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SECURITIES AND EXCHANGE COAMISSION WASHINGTON, DC. 20549
FORM 10 -Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Secnrities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1997
Comission File Noaber 1-12139 V. R. GRACE & CO.
Delaware
65-0654331
(State of Incorporation)
(I.R.S. Eoployer Identification No.)
One Town Center Road Boca Raton, Florida 33486-1010
(561) 362-2000
Indicate by check aark whether the registrant (including its predecessor) (1) has filed all reports required to be filed by Section 13 or 15(d) of the Secnrities Exchange Act of 1934 daring the preceding 12 nonths and (2) has been subject to anch filing requirenents for the past 90 days.
Ye s X
No
73,410,165 shares of Comon Stock, S.01 par valne, were outstanding at August 1, 1997.
1
V. R. GRACE ft CO. AND SUBSIDIARIES Table oi Contents
Part I. Financial Information
Iten 1. Financial Statement!
Consolidated Statement ot Operations
Consolidated Statement oi Cash Flows
Consolidated Balance Sheet
Notes to Consolidated Financial Statements
Item 2. Management's Discussion aud Analysis of Results uX Operations and Financial Condition
Part II. Other Information
Item 1. Legal Proceedings Item 4. Submission of Matters to s Vote of Security Holders Item S. Other Information Item 6. Exhibits and Report! on Form S-K
Page No.
I-1 1-2 1-3 I - 4 to I I - 11 U> I
II 1 II - 1 II - 3 II - 3
As nsed in this Report, the term "Company" refers to tt. K. Grace ft Co. and The term "Grace" refers to the Company and/or one or more oi its subsidiaries.
PART L. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS
V. R. GRACE & CO. AND SUBSIDIARIES
Three Months Ended Six Months Ended
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
June 30,
Jane 30,
In Billions (except per share aaonnts)
1997
1996
1997
1996
Sales and revenues Other income...........
.1 842.1 $ 920.3 SI,627 6 $1,781.9
18.9
14.3
23 6
18.1
TOTAL
861.4
934.6 1,651.2 1,800.0
Cos (. ui goods sold and opera Ling expenses........... Selling, general and administrative expenses... Depreciation and amortization...................................... Interest expense and related financing costs... Research and development expenses............................. Restructuring costs............................................................. Gain on sales of businesses...........................................
313.2 158.0
49.2 20.3 21.7
12.4 (103.1)
549.2 201.0
45.9 18.3 26.2 S3.7 (326.4)
993.2 304.6
97.7 39.4 43.6 12.4 (103.1)
1,061.8 394.9 90.8 36.7 52.5 53.7
(326.4)
TOTAL
671.7
567.9 1,387.8 1,364.0
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES..........................................
Provision for income taxes...........................................
189.7 72.3
366.7 131.7
263 4 99.6
436.0 157.4
INCOME FROM CONTINUING OPERATIONS Income from discontinued operations....
117.4 --
235.0 98.9
163.8
278.6 118.9
NET INCOME.................................................
$ 117.4 $ 333.9 S 163.8 $ 397.5
Earnings per share: Continuing operations........................................ Net income.................................................................
Fully dilated earnings per share: Continuing operations........................................ Net income.................................................................
Dividends declared per common share...............
Weighted average sharea outstanding...............
$ 1.61 $ 2.43 $ 2.21 $ 2.86 $ 1.61 $ 3.45 $ 2.21 $ 4.09
$ 1.56 $ 2.39 $ 2.15 $ 2. 80 $ 1.56 $ 3.39 5 2.15 3 4.00
$ .145 $ .125 $
.27 $
.25
72.8
96.6
74.0
97.3
The Notes to Consolidated Financial Statements nre integral parts of these statements.
I-1
V. R. GRACE & CO. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
In nillions
SIX hENTHS ENDED JUNE 30,
1997
1996
OPERATING ACTIVITIES Incone iron continuing operations before incone taxes.............. Reconciliation to cash provided by operating activities:
Depreciation and anortization............................................................. Provision relating to rest.rnct.nring costs................................. Gain, on sales of businesses................................................................. Changes m assets and liabilities, excluding effect of
businesses acquired/divested and foreign currency exchange: Increase in notes and acconnts receivable, net................ (Increase)/decrease in inventories........................................... Proceeds Iioia asbes los-rela Led insurance settlements.. Payments made for asbestos-related litigation
settlements, judgments and defense costs....................... Decrease in acconnts payable........................................................ Other............................................................................................................
NET PRETAX CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS...................................................................
Net pretax cash (used forj/provided by operating activities of discontinued operations...............................................................
NET PRETAX CASH PROVIDED BY OPERATING ACTIVITIES.................. income taxes paid..............................................................................................
NET CASH PROVIDED BY OPERATING ACTIVITIES.................................
INVESTING ACTIVITIES CapiLal expenditures....................................................................................... Net proceeds from divestments................................................................... Easinesses acquired in pnrehtse transactions, net of
cash acquired and debt assumed.......................................................... Net investing activities of discontinued operations.................. Other .......................................................................................................................
NET CASH PROVIDED BY INVESTING ACTIVITIES..................................
FINANCING ACTIVITIES Dividends paid..................................................................................................... Repayments of borrowings having original maturities in
excess of three months............................................................................ Increase in borrowings having original maturities in
excess of three months............................................................................ Net repayments of borrowings having original maturities of
three months or less................................................................................. Stock options exercised................................................................................. Net financing activities of discontinued operations.................. Purchase of tressnry stock..........................................................................
NET CASH USED FOR FINANCING ACTIVITIES........................................
$263.4
97.7 12.4 (103.1)
$ 436.0
90.8 53.7 (326.4)
(72.3) (13.1)
42.3
(49.9) (36.3) (47.2)
94.1
(25.3)
68. * (28.0)
40.8
(113.6) 666.3
(15.9) (70.7)
14.9
481.0
(19.8)
(72.8)
(2.9)
(137.0) 24.3
(335.9)
(544.1)
(78.4) 33.3 99.7
(73.1) (20.3) (98.2)
117.1
41.9
159.0 (40.5)
L18.5
(234.5) 697.1
(97.6) 14.7
379.7
(24.5)
(50.8)
-(6.7) 53.2 (37.1) (398.2)
(464.1)
Effect, of exchange rate changes nn cash and cash eqnivalent.s (DECREASE)/ INCREASE IN CASH AND CASH EQUIVALENTS..................
(2.8) $ (25.1)
(1.0) $ 33.1
TUe Notes U> Consolidated Financial Statements me integral parts of these stateneats.
