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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period Ended March 31, 2015
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number 1-13953
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Delaware
(State of Incorporation)
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65-0773649
(I.R.S. Employer Identification No.)
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Large accelerated filer
ý
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a
smaller reporting company)
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Smaller reporting company
o
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Class
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Outstanding at April 30, 2015
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Common Stock, $0.01 par value per share
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72,765,831 shares
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Three Months Ended March 31,
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(In millions, except per share amounts)
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2015
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2014
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Net sales
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$
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720.6
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$
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744.5
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Cost of goods sold
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462.3
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475.3
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Gross profit
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258.3
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269.2
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Selling, general and administrative expenses
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137.2
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136.8
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Research and development expenses
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17.9
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20.5
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Interest expense and related financing costs
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24.8
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11.2
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Interest accretion on deferred payment obligations
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0.2
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8.2
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Chapter 11 expenses, net
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1.6
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6.1
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Equity in earnings of unconsolidated affiliate
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(6.2
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)
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(3.7
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)
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Other expense, net
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1.3
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10.0
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Total costs and expenses
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176.8
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189.1
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Income before income taxes
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81.5
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80.1
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Provision for income taxes
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(28.7
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)
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(29.8
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)
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Net income
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52.8
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50.3
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Less: Net income attributable to noncontrolling interests
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(0.1
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)
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(0.2
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)
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Net income attributable to W. R. Grace & Co. shareholders
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$
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52.7
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$
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50.1
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Earnings Per Share Attributable to W. R. Grace & Co. Shareholders
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Basic earnings per share:
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Net income attributable to W. R. Grace & Co. shareholders
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$
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0.72
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$
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0.65
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Weighted average number of basic shares
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72.8
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77.0
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Diluted earnings per share:
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Net income attributable to W. R. Grace & Co. shareholders
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$
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0.72
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$
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0.64
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Weighted average number of diluted shares
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73.5
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78.1
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Three Months Ended March 31,
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(In millions)
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2015
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2014
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Net income
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$
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52.8
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$
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50.3
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Other comprehensive income (loss):
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Defined benefit pension and other postretirement plans, net of income taxes
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(0.4
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)
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(0.1
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)
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Currency translation adjustments
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(10.8
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)
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(2.1
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)
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Gain (loss) from hedging activities, net of income taxes
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(1.9
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)
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0.7
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Gain on securities available for sale, net of income taxes
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—
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0.1
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Total other comprehensive income attributable to noncontrolling interests
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0.1
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0.1
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Total other comprehensive loss
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(13.0
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)
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(1.3
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)
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Comprehensive income
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39.8
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49.0
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Less: comprehensive income attributable to noncontrolling interests
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(0.2
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)
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(0.3
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)
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Comprehensive income attributable to W. R. Grace & Co. shareholders
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$
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39.6
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$
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48.7
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Three Months Ended March 31,
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(In millions)
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2015
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2014
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OPERATING ACTIVITIES
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Net income
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$
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52.8
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$
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50.3
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Reconciliation to net cash used for operating activities:
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Depreciation and amortization
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33.5
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34.0
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Equity in earnings of unconsolidated affiliate
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(6.2
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)
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(3.7
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)
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Chapter 11 expenses, net
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1.6
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6.1
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Asbestos and bankruptcy related charges, net
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(8.7
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)
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8.8
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Cash paid for Chapter 11 and asbestos
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(491.4
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)
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(1,323.9
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)
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Provision for income taxes
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28.7
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29.8
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Cash paid for income taxes, net of refunds
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(9.0
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)
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(16.1
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)
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Cash paid for interest on credit arrangements
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(16.8
