Document Ga8OOeXzYGMwYBjjG9znom9m

^ase^I^DocuPien^^rint^Sunmary Accounting: Date Printed: Tiae Printed: Subject Nane: Subject *: Document Type: Document Date: Amendment: Document #: Printed: Pages Printed: Disabled 03/30/95 03:30 P.M. V R GRACE & CO W016000000 10-Q 06/30/94 N/A 9454301^- Document 3B * DISCLOSURE INC (DALLAS INFO. CENTER> Company Naae: Exchange: Ticker Synbol: Coapany : Docuaent Type: Docuaent Date: Aaendaent: Docuaent *- Laser D SEC EDGAR Filing 1 W R GRACE k CO N GBA *016000000 10-0 06/30/94 N/A 945430IS SECURITIES AND EXCHANGE COMMISSION WASHINGTON. EC. 20S49 FORM 10-0 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30. 1994 Commission File Number 1-3720 W. R. GRACE * CO. NEW YORK 13-3461988 (State of Incorporation) (l.R.s. Employer Identification No.) One Town Center Road Boca Raton, Florida 33486-1010 (407) 362-2000 Indicate by check mark whether the registrant (l) has filed all reports required to be filed by section 13 or is(d) of the securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x No 93,974,981 shares of Common stock, fl.00 par value, were outstanding at July 29 1994. V. B. GRACE * CO. AMO SUBSIDXABXES TABLE OF CONTENTS Page NO. FABT X. Financial information item l. Financial Statements Consolidated Statement of operations Consolidated Statement of Cash Flows Consolidated Balance Sheet Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Results of operations and Financial Condition 1-1 1-2 1-3 1-4 to 1-7 X-8 to X-14 PART XX. Other Information item l. Item 4. Item s. Item . Legal Proceedings Submission of Matters to a Vote of Security Holders Other Xnforaation Exhibits and Beports on Form 8-K XX-1 XX-1 XX-3 XX-3 As used in this Report, the term 'Company'' refers to V. R. Grace * Co.. and the tern `'Grace*' refers to the Company and/or one or more of its subsidiaries. NOT I. FINANCIAL MKHWTIGN ITBl 1. FINANCIAL STATBfNIS U. 8. ten Co. ool SahoUtariw Co--IMatoi Stetoaoot of Operation (Uaartitrt) $ ollltaw (o--ft per ahan) Salw aal raw--a.......................................................... Othar lac--................................................................... ToUl......................................................................... Coot of --to nil art operat'lav on----..................... Selliaf, --ml art ataiaiotntlw ex--.................. Do--ciatlw art aaartintlw........................................ lotoroot oapo-- art rolatrt Fla--lap ooete................... Haaaarch art ioaalo--at axpa--.................................. Pro*lain relatlag U aohortw rolatrt iaoara-- cowr--................................................. IoUl......................................................................... (L--Viae-- F-- coatlaalaf oporatl-- haFare lac-- ta--.......................................................... OeaaFttVf--ialon Far la--a ta--............................... (L--Via--e F-- natlwiat o--atl--......................... L-- Frw tlocoatiaart o--ati--.................................. Nrt low Thrw ttontha Faded Jane 30, 1994 1993 Six Martha Ended Jane 38, 1994 1993 $1.23b.9 4.8 1.248.9 721.5 292.1 24 .b 32.8 31b .8 1.447.5 $1,894.1 17.2 1,111.3 644.1 2S9.2 5b .6 21.4 36.9 -- 1.817.2 $2,313.7 36.5 2,358.2 1,482.1 557.5 120.6 45.7 66.0 316.0 2,507.9 $2,080.3 27.9 2,188.2 1,236.5 498.8 111.4 41.3 72.4 -- 1,960.4 (2Bb.b) (72.3) 94.1 (157.7) 147.8 48.2 (61.6) 62.2 (134.3) 53.9 (105.0) (96.1) -- 85.6 (188.43 $ 034.3) $ (51.1) $ (96.1) $ (22.8) (l--Vearal-- far than'. Coatiwlaf oforati--............... Nit low..................................... Fully IlhM aarai-- far ohara: Coatiwlaf fwitlow............... Nrt low..................................... Miliwli Nclml for con-- ohm (1) Nrt frooe*Y w tht offact lo artirtllotlw. (1.43) (1.43) -(1) -(1) .35 .60 (.57) $ (1.83) $ (1.83) ! * $ (.26) .56 $ -(1) $ -d) $ .92 -(1) $ -<: .35 $ .70 $ .70 The Netw to Co--IMatai Fiowclil SUtwairte an am iaUfrtl part at thie otatagent. 1-1 U. R. trace 8 Co. aad Saheidiarin Coanlldated Stataaaat at Coab Flan (Uaaaditad) $ alllion 1991 1993 Gramme activities OonViaaan Froa eoatinlap oporation beFara iacaae taxn. . . . Racaaclliatioa to caah proaldad V/Cnad Far) operatiap aetiaitin: Bapraclatiaa aad aaortisation ................................................. Prooialoa ralatiap to aabaotaa-relatad iaaaraaee oaoerape . . . fhiapai ia aaaata aad liabilitin, excladiag bniaaaan aapairod/dioaetad aad Fareipn axthaape aFFact: lacraan ia aotn aad aecaaato roceloafcle, aet...................... lacraan ia laooatarin....................................................... Net procaeda Fm aahaataa laiatad iaaaraaee aattlenata. . . Nat axpeaditam Far nhaotn related litigation.................. Dacraiaa ia accoaata payable................................................. Othar ................................................................................... Nat pretax cnh proaMM bp oparatiap aetiaitin T notinlap operation............................................................................................... Nat yratax cnh proaldad by'teaad Far) oporatlip aetiaitin of dtacoatiaaad opantion............................................................................................ Not pretax cnh proaldad by'Caaad for) oparatiap aetiaitin.............................................. Inon taxn paid.............................................................................................................. Nat cnh proaldad by'teaod For) operation aetiaitin.......................................................... $(157 .?> 128.6 316.8 (189.2) (19.1) 96.3 (86.6) (126.5) 26.8 68.6 15.4 76.8 (47.1) 28.9 $ 147.8 111.4 - (58.8) (49.2) 48.3 (95.8) (53.5) (6.8) 44.2 (77.6) (33.4) (39.2) (72.6) IMCSTINC ACTIVITIES Capital oxpaaditem................................................................................................................... Bniaaoan repaired ia parchan traaaaetian. aetof each acquired............................................ Nat praenla fm dloaatnato............................................................................................ Not praenla fm aaU'laaaotack tranaetlon................................................................... Othar................................................................................................................................ Nat eaab (aaod (orVrrwiM by iaoaatiap aetiaitin........................................................... (171.3) (178.6) US.8 -- (.1) (123.9) (236.6) 418.4 67.4 2.6 (223.2)127.9 FINANCING ACT1UITIE Diaidoada paid............................................................................................................................. Bopannata at bormiapa haaiay oripimlartaritinia axean oF throe aoatho............................ 