Grace Reports First Quarter EPS of $0.22

Apr 23, 2001, 01:00 ET from W. R. Grace & Co.

    COLUMBIA, Md., April 23 /PRNewswire Interactive News Release/ -- W. R.
 Grace & Co. (NYSE:   GRA) today reported 2001 first quarter net income of
 $14.6 million, or $0.22 per diluted share, compared to $24.2 million or
 $0.35 in the first quarter of 2000.  Sales for the quarter totaled
 $395.7 million compared to $384.7 million in the prior year quarter, a
 2.9% increase.  Excluding currency translation impacts, the sales increase was
 6.5%.  Pretax income from core operations was $28.7 million compared to
 $39.8 million in the first quarter of 2000.  The quarter was negatively
 affected by continued higher raw material costs and natural gas prices.
     "As we expected, and compared to an exceptional first quarter in 2000
 where we posted a 56% increase in core operating earnings, our first quarter
 2001 results showed continued growth in revenue with pressure on margins from
 the higher cost of raw materials and natural gas," said Grace Chairman,
 President and Chief Executive Officer Paul J. Norris.  "Our decision on April
 2, 2001 to seek Chapter 11 protection as a way to define and resolve asbestos-
 related claims was executed with no disruption to our customers.  We continue
 to remain focused on growth and productivity and are anticipating a stronger
 second half of the year."
 
     CORE OPERATIONS
     Davison Chemicals
     Refining Catalysts, Chemical Catalysts and Silica Products
     First quarter sales for the Davison Chemicals segment were $198.4 million,
 up 3.3% from the prior year.  Excluding currency translation impacts, sales
 were up 6.8%.  Operating income of $24.6 million and operating margin of
 12.4% were significantly lower than the record-level 2000 first quarter.
 Operating income and margins were negatively impacted by higher energy costs,
 primarily in natural gas and raw materials.
     Sales of refining catalysts, which include fluid cracking catalysts (FCC)
 and additives and hydroprocessing catalysts, were down slightly (up
 2.5% excluding currency translation impacts) compared to the 2000 first
 quarter.  Sales in Europe and Asia Pacific increased due to hydroprocessing
 volume gains and strong FCC and additives sales.  Latin American sales were up
 due to increased  FCC volumes.  North American sales were down due to a
 decrease in hydroprocessing sales.  Sales of chemical catalysts increased
 13.8% (17% excluding  currency translation impacts) over the first quarter of
 2000 due to strong polyolefin sales in Europe and Asia Pacific as well as
 increases in other chemical catalyst sales.  Sales of silica products were up
 5.1% (10.1% before currency translation), primarily from the Ludox(R)
 colloidal silica acquisition.
 
     Performance Chemicals
     Construction Chemicals, Building Materials and Container Products
     First  quarter sales for the Performance Chemicals segment were
 $197.3 million, up 2.4% from the prior year.  Excluding currency translation
 impacts, sales were up 6.0%.  Operating income was $17.8 million, down
 6.8% compared to the prior year quarter.  Operating margin was 9.0%, a
 0.9 percentage point decrease from the 2000 first quarter.  Quarterly
 operating income and margins were affected by higher utilities and raw
 material costs.
     Sales of specialty construction chemicals, which include concrete
 admixtures, cement additives and masonry products, were down 2.0% versus the
 year-ago quarter, due to volume decreases in North America and the continued
 softness of the Asia Pacific market.  Sales of specialty building materials,
 which include waterproofing and fire protection products, were up 2.8% for the
 quarter.  Sales of fire protection products remained strong, and North
 American waterproofing sales were up from volume increases in roofing
 underlayments and other high performance products.  European sales were
 negatively impacted by weak currencies and depressed construction activity in
 the United Kingdom.  Sales of container products, which include container
 sealants, closure systems and coatings, were up 8.1% from the first quarter of
 2000 (up 14.5% before the effect of currency translation).  The increase
 relates to the positive impact of the Hampshire Polymers business acquired in
 July 2000 as well as higher sales of specialty coatings products, which offset
 decreases in can and closure sealants sales.
 