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)
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(1.6
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)
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Defined benefit pension expense
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11.2
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3.5
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Cash paid under defined benefit pension arrangements
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(4.6
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)
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(8.8
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)
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Cash paid for restructuring
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(3.7
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)
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(1.9
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)
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Cash paid for repositioning
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(3.1
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)
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—
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Cash paid for environmental remediation
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(4.2
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)
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(1.8
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)
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Changes in assets and liabilities, excluding effect of currency translation:
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Trade accounts receivable
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11.3
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(21.1
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)
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Inventories
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(2.5
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)
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(30.2
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)
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Accounts payable
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19.2
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13.5
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All other items, net
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18.3
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9.8
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Net cash used for operating activities
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(373.6
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)
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(1,253.3
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)
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INVESTING ACTIVITIES
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Capital expenditures
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(40.7
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)
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(40.1
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)
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Transfer from restricted cash and cash equivalents
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—
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395.4
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Other investing activities
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0.1
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(2.6
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)
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Net cash (used for) provided by investing activities
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(40.6
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)
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352.7
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FINANCING ACTIVITIES
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Borrowings under credit arrangements
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265.0
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979.2
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Repayments under credit arrangements
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(24.1
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)
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(543.2
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)
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Cash paid for debt financing costs
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(0.4
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)
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(23.7
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)
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Proceeds from exercise of stock options
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13.7
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7.7
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Cash paid for repurchases of common stock
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(55.6
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)
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(60.5
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)
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Other financing activities
|
0.2
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|
1.3
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Net cash provided by financing activities
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198.8
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|
360.8
|
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Effect of currency exchange rate changes on cash and cash equivalents
|
(15.3
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)
|
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(2.1
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)
|
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Decrease in cash and cash equivalents
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(230.7
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)
|
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(541.9
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)
|
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Cash and cash equivalents, beginning of period
|
557.5
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|
|
964.8
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Cash and cash equivalents, end of period
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$
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326.8
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$
|
422.9
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(In millions, except par value and shares)
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March 31,
2015 |
|
December 31,
2014 |
||||
ASSETS
|
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Current Assets
|
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Cash and cash equivalents
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$
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326.8
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$
|
557.5
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Trade accounts receivable, less allowance of $6.1 (2014—$5.8)
|
447.9
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|
481.1
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||
Inventories
|
325.1
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|
|
332.8
|
|
||
Deferred income taxes
|
143.7
|
|
|
235.4
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Other current assets
|
95.3
|
|
|
84.1
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Total Current Assets
|
1,338.8
|
|
|
1,690.9
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Properties and equipment, net of accumulated depreciation and amortization of $1,770.1 (2014—$1,818.4)
|
813.1
|
|
|
833.5
|
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Goodwill
|
443.2
|
|
|
452.9
|
|
||
Technology and other intangible assets, net
|
278.3
|
|
|
288.0
|
|
||
Deferred income taxes
|
682.7
|
|
|
612.0
|
|
||
Overfunded defined benefit pension plans
|
43.1
|
|
|
44.1
|
|
||
Investment in unconsolidated affiliate
|
106.6
|
|
|
113.1
|
|
||
Other assets
|
62.3
|
|
|
60.7
|
|
||
Total Assets
|
$
|
3,768.1
|
|
|
$
|
4,095.2
|
|
LIABILITIES AND EQUITY
|
|
|
|
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Current Liabilities
|
|
|
|
||||
Debt payable within one year
|
$
|
88.8
|
|
|
$
|
96.8
|
|
Accounts payable
|
258.2
|
|
|
255.3
|
|
||
PI warrant liability
|
—
|
|
|
490.0
|
|
||
Other current liabilities
|
315.9
|
|
|
340.0
|
|
||
Total Current Liabilities
|
662.9
|
|
|
1,182.1
|
|
||
Debt payable after one year
|
2,143.8
|
|
|
1,919.0
|
|
||
Deferred income taxes
|
17.8
|
|
|
19.3
|
|
||
Income tax contingencies
|
23.1
|
|
|
24.0
|
|
||
Underfunded and unfunded defined benefit pension plans
|
428.9
|
|
|
457.5
|
|
||
Other liabilities
|
123.4
|
|
|
124.3
|
|
||
Total Liabilities
|
3,399.9
|
|
|
3,726.2
|
|
||
Commitments and Contingencies—Note 8
|
|
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|
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Equity
|
|
|
|
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Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 72,766,606 (2014—72,922,565)
|
0.7
|
|
|
0.7
|
|
||
Paid-in capital
|
498.5
|
|
|
526.1
|
|
||
Retained earnings
|
344.8
|
|
|
292.1
|
|
||
Treasury stock, at cost: shares: 4,680,641 (2014—4,524,688)
|
(442.2
|
)
|
|
(429.2
|
)
|
||
Accumulated other comprehensive income
|
(36.9
|
)
|
|
(23.8
|
)
|
||
Total W. R. Grace & Co. Shareholders' Equity
|
364.9
|
|
|
365.9
|
|
||
Noncontrolling interests
|
3.3
|
|
|
3.1
|
|
||
Total Equity
|
368.2
|
|
|
369.0
|
|
||
Total Liabilities and Equity
|
$
|
3,768.1
|
|
|
$
|
4,095.2
|
|
(In millions)
|
Common
Stock
and
Paid-in
Capital
|
|
Retained
Earnings
|
|
Treasury
Stock
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
||||||||||||
Balance, December 31, 2013
|
$
|
534.2
|
|
|
$
|
15.8
|
|
|
$
|
—
|
|
|
$
|
10.6
|
|
|
$
|
10.6
|
|
|
$
|
571.2
|
|
Net income
|
—
|
|
|
50.1
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
50.3
|
|
||||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
(60.5
|
)
|
|
—
|
|
|
—
|
|
|
(60.5
|
)
|
||||||
Stock based compensation
|
2.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.8
|
|
||||||
Exercise of stock options
|
7.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7.7
|
|
||||||
Shares issued
|
1.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.2
|
|
||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.4
|
)
|
|
0.1
|
|
|
(1.3
|
)
|
||||||
Balance, March 31, 2014
|
$
|
545.9
|
|
|
$
|
65.9
|
|
|
$
|
(60.5
|
)
|
|
$
|
9.2
|
|
|
$
|
10.9
|
|
|
$
|
571.4
|
|
Balance, December 31, 2014
|
$
|
526.8
|
|
|
$
|
292.1
|
|
|
$
|
(429.2
|
)
|
|
$
|
(23.8
|
)
|
|
$
|
3.1
|
|
|
$
|
369.0
|
|
Net income
|
—
|
|
|
52.7
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
52.8
|
|
||||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
(55.6
|
)
|
|
—
|
|
|
—
|
|
|
(55.6
|
)
|
||||||
Stock based compensation
|
1.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
||||||
Exercise of stock options
|
(28.9
|
)
|
|
—
|
|
|
42.6
|
|
|
—
|
|
|
—
|
|
|
13.7
|
|
||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(13.1
|
)
|
|
0.1
|
|
|
(13.0
|
)
|
||||||
Balance, March 31, 2015
|
$
|
499.2
|
|
|
$
|
344.8
|
|
|
$
|
(442.2
|
)
|
|
$
|
(36.9
|
)
|
|
$
|
3.3
|
|
|
$
|
368.2
|
|
•
|
Realization values of net deferred tax assets, which depend on projections of future taxable income (see Note 5);
|
•
|
Pension and postretirement liabilities that depend on assumptions regarding participant life spans, future inflation, discount rates and total returns on invested funds (see Note 6); and
|
•
|
Contingent liabilities, which depend on an assessment of the probability of loss and an estimate of ultimate resolution cost, such as litigation (see Note 8), income taxes (see Note 5), and environmental remediation (see Note 8).