1acrean ia bomwiapa haaiap aripinl Mtaritin ia axean of thm aaatba..................... Not iacmaa '(dacraan) ia barraaiapa haaiap aripinl ntaritin oT Un tbn thm aaatha................................................................................................. Othar.......................................................................................................................................... Not aaah proaldad by'taaod Far) Fiaaaciapaetiaitin................................................................... (65.9) (63.1) (782) (92.4) 181.7 357.4 2562 (235.1) 1S.S 5.7 237.4 (27.5) EFFact of aaehaapa rata ebaapn n aaah aad caah aquioalaata................................................. lacraan ia aaah aad eaab opalnleate...................................................................................... -- $ 43.1 (2.3) $ 25.5 The Notes to consolidated Financial statenents are integral parts of these statenents. 1-2 U. R. tece ICo. nl SahellUriae Coaaelilatel Baluce Shaft (Uaealital) $ aillima (except par aalaa) Jaae 3B, 1994 Daceatar 31, 1993 ASSETS current assets Caah aai caah apalaaleate.................................................................................................. Nataa aai accaaata receleakle, aat................................................................................... laaaatM lea....................................................................................................................... Nat aaaeta of liecoetiaael oparattoaa................................................................................ Deferral lacaaa taxaa, correct............................................................................................ Other carraat aaaeU........................................................................................................... total Carraat Aaaeta..................................................................................................... lepraciatlaa aai oaortlxotioo of $1,398.9 aai $1,323.7, reapectiaaly......................................................................................... Coalaill, laae accaaalatel aMrtlsattoa of $68.5 aai $53.2, roepactiel>|............................................................................................... Aaheetoe-retotal taaaraaee ramiaakla...................................................................................... Other aaaeta .......................................................................................................................... TOTAL............................................................................................................................. $ 90.7 819.9 479.8 789.9 28.1 88.8 2,196.4 $ 47.6 6S7.4 441.8 761.3 31.8 36.2 1,975.3 1.SBB.8 593.3 568.8 1.314.9 $6,215.4 1,454.1 481.6 962.3 1,235.3 $6,188.6 LIABILITIES MB SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-tent labt................................................................................................................. AccoenU payable................................................................................................................. laoaae taxaa....................................................................................................................... Other carraat I tab! litter.................................................................................................. Hlaorttji iatarerte.............................................................................................................. Total Carraat Liakilitiaa............................................................................................... Leartaralaht....................................................................................................................... Other aaacarroat liahilltiaa ............................................................................................... Defarral iacoaa taaea.............................................................................................................. Nwcarraat liability far aahaatearatotal litlpatioa............................................................... total Liablltttae........................................................................................................... cominsos and contingencies SHAREHOLDERS' EQUITY Ftefarrel atocka, $188 par aalaa......................................................................................... Caaaaa etack, $1 par aalae.................................................................................................. Fall la capital................................................................................................................. Rataiaal aaralaia .............................................................................................................. Caaatotiae tnaatotloa aUaetaeate...................................................................................... total SharahaMara' Efelty............................................................................................ $ 761.7 385.7 118.6 693.1 297.8 2,168.1 1,257.1 663.7 93.7 654.2 4,836.8 $ 532.6 414.6 126.5 621.9 297.B 1,992.6 1,173.5 613.8 97.4 713.7 4,591.8 7.4 94 J 383.8 1,834.2 (68.8) 1,378.6 7.4 93.5 29?.8 1,196.2 (67.3) 1,517.6 TOTAL The Netee to CmeolUetel Flaesciel Statoarate era ietoynl ptrti cf these eUteeeete. 1-3 $6,215.4 $6,106.6 W. H. Grace * Co. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (8 aillions except per share) a) The financial statements in this Report at and for the three- and six-month interim periods ended June 30. 1994 and 1993 are unaudited and should be read in conjunction with the consolidated financial statements in the Company's 1993 Annual Report on Form 10-K. Such interim financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of the interim periods presented; all such adjustments are of a normal recurring nature. Certain amounts in the prior periods' consolidated financial statements have been reclassified to conform to the current periods' basis of presentation. The results of operations for the three- and six-month interim periods ended June 30, 1994 are not necessarily indicative of the results of operations for the fiscal year ending December 31, 1994. b) As previously reported, Grace is a defendant in lawsuits relating to previously sold asbestos-containing products and anticipates that it will be named as a defendant in additional asbestos-related lawsuits in the future. At June 30, 1994, Grace was a defendant in approximately 37,800 asbestos-related lawsuits (78 involving claims for property damage and the remainder involving approximately 60,900 claims for personal injury), as compared to approximately 38,100 lawsuits (92 involving claims for property damage and the remainder involving approximately 56,600 claims for personal injury) at December 31, 1993. During the first half of 1994, three property damage lawsuits against Grace were dismissed; judgment was entered in favor of Grace in two property damage cases (one of which had been on appeal and is now final); fourteen additional property damage lawsuits were settled for a total of 820; and five new property damage lawsuits were filed. During this period, Grace also recorded settlements of approximately 2,700 personal injury claims for 89.2 and dismissals of approximately 1,000 personal injury claims. On September l, 1993, the U.S. Court of Appeals for the Second Circuit issued a decision that bad the effect of reducing the amount of insurance coverage available to Grace with respect to asbestos property damage litigation and claims. Grace recorded a non-cash charge of 8475 (8300 after taxes) in the 1993 third quarter to reflect this reduction, but reversed 8316 (8200 after taxes) of the charge in the 1993 fourth quarter, after the Court withdrew the September 1993 decision and agreed to rehear the case. On May 16. 