     Other Highlights
     Grace announced two acquisitions and the formation of a joint venture
 during the quarter.  Grace acquired The Separations Group, a company engaged
 in the manufacturing of chromatography columns and separations media in
 Hesperia, California.  Grace's German subsidiary acquired the precipitated
 silicas business of Akzo-PQ Silica.  Advanced Refining Technologies LLC (ART),
 the global hydroprocessing venture between Grace and Chevron Products Co.,
 began operations on March 1, 2001.
 
     Subsequent Event -- Voluntary Chapter 11 Filing
     On April 2, 2001 Grace and 61 of its United States subsidiaries and
 affiliates filed voluntary petitions for reorganization under Chapter 11 of
 the U.S. Bankruptcy Code in Wilmington, Delaware.  Grace's non-U.S. operating
 subsidiaries were not part of the filing.  The filing was made in response to
 a sharply increasing number of asbestos-related bodily injury claims.  Under
 Chapter 11, Grace expects to continue to operate these entities as debtors-in-
 possession under court protection from creditors and claimants, while using
 the Chapter 11 process to develop and implement a plan for addressing the
 asbestos-related claims and satisfying obligations to other creditors.
     Beginning in the second quarter of 2001, Grace will be required to follow
 Statement of Position 90-7 (SOP 90-7), "Financial Reporting by Entities in
 Reorganization under the Bankruptcy Code". Pursuant to SOP 90-7, Grace's
 pre-petition liabilities that are subject to compromise will be reported
 separately on the balance sheet at an estimate of the amount that will
 ultimately be allowed by the Bankruptcy Court.  Obligations of Grace
 subsidiaries not covered by the filing will remain classified on the
 consolidated balance sheet based upon maturity dates or expected dates of
 payment.  SOP 90-7 also requires separate reporting of certain expenses,
 realized gains and losses, and provisions for losses related to the filing as
 reorganization items.  On a pro forma basis, approximately 90% of the
 liabilities reflected on Grace's March 31, 2001 balance sheet will be subject
 to compromise.
     Grace is a leading global supplier of catalysts and silica products,
 specialty construction chemicals and building materials, and container
 products.  With annual sales of approximately $1.6 billion, Grace has over
 6,000 employees and operations in nearly 40 countries.  For more information,
 visit Grace's Web site at www.grace.com.
 
     This announcement contains forward-looking statements that involve risks
 and uncertainties, as well as statements that are preceded by, followed by or
 include the words "believes," "plans," "intends", "targets", "will,"
 "expects," "anticipates," or similar expressions.  For such statements, Grace
 claims the protection of the safe harbor for forward-looking statements
 contained in the Private Securities Litigation Reform Act of 1995.  Actual
 results may differ materially from the results predicted, and reported results
 should not be considered as an indication of future performance.  Factors that
 could cause actual results to differ from those contained in the forward-
 looking statements include those factors set forth in Grace's most recent
 Annual Report on Form 10-K and quarterly reports on Form 10-Q, which have been
 filed with the SEC.
 
 
     W. R. Grace & Co. and Subsidiaries
     Consolidated Statement of Operations
     (Unaudited)                                       Three Months Ended
                                                             March 31,
     Amounts in millions, except earnings per share     2001         2000(a)
 
     Net sales                                         $395.7         $384.7
     Other income                                        18.8           10.2
                                                        414.5          394.9
 
     Cost of goods sold and operating expenses          253.0          231.8
     Selling, general and administrative expenses        90.7           86.5
     Research and development expenses                   10.2           11.3
     Depreciation and amortization                       21.9           22.2
     Interest expense                                     9.0            5.3
     Reorganization expenses                              2.9             --
                                                        387.7          357.1
 
     Income before income taxes and minority
      interest                                           26.8           37.8
     Provision for income taxes                        (11.9)          (13.6)
     Minority interest                                   (0.3)            --
     Net income                                         $14.6          $24.2
 
     Basic Earnings per Common Share                    $0.22          $0.35
 
     Average number of basic shares                      65.3           68.2
 
     Diluted Earnings per Common Share                  $0.22          $0.35
 
     Average number of diluted shares                    65.3           69.4
 
     (a) Amounts reflect a reclassification of freight costs and sales
 commissions (previously shown as a reduction of net sales) to cost of goods
 sold and selling expenses in accordance with Emerging Issues Task Force
 Consensus No. 00-10, "Accounting for Shipping and Handling Revenues and
 Costs."
 