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V. R. GRACE 4 CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED)
In nillions (except par value)
June 30, 1997
December 31, 1996
ASSETS CURRENT ASSETS
Cash and cash equivalents............................................................................ $ Notes and accounts receivable, net...................................................... Inventories........................................................................................................... Net assets of discontinued operations..................................................
Deferred income taxes..................................................................................... Other cnrrent assets.......................................................................................
43.2 635.1 376.0
56.8
121.5 26.8
$
68.3 831.4 376.1 297.4
183.9 17.S
TOTAL CURRENT ASSETS.................................................................................
1.259.4
1,774.9
Properties and equipment, net of accnmnlated depreciation and amortization of $1,478.9 (December 31, 1996 - $1,436.6)..
Goodwill, leas accumulated amortization of $14.3 (December 31, 1996 - $18.6).................................................................
Asbestos-related insurance receivable......... ........................................ Deferred income taxes..................................................................................... Other assets.........................................................................................................
1,814.6
38.1 271.2 314.7 614.3
TOTAL ASSETS................................................................................................... $4,312.3
1,871.3
40.6 296.3 309.2 653.5
$4,945.8
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES
Short-term debt................................................................................. Accounts payable............................................................................... Income taxes....................................................................................... Other cnrrent liabilities..........................................................
$ 106.5 218.8 122.6 697.0
$ 315.2 274.7 123.3 773.9
TOTAL CURRENT LIABILITIES....................................................
1,144.9
1,487.1
Long term debt................................................................................... Deferred income taxes................................................................... Noncurrent liability for asbestos-related litigation Other liabilities............................................................................
1,060.9 52.0
812.7 819.9
1,073.0 43.5
859.1 850.7
TOTAL T.TARTTTTTES........................................................ .........
3,890.4
4,313.4
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY Common stock issued, par value $.01...................................................... Paid in capital.......................................................................................................... ReLaiued earnings...................................................................................................... Cumulative translation adjustments.............................................................. Deferred compensation trust, at market: 70,250 common shares Treasury stock, at cost: 6,220,583 common shares
(December 31, 1996 -10,000).....................................................................
.8 556.7 316.6 (116.4) (3.9)
(331.9)
.8 524.1 172.6 (64.6)
(.5)
TOTAL SHAREHOLDERS' EQUITY..................................
421.9
632.4
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$4,312.3
$4,945.8
The Notes to Consolids ted Financisl Ststenents are integral parts ul these sta teueuts.
I3
V. R. GRACE t CO. AMD SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEhCNTS (Dollars m millions, except per share amounts)
1. BASIS OF PRESENTATION
The interim consolidated financial statements in this Report are nnaadited and should be read in conjunction with the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31. 1996 (1996 Fora 10-K). The interim consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of the interin periods presented; all anch adjustments were of a normal recarring nature. Certain amounts in the prior periods' consolidated financial statements have been reclassified to conform to the current periods' basis of presentation and as required with respect to discontinned operations.
The retain of operations for the three- and six-month interim periods ended Juue 30, 1997 are nut necessarily indicative uf the results oi operations lur the fiscal year ending December 31, 1997.
2. ASBESTOS AND RELATED INSURANCE LITIGATION
Grace is a defendant in property damage and personal injnry lawsuits relating to previously sold asbestos-containing products and anticipates that it will be named as a defendant in additional asbestos-related lawsnits in the futnre. Grace was a defendant in approximately 43.300 asbestos-related lawsuits at June 30, 1997 (25 involving claims for property damage and the remainder involving approximately 104,500 claims for personal injnry), compared to approximately 41,500 lawsnits at December 31, 1996 (31 involving claims for property damage and the remainder involving approximately 91,500 claims tor personal injnry).
Property Damage Litigation
Through Juue 30, 1997, 137 asbestos property damage cases were dismissed without payment of any damages or settlement amounts; judgments were entered in favor of Grace in nine cates (excluding cates settled following appeals of judgments in favor of Grace); judgments were entered in favor of the plaintiffs in seven cases (none of which is on appeal) for a total of 360.3; and 190 property danage cases were settled for a total of $454.0. Property damage case activity for the six months ended June 30, 1997 was as follows;
Cases outstanding,December 31, 1996.............................................................................. Settlements.............................................................................................................................. Dismissals................................................................................................................................
31 (4) (2)
Cases outstanding,June 30, 1997...........................................................................
25
Personal Injnry LiLigution
Through June 30, 1997, approximately 12,500 asbestos personal injury lawsuits involving approximately 29,000 claims were dismissed without payment oi any damages or settlement amounts (primarily on the basis that Grace prodnets were not involved), and approximately 32,800 lawsuits involving approximately 69,700 claims were disposed ol for a total of $204.0. Personal injnry claim activity for the nix months ended Inne 30, 1997 was as follows;
I-4
V. R. GRACE t CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STAIENCNTS (Doll*is in Millions, except per share anounts)
Clains outstanding, December 31, 1996................................................................... New clains................................................................................................................................ Clains under amended conplaints................................................................................. Sctllcncnts.............................................................................................................................. Disnissals................................................................................................................................ Jnrignent.s..................................................................................................................................
Clains outstanding, Jnne 30, 1997......................................................................
91,511 14,859
3.101 (3,420) (1,585)
(3)
104,463
Aabeatos-Related Liability
Based upon and subject to the factors discussed in Note 2 to the consolidated financial stateaents in the 1996 Fora 10-K, Grace estinatea that its probable liability with respect to the defease and disposition of asbestos property danage and personal injury cases and clains was as follows at Jane 30, 1997 and Deeenber 31, 1996:
Jane 30, Dcccnbcr 31,
1997(1)
1996(1)
Current liability for asbestos-related litigation(2).... Noncnrrent liability tor asbestos-related litigation....
$135.0 812.7
$135.0 859.1
Total asbestos-related liability(3)...................................... $947.7
$994.1
(1) Re Heels properly damage ain] personal injury cases and clains pending at Jnne 30. 1997 and Deeenber 31, 1996, respectively, as well as personal injury clains expected to be filed throngh 2001.
(2) Included in "Other current liabilities" in the Consolidated Balance Sheet.
(3) Excludes one property denage ease as to which liability is cot yet estinable becanse Grace bas not yet been able to obtain sufficient infornation through discovery proceedings.