1994, the Court issued a new decision confirming its September l, 1993 decision, as a result, Grace recorded a non-cash charge of 8200 after taxes in the second quarter of 1994 to reflect the reduction in asbestos property damage insurance coverage. in July 1994, a South Carolina state court judge dismissed the claims of most class members from a purported nationwide class action asbestos property damage lawsuit pending in a South Carolina state court (ANDERSON MEMORIAL HOSPITAL. ET AL. V. W. R. GRACE A CO., ET AL.). In his ruling, the Judge determined that a South Carolina statute prohibits non-residents from pursuing claims in the South Carolina state courts with respect to buildings located outside the state. Grace expects the ruling to be appealed and that the plaintiffs' lawyer may attempt to sue on behalf of a nationwide class in a different jurisdiction, in August 1994, Grace entered into an agreement to settle IN RE: asbestos school litigation, a nationwide class action pending in the 1-4 W. R. Grace ft Co. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (I Billions except per share) United States Court Tor the Eastern District of Pennsylvania on behalf of public and private elementary and secondary schools that contain friable asbestos materials :other than schools that have 'opted out* of the class). The terms of the settlement agreement (which is subject to judicial review after class members have an opportunity to be heard) are not expected to have a significant effect on Grace's consolidated results of operations or financial position. In Grace's opinion (based upon and subject to the factors discussed in Note 2 to Grace's consolidated financial statements for the year ended December 31, 1993), it is probable that the personal injury and property damage lawsuits pending at June 30, 1994 can be disposed of for a total of $754.2, inclusive of legal fees and expenses, of which Grace has recorded $654.2 as a noncurrent liability and $100 as a current liability. This compares to the estimated liability (current and noncurrent) of $813.7 at December 31, 1993, the decrease being attributable to payments made by Grace in the first half of 1994. in addition, Grace has recorded a receivable of $560 for the insurance proceeds it expects to receive in reimbursement for prior payments and estimated future payments to dispose of asbestos-related litigation. The amount of this receivable has declined from $962.3 at December 31, 1993 due to the net insurance proceeds received during the first half of 1994 and the special non-cash charge recorded in the second quarter of 1994 as a result of the May 16, 1994 decision referred to above. Grace received a total of $121.6 in the first half of 1994 pursuant to settlements with certain insurance carriers in reimbursement for monies previously paid by Grace in connection with asbestos-related litigation. portion of that amount has been paid to plaintiffs in previously settled asbestos-related lawsuits. A Grace continues to be involved in litigation with certain of its insurance carriers, including an affiliated group of carriers that had agreed to a settlement and had made a series of payments under that agreement in 1993. The group of carriers subsequently notified Grace that it would no longer honor the agreement (which had not been executed) due to the September 1, 1993 U. S. Court of Appeals decision discussed above. Grace believes that the settlement agreement (which involves approximately $200 of the asbestos-related receivable of $560 at June 30, 1994> is binding and initiated action to enforce the settlement agreement, in January 1994, the U.S. District Court for the Eastern District of Texas held the agreement to be enforceable. The affiliated group of carriers has appealed this ruling to the U. 8. Court of Appeals for the Fifth Circuit and has sought to attack it in a collateral action in the U.S. District Court for the Southern District of New vork; however, Grace has successfully stayed this collateral attack. Grace's ultimate exposure in respect of its asbestos-related lawsuits and claims will depend on the extent to which its insurance will cover damages for which it may be held liable, amounts paid in settlement and litigation costs. In Grace's opinion, it is probable that recoveries from its insurance carriers (reflected in the receivable discussed above), along with other funds, will be available to satisfy the personal injury and property damage lawsuits and claims pending at June 30, 1994. Consequently, Grace believes that the resolution of its asbestos-related litigation will not have a material effect on its consolidated results of operations or financial position. 1-5 U. R. tease 8 Cs. Ml Sakeliiarles NOTES TO CONSOLIDATES FINANCIAL SIMDCNIS ($ ail11mm eapt fer skare) Far aiiitloaal laforaatisa, aaa Note 2 to the coosolUatai fiaaacial itrtaati la tke Casp--a'a 1993 tonl Report on f 10-#. (c> la tka secoai paarter of 1993, teaee classiflei as ilscoattaaei orerations its mat aai kattaq aaraiatora kaaiaaaaea; cartola eaglaaerai Materiala kaaiaaaasa, priacipallit Its rriatiaa rrotecte, eleetraaayaatlc raiiatioa coatrol aai Material tsckaalofy kaaiaaaaas (collectiaaly INS); aai etkar aoa cars kaaiaaaaas paailaa tkalr iiaaataeat. A proeisioa of $105 (aet of as arrlicakla tax kaaaflt af $22.3) aaa raooriei to tka saconi farter of 1993: tkat provision iaclaisi tka axpectoi loss oa tka iiaastaent of tkaae kaaiaaaasa, tkslr aaticirstai aet operathf resalts peaiiag iiaesteewt aai a $15.7 rrsslsiaa for tatarost expense allocatoi to tka iiaooatiaaai oparatioas tkroagk tkslr axpectoi iates of iiaaataeat. At Jeae 30, 1994, cartel* af tkaaa kaaiaaaaas kai kasa soli aai otkers aara la tka process of koiai ilaastai. Hiaority lataraat ooaatoto prtoarily of a Itoitai partaerskip iatenst to Grace Cocoa Aaoaciatas, L.P. (If). IP's assets coasist af Grace's sarliaiia cocoa aai ckocolate kasiaaas, tortea aotea aai ieaaai loaas tea fraa eartoss teaco aatitlas aai paarawtoai ky tka Coapaay aai Its principal aparatias aakaliiary, aai cadi. If is a separate aai ilstinct laaal entity fraa sack of tka tease aatitlas aai kas separate assets, liakllttiao, kasiaaas faactioaa aai oparatioas. Far fiaaaclal reporting porpassB, tka aaaeta, liakllltiaa, roaalts of oparatioas aai cask floas of If are iaclaisi la tease's coaaoliiatai fiaaacial atataacats aai tke aataite iaaastera' tatorsst to If is raflectai as a alacrity lataraat. Ike iatarcaapHS aotea kali ky LP are altaiaatai to preparing tke conaolltetoi fiaaacial stataaeste aai, tkarafare, kae aot keen classifisi as pertatoiaf to iiscaatlaaai oparatioaa. Iks aet assets af tease's iiacontlauei oparatioas (axetaiiay intercoopany asset*) at teas 30, 1991 aara as follaae: \ CMrrest aoaati Properties aai spalpoaat, aet laaaotaaata la aai aiaaacas to affiliate! caapaaias Otkar aaacamat assets Total assets Comet llakilitiaa Otkar aaacamat llakilitiaa Totol liakllitles Net assets Battery Separators aai DG Grace Eaaryy Otker Total $314.6 173.6 44.2 $532.4 $210.0 02.6 $292.6 $239.8 $121.1 147.3 5.0 21.3 $294.7 $46.4 41.6 $08.0 $206.7 $ 12.0 128.1 4.1 ffl.l $154.3 $ 11.8 20.4 $ 32.2 $122.1 $ 54.7 32.0 37.8 37.4 $161.9 $23.2 (2.6) $ 28.6 $141.3 $ 502.4 401.0 46.9 113.0 $1,143.3 $ 291.4 142.0 $ <33.4 $ 709.9 M . H. Grace fc Co. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (8 millions except per share) d) inventories consist of: Haw and packaging materials in process Finished products Less: Adjustment of certain inventories to a last-in/first-out (LIFO) basis Total inventories June 30. 1994 December 31, 1993 8118.7 78.5 326.7 520.9 (41.1) 8479.8 8111.4 59.9 310.3 481.6 (40.6) 9441.0 e) Earnings per share are calculated on the basis of the following weighted average number of common shares outstanding: Three Months Ended June 30: 1994 - 93,933,000 1993 - 90,183,000 Six Months Ended June 30: 1994 - 93,842,000 1993 - 90,083,000 1-7 Itm2. IWMMNrS DISCUSSION AM ANALYSIS OF RESULTS OF 0HMI10NS AM FINANCIAL CONDITION U) Iwtw of (pWtllM ) Overate: Salas hiwmi Itniwl 13x Ml llx la the second yaarter Ml first hiIf of 1994, respectively, omt the cospenhle periods of 1993. locate fra* coatteiep opantlorn for the eeceel ftirtv Ml first half of 1994 leerssm! Zbt ate 2tx, to $66.7 aillioe esl $183.9 sillim, respectively, m cesserel to the 1993 periods, axclndiae e aoa-caah chirre of $280 aillioe after Urn ($316 alllloa pretax) rocorlel is the 1994 accost yaarter to reflect a rotactiM is iseorosce coveraje for iiheotoo property lioaoe lasMits aal elate tee Note (h) to the coseolMitel fiseecial stateeats is this Reyort). Iscloliag this provision, Grace reported losses fron cootiaiieo opantion far the aecoal foarter aal first half of 1994 of $134.3 aillte aal $96.1 sillte. respectively. Ae liacasaal is Nate <c) to the conaolilital fissecial statooeats in this Report, tan ciaaolflet certain teiseoan as tieeestiaaot spentlose in the saoost yaerter of 1993. (2) Operettas Resells: The folteies tele ceesiree eosMst remits for the 1994 soconl yaarter aal first half to roMlts far the caaparable periols of 1993: V. R. fence t Co. ate Sateiliarte Oyontte Remits $ ailltee SALES AM HUMES teclaity Chmtels Health Cm Total ommiNB ucorc bforb vm > tecialty ChMtels Hmlth Care Total Thne Months Ended Jem 38. 1994 1993 Six Months Ended Jam 38, 1994 1993 $ 782.9 454.8 $1,236.9 $ 729.9 364.2 $1,894.1 $1,458.3 855.4 $2,313.7 $1,378.8 782.3 $2,888.3 $ 79.8 57.9 $ 136.9 $ 66.8 46.7 $ 113.5 $ 119.1 181.6 $ 228.7 $ 188.5 81.4 $ 189.9 (i) Sessent roeeltn for the 1993 poriols heee hen roclaneifiel to coafora to the 1994 hMis of proaantatte. Sessent remits reflect the allocette of carparate overhead aal corporate research expenses. Corporate interest, f Isaaciar coots and noaillocalle anpenaea (sach as those asoociatel site dieostet hastemee) an not iacladal in the oassest romlts. 1-8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) SPECIALTY CHEMICALS Sales and revenues increased 74 and 64 in the second quarter and first half of 1994, respectively, as conpared to the 1993 periods, reflecting favorable volume variances estimated at 94 and 74 for the second quarter and first half of 1994, respectively, and a favorable price/product mix variance estivated at it for the first half of 1994 (no price/product six variance was experienced for the second quarter of 1994), offset by unfavorable currency translation variances estimated at 2% for both the second quarter and first half of 1994. Volume increases occurred in both the second quarter and first half of 1994 for all core product lines, particularly packaging (due to improved sales of bags, films and laminates), construction products (reflecting the acquisition of concrete admixture businesses in the first quarter of 1994 and the improving economy in North America), water treatment (due to improving conditions in the paper industry process chemicals business in Europe), fluid cracking catalysts in Europe and Asia Pacific (reflecting improvement in market share) and silica products in North America (due to strong sales of dentifrice). Operating income before taxes increased 184 in the second quarter of 1994 compared to the second quarter of 1993. North American results improved in the second quarter of 1994, as strong growth occurred in packaging and construction products (due mainly to the volume increases noted above), partially offset by reduced profitability in fluid cracking catalysts (due to an increase in routine customer maintenance shutdowns during the second quarter of 1994 as compared to the second quarter of 1993). European results were flat versus the 1993 second quarter, primarily due to costs associated with streamlining operations in the water treatment and container products businesses, offset by improvements in both the paper industry process chemicals and fluid cracking catalyst businesses due to the volume increases noted above and to improvements in cost controls. In Asia Pacific, favorable results were achieved, primarily in fluid cracking catalysts (due mainly to the volume increase noted above) and container products (due to market gains and savings achieved from cost containment efforts). In Latin America, results were favorable, primarily in packaging (due to volume increases in bags and laminates) and water treatment (due to strong seasonal sales to the sugar and alcohol industries). For the first half of 1994, operating income increased 104 over the comparable period of 1993, primarily due to the significant growth in packaging and construction products discussed above, partially offset by unfavorable results in water treatment, primarily due to the streamlining costs discussed above and to Brazil's unstable economic conditions in the first quarter of 1994. HEALTH CASE Sales and revenues for the second quarter and first half of 1994 increased by 254 and 224 over the comparable periods of 1993. These improvements were due to increases of 274 and 244, respectively, in kidney dialysis services and 784 and 604, respectively, in hone health care operations, offset by decreases of 154 and 114, respectively, in medical products operations. The decrease in medical products operations was primarily due to a decline in bloodline sales resulting from import alerts issued in the 1993 second quarter (see 1-9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) discussion below). second quarter and first half 1994 results for dialysis services and hone health care include the results of Hove intensive Care, Inc.. acquired in June 1993, as well as a nunber of smaller businesses acquired during the second half of 1993. Also included in home health care operations tor the 1994 second quarter are the results of Home Nutritional Services, Inc. (HNS), a national provider of home infusion therapy services acquired in April 1994. The number of centers providing dialysis and related services increased 22*, from 440 at June 30, 1993 to S3? at June 30, 1994 (498 in North America, 36 in Europe , 2 in Latin America and l in Asia Pacific). Operating income before taxes in the second quarter and first half of 1994 increased by 24* and 251, respectively, over the 1993 periods. 