     W. R. Grace & Co. and Subsidiaries
     Continuing Operations Segment Basis        Three Months Ended
     (Unaudited)                                     March 31,
 
     Dollars in millions              2001            2000(a)           %
                                                                      Change
 
     Net Sales:
     Davison Chemicals
       Refining catalysts             $109.7          $110.0         (0.3%)
       Chemical catalysts               33.0            29.0         13.8%
       Silica products                  55.7            53.0          5.1%
     Net sales - Davison Chemicals     198.4           192.0          3.3%
 
     Performance Chemicals
       Construction chemicals           78.0            79.6         (2.0%)
       Building materials               57.8            56.2          2.8%
       Container products               61.5            56.9          8.1%
     Net sales - Performance
      Chemicals                        197.3           192.7          2.4%
     Total sales-core operations      $395.7          $384.7          2.9%
 
     Pre-tax operating income:
       Davison Chemicals               $24.6           $32.9         (25.2%)
       Performance Chemicals            17.8            19.1          (6.8%)
       Corporate operating costs       (13.7)          (12.2)        (12.3%)
     Pretax income from core
      operations                        28.7            39.8         (27.9%)
 
     Pretax income from noncore
      activities                         8.2             1.0            NM
     Reorganization expenses            (2.9)             --            NM
     Interest expense                   (9.0)           (5.3)        (69.8%)
     Interest income                     1.8             2.3         (21.7%)
        Income before income taxes
         and minority interest             8
 26.             37.8         (29.1%)
     Provision for income taxes        (11.9)          (13.6)        (12.5%)
     Minority interest                  (0.3)             --            NM
 
        Net income                     $14.6           $24.2         (39.7%)
 
     Key Financial Measures:
       Pretax income from core
        operations as a
        percentage of sales             7.2%           10.3%         (3.1) pts
       Pretax income from core
        operations before
        depreciation and
        amortization                   $50.6           $62.0         (18.4%)
         As a percentage of sales      12.8%           16.1%         (3.3) pts
     Net Sales by Region:
       North America                  $207.5          $206.7          0.4%
       Europe                          107.6           105.4          2.1%
       Asia Pacific                     54.1            47.3         14.4%
       Latin America                    26.5            25.3          4.7%
     Total                            $395.7          $384.7          2.9%
 
     (a) Amounts reflect a reclassification of freight costs and sales
 commissions (previously shown as a reduction of net sales) to cost of goods
 sold and selling expenses in accordance with Emerging Issues Task Force
 Consensus No. 00-10, "Accounting for Shipping and Handling Revenues and
 Costs."
 
     NM -- Not Meaningful
 
 
     W. R. Grace & Co. and Subsidiaries                Three Months Ended
     Consolidated Statement of Cash Flows (Unaudited)        March 31,
 
     Dollars in millions                                2001           2000
 
     OPERATING ACTIVITIES
     Income before income taxes and minority
      interest                                          $26.8          $37.8
 
     Reconciliation to net cash
      (used for) provided by operating activities:
        Depreciation and amortization                    21.9           22.2
        (Gain) on disposal of assets                     (2.8)            --
        Changes in assets and liabilities,
         excluding effect of businesses acquired/
         divested and foreign currency translation:
          (Increase) in working capital items           (52.2)         (17.7)
          Expenditures for asbestos-related
           litigation                                  (103.1)         (38.3)
          Proceeds from asbestos-related insurance       31.7           24.2
 
          Expenditures for environmental remediation     (8.4)         (12.4)
          Expenditures for postretirement benefits       (5.6)         (5.1)
          Other changes                                 (44.8)         (19.7)
        Net cash used for operating activities
         of continuing operations before tax           (136.5)          (9.0)
 