|
(In millions)
|
March 31,
2015 |
|
December 31,
2014 |
||||
Raw materials
|
$
|
84.6
|
|
|
$
|
78.8
|
|
In process
|
47.1
|
|
|
47.2
|
|
||
Finished products
|
166.4
|
|
|
177.7
|
|
||
Other
|
27.0
|
|
|
29.1
|
|
||
|
$
|
325.1
|
|
|
$
|
332.8
|
|
(In millions)
|
March 31,
2015 |
|
December 31,
2014 |
||||
U.S. dollar term loan, net of unamortized discount of $2.0 at March 31, 2015, and $2.1 at December 31, 2014(1)
|
$
|
940.4
|
|
|
$
|
692.6
|
|
5.125% senior notes due 2021
|
700.0
|
|
|
700.0
|
|
||
5.625%
senior notes due 2024
|
300.0
|
|
|
300.0
|
|
||
Euro term loan, net of unamortized discount of $0.4 at March 31, 2015, and $0.4 at December 31, 2014(2)
|
160.8
|
|
|
181.2
|
|
||
Debt payable—unconsolidated affiliate
|
31.2
|
|
|
31.5
|
|
||
Deferred payment obligation
|
28.4
|
|
|
28.2
|
|
||
Other borrowings(3)
|
71.8
|
|
|
82.3
|
|
||
Total debt
|
2,232.6
|
|
|
2,015.8
|
|
||
Less debt payable within one year
|
88.8
|
|
|
96.8
|
|
||
Debt payable after one year
|
$
|
2,143.8
|
|
|
$
|
1,919.0
|
|
Weighted average interest rates on total debt
|
4.1
|
%
|
|
4.3
|
%
|
(1)
|
Interest at LIBOR +200 bps with a 75 bps LIBOR floor at
March 31, 2015
, and LIBOR +225 bps with a 75 bps LIBOR floor at
December 31, 2014
|
(2)
|
Interest at EURIBOR +225 bps with a 75 bps EURIBOR floor at
March 31, 2015
, and EURIBOR +250 bps with a 75 bps EURIBOR floor at
December 31, 2014
|
(3)
|
Represents borrowings under various lines of credit and other borrowings, primarily by non-U.S. subsidiaries.
|
|
March 31, 2015
|
|
December 31, 2014
|
||||||||||||
(In millions)
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
||||||||
U.S. dollar term loan(1)
|
$
|
940.4
|
|
|
$
|
943.6
|
|
|
$
|
692.6
|
|
|
$
|
691.3
|
|
5.125% senior notes due 2021
|
700.0
|
|
|
733.3
|
|
|
700.0
|
|
|
720.9
|
|
||||
5.625% senior notes due 2024
|
300.0
|
|
|
321.0
|
|
|
300.0
|
|
|
312.0
|
|
||||
Euro term loan(1)
|
160.8
|
|
|
161.4
|
|
|
181.2
|
|
|
181.4
|
|
||||
Other borrowings
|
131.4
|
|
|
131.4
|
|
|
142.0
|
|
|
142.0
|
|
||||
Total debt
|
$
|
2,232.6
|
|
|
$
|
2,290.7
|
|
|
$
|
2,015.8
|
|
|
$
|
2,047.6
|
|
(1)
|
Carrying amounts are net of unamortized discounts of
$2.0 million
and
$0.4 million
as of
March 31, 2015
, and
$2.1 million
and
$0.4 million
as of
December 31, 2014
, related to the U.S. dollar term loan and euro term loan, respectively.