1994 second quarter and first half results for all health care businesses benefited from acquisitions made in 1993 and continued improvements in cost controls, operating efficiencies and/or capacity utilization, partially offset by the costs of improving and expanding quality assurance systems for medical products manufacturing operations (see discussion below). it is unclear at this tine whether and to what extent any of the currently proposed reforms of the U.S- health care system will affect Grace's health care operations. However, based on its knowledge and understanding of the health care industry in general and of other providers of kidney dialysis and infusion therapy, as well as on publicly available information, Grace believes that its health care operations are among the most cost-efficient in the industry. In 1993, the U. S. Food and Drug Administration (FDA) issued import alerts with respect to (1) hemodialysis bloodlines manufactured at the plant of National Medical Care. inc. (NMC), Grace's principal health care subsidiary, located in Beynosa, Mexico and (2) hemodialyzers manufactured in NMC*s Dublin, Ireland facility. Products subject to FDA import alerts nay not enter the U. S. until the FDA approves the quality assurance systems of the facility at which such products are manufactured. In January 1994, NMC entered into a consent decree providing for the resumption of importation of bloodlines and hemodialyzers following certification by NMC that the relevant facility complies with FDA regulations and successful completion of an FDA inspection to verify such compliance- In accordance with the consent decree. NMC certified compliance to the FDA with respect to the Reynosa, Mexico facility in January 1994, and the FDA lifted the bloodline import alert in March 1994 following a thorough reinspection by the FDA and a commitment by NMC to finish certain studies by May 1994 and, in the interim, to perform additional product testing, nmc has completed the studies, as requested. Certification of compliance at the Dublin, Ireland facility was submitted to the FDA in April 1994. The consent decree also requires NMC to certify and maintain compliance with applicable FDA device manufacturing laws and regulations at all of its U. S. manufacturing facilities, nmc has conducted a full review of its facilities and upgraded, as necessary, all of its quality assurance systems. No fines or penalties were imposed on NMC as a result of any of the FDA's actions relating to the import alerts or in connection with the consent decree. Neither the import alerts nor previously reported recalls of certain nmc products are expected to have a material effect on Grace's consolidated results of operations or financial position. 1-10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) (3) Statement of Operations: OTHER INCOME Other incoae includes, among other things, interest incone, dividends, royalties fron licensing agreenents. and equity in earnings of affiliated conpanies. Other incone for the first half of 1994 also includes a 927 illion gain :pre- and after-tax) fron the January 1994 sale of Grace's reaaining interest in The Restaurant Enterprise Group, Inc. (REG). INTEREST EXPENSE AND RELATED FINANCING COSTS interest expense and related financing costs increased by 15* and lit in the second quarter and first half of 1994, respectively, versus the coaparable 1993 periods, due to an increase in related financing costs and reductions in interest allocated to discontinued operations, partially offset by decreases reflecting lower effective interest rates due to both the replacement of certain fixed-rate debt with lower-cost floating-rate borrowings and the use of financial instruments. Grace enters into various types of interest rate hedge agreements to manage interest costs and risks associated with changing interest rates; most of these agreements effectively convert underlying fixed-rate debt into variable-rate debt. Exposure to market risk on interest rate hedge agreenents results fron actual or expected future fluctuations in floating rate indices during the periods in which the agreenents are outstanding. See ''Financial condition: Liquidity and Capital Resources'1 below for Information on borrowings. RESEARCH AND DEVELOPMENT EXPENSES Research and development spending decreased by li* and 9* in the second quarter and first half of 1994, respectively, versus the 1993 periods. Research and development spending is now directed primarily toward Grace's core specialty chemicals and health care businesses. INCOME TAXES The effective tax rates for the second quarter and first half of 1994 decreased to 35-0* and 39.1*, respectively, as compared with 42.7* and 42.1*, respectively, for the second quarter and first half of 1993. Excluding the provision for asbestos-related litigation and claims discussed above, the effective tax rate was 39.9* for the second quarter of 1994. The effective tax rate for the first half of 1994 was also 39.9*. excluding the asbestos-related provision, the gain on the REG transaction and the 926 million provision (940 million pretax) for environmental costs and workforce reductions recorded in the first quarter of 1994. I-ll MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) In the third quarter of 1993, Grace recorded the effects of the Oanibus Budget Reconciliation Act of 1993 (OBRA), which was enacted in August 1993. Aaong other things, OBRA increased the highest U.S. Federal corporate tax rate to 359, effective January l, 1993. However, neither this increase in the U.S. Federal corporate tax rate (from 34*), nor the other provisions of OBRA, had a saterial effect on Grace's results of operations. LOSS FROM DISCONTINUED OPERATIONS in the second quarter of 1993, Grace restated its financial statements to reflect the classification of certain businesses as discontinued operations. See Note Jc) to the consolidated financial statements in this Report for further information. (b) Financial Condition; Liquidity and Capital Resources During the first half of 1994, the net pretax cash flow provided by Grace's continuing operating activities was 960.6 Million, versus 944.2 Billion in the first half of 1993. The increase was primarily due to the net cash inflow of 99.7 Billion, reflecting settlements with certain insurance carriers, net of amounts paid in the first half of 1994 for the defense and disposition of asbestos-related property damage and personal injury litigation (see discussion below), compared