     Net cash used for retained obligations
      of discontinued operations                         (5.2)          (7.0)
       Net cash used for operating activities
        before tax                                     (141.7)         (16.0)
     Income taxes paid, net of refunds                   (6.9)         (11.4)
       Net cash used for operating activities          (148.6)         (27.4)
 
     INVESTING ACTIVITIES
     Capital expenditures                               (11.3)         (12.5)
     Businesses acquired in purchase
      transactions, net of cash acquired                (56.5)         (25.0)
     Net investment in life insurance policies           (2.3)         (11.3)
     Proceeds from disposals of assets                    3.7            0.4
        Net cash used for investing activities          (66.4)         (48.4)
 
     FINANCING ACTIVITIES
     Borrowings under bank credit facilities,
      net of repayments                                  97.1          158.7
     Repayment of long-term debt                           --         (24.7)
     Proceeds from loans secured by cash
      value of life insurance policies,
      net of loan repayments                             46.6          (0.4)
     Proceeds from exercise of stock
      options (shares: 2000 - 800,000)                     --            1.7
     Purchase of treasury stock (shares: 2000 -
      4,800,000)                                           --          (25.4)
        Net cash provided by financing activities       143.7          109.9
 
     Effect of currency exchange rate
      changes on cash and cash equivalents               (4.8)          (4.0)
        (Decrease) increase in cash and
         cash equivalents                               (76.1)          30.1
     Cash and cash equivalents, beginning
      of period                                         191.9          199.8
     Cash and cash equivalents, end of period          $115.8         $229.9
 
 
     W. R. Grace & Co. and Subsidiaries
     Consolidated Balance Sheet (Unaudited)         March 31,     December 31,
                                                      2001            2000
     Amounts in millions, except par value
      and shares
 
     ASSETS
     Current Assets
     Cash and cash equivalents                         $115.8         $191.9
     Notes and accounts receivable, net                 207.1          197.2
     Inventories                                        162.7          144.2
     Deferred income taxes                               84.2           98.8
     Asbestos-related insurance expected
      to be realized within one year                     42.1           83.8
     Other current assets                                60.2           58.0
        Total Current Assets                            672.1          773.9
 
     Properties and equipment, net of
      accumulated depreciation and
      amortization of $942.7 (2000 - $935.4)            603.4          601.7
 
 
     Goodwill, less accumulated amortization
      of $7.0 (2000 - $7.2)                              66.0           34.1
     Cash value of life insurance policies,
      net of policy loans                                64.1          104.3
     Deferred income taxes                              401.0          388.4
     Asbestos-related insurance expected
      to be realized after one year                     298.3          288.2
     Other assets                                       403.8          394.3
        Total Assets                                 $2,508.7       $2,584.9
 
     LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
     Current Liabilities
     Short-term debt                                   $518.6         $421.9
     Accounts payable                                    93.8          117.5
     Income taxes payable                               125.4          123.1
     Asbestos-related liability expected
      to be satisfied within one year                   120.3          178.4
     Other current liabilities                          213.9          252.0
        Total Current Liabilities                     1,072.0        1,092.9
 
     Long-term debt                                        --             --
     Deferred income taxes                               19.2           20.2
     Asbestos-related liability expected
      to be satisfied after one year                    882.5          927.5
     Other liabilities                                  609.3          615.6
        Total Liabilities                             2,583.0        2,656.2
 
     Commitments and Contingencies
 
     Shareholders' (Deficit) Equity
     Common stock issued, par value $.01;
      300,000,000 shares authorized;
       Outstanding: 2001 - 65,457,000;
        2000 - 65,418,000                                 0.8            0.8
     Paid in capital                                    432.6          432.2
     Accumulated deficit                               (201.8)       (216.4)
     Treasury stock, at cost (shares: 2001 -
      11,443,900; 2000 - 11,443,900)                   (136.4)        (136.4)
     Accumulated other comprehensive loss              (169.5)        (151.5)
        Total Shareholders' (Deficit) Equity            (74.3)         (71.3)
        Total Liabilities and Shareholders'
         (Deficit) Equity                            $2,508.7       $2,584.9
 