|
|
Fair Value Measurements at March 31, 2015, Using
|
||||||||||||||
(In millions)
|
Total
|
|
Quoted Prices in Active Markets for Identical Assets or Liabilities
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
$
|
9.8
|
|
|
$
|
—
|
|
|
$
|
9.8
|
|
|
$
|
—
|
|
Total Assets
|
$
|
9.8
|
|
|
$
|
—
|
|
|
$
|
9.8
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
$
|
0.4
|
|
|
$
|
—
|
|
|
$
|
0.4
|
|
|
$
|
—
|
|
Interest rate derivatives
|
9.0
|
|
|
—
|
|
|
9.0
|
|
|
—
|
|
||||
Commodity derivatives
|
2.7
|
|
|
—
|
|
|
2.7
|
|
|
—
|
|
||||
Total Liabilities
|
$
|
12.1
|
|
|
$
|
—
|
|
|
$
|
12.1
|
|
|
$
|
—
|
|
|
Fair Value Measurements at December 31, 2014, Using
|
||||||||||||||
(In millions)
|
Total
|
|
Quoted Prices in Active Markets for Identical Assets or Liabilities
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
$
|
3.3
|
|
|
$
|
—
|
|
|
$
|
3.3
|
|
|
$
|
—
|
|
Total Assets
|
$
|
3.3
|
|
|
$
|
—
|
|
|
$
|
3.3
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Currency derivatives
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
Interest rate derivatives
|
5.5
|
|
|
—
|
|
|
5.5
|
|
|
—
|
|
||||
Commodity derivatives
|
2.6
|
|
|
—
|
|
|
2.6
|
|
|
—
|
|
||||
Total Liabilities
|
$
|
8.2
|
|
|
$
|
—
|
|
|
$
|
8.2
|
|
|
$
|
—
|
|
March 31, 2015
(In millions)
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||
Balance Sheet
Location
|
|
Fair Value
|
|
Balance Sheet
Location
|
|
Fair Value
|
|||||
Derivatives designated as hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
||||
Commodity contracts
|
Other current assets
|
|
$
|
—
|
|
|
Other current liabilities
|
|
$
|
2.7
|
|
Currency contracts
|
Other current assets
|
|
6.5
|
|
|
Other current liabilities
|
|
—
|
|
||
Interest rate contracts
|
Other current assets
|
|
—
|
|
|
Other current liabilities
|
|
3.9
|
|
||
Currency contracts
|
Other assets
|
|
3.1
|
|
|
Other liabilities
|
|
—
|
|
||
Interest rate contracts
|
Other assets
|
|
—
|
|
|
Other liabilities
|
|
5.1
|
|
||
Derivatives not designated as hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
||||
Currency contracts
|
Other current assets
|
|
0.2
|
|
|
Other current liabilities
|
|
0.4
|
|
||
Total derivatives
|
|
|
$
|
9.8
|
|
|
|
|
$
|
12.1
|
|
December 31, 2014
(In millions)
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||
Balance Sheet
Location
|
|
Fair Value
|
|
Balance Sheet
Location
|
|
Fair Value
|
|||||
Derivatives designated as hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
||||
Commodity contracts
|
Other current assets
|
|
$
|
—
|
|
|
Other current liabilities
|
|
$
|
2.6
|
|
Currency contracts
|
Other current assets
|
|
0.8
|
|
|
Other current liabilities
|
|
—
|
|
||
Interest rate contracts
|
Other current assets
|
|
—
|
|
|
Other current liabilities
|
|
2.5
|
|
||
Currency contracts
|
Other assets
|
|
0.9
|
|
|
Other liabilities
|
|
—
|
|
||
Interest rate contracts
|
Other assets
|
|
—
|
|
|
Other liabilities
|
|
3.0
|
|
||
Derivatives not designated as hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
||||
Currency contracts
|
Other current assets
|
|
1.6
|
|
|
Other current liabilities
|
|
0.1
|
|
||
Total derivatives
|
|
|
$
|
3.3
|
|
|
|
|
$
|
8.2
|
|
Three Months Ended March 31, 2015
(In millions)
|
Amount of Gain (Loss) Recognized in OCI on Derivatives
(Effective Portion)
|
|
Location of Gain (Loss) Reclassified from Accumulated OCI into Income
(Effective Portion)
|
|
Amount of Gain (Loss) Reclassified from OCI into Income
(Effective Portion)
|
||||
Derivatives in ASC 815 cash flow hedging relationships:
|
|
|
|
|
|||||
Interest rate contracts
|
$
|
(3.5
|
)
|
|
Interest expense
|
|
$
|
(0.6
|
)
|
Currency contracts
|
6.4
|
|
|
Other expense
|
|
6.5