with a net cash outflow of 956.9 million in the first half of 1993. After giving effect to discontinued operations and payments of income taxes, the net cash provided by operating activities was 928.9 million in the first half of 1994 versus 972.6 million of net cash used for operating activities in the first half Of 1993. investing activities used 3223.2 million of cash in the first half of 1994, largely reflecting capital expenditures and business acquisitions and investments, primarily the acquisitions of HNS for approximately 990 million (exclusive of expenses and assumed debt of approximately 930 million) and of concrete admixture businesses by Grace Construction Products. These investing activities were offset by net proceeds of 3118.8 million from divestments, primarily the disposition of Grace's remaining interest in REG in the first quarter of 1994 and the second quarter 1994 divestments of Grace's blow-molded plastic case business; its Endura Products Division, a custom saturator and coater of specialty papers for the tape industry; and its Diamonite Products Division, a manufacturer of technical ceramics for a broad range of industrial applications. Net cash provided by financing activities in the first half of 1994 was 9237.4 million, primarily reflecting an increase in total debt from year-end 1993, offset by the payment of 965.9 million of dividends. Total debt was approximately 82 billion at June 30, 1994, an increase of 9312.7 million from December 31, 1993. Grace's total debt as a percentage of total capital (debt ratio) increased from 52.9* at December 31, 1993 to 59.4* at June 30, 1994, as a result of the 3200 million provision recorded in the 1994 second quarter, as discussed in Note (b> to the consolidated financial statements in this Report, and the increase in total debt. 1-12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) in April 1994, Grace entered into a selling Agency Agreement relating to the offering from tine to tine of up to 9300 nillion (issue price) of Medium-Term Notes, Series a (mtns). Through June 30, 1994, Grace issued IBS nillion principal anount of MTNs and applied the net proceeds therefrom to reduce commercial paper and/or hank borrowings. The mtns nature at various dates from 1996 to 1997 and bear interest from 6.5S* to 7.099 per annua. Grace expects to satisfy its 1994 cash requirements froa the following sources: (l) funds generated by operations, (2) proceeds fron divestments and (3) financings. Such financings are expected to include new borrowings, the availability and cost of which will depend upon general economic and market conditions. In August 1994, Grace sold 9300 million principal anount of 89 Notes Due 2004. The net proceeds from the sale of these Notes are being used to reduce commercial paper and/or bank borrowings. On July 1, 1994, Grace announced that it had entered into a definitive agreement to sell its American Breeders Service and Caribbean Fertilizer businesses, completion of the transaction is subject to various conditions and is expected to occur during the third quarter of 1994. On August 4, 1994, Grace announced that it had entered into a definitive agreement to sell its battery separators business. Grace's battery separators business involves the production of microporous insulating sheets placed between the reactive components in automotive, industrial and consumer batteries. Completion of the transaction is subject to various conditions and is expected to occur later in 1994. ASBESTOS-RELATED MATTERS As reported in Note (b) to the consolidated financial statements in this Report, Grace is a defendant in lawsuits relating to previously sold asbestos-containing products and is involved in related litigation with certain of its insurance carriers, in the first half of 1994, Grace received 99.7 nillion, reflecting settlements with certain insurance carriers, net of amounts paid in the first half of 1994 for the defense and disposition of asbestos-related property damage and personal injury litigation, in the second quarter of 1994, Grace recorded a non-cash charge of 9200 nillion after taxes to reflect a court decision that had the effect of reducing Grace's insurance coverage for asbestos property damage lawsuits and claims. The balance sheet at June 30. 1994 includes a receivable due fron insurance carriers, subject to litigation, of 9560 nillion. Grace has also recorded a receivable of approximately 9104 nillion for amounts to be received in 1994 to 1999 pursuant to settlement agreements previously entered into with certain insurance carriers. Although Grace cannot precisely estimate the amounts to be paid in 1994 in respect of asbestos-related lawsuits and claims, Grace expects that it will be required to expend approximately ISO million (pretax) in 1994 to defend and dispose of such lawsuits and claims (after giving effect to payments to be received froa certain insurance carriers, as discussed above and in Note (b) to the consolidated financial statements in this Report). As 1-13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) indicated therein, the mounts reflected in the consolidated financial stateaents with respect to the probable cost of disposing of pending asbestos lawsuits and claims and probable recoveries from insurance carriers represent estimates; neither the outcomes of such lawsuits and claims nor the outcomes of Grace's ongoing litigations with certain of its insurance carriers can be predicted with certainty. ENVIRONMENTAL MATTERS In the first quarter of 1994, Grace recorded a charge primarily to provide for future environmental costs relating to a previously divested business. Ho other significant developments relating to environmental liabilities occurred in the first half of 1994. For additional information relating to environmental liabilities, see Note ll to the consolidated financial statements in the Company's 1993 Annual Report on Form 10-K. 1-14 PAST II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Note :b) to the Consolidated Financial Statements in Part x of this Report is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company's 1994 Annual Meeting of Shareholders ;"Annual Meeting1') was held on May 10, 1994. At the Annual Meeting, the Company's shareholders (a) elected seven class xx Directors for a term expiring in 1997; :b) ratified the selection of Price Waterhouse as independent accountants of the Coapany and its consolidated subsidiaries for 1994; tc) approved the Company's 1994 stock Incentive Flan; (d) approved the Conpany's 1994 Stock Retainer Flan for Nonenployee Directors; :e> approved the Conpany's Long-Tern incentive Program; :f) defeated a shareholder proposal requesting that the Company endorse the ''Ceres principles'* and take certain related actions; and :g) defeated a shareholder proposal requesting that Grace take certain actions with respect to its operation in Mexico. Following the Annual Meeting, eight Class xxx Directors, having terns expiring in 1995, and seven Class X Directors, having terns expiring in 1996, continued in