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SOURCE W. R. Grace & Co.
    COLUMBIA, Md., April 23 /PRNewswire Interactive News Release/ -- W. R.
 Grace & Co. (NYSE:   GRA) today reported 2001 first quarter net income of
 $14.6 million, or $0.22 per diluted share, compared to $24.2 million or
 $0.35 in the first quarter of 2000.  Sales for the quarter totaled
 $395.7 million compared to $384.7 million in the prior year quarter, a
 2.9% increase.  Excluding currency translation impacts, the sales increase was
 6.5%.  Pretax income from core operations was $28.7 million compared to
 $39.8 million in the first quarter of 2000.  The quarter was negatively
 affected by continued higher raw material costs and natural gas prices.
     "As we expected, and compared to an exceptional first quarter in 2000
 where we posted a 56% increase in core operating earnings, our first quarter
 2001 results showed continued growth in revenue with pressure on margins from
 the higher cost of raw materials and natural gas," said Grace Chairman,
 President and Chief Executive Officer Paul J. Norris.  "Our decision on April
 2, 2001 to seek Chapter 11 protection as a way to define and resolve asbestos-
 related claims was executed with no disruption to our customers.  We continue
 to remain focused on growth and productivity and are anticipating a stronger
 second half of the year."
 
     CORE OPERATIONS
     Davison Chemicals
     Refining Catalysts, Chemical Catalysts and Silica Products
     First quarter sales for the Davison Chemicals segment were $198.4 million,
 up 3.3% from the prior year.  Excluding currency translation impacts, sales
 were up 6.8%.  Operating income of $24.6 million and operating margin of
 12.4% were significantly lower than the record-level 2000 first quarter.
 Operating income and margins were negatively impacted by higher energy costs,
 primarily in natural gas and raw materials.
     Sales of refining catalysts, which include fluid cracking catalysts (FCC)
 and additives and hydroprocessing catalysts, were down slightly (up
 2.5% excluding currency translation impacts) compared to the 2000 first
 quarter.  Sales in Europe and Asia Pacific increased due to hydroprocessing
 volume gains and strong FCC and additives sales.  Latin American sales were up
 due to increased  FCC volumes.  North American sales were down due to a
 decrease in hydroprocessing sales.  Sales of chemical catalysts increased
 13.8% (17% excluding  currency translation impacts) over the first quarter of
 2000 due to strong polyolefin sales in Europe and Asia Pacific as well as
 increases in other chemical catalyst sales.  Sales of silica products were up
 5.1% (10.1% before currency translation), primarily from the Ludox(R)
 colloidal silica acquisition.
 
     Performance Chemicals
     Construction Chemicals, Building Materials and Container Products
     First  quarter sales for the Performance Chemicals segment were
 $197.3 million, up 2.4% from the prior year.  Excluding currency translation
 impacts, sales were up 6.0%.  Operating income was $17.8 million, down
 6.8% compared to the prior year quarter.  Operating margin was 9.0%, a
 0.9 percentage point decrease from the 2000 first quarter.  Quarterly
 operating income and margins were affected by higher utilities and raw
 material costs.
     Sales of specialty construction chemicals, which include concrete
 admixtures, cement additives and masonry products, were down 2.0% versus the
 year-ago quarter, due to volume decreases in North America and the continued
 softness of the Asia Pacific market.  Sales of specialty building materials,
 which include waterproofing and fire protection products, were up 2.8% for the
 quarter.  Sales of fire protection products remained strong, and North
 American waterproofing sales were up from volume increases in roofing
 underlayments and other high performance products.  European sales were
 negatively impacted by weak currencies and depressed construction activity in
 the United Kingdom.  Sales of container products, which include container
 sealants, closure systems and coatings, were up 8.1% from the first quarter of
 2000 (up 14.5% before the effect of currency translation).  The increase
 relates to the positive impact of the Hampshire Polymers business acquired in
 July 2000 as well as higher sales of specialty coatings products, which offset
 decreases in can and closure sealants sales.
 