|
|
||
Currency contracts
|
0.1
|
|
|
Cost of goods sold
|
|
—
|
|
||
Commodity contracts
|
(1.0
|
)
|
|
Cost of goods sold
|
|
(1.0
|
)
|
||
Total derivatives
|
$
|
2.0
|
|
|
|
|
$
|
4.9
|
|
|
|
|
|
|
|
||||
|
|
Location of Gain (Loss) Recognized in Income on Derivatives
|
|
Amount of Gain (Loss) Recognized in Income on Derivatives
|
|||||
Derivatives not designated as hedging instruments under ASC 815:
|
|
|
|
|
|||||
Currency contracts
|
|
Other expense
|
|
$
|
(0.5
|
)
|
Three Months Ended March 31, 2014
(In millions)
|
Amount of Gain (Loss) Recognized in OCI on Derivatives
(Effective Portion) |
|
Location of Gain (Loss) Reclassified from Accumulated OCI into Income
(Effective Portion) |
|
Amount of Gain (Loss) Reclassified from OCI into Income
(Effective Portion) |
||||
Derivatives in ASC 815 cash flow hedging relationships:
|
|
|
|
|
|||||
Interest rate contracts
|
$
|
1.0
|
|
|
Interest expense
|
|
$
|
—
|
|
Currency contracts
|
0.5
|
|
|
Other expense
|
|
0.5
|
|
||
Commodity contracts
|
0.4
|
|
|
Cost of goods sold
|
|
0.3
|
|
||
Total derivatives
|
$
|
1.9
|
|
|
|
|
$
|
0.8
|
|
|
|
|
|
|
|
||||
|
|
Location of Gain (Loss) Recognized in Income on Derivatives
|
|
Amount of Gain (Loss) Recognized in Income on Derivatives
|
|||||
Derivatives not designated as hedging instruments under ASC 815:
|
|
|
|
|
|||||
Currency contracts
|
|
Other expense
|
|
$
|
4.5
|
|
Three Months Ended March 31, 2015
(In millions) |
Amount of Gain (Loss) Recognized in OCI in Currency Translation Adjustments
(Effective Portion)
|
|
Location of Gain (Loss) Reclassified from Accumulated OCI into Income
(Ineffective Portion)
|
|
Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
(Ineffective Portion)
|
||||
Nonderivatives in ASC 815 net investment hedging relationships:
|
|
|
|
|
|
||||
Foreign currency denominated debt
|
$
|
20.0
|
|
|
Not applicable
|
|
$
|
—
|
|
Total nonderivatives
|
$
|
20.0
|
|
|
|
|
$
|
—
|
|
|
Deferred Tax Asset
(Net of Liabilities)(2)
|
|
Valuation Allowance
|
|
Net Deferred Tax Asset
|
||||||
United States—Federal(1)
|
$
|
717.1
|
|
|
$
|
(2.4
|
)
|
|
$
|
714.7
|
|
United States—States(1)
|
61.4
|
|
|
(5.9
|
)
|
|
55.5
|
|
|||
Germany
|
35.5
|
|
|
—
|
|
|
35.5
|
|
|||
Other Foreign
|
5.5
|
|
|
(4.2
|
)
|
|
1.3
|
|
|||
Total
|
$
|
819.5
|
|
|
$
|
(12.5
|
)
|
|
$
|
807.0
|
|
(1)
|
The U.S. federal deductions generated during 2014 relating to emergence of
$670 million
and settlement of the PI deferred payment obligation of
$632 million
, and the
$490 million
warrant repurchase on February 3, 2015, plus the
$30 million
ZAI PD deferred payment obligation, account for a significant portion of the U.S. federal and state deferred tax assets.
|
(2)
|
Deferred tax assets are net of
$5.7 million
of income tax contingencies related to these deferred tax assets.
|
|
Expiration Dates
|
United States—Federal
|
2034 - 2035
|
United States—States
|
2015 - 2035
|
Brazil
|
Unlimited Carryforward
|
(In millions)
|
March 31,
2015 |
|
December 31,
2014 |
||||
Overfunded defined benefit pension plans
|
$
|
43.1
|
|
|
$
|
44.1
|
|
Underfunded defined benefit pension plans
|
(79.7
|
)
|
|
(79.5
|
)
|
||
Unfunded defined benefit pension plans
|
(349.2
|
)
|
|
(378.0
|
)
|
||
Total underfunded and unfunded defined benefit pension plans
|
(428.9
|
)
|
|
(457.5
|
)
|
||
Pension liabilities included in other current liabilities
|
(14.8
|
)
|
|
(15.6
|
)
|
||
Net funded status
|
$
|
(400.6
|
)
|
|
$
|
(429.0
|
)
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||
|
2015
|
|
2014
|
||||||||||||||||||||
|
Pension
|
|
Other Post
Retirement
|
|
Pension
|
|
Other Post
Retirement
|
||||||||||||||||
(In millions)
|
U.S.
|
|
Non-U.S.
|
|
|
U.S.
|
|
Non-U.S.