Asbestos-Related Insurance Receivable
Grace previously pnrehased insurance policies with respect to its asbestos-related lawsuits and clains. The following table displays the activity in Grace's notes receivable fxon insurance carriers and asbestos-related insurance receivable during the six months ended Jnne 30. 1997:
NOTES RECEIVABLE Notes receivable from inanrance carriers at December 31, 1996,
net of discount of $7.4(1)................................................................................... Proceeds from asbestos-related insurance settlenents............................... Amortization, net..............................................................................................................
Notes receivable from insurance carriers at. June 30, 1997. net of diacount of $6.1(2)...............................................................................
$ 48.5 (17 4) 1.3
$ 32.4
INSURANCE RECEIVABLE Asbestos-related insurance receivable at Decenber 31, 1996(3)........... Proceeds from asbestos-related insurance settleaents...............................
Asbestos-related insurance receivable at Jnne 30, 1997(3).............
$ 331 3 (25.1)
$ 306.2
Total anoonts dne from intnrance carriers................................................. 3 338.6
(1) Classified in tbe December 31, 1996 Consolidated Balance Sheet as $17.2 in "Notes and accounts receivable, net" and $31.3 in 'Otbec assets."
(2) Classified in tbe Jnne 30, 1997 Consolidated Balance Sheet as 315.0 m "Notes and accounts receivable, net" and $17.4 in "Other assets."
(3) $35.0 of the asbestos-related insurance receivable is classified in "Notes and accounts -receivable, net." in the December 31 , 1996 and Inne 30, 1997 Consolidated Balance Sheets.
I-5
V. R. GRACE t CO. AND SUBSIDIARIES NOUS 10 UJNSOLIDAIED FINANCIAL STAlhhtiNlS (Dollars in Billions, except per share amounts)
Insurance Litigation
Grace's ultimate exposure with respect to its asbestos-related cases and clains will depend on the extent to which its inanranoe will cover damages for which it nay be held liable, anonnts paid in settlenent and litigation costs. In Grace's opinion, it is probable that recoveries fron its insurance carriers (including amounts reflected in the receivable discussed above), along with other funds, will be available to satisfy the property damage and personal injury cases and claims pending at. Inne 30, 1997, as well as personal injury claims expected to be filed in the foreseeable future. Consequently, Grace believes that the resolution of its asbestos-related litigation will not have a material advene effect on its consolidated financial position.
For additional information, see Note 2 to the consolidated financial statements in the 1996 Form 10-K.
3. ACQUISITIONS AND DIVESTMENTS
Acquisitions
In April 1997, Graoe purchased all of the shsrei of capital stock of Schnrpack. Inc. (Schnrpack), a manufacturer of flexible food packaging located in St. Joseph, Missouri. Schnrpack, with 1996 sales of approximately $20.0, is a leading manufacturer of plastic laminate packaging materials for the institutional and retail cook-in market segment. Schnrpack also co-extrudes and converts film for fond and non-food applications.
Divestments
In May 1997, Grace completed the sale of its specialty polymers business to National Starch and Chemical Company for S148.0, subject to adjustment. The sales and revenues of this business for the three end six month: ended Inne 30, 1997 were $6.8 and $24.8, respectively ($17.6 and $36.1 lor the Ihiee aud six months ended June 30, 1996, respectively); its financial position and results of operations were not significant to Grace, the tale of this business resulted in a pretax gain of $103.1, and an after-tax gain of $63.0 ($.86 per common share), in continuing operations.
In Jnne 1996, Grace sold its water treatment and process chemicals business (Dearborn). The sales and revenues of this business for the three and six months ended Inne 30, 1996 were $103.6 and $201.2, respectively; its financial position and results of operations were not significant to Grace. The sale of this hnsineas and the biopest.icides hnsineas (sold in the second quarter of 1996) resulted in a pretax gain of $326.4, and an after-tax gain of $210.1 ($2.18 per common share), in continuing operations.
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W. R. GRACE k CO. AND SUBSIDIARIES NOTES 10 CONSOLIDATED FINANCIAL STATEMiNTS (Dollars in millions, except per shire mounts)
4. DISCONTINUED OPERATIONS
In February 1997, Grace sold its cocoa business to Archer-Daniels-Midland Company for total proceeds of $470.0 (inclusive of debt assumed by the buyer), subject to adjustment. The pretax and after tax effects of the divestment were consistent with prior estimates and have been charged against previously established reserves.
Tn the fourth quarter of 1996, Grace classified its thernal and emission control systems business (TEC Systems) as a discontinued operation. Grace classified its health care business as a discontinued operation in the second quarter of 1995 and ditposed of thal business in 1996. Results of these discontinued operations that were not charged against previously established reserves, and the gain on the May 1996 sale of Giace's transgenic plant bnsiness, were as follows:
Three Months Ended Jane 30,
1996
Six Months Ended June 30,
1996
HEALTH CARE Sales and revennes...............................................................
Income from operations before taxes(l).................. Income tax provision..........................................................
Income from discontinued health care operations
TEC SYSTEMS Sales and revenues...............................................................
Loss from operations before taxes............................. Income tax benefit...............................................................
Loss from discontinued TEC Systens operations
$565.5 $ 38.9
17 5 $ 21.4
$ 28.5 $ (3.1)
(12) $ (1.9)
$1 ,105.2 $ 77. L
33.7
$ '43.4
$ 52.9 $ (6.4)
(2.5) $ (3.9)
Total operating results.............................................
Gain on sale of transgenic plant bnsiness........... Provision for income taxes on sale of transgenic
plant basinets.................................................................
$ 19.5 129.0 49 6
$ 39.5 129.0 49.6
Total income-from discontinued operations...
$ 98.9
$ 118.9
(1) Reflects allocated interest expense of $24.4 and $51.2 for the three and
six months ended June 30, 1996, respectively, based on the ratio of the
net assets of the health care hnsiness compared to Grace's total capital.
For the three and six nonths ended June 30, 1997, the operating results ol TEC Systems, the cocoa business tod other discontinued operations have been charged against previously established reserves and, therefore, are not reflected in the Consolidated htatenent oi Operations.
I-7
V. R. GRACE t CO. AND SUBSIDIARIES
NOTES ID CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Billions, except per shire amounts)
The net assets ol discontinued operations at Jnne 10, 1997 primarily reflect TEC Systems. The components ol the net assets of Grace's discontinued operations (excluding intercompany assets) at Jnne 30, 1997 are as follows:
Cnrient assets....................................................................................................................... Properties and equipment,net........................................................................................ Investments in and advancesto alliliated companies....................................... Other assets...........................................................................................................................
Total assets.....................................................................................................................
Jane 30. 1997
$42.4 15.2 12.1 6.3
$76.0
Current liabilities............................................................................................................ Other liabilities................................................................................................................