     Other Highlights
     Grace announced two acquisitions and the formation of a joint venture
 during the quarter.  Grace acquired The Separations Group, a company engaged
 in the manufacturing of chromatography columns and separations media in
 Hesperia, California.  Grace's German subsidiary acquired the precipitated
 silicas business of Akzo-PQ Silica.  Advanced Refining Technologies LLC (ART),
 the global hydroprocessing venture between Grace and Chevron Products Co.,
 began operations on March 1, 2001.
 
     Subsequent Event -- Voluntary Chapter 11 Filing
     On April 2, 2001 Grace and 61 of its United States subsidiaries and
 affiliates filed voluntary petitions for reorganization under Chapter 11 of
 the U.S. Bankruptcy Code in Wilmington, Delaware.  Grace's non-U.S. operating
 subsidiaries were not part of the filing.  The filing was made in response to
 a sharply increasing number of asbestos-related bodily injury claims.  Under
 Chapter 11, Grace expects to continue to operate these entities as debtors-in-
 possession under court protection from creditors and claimants, while using
 the Chapter 11 process to develop and implement a plan for addressing the
 asbestos-related claims and satisfying obligations to other creditors.
     Beginning in the second quarter of 2001, Grace will be required to follow
 Statement of Position 90-7 (SOP 90-7), "Financial Reporting by Entities in
 Reorganization under the Bankruptcy Code". Pursuant to SOP 90-7, Grace's
 pre-petition liabilities that are subject to compromise will be reported
 separately on the balance sheet at an estimate of the amount that will
 ultimately be allowed by the Bankruptcy Court.  Obligations of Grace
 subsidiaries not covered by the filing will remain classified on the
 consolidated balance sheet based upon maturity dates or expected dates of
 payment.  SOP 90-7 also requires separate reporting of certain expenses,
 realized gains and losses, and provisions for losses related to the filing as
 reorganization items.  On a pro forma basis, approximately 90% of the
 liabilities reflected on Grace's March 31, 2001 balance sheet will be subject
 to compromise.
     Grace is a leading global supplier of catalysts and silica products,
 specialty construction chemicals and building materials, and container
 products.  With annual sales of approximately $1.6 billion, Grace has over
 6,000 employees and operations in nearly 40 countries.  For more information,
 visit Grace's Web site at www.grace.com.
 
     This announcement contains forward-looking statements that involve risks
 and uncertainties, as well as statements that are preceded by, followed by or
 include the words "believes," "plans," "intends", "targets", "will,"
 "expects," "anticipates," or similar expressions.  For such statements, Grace
 claims the protection of the safe harbor for forward-looking statements
 contained in the Private Securities Litigation Reform Act of 1995.  Actual
 results may differ materially from the results predicted, and reported results
 should not be considered as an indication of future performance.  Factors that
 could cause actual results to differ from those contained in the forward-
 looking statements include those factors set forth in Grace's most recent
 Annual Report on Form 10-K and quarterly reports on Form 10-Q, which have been
 filed with the SEC.
 
 
     W. R. Grace & Co. and Subsidiaries
     Consolidated Statement of Operations
     (Unaudited)                                       Three Months Ended
                                                             March 31,
     Amounts in millions, except earnings per share     2001         2000(a)
 
     Net sales                                         $395.7         $384.7
     Other income                                        18.8           10.2
                                                        414.5          394.9
 
     Cost of goods sold and operating expenses          253.0          231.8
     Selling, general and administrative expenses        90.7           86.5
     Research and development expenses                   10.2           11.3
     Depreciation and amortization                       21.9           22.2
     Interest expense                                     9.0            5.3
     Reorganization expenses                              2.9             --
                                                        387.7          357.1
 
     Income before income taxes and minority
      interest                                           26.8           37.8
     Provision for income taxes                        (11.9)          (13.6)
     Minority interest                                   (0.3)            --
     Net income                                         $14.6          $24.2
 
     Basic Earnings per Common Share                    $0.22          $0.35
 
     Average number of basic shares                      65.3           68.2
 
     Diluted Earnings per Common Share                  $0.22          $0.35
 
     Average number of diluted shares                    65.3           69.4
 
     (a) Amounts reflect a reclassification of freight costs and sales
 commissions (previously shown as a reduction of net sales) to cost of goods
 sold and selling expenses in accordance with Emerging Issues Task Force
 Consensus No. 00-10, "Accounting for Shipping and Handling Revenues and
 Costs."
 
