.2 %   3.3 pts
Pension costs in cost of goods sold (0.2 )%   (0.6 )%   0.4 pts   (0.2 )%   (1.1 )%   0.9 pts
Total Grace 44.4 %   41.2 %   3.2 pts   43.3 %   39.1 %   4.2 pts
Adjusted EBIT:                      
Catalysts Technologies $ 87.5     $ 86.6     1.0 %   $ 165.8     $ 160.3     3.4 %
Materials Technologies 28.0     23.8     17.6 %   48.6     47.7     1.9 %
Corporate (19.4 )   (28.0 )   30.7 %   (35.7 )   (54.1 )   34.0 %
Total Grace 96.1     82.4     16.6 %   178.7     153.9     16.1 %
Depreciation and amortization:                      
Catalysts Technologies $ 17.8     $ 17.0     4.7 %   $ 35.5     $ 34.1     4.1 %
Materials Technologies 4.7     6.0     (21.7 )%   9.7     12.1     (19.8 )%
Corporate 1.1     2.0     (45.0 )%   1.6     4.0     (60.0 )%
Total Grace 23.6     25.0     (5.6 )%   46.8     50.2     (6.8 )%
Adjusted EBITDA:                      
Catalysts Technologies $ 105.3     $ 103.6     1.6 %   $ 201.3     $ 194.4     3.5 %
Materials Technologies 32.7     29.8     9.7 %   58.3     59.8     (2.5 )%
Corporate (18.3 )   (26.0 )   29.6 %   (34.1 )   (50.1 )   31.9 %
Total Grace 119.7     107.4     11.5 %   225.5     204.1     10.5 %
Adjusted EBIT margin:                      
Catalysts Technologies 31.4 %   29.9 %   1.5 pts   30.8 %   28.1 %   2.7 pts
Materials Technologies 25.0 %   20.2 %   4.8 pts   22.7 %   20.4 %   2.3 pts
Total Grace 24.6 %   20.2 %   4.4 pts   23.7 %   19.1 %   4.6 pts
Adjusted EBITDA margin:                      
Catalysts Technologies 37.8 %   35.8 %   2.0 pts   37.3 %   34.1 %   3.2 pts
Materials Technologies 29.2 %   25.3 %   3.9 pts   27.2 %   25.6 %   1.6 pts
Total Grace 30.7 %   26.4 %   4.3 pts   29.9 %   25.4 %   4.5 pts
                                   

W. R. Grace & Co. and Subsidiaries
Analysis of Operations (unaudited) (continued)

  Six Months Ended June 30,
(In millions) 2016   2015
Cash flow measure (A):      
Net cash provided by (used for) operating activities from continuing operations $ 136.8     $ (309.4 )
Capital expenditures (57.3 )   (57.2 )
Free Cash Flow 79.5     (366.6 )
Cash paid for repositioning 31.6     10.1  
Cash paid for restructuring 10.7     3.4  
Cash paid for Chapter 11, and legacy product and environmental 6.0     498.2  
Cash paid for taxes related to repositioning 2.6     —  
Cash paid for third-party acquisition-related costs 1.2     —  
Capital expenditures related to repositioning 0.9     0.8  
Adjusted Free Cash Flow $ 132.5     $ 145.9  
               
  Four Quarters Ended
(In millions) June 30,
2016		   December 31, 2015
Calculation of Adjusted EBIT Return On Invested Capital (trailing four quarters):      
Adjusted EBIT $ 370.6     $ 345.8  
Invested Capital:      
Trade accounts receivable 216.5     254.5  
Inventories 233.8     198.8  
Accounts payable (163.8 )   (157.8 )
  286.5     295.5  
Other current assets (excluding income taxes) 45.4     43.2  
Properties and equipment, net 729.0     624.9  
Goodwill 403.7     336.5  
Technology and other intangible assets, net 267.6     227.5  
Investment in unconsolidated affiliate 99.0     103.2  
Other assets (excluding capitalized financing fees) 33.3     31.8  
Other current liabilities (excluding income taxes, legacy environmental matters, accrued interest, and restructuring) (129.5 )   (160.0 )
Other liabilities (excluding legacy environmental matters) (104.1 )   (81.4 )
Total invested capital $ 1,630.9     $ 1,421.2  
Adjusted EBIT Return On Invested Capital 22.7 %   24.3 %
           