office. XX-1 Tin follMiM sets fartk tin raaalta of wtiej at the Aeasal Hadiss: Hatter For Afeimt* Abatedioas Broker Norilotas ELBCT10H IT DIRECTORS* C. H. Erhart, Jr. M. A. M J. E. Phipps E. 8. Pyss D. V. Robbias, Jr. A. UoaJ Prises D. L. Vaalcb SaladUs of Aeoosstests l>prs*l of 1994 Stack lsosstlw Plat Approsal of 1994 Stock Retailor Plea fpprowl of Loar-Tsra laoostiee Profras SbarahoMar Propooals GERS Priaciplos Hniloao Opardioss 86,681,548 86,739,076 86,611,644 86,629,866 86,622,318 86,238,384 86,539,456 87,865,271 71,568.932 83,983,666 82,694.133 1.882,913 945,376 1,872,88B 1.854,597 1,862.136 1,454.869 1,144,997 483,641 IS,884,313 2.661,776 4.278,565 -8-8-8-8-88-8- 215,548 1,841,287 1.119.818 711.756 3.568,182 11,458,853 67,988,388 66,813,596 13,452.537 7,449,331 Hltk raspsd to tin olaction of Jirsdort, tin font of proxy pernittef skaraksMsra to dnck bans isiiertiag sotss oitbor tor" or "sithkeU"; otoo nlitlii to iirodar* talfsataJ abora m "asaiast" ire rates cut as "dtbheU". -8-8-8-8-8-8-8- -8- -8- -8- -8- 2,771,425 2,771,474 ITEM S. OTHER XNTORMATIOM. :) on July l, 1994. Grace announced that it had completed the sales of its Endura Products and Diaaonite Products Divisions, and that it had entered into a definitive agreement to sell its American Breeders Service and Caribbean Fertilizer businesses to an investor group organized by Ardshiel. Inc. Completion of the latter transaction is subject to various conditions and is expected to occur during the third Quarter of 1994. Grace expects to receive a total of approximately 175 million from these transactions. :b) On August 4. 1994, Grace announced that it had entered into a definitive agreement to sell its battery separators business to a subsidiary of The xnterTech Group, Inc., a privately held company based in Charleston, south Carolina. Grace's battery separators business involves the production of microporous insulating sheets placed between the reactive components in automotive, industrial and consumer batteries. Completion of the transaction is subject to various conditions and is expected to occur later in 1994. :e) On August 9, 1994, Grace completed the public offering of S300 million of M Notes Due 2004 ("Notes*) at an initial public offering price of 99.7949 of their principal amount. The net proceeds of the Notes was used to reduce commercial paper and bank borrowings incurred to finance capital expenditures and working capital requirements. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) exhibits. The following are being filed as exhibits to this Report: -- Amendment, dated as of May 16, 1994, to Credit Agreement, dated as of September l, 1992, among V. B. Grace & Co.- Conn., . B. Grace XX-3 A Co.. the hanks and other financial institutions parties thereto :the ''Banks'* > and Cbeaical Bank as agent for the Banks; -- weighted average nuaber of shares and earnings used in per share coaputations; and -- coaputation of ratio of earnings to fixed charges and coabined fixed charges and preferred stock dividends. :b> REPORTS ON FORM 8-K. During the quarter ended June 30. 1994. the Coapany filed a Report on Fora 8-K dated June 14, 1994 relating to a decision by the United States Court of Appeals for the Second Circuit that had the effect of reducing the Coapany*a insurance coverage relating to asbestos property daaage litigation and dales. The Coapany also filed a Report on Fora 8-K dated Hay 4, 1994 announcing its consolidated results of operations for the quarter ended March 31, 1994. The Coapany also filed a Report on Fora 8-K dated Hay 3, 1994 announcing that it had entered into a selling Agency Agreeaent relating to the offering froa tiae to tiae of Mediua-Tera Notes. Series A, with an aggregate issue price of up to 8300 aillion. EX-4 * SXGHATUBE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to he signed on its behalf by the undersigned thereunto duly authorized. V. B. GRACE k CO. ^Registrant) Date: August 11. 1994 xx-s By /s/ Richard N. Sukenik Richard N. Sukenik Vice President and Controller ^Principal Accounting Officer) Exhibit Ho. 4.1 11 12 V. R. GRACE * CO. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30. 1994 EXHIBIT INDEX Description Amendment, dated as of May 16, 1994, to Credit Agreement, dated as of September l, 1992, among f. R. Grace * Co.- conn., W. r. Grace k Co., the banks and other financial institutions parties thereto :the"Banks"> and Chemical Bank as agent for the Banks. Weighted average number of shares and earnings used in per share computations Computation of ratio of earnings to fixed charges and combined fixed charges and preferred stock dividends Exhibit 4.1 AMENDMENT AMENDMENT, dated as of May 16. 1994 (this "AMENDMENT-*), to the Credit Agreement, dated as of September l, 1992 (as anended, suppleaented or otherwise Modified prior to the date hereof, the 'CREDIT agreement"). among w. R. grace * CO. -CONN., a Connecticut corporation (the "COMPANY"), V. R. GRACE k CO.. a New York corporation (''GRACE NEW YORK11), the banks and other financial institutions parties thereto (the ''BANKS'*) and chemical bank, a New York banking corporation, as agent (in such capacity the "AGENT") for the Banks. WITNESSETH: whereas, the Conpany and Grace New York have reguested the Agent and the Banks to agree to aaend certain provisions to the Credit Agreenent as set forth in this Aaendnent; and WHEREAS, the Agent and the Banks are willing to agree to such aaendnent. but only on the terns and subject to the conditions set forth in this Aaendnent; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Conpany. Grace New York and the Agent hereby agree as follows: 1. definitions. Unless otherwise defined herein, terns defined in the Credit Agreenent are used herein as therein defined. 2. AMENDMENT. The definition of "EBIT" in subsection l.l of the Credit Agreenent is hereby anended by: (a) inserting iaaediately after the conna at the end of clause (c) thereof the following new clause (d): "PLUS (d) non-cash pre-tax charges against earnings in the approximate anount of 9316,000,000 recorded by Grace New York during the fiscal quarter ending June 30. 1994 to recognize the reduction in insurance coverage for asbestos property damage litigation and clains (to the extent that such amount has been deducted in determining the amount set forth opposite the caption "income from continuing operations" (or the equivalent caption) for such period)," (b) relettering existing clause (d) thereof as clause (e), and (c) inserting iaaediately before the period at the end of such definition the following now clause if): "HXNU8 if) any payments wade in respect of asbestos property damage litigation and clains which pertain to the charges referred to in clause id) of this definition for such period.'1 3. effectiveness. This Amendment shall become effective upon receipt by the Agent of evidence satisfactory to the Agent that this Amendment has been executed and delivered by the Coapany, Grace New fork and the Majority Banks. 