     W. R. Grace & Co. and Subsidiaries
     Continuing Operations Segment Basis        Three Months Ended
     (Unaudited)                                     March 31,
 
     Dollars in millions              2001            2000(a)           %
                                                                      Change
 
     Net Sales:
     Davison Chemicals
       Refining catalysts             $109.7          $110.0         (0.3%)
       Chemical catalysts               33.0            29.0         13.8%
       Silica products                  55.7            53.0          5.1%
     Net sales - Davison Chemicals     198.4           192.0          3.3%
 
     Performance Chemicals
       Construction chemicals           78.0            79.6         (2.0%)
       Building materials               57.8            56.2          2.8%
       Container products               61.5            56.9          8.1%
     Net sales - Performance
      Chemicals                        197.3           192.7          2.4%
     Total sales-core operations      $395.7          $384.7          2.9%
 
     Pre-tax operating income:
       Davison Chemicals               $24.6           $32.9         (25.2%)
       Performance Chemicals            17.8            19.1          (6.8%)
       Corporate operating costs       (13.7)          (12.2)        (12.3%)
     Pretax income from core
      operations                        28.7            39.8         (27.9%)
 
     Pretax income from noncore
      activities                         8.2             1.0            NM
     Reorganization expenses            (2.9)             --            NM
     Interest expense                   (9.0)           (5.3)        (69.8%)
     Interest income                     1.8             2.3         (21.7%)
        Income before income taxes
         and minority interest             8
 26.             37.8         (29.1%)
     Provision for income taxes        (11.9)          (13.6)        (12.5%)
     Minority interest                  (0.3)             --            NM
 
        Net income                     $14.6           $24.2         (39.7%)
 
     Key Financial Measures:
       Pretax income from core
        operations as a
        percentage of sales             7.2%           10.3%         (3.1) pts
       Pretax income from core
        operations before
        depreciation and
        amortization                   $50.6           $62.0         (18.4%)
         As a percentage of sales      12.8%           16.1%         (3.3) pts
     Net Sales by Region:
       North America                  $207.5          $206.7          0.4%
       Europe                          107.6           105.4          2.1%
       Asia Pacific                     54.1            47.3         14.4%
       Latin America                    26.5            25.3          4.7%
     Total                            $395.7          $384.7          2.9%
 
     (a) Amounts reflect a reclassification of freight costs and sales
 commissions (previously shown as a reduction of net sales) to cost of goods
 sold and selling expenses in accordance with Emerging Issues Task Force
 Consensus No. 00-10, "Accounting for Shipping and Handling Revenues and
 Costs."
 
     NM -- Not Meaningful
 
 
     W. R. Grace & Co. and Subsidiaries                Three Months Ended
     Consolidated Statement of Cash Flows (Unaudited)        March 31,
 
     Dollars in millions                                2001           2000
 
     OPERATING ACTIVITIES
     Income before income taxes and minority
      interest                                          $26.8          $37.8
 
     Reconciliation to net cash
      (used for) provided by operating activities:
        Depreciation and amortization                    21.9           22.2
        (Gain) on disposal of assets                     (2.8)            --
        Changes in assets and liabilities,
         excluding effect of businesses acquired/
         divested and foreign currency translation:
          (Increase) in working capital items           (52.2)         (17.7)
          Expenditures for asbestos-related
           litigation                                  (103.1)         (38.3)
          Proceeds from asbestos-related insurance       31.7           24.2
 
          Expenditures for environmental remediation     (8.4)         (12.4)
          Expenditures for postretirement benefits       (5.6)         (5.1)
          Other changes                                 (44.8)         (19.7)
        Net cash used for operating activities
         of continuing operations before tax           (136.5)          (9.0)
 