W. R. Grace & Co. and Subsidiaries
Adjusted Earnings Per Share (unaudited)

  Three Months Ended June 30,
  2016   2015
(In millions, except per share amounts) Pre-
Tax		   Tax Effect   After-
Tax		   Per
Share		   Pre-
Tax		   Tax Effect   After-
Tax		   Per
Share
Diluted earnings per share from continuing operations (GAAP)             $ 0.54                 $ 0.45  
Restructuring and repositioning expenses $ 9.4     $ 3.4     $ 6.0     0.08     $ 4.2     $ 1.2     $ 3.0     0.04  
Costs related to Chapter 11, and legacy product and environmental, net 6.7     2.4     4.3     0.06     2.8     1.5     1.3     0.02  
Third-party acquisition-related costs 2.5     0.7     1.8     0.03     —     —     —     —  
Gain on sale of product line (0.7 )   (0.3 )   (0.4 )   (0.01 )   —     —     —     —  
Pension MTM adjustment and other related costs, net (0.7 )   (0.1 )   (0.6 )   (0.01 )   —     —     —     —  
Income and expense items related to divested businesses (0.1 )   —     (0.1 )   —     0.3     0.1     0.2     —  
Discrete tax items:                              
Discrete tax items, including adjustments to uncertain tax positions     (3.5 )   3.5     0.05         (0.3 )   0.3     —  
Adjusted EPS (non-GAAP)             $ 0.74                 $ 0.51  
                                       
  Six Months Ended June 30,
  2016   2015
(In millions, except per share amounts) Pre-
Tax		   Tax Effect   After-
Tax		   Per
Share		   Pre-
Tax		   Tax Effect   After-
Tax		   Per
Share
Diluted earnings per share from continuing operations (GAAP)             $ 0.68                 $ 0.86  
Restructuring and repositioning expenses $ 23.0     $ 8.1     $ 14.9     0.21     $ 9.7     $ 2.9     $ 6.8     0.09  
Loss on early extinguishment of debt 11.1     4.1     7.0     0.10     —     —     —     —  
Costs (benefit) related to Chapter 11, and legacy product and environmental, net 11.1     4.1     7.0     0.10     (6.8 )   (2.0 )   (4.8 )   (0.07 )
Third-party acquisition-related costs 2.5     0.7     1.8     0.03     —     —     —     —  
Gain on sale of product line (0.7 )   (0.3 )   (0.4 )   (0.01 )   —     —     —     —  
Income and expense items related to divested businesses 0.2     0.1     0.1     —     (0.5 )   (0.2 )   (0.3 )   —  
Pension MTM adjustment and other related costs, net (0.9 )   (0.2 )   (0.7 )   (0.01 )   4.2     1.7     2.5     0.03  
Discrete tax items:                              
Discrete tax items, including adjustments to uncertain tax positions     (17.4 )   17.4     0.25         (0.6 )   0.6     0.01  
Adjusted EPS (non-GAAP)             $ 1.35                 $ 0.92  
                                       

W. R. Grace & Co. and Subsidiaries
Notes to the Financial Information

(A) In the above charts, Grace presents financial information in accordance with U.S. generally accepted accounting principles (U.S. GAAP), as well as the non-GAAP financial information described below. Grace believes that this non-GAAP financial information provides useful supplemental information about the performance of its businesses, improves period-to-period comparability and provides clarity on the information management uses to evaluate the performance of its businesses. In the above charts, Grace has provided reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP. These non-GAAP financial measures should not be considered as a substitute for financial measures calculated in accordance with U.S. GAAP, and the financial results calculated in accordance with U.S. GAAP and reconciliations from those results should be evaluated carefully.