Total liabilities..........................................................................................................
Net assets.........................................................................................................................
$17.8 1.4
$19.2
$56. S
Tn Jnne 1997. Grace entered into an agreement, t.o sell TFT Systems t.o Serpii Corporation.
For additional information, see Note 6 to the consolidated financial statements in the 1996 Form 10-K.
3. RESTRUCTURING COSTS
As discnsied in Note 4 to the consolidated financial statements in the 1996 Form 10-K, Grace began implementing a worldwide program in 1995 locnsed on streamlining processes and reducing general and administrative expenses, factory administration costs and noncore corporate research and development expenses. As previously reported, Grace has continued to implement additional cost redactions and efficiency improvements beyond those initiated in 1995, as its businesses have farther evaluated and reengineered their operation!. As a result of these evaluations, in the second quarters of 1997 and 1996, Grace recorded pretax charges of $12.4 ($S.D afT.er-t.*x) and $53.7 ($32.4 nft.er-r.ax), respectively, principally related to the restructuring of its packaging business, lhe 1997 charge primarily relates to the restructuring of the packaging basinets from a worldwide group of independent regional nnits into an integrated global organization, and is primarily comprised of employee termination benefits. The 1996 charge primarily related to the restructuring of Grace'a Enropean packaging bntiness and consisted of costs related to employee termination benefits and lease termination ousts.
I-8
V. R. GRACE t CO. AND SUBSIDIARIES NOTES TO OOfvSOLlDAlH) FINANCIAL SlATTAtNlS (Dollars in millions, except per share amounts)
6. INVENTORIES The components of Grace's inventories are as follows:
June 30, December 31.
1997
1996
Raw materials............................................................................ ... $ 101 8
$ 100 9
In process.....................................................................................
70.7
67.6
Finished products...................................................................
184.5
179.0
General merchandise................................................................
65 0
73 4
Less: Adjustment of certain inventories to a
last-in/firat-ont (LIFO) basis...........................
(46.0)
(44.8)
$ 376.0
$ 376.1
7. OTHER ASSETS The components of Grace's other assets are as follows:
Jnne 30, December 31.
1997
1996
Prepaid pension costs.................................................................
Long-term receivables, less allowance of S45.2 (December 31, 1996 - $42.7).............................................
Deferred charges............................................................................ OLlier.....................................................................................................
$
279.0
126.8 105.2 103.3
$ 275.1
152.9 102.4 123.1
$ 614.3
$ 653.5
8. SHAREHOLDERS' EQUITY
During the first half of 1997, the Company substantially completed the share repurchase program initiated in 1996 hy acquiring 6,306,300 additional shares of its common stock for $335.9, or an average price of $53.26 per share. For additional information, see Note 13 to the consolidated financial statements in the 1996 Form 10-K.
In 1997, Grace established a trust to fnnd certain deferred employee incentive compensation and nonemployee director compensation and benefits. The shares held in the trust tie valued at the closing market price at Ibe end ul each reporting period.
I9
W. R. GRACE t CO. AMU SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STAIEhCNTS (Dollars iu millions, except, pet share auwuiiLs)
9. EARNINGS PER SHARE In calculating primary earnings per share, the dilntive effect of common stock equivalents was not material (as defined by Accounting Principles Board Opinion No. 15, "Earnings Per Share') for the periods presented. Accordingly, earnings per share presented in the Consolidated Statcncnt of Operations arc computed on the basis of the weighted average nanber of shares outstanding. In the first qnarter of 1997, the Financial Accounting Standards Doard issued Statement of Financial Accounting Standards (SEAS) No. 12*, 'Earnings Per Share," which establishes new standards for computing and presenting esrmngs per share effective December 31, 1997. At December 31, 1997, all prior periods will be restated to reflect the new basic and dilated earnings per share amounts required by SFAS No. 12*. The pro forma effect of the adoption of SFAS No. 12* on earnings per share is not material 1or Lite periods presented.
I - 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AT FINANCIAL CONDITION
REVIEW OF OPERATIONS
OVERVIEW
-<)
Grace is one of tbe world's leading packaging and specialty chemicals companies. Grace's core businesses are packaging, catalysts and other silica-bascd prodnots (Grace Davison), and construction products.
Sales and revennes decreased S it for the second quarter of 1997 compared to the second quarter of 1996 and decreased 8.7* for the iirst half of 1997 compared to tbe first hall of 1996. Excluding divested bnsinesses, sales and revennes for the 1997 second quarter increased 4.6*. and tales and revennes for the first six months of 1997 increased 3.8*. over the comparable periods of 1996. Pretax income from continuing operations was $189.7 nillion for the second quarter of L997, a 48.3* decrease conpared to the 1996 second quarter, and was $263.4 million fur the first six mouths of 1997, a 39.6* decrease compared to the 1996 first half. As noted in the table below, pretax income iron continuing operations for the three and six months ended June 30, 1997 and 1996 was affected by various special items. Excluding these special items, Grace's pretax operating income was $118.5 million for the 1997 second quarter, an increase of 12.6* over the 1996 quarter, and S209.8 million for the six months ended Jane 30, 1997, an increase of 9.0* over the sane period in 1996. Pretax operating resnlts for the three and six months ended Jnne 30. 1996 have been restated to reflect the classification of certain basincsscs as discontinued operations.
PRETAX OPERATING RESULTS - CONTINUING OPERATIONS Three Months Ended Six Months Ended
(In millions)
Jane :30,
Jnne :30,
1997
1996
1997
1996
Sales and revennes, excluding divested bnsinesses.. $833.7
Sales and revennes of divested bnsinesses(l)...........
6.8
Sales and revennes................................................................. $842.3
$798.8 $1 ,602.8 $1 ,543.9
121.5
24.8
238.0
$920.3 $1 ,627.6 $1 ,781.9
Operating income, excluding special items and divested businesses...............................................................
Operating income of divested bnsinesses(l')..................
$117 3 1.2
$102.0 $ 206 0 $ 188.3 3.2 3.8 4.1
Operating income before special items...................... Special items:
Gain on sales of bnsinesses............................................. Restructuring costs...............................................................
$118 5 $105.2 $ 209 8 $
103.1 (12.4)
326.4 (53.7)
103.1 (12.4)
192.4
326.4 (53.7)
Operating, income from continuing operations......... Other incomes' (expense):
Interest expense and related financing costs.... Other incone, net...................................................................