|
|
||||||||||||||
Service cost
|
$
|
6.4
|
|
|
$
|
3.0
|
|
|
$
|
—
|
|
|
$
|
5.9
|
|
|
$
|
2.7
|
|
|
$
|
—
|
|
Interest cost
|
13.8
|
|
|
4.2
|
|
|
0.1
|
|
|
15.2
|
|
|
5.7
|
|
|
0.6
|
|
||||||
Expected return on plan assets
|
(17.6
|
)
|
|
(3.4
|
)
|
|
—
|
|
|
(17.5
|
)
|
|
(3.9
|
)
|
|
—
|
|
||||||
Amortization of prior service cost (credit)
|
0.1
|
|
|
—
|
|
|
(1.0
|
)
|
|
0.2
|
|
|
—
|
|
|
(0.1
|
)
|
||||||
Amortization of net deferred actuarial loss (gain)
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
||||||
Mark-to-market adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.1
|
)
|
|
—
|
|
|
—
|
|
||||||
Net periodic benefit cost (income)
|
$
|
2.7
|
|
|
$
|
3.8
|
|
|
$
|
(0.7
|
)
|
|
$
|
0.7
|
|
|
$
|
4.5
|
|
|
$
|
0.3
|
|
(In millions)
|
March 31,
2015 |
|
December 31,
2014 |
||||
Other Current Liabilities
|
|
|
|
||||
Accrued compensation
|
$
|
67.7
|
|
|
$
|
77.0
|
|
Income tax payable
|
34.8
|
|
|
34.1
|
|
||
Accrued interest
|
25.5
|
|
|
21.0
|
|
||
Customer volume rebates
|
24.9
|
|
|
37.8
|
|
||
Deferred revenue
|
19.3
|
|
|
19.4
|
|
||
Pension liabilities
|
14.8
|
|
|
15.6
|
|
||
Environmental contingencies
|
14.0
|
|
|
21.5
|
|
||
Deferred tax liability
|
1.6
|
|
|
1.5
|
|
||
Other accrued liabilities
|
113.3
|
|
|
112.1
|
|
||
|
$
|
315.9
|
|
|
$
|
340.0
|
|
•
|
Product warranties with respect to certain products sold to customers in the ordinary course of business. These warranties typically provide that products will conform to specifications. Grace accrues a warranty liability on a transaction-specific basis depending on the individual facts and circumstances related to each sale. Both the liability and annual expense related to product warranties are immaterial to the Consolidated Financial Statements.
|
•
|
Performance guarantees offered to customers under certain licensing arrangements. Grace has not established a liability for these arrangements based on past performance.
|
•
|
Licenses of intellectual property by Grace to third parties in which Grace has agreed to indemnify the licensee against third party infringement claims.
|
•
|
Contracts providing for the sale of a former business unit or product line in which Grace has agreed to indemnify the buyer against liabilities arising prior to the closing of the transaction, including environmental liabilities.
|
•
|
Guarantees of real property lease obligations of third parties, typically arising out of (a) leases entered into by former subsidiaries of Grace, or (b) the assignment or sublease of a lease by Grace to a third party.
|
Restructuring Expenses
(In millions)
|
Three Months Ended March 31,
|
||||||
2015
|
|
2014
|
|||||
Restructuring expenses
|
$
|
9.5
|
|
|
$
|
0.7
|
|
Total restructuring expenses
|
$
|
9.5
|
|
|
$
|
0.7
|
|
Restructuring Liability
(In millions)
|
Total
|
||
Balance, December 31, 2014
|
$
|
4.5
|
|
Accruals for severance and other costs
|
9.5
|
|
|
Payments
|
(3.7
|
)
|
|
Currency translation adjustments and other
|
0.1
|
|
|
Balance, March 31, 2015
|
$
|
10.4
|
|
|
Three Months Ended March 31,
|
||||||
(In millions)
|
2015
|
|
2014
|
||||
Restructuring expenses
|
$
|
9.5
|
|
|
$
|
0.7
|
|
Asbestos and bankruptcy-related charges, net
|
(8.7
|
)
|
|
8.8
|
|
||
Repositioning expenses
|
6.9
|
|
|
—
|
|
||
Provision for environmental remediation, net
|
(3.3
|
)
|
|
1.2
|
|
||
Currency transaction effects
|
(2.8
|
)
|
|
0.3
|
|
||
Net loss on sales of investments and disposals of assets
|
0.4
|
|
|
0.7
|
|
||
Interest income
|
(0.1
|
)
|
|
(0.5
|
)
|
||
Other miscellaneous income
|
(0.6
|
)
|
|
(1.2
|
)
|
||
Total other expense, net
|
$
|
1.3
|
|
|
$
|
10.0
|
|
Three Months Ended March 31, 2015
(In millions)
|
Pre-Tax Amount
|
|
Tax Benefit/ (Expense)
|
|
After-Tax Amount
|
||||||
Defined benefit pension and other postretirement plans:
|
|
|
|
|
|
||||||
Amortization of net prior service credit included in net periodic benefit cost
|
$
|
(0.9
|
)
|
|
$
|
0.4
|
|
|
$
|
(0.5
|
)
|