Grace defines these non-GAAP financial measures as follows:

  • Adjusted EBIT means income from continuing operations attributable to W. R. Grace & Co. shareholders adjusted for interest income and expense; income taxes; costs related to Chapter 11, and legacy product and environmental; restructuring and repositioning expenses and asset impairments; pension costs other than service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits; income and expense items related to divested businesses, product lines, and certain other investments; gains and losses on sales of businesses, product lines, and certain other investments; third-party acquisition-related costs; and certain other items that are not representative of underlying trends.
  • Adjusted EBITDA means Adjusted EBIT adjusted for depreciation and amortization.
  • Adjusted EBIT Return On Invested Capital means Adjusted EBIT divided by the sum of net working capital, properties and equipment and certain other assets and liabilities.
  • Adjusted Gross Margin means gross margin adjusted for pension-related costs included in cost of goods sold.
  • Adjusted EPS means diluted EPS from continuing operations adjusted for costs related to Chapter 11, and legacy product and environmental; restructuring and repositioning expenses and asset impairments; pension costs other than service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits; income and expense items related to divested businesses, product lines, and certain other investments; gains and losses on sales of businesses, product lines, and certain other investments; third-party acquisition-related costs; certain other items that are not representative of underlying trends; and certain discrete tax items.
  • Adjusted Free Cash Flow means net cash provided by or used for operating activities from continuing operations minus capital expenditures plus cash flows related to Chapter 11, and legacy product and environmental; cash paid for restructuring and repositioning; capital expenditures related to repositioning; cash paid for third-party acquisition-related costs; and accelerated payments under defined benefit pension arrangements.

Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT Return On Invested Capital, Adjusted Gross Margin, Adjusted EPS and Adjusted Free Cash Flow do not purport to represent income or liquidity measures as defined under U.S. GAAP, and should not be considered as alternatives to such measures as an indicator of Grace's performance or liquidity.

Grace uses Adjusted EBIT as a performance measure in significant business decisions and in determining certain incentive compensation. Grace uses Adjusted EBIT as a performance measure because it provides improved period-to-period comparability for decision making and compensation purposes, and because it better measures the ongoing earnings results of its strategic and operating decisions by excluding the earnings effects of the Chapter 11 proceedings, legacy product and environmental matters, restructuring and repositioning activities, and divested businesses.

Grace uses Adjusted EBITDA, Adjusted EBIT Return On Invested Capital, Adjusted Gross Margin, and Adjusted EPS as performance measures and may use these measures in determining certain incentive compensation.

Grace uses Adjusted Free Cash Flow as a liquidity measure to evaluate its ability to generate cash to support its ongoing business operations, to invest in its businesses, and to provide a return of capital to shareholders. Grace also uses Adjusted Free Cash Flow as a performance measure in determining certain incentive compensation.

These measures are provided to investors and others to improve the period-to-period comparability and peer-to-peer comparability of Grace’s financial results, and to ensure that investors and others understand the information Grace uses to evaluate the performance of its businesses. They distinguish the operating results of Grace's current business base from the costs of Grace's Chapter 11 proceedings, legacy product and environmental matters, restructuring and repositioning activities, and divested businesses. These measures may have material limitations due to the exclusion or inclusion of amounts that are included or excluded, respectively, in the most directly comparable measures calculated and presented in accordance with U.S. GAAP and thus investors and others should review carefully the financial results calculated in accordance with U.S. GAAP.

(B) Grace's segment operating income includes only Grace's share of income from consolidated and unconsolidated joint ventures.

(C) Certain pension costs include only ongoing costs recognized quarterly, which include service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits. Catalysts Technologies and Materials Technologies segment operating income and corporate costs do not include any amounts for pension expense. Other pension related costs including annual mark-to-market adjustments and actuarial gains and losses are excluded from Adjusted EBIT. These amounts are not used by management to evaluate the performance of Grace's businesses and significantly affect the peer-to-peer and period-to-period comparability of our financial results. Mark-to-market adjustments and actuarial gains and losses relate primarily to changes in financial market values and actuarial assumptions and are not directly related to the operation of Grace's businesses.