4. befresentatEONS anb VABBANTXES. To induce the Agent and the Banks to enter into this Aaendment, the Company and Grace New York hereby represent and warrant to the Agent and the Banks that, after giving effect to the amendment provided for herein, the representations and warranties contained in the Credit Agreement and the other Loan Documents iif any) will be true and correct in all material respects as if made on and as of the date of effectiveness hereof and that as of such date no Default or Event of Default will have occurred and be continuing. 5. NO OTHER AMENDMENTS. Except as expressly amended hereby, the Credit Agreement and the other Loan Documents (if any) shall remain in full force and effect in accordance with their respective terms. 6. counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts and ail of said counterparts taken together shall be deemed to constitute one and the same instrument. 7. expenses. The Company and Grace New York agree to pay and reimburse the Agent for all of the out-of-pocket costs and expenses incurred by the Agent in connection with the preparation, execution and delivery of this Amendment, including, without limitation, the fees and disbursements of Simpson Thacher k Bartlett, counsel to the Agent. 8. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND C0N8TRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. IN witness whereof, the parties hereto have caused this Amendnent to be duly executed and delivered as of the day and year first above written. W. B. GRACE * CO.-CONN. By: Title: W. R. GRACE A CO. By: Title: CHEMICAL BANK, as Agent By:. Title: The undersigned Banks hereby consent and agree to the foregoing Aaendaent: CHEMICAL BANK By:. Title: ABN AMRO BANK N.V. By: Title: By: Title: THE CHASE MANHATTAN BANK, N.A. By: Title: CITIBANK, N-A. By:----------------------------------------------------Title: COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA AGENCY By: Title: By: Title: MORGAN GUARANTY TRUST COMPANY QF NEW YORK By: Title: NATIONSBANK OF FLORIDA, N.A. By:: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By:_______ Title: THE BAIR OF NOVA SCOTIA By:_______ Title: BARCLAYS BANK PLC By:----------- Title: CREDIT LYONNAIS ATLANTA AGENCY By:----------- Title: DBESDHEB BANK AG NEW YORK AND GRAND CAYMAN BRANCHES By:_______ Title: By:----------- Title: THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED By:_______ Title: SWISS BANK CORPORATION -- HEW YORK BRANCH By: Title: By:--------------------------------------------------------------- Title: UNION BANK OF SWITZERLAND By: Title: By: Title: J.P. MORGAN DELAWARE By: Title: CONTINENTAL BANK. N.A. By: Title: Exhibit U U. R. GRACE I CO. AM) SUBSIDIARIES EIGHTS) AUERAGE MISER OF SHARES AMI EARNINGS USED IN FER SHARE COHUTATIOKS (UnMdited) The wightod **crfe auHr of shown of Cowon Stock outstanding were u follow (in thowendo): 3 Hon. Enied 6/38/94 - 6/30/93 6 Nos. Mel 6/30/94 - 6/38/93 Weighted ovorego nwber of iKum of Cowon Stock ontstondlng................................................................ Cowrtion of convertible Ut obllgotloee........................ Additionel 41 lot1m affoct of oototoading ogtions Us determined bg the egpllcotleo of tho treeevy stock Mtkol)....................................... .............................. Weighted oMrsye owkor of shown of Cowon Stock antotendisg snowing foil 41lotion............................ 614 -- 90,183 12.187 782 183,152 MWOWWWW 93,842 -- 90,083 3,626 790 782 94,648 -- 94,491 Loon ooo4 In tko congntotlw of sowings ger shorn nere os follow (In nillions except gor shore): 3 Hon. Ended 6/30/94 - 6/30/93 6 Hoe. Ended 6/30/94 - 6/30/93 Not loon .............................................. Dividends gold on gwforwd stocks . . . .................................. Loon oooi In for shun confutation of "`R1.............................................. Intnrnot, not of too, on conoortiblo debt obllfitiono................................................................................ Loon osnd in gor shun congototion of norninoo snowing foil dliotion............ Loon gor slwn ..................................... Loon gor shun aonwlng foil dliotion. . $(51.1) $(96.1) $(22.8) (.1) (.1) (.2) (.2) (51.2) (96.3) (23.0) -- 4.5 1.2 $(46.7) $ (.57) $ (.45) $(96.3) ---- -- $(1.83) $(1.82) $(21.8) ------ $ (.26) $ (.23) f Exhibit 12 li. R. ones CO. AND SUBSIDIARIES CMUTOTIW OF RATIO OF BWUNGS TO FIXED CHARGES AM) coreUG> fixes charges aw preferred stock diuidews (la at11 1mm except ratlea) (UaMditol) Veara Ealel Decanter 31, (b> 1993(c) 1992(1) 1991 1998 1989 Six Hoatha Ealel Jaae 30, 1994(e) 1993(h) Nat Incana'(loce) Iran coatiaaief oferetioae ............ AM (laiact): Proiaioe'(keaeUt) far laooae taxea...................... Iimh (mi af S^omi nnnilfii..................... Maorlty internet la iaean* af naJority-wnM* ante14iarlea............................... Eyity ia uneltM oaralapa af laaa SErawai raaiilii............................ lataraat cxpoaaa, laclaliap Mortisation of capitaliaM lataraat..................................... Aaortiaatioa af labt liacoaat aai axpeaaa............ Batiaatol aaoaat af rental expaaae 4aana4 to rapraaaat the lataraat factor ............ $134.4 06.8 .1 $57.7 134.8 2.1 $281.7 132.5 1.5 $174.6 97.5 1.9 $145.9 61.3 1.2 $(96.1) $86.6 (61.6) -- 62.2 -- -- -- -- 1.2 .6 -- -- (1.3) (1.8) (2.5) (2.1) (.3) (1.4) (.3) 119.8 152.9 198.4 235.7 224.8 48.5 59.9 4.3 1.5 2.1 1.9 1.9 .6 1.2 21.3 26.6 21.7 21.8 19.1 15.8 15.2 laaone/doea) aa eljnatal........................................... $365.4 $373.8 $555.4 $631.7 $454.5 $(96.8) $223.8 CoahlaM fiaa4 rharpaa aa4 preferel atock 4ii4ea4t: lataraat axpeaaa, lactally caplUlUai lataraat............................................................. ftaortiaatiaa af labt liacoaat aal eyenaa ............ Eetinatol anoint af rental expaaae 4aana4 to repreeaat the lataraat factor ............ $119.9 4.3 $166.5 1.5 $213.3 2.1 $244.7 1.9 $229.3 1.9 $49.7 .6 $68.3 1.2 21.3 26.6 21.7 21.B 19.1 15.8 15.2 Final rharpaa............................................................. Preform! atock 4114ea4 rayIrenaate(a)................... 145.5 194.6 237.1 267.6 258.3 65.3 76.7 .9 .9 .9 .8 .7 .4 .5 Coakiael final charpea aal paafetrel atock liillenli....................................................... $146.4 $196.5 $238.8 $268.4 $251.8 $65.7 $77.2 Ratio af oamleaa to flxel cherpaa............................ 2.51 1.92 2.34 1.99 1.82 Cf) 2.92 Ditto T mlto to OMfciwi fixe4 Hifwit stack 4iui4oa4o. . . . 2.9 1.91 2.33 1.98 1.81 <f) 2.98 to) Profonto utack tlaUnl mtulrminto, lacreoato to m Mount NfMMtln tto pretax oarntofo ttot uould to rofuiitol to eooer ouch 4l*14oto rotuto--inti tooo4 on tto offoctioo tux rateo for tto porio4* ffMMtei. (h) DoUto4 to coufam to tto 1994 prooontatiou. (c) Inelu4oo < proutoton of $159.8 relating to iotottoa-nIato4 ioMiraace (4) toctofco proutoton of $148.0 rolotiw to o fono4 tilioo plant In BolfiM- te) lnelo4oo proutoton of $316.8 ninths to ankooton rolta4 lnauraacc (f) An a moult of tto toon incurro4 for tto oix-Mntb porto4 on4o4 June 38. 1994. draco uaa uaakto to fully oouer tto in4ioato4 fixed etorpoo. >