Amortization of net deferred actuarial loss included in net periodic benefit cost
|
0.2
|
|
|
(0.1
|
)
|
|
0.1
|
|
|||
Benefit plans, net
|
(0.7
|
)
|
|
0.3
|
|
|
(0.4
|
)
|
|||
Currency translation adjustments
|
(10.8
|
)
|
|
—
|
|
|
(10.8
|
)
|
|||
Loss from hedging activities
|
(2.9
|
)
|
|
1.0
|
|
|
(1.9
|
)
|
|||
Other comprehensive loss attributable to W. R. Grace & Co. shareholders
|
$
|
(14.4
|
)
|
|
$
|
1.3
|
|
|
$
|
(13.1
|
)
|
Three Months Ended March 31, 2014
(In millions)
|
Pre-Tax Amount
|
|
Tax Benefit/ (Expense)
|
|
After-Tax Amount
|
||||||
Defined benefit pension and other postretirement plans:
|
|
|
|
|
|
||||||
Amortization of net prior service cost included in net periodic benefit cost
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
Amortization of net deferred actuarial gain included in net periodic benefit cost
|
(0.2
|
)
|
|
—
|
|
|
(0.2
|
)
|
|||
Benefit plans, net
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|||
Currency translation adjustments
|
(2.1
|
)
|
|
—
|
|
|
(2.1
|
)
|
|||
Gain from hedging activities
|
1.1
|
|
|
(0.4
|
)
|
|
0.7
|
|
|||
Gain on securities available for sale
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|||
Other comprehensive loss attributable to W. R. Grace & Co. shareholders
|
$
|
(1.0
|
)
|
|
$
|
(0.4
|
)
|
|
$
|
(1.4
|
)
|
Three Months Ended March 31, 2015
(In millions)
|
Defined Benefit Pension and Other Postretirement Plans
|
|
Currency Translation Adjustments
|
|
Gain (Loss) from Hedging Activities
|
|
Total
|
||||||||
Beginning balance
|
$
|
4.0
|
|
|
$
|
(22.8
|
)
|
|
$
|
(5.0
|
)
|
|
$
|
(23.8
|
)
|
Other comprehensive income (loss) before reclassifications
|
—
|
|
|
(10.8
|
)
|
|
2.3
|
|
|
(8.5
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income
|
(0.4
|
)
|
|
—
|
|
|
(4.2
|
)
|
|
(4.6
|
)
|
||||
Net current-period other comprehensive loss
|
(0.4
|
)
|
|
(10.8
|
)
|
|
(1.9
|
)
|
|
(13.1
|
)
|
||||
Ending balance
|
$
|
3.6
|
|
|
$
|
(33.6
|
)
|
|
$
|
(6.9
|
)
|
|
$
|
(36.9
|
)
|
Three Months Ended March 31, 2014
(In millions)
|
Defined Benefit Pension and Other Postretirement Plans
|
|
Currency Translation Adjustments
|
|
Gain (Loss) from Hedging Activities
|
|
Unrealized Loss on Investment
|
|
Gain on Securities Available for Sale
|
|
Total
|
||||||||||||
Beginning balance
|
$
|
6.6
|
|
|
$
|
5.2
|
|
|
$
|
(0.5
|
)
|
|
$
|
(0.8
|
)
|
|
$
|
0.1
|
|
|
$
|
10.6
|
|
Other comprehensive income (loss) before reclassifications
|
—
|
|
|
(2.1
|
)
|
|
1.2
|
|
|
—
|
|
|
0.1
|
|
|
(0.8
|
)
|
||||||
Amounts reclassified from accumulated other comprehensive income
|
(0.1
|
)
|
|
—
|
|
|
(0.5
|
)
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
||||||
Net current-period other comprehensive income (loss)
|
(0.1
|
)
|
|
(2.1
|
)
|
|
0.7
|
|
|
—
|
|
|
0.1
|
|
|
(1.4
|
)
|
||||||
Ending balance
|
$
|
6.5
|
|
|
$
|
3.1
|
|
|
$
|
0.2
|
|
|
$
|
(0.8
|
)
|
|
$
|
0.2
|
|
|
$
|
9.2
|
|
|
Three Months Ended March 31,
|
||||||
(In millions, except per share amounts)
|
2015
|
|
2014
|
||||
Numerators
|
|
|
|
||||
Net income attributable to W. R. Grace & Co. shareholders
|
$
|
52.7
|
|
|
$
|
50.1
|
|
Denominators
|
|
|
|
||||
Weighted average common shares—basic calculation
|
72.8
|
|
|
77.0
|
|
||
Dilutive effect of employee stock options
|
0.7
|
|
|
1.1
|
|
||
Weighted average common shares—diluted calculation
|
73.5
|
|
|
78.1
|
|
||
Basic earnings per share
|
$
|
0.72
|
|
|
$
|
0.65
|
|
Diluted earnings per share
|
$
|
0.72
|
|
|
$
|
0.64
|
|
|
Three Months Ended March 31,
|
||||||
(In millions)
|
2015
|
|
2014
|
||||
Net Sales
|
|
|
|
||||
Catalysts Technologies
|
$
|
281.0
|
|
|
$
|
284.5
|
|
Materials Technologies
|
200.3
|
|
|
219.8
|
|
||
Construction Products
|
239.3
|
|
|
240.2
|
|
||
Total
|
$
|
720.6
|
|
|
$
|
744.5
|
|
Adjusted EBIT
|
|
|
|
||||
Catalysts Technologies segment operating income
|
$
|
73.7
|
|
|
$
|
71.2
|
|
Materials Technologies segment operating income
|
41.0
|
|
|
45.5
|
|
||