$209.2
(20.3) .8
$377.9 S
(18.3) 7.1
300.5 $ 465.1
(39 4) 2.3
(36.7) 7.6
Income from continuing operations............................... $189.7 $366.7 $ 263.4 $ 436.0
(1) Primarily reflects Grace's specialty polymers business, divested in May 1997, and Grace's water treatment and process cbenicais business, divested in Jane 1996.
The following discussion includes projections and/or other ''forward-looking" information. Grace is subject to risks and other uncertainties that conld cause its actual results to differ materially from any snch projections or that conld cause other forward-looking information to prove incorrect. For a discussion of snch risks and nncertainties, see "Introduction and Overview Projections and Other Forward-Looking Information" in Item 1 of the 1996 Form 10-K.
T - 11
MANAGEMENT'S DISCUSSION A>D ANALYSIS OF RESULTS OF OPERATIONS FINANCIAL CCNDITICN (OOKriNUED>
SALES AND REVENUES
SALES AM) REVENUES (excluding divested businesses) (In nillions)
Three Months Ended June 30. % Change
1997
1996
1997 VS. 1996
Packaging.............................................................................. Grace Davison..................................................................... Construction Products.................................................... Other.....................................................................................
SAT.RS AND REVENUES.................................................
$531.8 175.5 127.8 .6
$835.7
$493.8 190.2 114.2 .6
$798 8
ssssss
7.7% O 1) 11.9
4.6%
SALES AM) REVENUES (excluding divested businesses) (in millions)
Six Months Ended lune 30,
% Change
i9y?
1996
1997 VS 11 996
Packaging......................... Grace Davison................ Cone cruetion Product! Other..................................
SALES AND REVENUES
$1,020.6 350.1 230.8 1.3
$1,602-8
$ 968.4 375.8 198.5 1.2
$1,543.9
5.4% (6.8) 16.3
8.3
3.8%
Aa noted above, tales and revenuea (excluding divetted bueineetee) increased 4.6% and 3.8% tor the three-month and six-month periods ended June 30, 1997, respectively, over the eane period* in 1996. Excluding unfavorable currency translation variances estimated at 3.4% and 3.1%, tales and revenuea in the 1997 three- and six-month periods increased by an estimated 8.0% and 69%, respectively, over the 1996 periods. The following is a discussion of the sales and revenues of Grace's product lines.
PACKAGING
Sales sad revenues of $531.8 Billion for the second quarter and $1,020-6 nillion for the first six nonths of 1997 increased 7.7% ond 5.4%, respectively, versus the comparable 1996 periods. Excluding unfavorable currency translation variances estinated at 3.8% and 3.3%, sales and revenues in the 1997 three- and six-nonth periods increased by an estimated 11.5% and 8.7%, respectively, over the 1996 periods. Packaging sales volume in 1997 has been positively affected by the July 1996 acquisition of Cypress Packaging, Inc., a leading supplier of plastic packaging materials for the retail pre-cut produce market, the August 1996 acquisition of Bayern S.A. de C.V. (Bayern), a Mexican producer of can coatings and closure sealants for the rigid container industry, and the April 1997 acquisition of Schurpack, a U.S manufacturer of plastic laminate packaging materials for the institutional and retail cook-in
market segment. These acquisitions accounted lor approximately 28% and 35% ol the overall tales increases for the 1997 second quarter and first half, respectively. In addition to these acquisitions, Packaging experienced sales growth within its product groups, as described below (in ail cases excluding the effect of currency translation).
I - 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AM) FINANCIAL CONDITION (CONTINUED)
Bag sales increased across all geographic regions for the second quarter and first half of 1997 over the second quarter and first half of 1996. Volumes increased in North America at a result of sales of fresh red neat bags to new customers and the continued penetration of TBG(TM) boneguard packaging products into the fresh beef segment. In addition, sales increased as a result of price increases in North America that vent into effect during the second quarter of 1997; these price increases alto resulted in voluae increases, as customers made additional purchases prior to the price increases. These increases, however, were moderately offset by continued softness in the North Aiaerican pork market, reflecting reduced slaughter rates steming from 1996 livestock reductions caused by higher prices for corn and other feeds. This narket is expected to improve over time as corn prices further stabilize and livestock numbers return to more normal levels. European bag sales increased ever the second quarter of 1996, as fresh red meat sales (primarily iu the U.K. and France) have partially recovered from consumer fears associated with publicity surrounding bovine spongiform encepbalopstby - commonly referred to as "mud cuw disease." Strung sales iu the cheese and processed (suuked aud cured) meat segments in northeastern Enrope (primarily Poland and Russia) continued in the second quarter. The increase in cheese sales was primarily due to substantial growth in Rnssian domestic sales due to an improving economy, which in turn drove large exports of cheese lion Poland to the Russian market; the processed meet increase was primarily due to the modernization of food distribntion infrastructures in northeastern Europe. Volumes in Latin America increased dne to the growing acceptance of boxed beef packaging and increased exports of fresh red meat to Europe as a result of the lingering effects of mad cow disease. Sag sales volnaes in Asia Pacific increased as a result. of strong demand in the Australian and New Zealand beef and lamb markets. These increases were partially offset by sales volume decreases in Japan dne to a continuing slow economy and a decline in beet consumption as consumers become more health conscious.
Second quarter and first half 1997 laminate sales increased 14.04 and *.34. respectively, as compared to the 1996 periods, primarily due to increases in North America aud Latin America. Iu North America, volumes increased as a result of increased customer acceptance of packaging liquid products in flexible packaging and the Schurpack acquisition discussed above. Sales growth in Latin America resulted fron increased demand for cook-in and food service packaging for the processed and prepared foods segment.
Film sales for the second quarter and first half of 1997 increased in all regions as compared to the second qnarter and first half of 1996. In North America, film sales increased as a result of new product introductions for industrial and consumer goods applications. Volunes were also favorably impacted by increased purchases prior to a price increase that took effect in May 1997. In Europe and Latin America, film sales increased primarily due to strong volunes, resniting from a strengthening of distribntion channels, including greatei use of distributors, which enabled wider access to market opportunities.
I - 13
1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AM) FINANCIAL CONDITION (CONTINUED)
Container sealants a ml coalings sales increased lor Lite second quarter and first half of 1997 compared to the sane periods in 1996. In Latin Anenca. volnmea increased as a resalt of improved market penetration of can coating products, primarily dne to the acquisition of Bayern discussed above. These increases were partially offset by nnfavorable variances within Enrope and Asia Pacific. European sales decreased primarily dne to an unseasonably cool and rainy spring, which resulted in decreased European beverage consumption. Additionally, two Enropean customers reverted to mannfactnring their own closure sealants in the second quarter of 1997. The Asia Pacific sales decrease resulted primarily from the depletion of customers' excess inventory in China and the increased penetration of alternative forms of packaging, snch as plastic and glass.