     Net cash used for retained obligations
      of discontinued operations                         (5.2)          (7.0)
       Net cash used for operating activities
        before tax                                     (141.7)         (16.0)
     Income taxes paid, net of refunds                   (6.9)         (11.4)
       Net cash used for operating activities          (148.6)         (27.4)
 
     INVESTING ACTIVITIES
     Capital expenditures                               (11.3)         (12.5)
     Businesses acquired in purchase
      transactions, net of cash acquired                (56.5)         (25.0)
     Net investment in life insurance policies           (2.3)         (11.3)
     Proceeds from disposals of assets                    3.7            0.4
        Net cash used for investing activities          (66.4)         (48.4)
 
     FINANCING ACTIVITIES
     Borrowings under bank credit facilities,
      net of repayments                                  97.1          158.7
     Repayment of long-term debt                           --         (24.7)
     Proceeds from loans secured by cash
      value of life insurance policies,
      net of loan repayments                             46.6          (0.4)
     Proceeds from exercise of stock
      options (shares: 2000 - 800,000)                     --            1.7
     Purchase of treasury stock (shares: 2000 -
      4,800,000)                                           --          (25.4)
        Net cash provided by financing activities       143.7          109.9
 
     Effect of currency exchange rate
      changes on cash and cash equivalents               (4.8)          (4.0)
        (Decrease) increase in cash and
         cash equivalents                               (76.1)          30.1
     Cash and cash equivalents, beginning
      of period                                         191.9          199.8
     Cash and cash equivalents, end of period          $115.8         $229.9
 
 
     W. R. Grace & Co. and Subsidiaries
     Consolidated Balance Sheet (Unaudited)         March 31,     December 31,
                                                      2001            2000
     Amounts in millions, except par value
      and shares
 
     ASSETS
     Current Assets
     Cash and cash equivalents                         $115.8         $191.9
     Notes and accounts receivable, net                 207.1          197.2
     Inventories                                        162.7          144.2
     Deferred income taxes                               84.2           98.8
     Asbestos-related insurance expected
      to be realized within one year                     42.1           83.8
     Other current assets                                60.2           58.0
        Total Current Assets                            672.1          773.9
 
     Properties and equipment, net of
      accumulated depreciation and
      amortization of $942.7 (2000 - $935.4)            603.4          601.7
 
 
     Goodwill, less accumulated amortization
      of $7.0 (2000 - $7.2)                              66.0           34.1
     Cash value of life insurance policies,
      net of policy loans                                64.1          104.3
     Deferred income taxes                              401.0          388.4
     Asbestos-related insurance expected
      to be realized after one year                     298.3          288.2
     Other assets                                       403.8          394.3
        Total Assets                                 $2,508.7       $2,584.9
 
     LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
     Current Liabilities
     Short-term debt                                   $518.6         $421.9
     Accounts payable                                    93.8          117.5
     Income taxes payable                               125.4          123.1
     Asbestos-related liability expected
      to be satisfied within one year                   120.3          178.4
     Other current liabilities                          213.9          252.0
        Total Current Liabilities                     1,072.0        1,092.9
 
     Long-term debt                                        --             --
     Deferred income taxes                               19.2           20.2
     Asbestos-related liability expected
      to be satisfied after one year                    882.5          927.5
     Other liabilities                                  609.3          615.6
        Total Liabilities                             2,583.0        2,656.2
 
     Commitments and Contingencies
 
     Shareholders' (Deficit) Equity
     Common stock issued, par value $.01;
      300,000,000 shares authorized;
       Outstanding: 2001 - 65,457,000;
        2000 - 65,418,000                                 0.8            0.8
     Paid in capital                                    432.6          432.2
     Accumulated deficit                               (201.8)       (216.4)
     Treasury stock, at cost (shares: 2001 -
      11,443,900; 2000 - 11,443,900)                   (136.4)        (136.4)
     Accumulated other comprehensive loss              (169.5)        (151.5)
        Total Shareholders' (Deficit) Equity            (74.3)         (71.3)
        Total Liabilities and Shareholders'
         (Deficit) Equity                            $2,508.7       $2,584.9
 
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 SOURCE  W. R. Grace & Co.

RELATED LINKS

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