GRACE DAVISON
Sales of catalysts and other silica-based products for the second quarter and first six mouths of 1997 declined 7.7% and 6.8%, respectively, compared to the same periods in 1996, dne primarily to the depressed flnid cracking catalyst market, as discussed below. The effect of a strengthening dollar caused sales to decline by an estimated 40% and 3.7% for che three- and six-month periods ended Jane 30. L997, respectively, compared to the 1996 periods.
Flnid cracking catalyst sales were negatively impacted by both price and volume redactions for the second qaarter and first half of 1997 compared to the comparable periods in 1996. Pricing pressures, which began in the third quarter of 1996, appear to have lessened m the lirst half of 1997 in North America, bnt. continue in F.nrnpe and Asia Pacific. Volnne redactions were primarily caused by a large number of refinery turnarounds (temporary shutdowns of customers' refineries lor maintenance, repair and upgrades) in the first quarter of 1997, a large nonrecurring order to The Middle East in the second quarter of 1996, the refining of 'sweeter'' crude oil, which requires less fluid cracking catalysts, and the loss of two customers m Asia Pacific during the first half of 1997.
Silica/adsorbent sales were higher for the second quarter and first half of 1997 compared to the aecond quarter and first half of 1996. These increaaaa were primarily due to increased volumes in North America from sales of new products m the graphic arts market, and m Asia Pacific as a result of the new silica plant in Kuantan, Malaysia. This new plant began operation in the fonrth qaarter of 1996, and increased production is expected over the next two quarters.
Polyolefin catalyst sales increased for both the three and six months ended June 30, 1997 compared to t.he same periods of 1996. Volumes increased primarily due to the addition of two new customers. Total 1997 sales of polyolefin catalysts axe expected to increase compared to 1996 fueled by a strong worldwide resin industry.
I - 14
MANAGEMENT'S DISOJSSION AND ANALYSIS OF RESULTS OF OPERATIONS AM) FINANCIAL CONDITION (CONTINUED)
CONSTRUCTION PRODUCTS
Construction Products had record sales of $127.8 nillion for the 1997 second quarter and $230.8 nillion for the first six noaths of 1997, increasing 11.9* and 16.3%. respectively, over the comparable 1996 periods, driven by volnne increases. Higher volanes of cenent additives and concrete adnixtures accounted for approximately half of the increase, with increased volunes of fire protection and waterproofing products contributing significantly to the remainder of the growth. New valne-added products, primarily water-reducing and anti-corrosion concrete admixtures and waterproofing prodnets, continued to show strong sales growth as a result of greater narket acceptance. Water-reducing concrete admixtures enhance concrete strength and snrtace textnre and provide greater plasticity daring ponring. Anti-corrosion concrete admixtures significantly increase the life of concrete structures by retarding the oxidation of steel reinforcement bars.
Sales grew in all geographic regions Tor the second quarter and lirsL six months of 1997. North American sales increased by 13.0% and 20.3% in the 1997 second quarter and six months, respectively, over the 1996 periods, contributing approximately 70% and 77% of the overall sales increase in the 1997 second quarter and first six months, respectively. Second quarter construction activity in North America remained strong after a mild winter in the northeastern U.S. allowed for more construction activity than normal m the first quarter, especially when compared to the nnnannlly harsh winter experienced in the 1996 first quarter. Market share gains and market penetration of new value-added prodnets, discussed above, also drove North American sales growth. Sales in F.nrnpe grew faster in the second quarter than in the first quarter, recovering from weather-related construction delays at the beginning of the year and benefiting from an improving economy in the United Kingdom. Geographic expansion into Asia Pacific and Latin America, where infrastxuctnre building activity helped to drive sales, progressed favorably.
OPERATING RESULTS
OPERATING INCOME (In millions)
Three Months Ended June 30, % Change
(exclnding special items and divested businesses)
1997
1996
1997 VS. 1996
Packaging............................................................... Grace T>*vi son...................................................... Construction Prodnets.................................... Other........................................................................
OPERATING INCOME........................................
$ 78.6 21.3 15.3 2.1
$117.3
$ 64.1 24.2 11.9 1.8
$102.0
22.6% (12.0)
28.6 16.7
15.0%
OPERATING INCOME (In millions)
Six Months Ended Jane 30, % Change
(exclnding special itens and divested businesses)
1997
1996
1997 VS. 1996
Packaging
$143. 8
$124.1
L7.5%
Grace Davison...................................................... Construction Products............................. Other........................................................................
OPERATING INCOME........................................
...............
19.1
52.3 8.3 3.6
$188.3
(25..4; 130 1 (41,.7;
9.. 44
I - 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AH) FINANCIAL CONDITION (CONTINUED)
Cos l. management programs initially implemented m 1995 continued Lo layuriblv impact pretax operating income across all geographic regions and prodnct lines. Grace has implemented, and expects to further implement, additional cost redactions and efficiency improvements, as it farther evaluates and reengineers its manufacturing productivity and operations. The following is a discussion of the operating results of Grtce's prodnct lines.
PACKAGING
Packaging pretax operating income increased 22.64 and 17.54 for the second qnnrt.er and first half of 1997, respectively, compared t.o t.he second qnarr.er and first half of 1996. The favorable variances were primarily due to the volume and price increases discussed above, as well as ongoing cost containment efforts, snch as lower factory administration and selling expenses. However, these improvements in operating income were partially offset by increased expenses, inclnding an increase in raw material prices for resins in North America, higher expenses (primarily depreciation and aiaur LiiaLiuu expenses) associated with the new packaging plant in Kuaulan. Malaysia that began operations in the fourth quarter of 1996, and an increase in research and development expenses at a result of the continned emphasis on new prodnct development.
GRACE DAVISON
Grace Davison operating income for the second quarter and first six months of 1997 declined 12.04 and 25.44, respectively, compared to the same periods in 1996. A weak llnid cracking catalyst market resulted in both volume and price decreases, and foreign exchange translation unfavorably impacted earnings There were also nonrecurring items contributing to the decrease in operating income between the first halt of 1997 and 1996. In particular, the large number of refinery inrnaronnds (discussed above) decreased sales, and harsh winter weather at Grace Davison's Lake Charles, Louisiana facility increased repair and maintenance coats. These charges were offset by manufacturing efficiencies and ongoing cost reduction efforts. Despite the decline in operating income, Grace Daviauu Las maintained its market share, and the introdnctions of new manufacturing process technologies and new products have improved margins throughout the year.
CONSTRUCTION PRODUCTS
Construction Products pretax operating income increased 2S.6% and 130.1% for the second quarter and first six months of 1997, respectively, over the 1996 comparable periods. The favorable results were primarily dne to the record sales levels achieved in 1997, discussed above. Production rate improvements from enhancements to nannfact.nring processes, along with additional cost, containment efforts, also contributed to earnings growth.
I - 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AM) FINANCIAL CONDITION (CONTINUED)
OTHER ITEMS
INTEREST EXPENSE AND RELATED FINANCING COSTS
Interest expense and related linancing costs lot continning operations of $20.3 nillion and $39.4 Billion lor the second quarter and lirst hall ol 1997, respectively, increased 10.9s and 7.4*, respectively, eoapared to the 1996 periods. Including anonnts allocated to discontinued operations, interest expense and related linancing coats decreased 52.5* and 55.2* daring the second quarter and lirst hall of 1997, respectively, conpared to the second quarter and first, half of 1996. The decrease was prinarily dne to lower average debt levels (as a result ol debt repayments made using the proceeds Iron the September 1996 separation ol Grace's principal health care business and other divestments) and lower average effective interest rates.
See "Financial Condition: Liquidity and Capital Resources' below for farther information on borrowings.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development (RAD) spending decreased 17.2* and 17.0* for the second quarter and first half of 1997, respectively, compared to the second quarter and first half of 1996. The decrease refleots the continued positive impact ol cost management initiatives implemented during 1996 and 1995, primarily the elimination of Grace's corporate research organization, the transfer of core RAD activities to the product lines and the termination of RAD activities not related to Grace's core packaging and specialty chenicals businesses. The decrease is also attrihnt.ahle t.o the elimination of RAD spending related to Grace's water treatment and process chemicals business, which was divested in June 1996. As a result ol these initiatives, Grace has been able to increase RAD spending for its core businesses while rednemg total RAD expenses. Grace's RAD spending will continne to be directed toward its core businesses.
RESTRUCTURING COSTS
As discussed in Note 4 to the consolidated financial statements in the 1996 Form 10-K, Grace began implementing a worldwide program in 1995 focused on streamlining processes and reducing general and administrative expenses, factory administration coats and noncoxe corporate research and development expenses. As previously reported, Grace has continued to implement additional cost redactions snd efficiency improvements beyond those initiated in 1995, as its businesses have further evaluated and reengineered their operations. As a result of these evaluations, in the second quarters of 1997 and 1996, Grace recorded pretax charges of $12.4 million ($8.0 million afr.er-t.ax) and $53.7 million (S32.4 million afier-tax), respectively, principally related to the restructuring of its packaging business. The 1997 charge primarily relates to the restructnring of the packaging business from a worldwide group of independent regional units into an integrated global organization; the 1996 charge primarily related to the restructuring of Grace's European packaging operations. The 1997 restructnring is expected to spar sales growth, improve manufacturing productivity, reduce costs, shorten product deyelupueut time and enhance customer service for the ptekaging business. The 1997 charge is primarily comprised of employee termination benefits, snd the 1996 charge consisted ol costs related to employee termination benefits and lease termination costs.
T - 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AM) FINANCIAL CONDITION (CONTINUED)
INCOAC TAXES
Guce'i effective tax rates were 38.1% end 37.8%, respectively, for tbe second quarter and first six months of 1997, coopered with 33.9% end 36.1%, respectively, for tbe second quarter end first six nonths of 1996. The variance was largely dne to higher state and foreign taxes on the gain on Grace's sale of the specialty polyners business. Excluding special iteas, the effective tax rates were 37.0% for the second quarter and first six months of 1997 and 39.0% and 38.2%, respectively, for the second quarter and first six nonths of 1996, primarily dne to lower taxes on foreign operations in the 1997 periods.
DISCONTINUED OPERATIONS
During 1996, Grace completed the separation of National Medical Care, Inc. and sold its separations science business (Amicon). These health care businesses had been classified as discontinued operations in 1995. Second quarter and lirxl hall 199C iucuiae from discontinued operations of $98.9 million and $11S.9 million, respectively, included net income of $21.4 million ($38.9 million pretax) and $43.4 million ($77.1 million pretax), respectively, from health care operations. In 1996, Grace classified TEC Systems as a discontinued operation. Second quarter and first half 1996 income from discontinued operations included a loaa of $1.9 million (S3.1 million pretax) and $3.9 nillion ($6.4 million pretax), respectively, fron TEC Systems. In May 1996, Grace completed the sale of the transgenic plant business for $150.0 million in oash, retailing in a pretax gain of $129.0 million, and an after-tax gain of $79.4 million, in discontinued operations.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Grace's continuing operating activities provided net pretax cash of $94.1 million in the first half of 1997, as compared to $117.1 million in the first hall oi 1996. Improved opera Ling income cash How was oXXseL by higher paynents made for asbestos-related litigation settlements, judgments and defense costs, net of amounts received from settlements with certain insurance carriers in connection with asbestos-related litigation. Net pretax cash provided by operating activities of diacontinued operations in the first half of 199? decreased by $67.2 million compared to the first half of 1996, primarily dne to the disposition of Grsce's health care and cocoa bnsinesses, which provided cash in the first six months of 1996. After giving effect to the payment of inoomc taxes, Grace's net oaah provided by operating activities was $40.8 million in the first half of 1997, versos $118.5 million in the first, half of 1996.
Investing activities provided $481.0 million of cash in the first halt ot 1997, largely reflecting net cash proceeds of $450.7 million from divestments (primarily the sale of Grace's specialty polymers and cocoa bnsinesses) and the receipt of $215.6 million in January 1997 on the 1996 divestments of Dearborn and Amicon. Grace made capital expenditures of $113.6 million in the six laonUis ended June 30, 1997, primarily re la Led to the Packaging mid Grace Davison businesses. Total Grace capital expenditnres for 1997 are not expected to exceed $300.0 million and will all be directed towards core businesses.
T - 18
MANAGEMENT' S DISCUSSION AND ANALYSIS OF RfcSULlS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
Net cash used loi financing acLiviLies iu Lhe liisl bull ol 1997 was $544.1 million. primarily reflecting redactions in debt, the reporchase of stock as distasted below, and the payment of dividends, partially offset by proceeds iron the exercise of enployee stock options. Total debt was $1,167.4 million at Jane 30, 1997, a decrease of $220.8 million from December 31, 1996.
Daring the first half of 1997, the Company substantially completed the share teporchase program initiated in 1996 by acquiring 6,306,300 additional shares of its conmon stock for $335.9 million, or an average price of $53.26 per share.
Grace is targeting a ratio of debt to earnings before interest, taxes, depreciation and amortization (EBllDA) of l.b to 2.0. The debt/EBITDA ratio was l.S at Jnne 30, 1997.
At Jnne 30, 1997, Grace had committed borrowing facilities totaling $1.0 billion, consisting of $650.0 million nnder t 364-day facility expiring in May 1998 (extendible Iui successive 364-day periods at the discretion ol Grace and the lenders) and $350.0 million under a long-tern facility expiring in May 2002. Aa of Jnne 30, 1997. $606.7 million was available under these facilities.
ASBESTOS RELATED MATTERS
In the first half of 1997, Grace paid $7.4 nillion for the defense and disposition of asbcstos-rclatcd property damage and personal injury litigation, net of amounts received under settlements with certain insurance carriers. Although the amonnt.a to be paid in 1997 with respect tin asbestos-related claims (after giving effect to payments to be received from insurance carriers) cannot be precisely estimated, Grace expects that it will be required to expend approximately $75-$100 nillion (pretax) in 1997 to defend against and dispose of snch claims (after giving effect to anticipated insurance recoveries). Ihe amounts with respect to the probable cost of defending against and disposing of asbestos-related claims and probable lecuveiies Irma insurance came is represent estimates and are un an nndisconnted basis; the outcomes of snch claims cannot be predicted with certainty.
In May 1997. the Texas legislature adopted legislation that had the effect of making it more difficult for ont of state residents to file olaims in Texts state coarts. The legislation is retroactive to Jannary 1. 1997. The effect of this legislation on Grace's ultimate exposure with respect to its asbcstos-rclatcd cases and olaims oannot be predicted with certainty.
See Note 2 t.o t.he interim consolidated financial sfcatemenT.s in this Report, for fnrther information concerning asbestos-related lawsaits and claims.
ENVIRONhENTAL MATTERS
There were no significant developments relating to environmental liabilities in the first half, of 1997. For additional information relating to environmental liabilities, see Note 11 to the consolidated financial statements in the 1996 Form 10-K.
I - 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Note 2 to the Consolidated.Financial Statements in Part I of this Report is incorporated herein by reference.
Itea 4. Submission of Matters to s Vote of Security Holders.
The Company's 1997 Annual Meeting of Shareholders ('Annual Meeting') eras held on May 9, 1997. At the Annual Meeting, the Conpany's shareholders (a) elected fonr Class II Directors for a tern expiring in 2000; (b) ratified the selection of Price Waterhonse LLP as independent certified public accountants of the Company and it.* consolidated xnhsidiarie* for 1997; (c) approved t.he Company's 1996 Stock Incentive Plan; (d) approved the Company's Long-Term Incentive Program; (e) approved the Company's Annual Incentive Compensation Program; and (f) approved the Company's 1997 Stock Plan for Nonemployee Directors.
page:
The results of voting at the Annual Meeting appear on the following
II-l
MATTER
VOTES*
FOR
AGAINST**
ABSTENTIONS
Election of Directors**
J. F. Akers C. Cheng V. A. Kamaky J. E. Phipps
Selection of Independent Accountants
Approval of 1996 Stock Iuceulive Plan
Approval of Long-Tern Incentive Program
Approval of Annual Incentive Conpcnsaiion Program
Approval of 1997 Stock Plan for Nonenployee Directors
65,313,700 64,751,489 56,879,213 56,876,922
64,952,184
39,958,099
61,720,386
62,745,711
62,213,024
419,217 981,428 8,853,704 8,855,995
502,715
25,308,108
3,504.974
2,414,648
2,962,113
-0-0-0-0-
278,01*
466,709
507,556
572,555
557,680
* There were no broker uuu-votes ou any nailer. ** With respect to the election oi directors, the fora of proxy permitted
shareholders to check boxes indicating votes either 'for" or "withheld; " votes relating to directors designated above as "against" are votes cast as "withheld."
II-2
Item 5. Other Info nut ion.
On lane 23, 1997. Grace announced that it had entered into an agreement to tell ita TBC Systems unit to Seqna Corporation. Grace TEC Systems is a leading global supplier of high-performance air flotation dryers and other veb handling eqnipaent for the printing, industrial coating and paper industries.
Iten 6. Exhibits and Reports on Forn 8-K.
ia; Exhibits. The following are being filed as exhibits to this Report:
304-Day Credit Agreement, dated as of May 10, 1997, among W. R. Grace A Co.-Conn., 9i. R. Grace A Co., the several banks parties thereto, NationsBank, N.A. (South), as documentation agent, and The Chase Manhattan Bank, as administrative agent for such banks Credit Agreement, dated as of May 16, 1997, among W. R. Grace & Co.-Conn., W. R. Grace Co., the several banks parties thereto, and The Chase Manhattan Bank, as administrative agent for snch banks weighted average number of shares and earnings nsed in per share coapntations computation of ratio of earnings to fixed charges and combined fixed charges and preferred stock Hi vi dencH financial data schedule
II-3
ib) Reports on Form S-K. The Company filed the following Reports on Font 8-K during the second quarter and to dale Juriug the third quarter ol 1997:
Date of Filing
Disclosare(s)
May 1, 1997 Angnst 5, 1997
Announcement of 1997 first quarter results Announcement of 1997 second quarter results
II-4
SIGNATURE
Pursuant to the requirenenta of the Securities Exchange Act oi 1934, the registrant lias duly caused this report Lu be signed on its behall by cite undersigned tberennto duly authorized.
W. R. GRACE & CO. (Registrant)
Date: Angnst 12, 1997
By ft! Kathleen A. Browne
Kathleen A. Browne Vice President, and Controller (Principal Accounting Officer)
II-5
LaserD II PRINT SUMMARY
Accounting:
Disabled
Date Printed: Time Printed:
11/03/97 10: 45 AM.
Company Name: Exchange: Ticker Symbol: Company Number:
W R GRACE i CO DE N GRA W017250000
Document Type: Document Date: Amendment: Document Number:
10-Q 06/30/97
97656993
Pages Printed: 37
Lsser^k
Conpany Nana: Exchange: Ticker Synbol: Conpany #:
Dncnnent. Type: Doconent Date: Anendaent: Doconent H:
Disclosure SBC EDGAR Filing
W R GRACE Sc CO DE N GRA W017250000
10-Q 06/30/97
97656993