Construction Products segment operating income
|
29.4
|
|
|
25.4
|
|
||
Corporate costs
|
(20.6
|
)
|
|
(22.5
|
)
|
||
Certain pension costs
|
(6.5
|
)
|
|
(8.3
|
)
|
||
Total
|
$
|
117.0
|
|
|
$
|
111.3
|
|
|
Three Months Ended March 31,
|
||||||
(In millions)
|
2015
|
|
2014
|
||||
Grace Adjusted EBIT
|
$
|
117.0
|
|
|
$
|
111.3
|
|
Benefit (costs) related to Chapter 11 and asbestos, net
|
9.7
|
|
|
(15.5
|
)
|
||
Pension MTM adjustment and other related costs, net
|
(4.7
|
)
|
|
4.8
|
|
||
Restructuring expenses
|
(9.5
|
)
|
|
(0.7
|
)
|
||
Repositioning expenses
|
(6.9
|
)
|
|
—
|
|
||
Income and expense items related to divested businesses
|
0.7
|
|
|
(1.1
|
)
|
||
Interest expense, net
|
(24.9
|
)
|
|
(18.9
|
)
|
||
Net income attributable to noncontrolling interests
|
0.1
|
|
|
0.2
|
|
||
Income before income taxes
|
$
|
81.5
|
|
|
$
|
80.1
|
|
|
Three Months Ended March 31,
|
||||||
(In millions)
|
2015
|
|
2014
|
||||
Net Sales
|
|
|
|
||||
United States
|
$
|
214.6
|
|
|
$
|
206.0
|
|
Canada and Puerto Rico
|
17.8
|
|
|
16.6
|
|
||
Total North America
|
232.4
|
|
|
222.6
|
|
||
Europe Middle East Africa
|
235.2
|
|
|
274.9
|
|
||
Asia Pacific
|
176.6
|
|
|
164.9
|
|
||
Latin America
|
76.4
|
|
|
82.1
|
|
||
Total
|
$
|
720.6
|
|
|
$
|
744.5
|
|
|
Three Months Ended March 31,
|
||||||
(In millions)
|
2015
|
|
2014
|
||||
Grace sales of catalysts to ART
|
$
|
54.2
|
|
|
$
|
65.5
|
|
Charges for fixed costs, research and development and selling, general and administrative services to ART
|
5.9
|
|
|
7.5
|
|
•
|
Net sales decreased
3.2%
to
$720.6 million
.
|
•
|
Adjusted EBIT increased
5.1%
to
$117.0 million
.
|
•
|
Grace net income increased
5.2%
to
$52.7 million
or
$0.72
per diluted share. Adjusted EPS was
$0.82
per diluted share.
|
•
|
Adjusted EBIT Return On Invested Capital was
32.2%
on a trailing four quarters basis compared with
27.2%
for the
2014
first quarter
.
|
•
|
Fluid catalytic cracking catalysts, also called FCC catalysts, that help to "crack" the hydrocarbon chain in distilled crude oil to produce transportation fuels, such as gasoline and diesel fuels, and other petroleum-based products; and FCC additives used to reduce sulfur in gasoline, maximize propylene production from refinery FCC units, and reduce emissions of sulfur oxides, nitrogen oxides and carbon monoxide from refinery FCC units.
|
•
|
Hydroprocessing catalysts (HPC), most of which are marketed through our ART joint venture with Chevron Products Company in which we hold a 50% economic interest, that are used in process reactors to upgrade heavy oils into lighter, more useful products by removing impurities such as nitrogen, sulfur and heavy metals, allowing less expensive feedstocks to be used in the petroleum refining process (ART is not consolidated in our financial statements, so ART's sales are excluded from our sales).
|
•
|
Polyolefin catalysts and catalyst supports, also called specialty catalysts (SC), for the production of polypropylene and polyethylene thermoplastic resins, which can be customized to enhance the performance of a wide range of industrial and consumer end-use applications including high pressure pipe, geomembranes, food packaging, automotive parts, medical devices, and textiles; chemical catalysts used in a variety of industrial, environmental and consumer applications; and gas-phase polypropylene process technology, which provides our licensees with a reliable capability to manufacture polypropylene products for a broad array of end-use applications.
|
•
|
Engineered materials, including silica-based and silica-alumina-based materials, used in:
|
•
|
Coatings and print media applications, including functional additives that provide matting effects and corrosion protection for industrial and consumer coatings and media and paper products to enhance quality in ink jet coatings.
|
•
|
Consumer applications, as a free-flow agent, carrier or processing aid in food and personal care products; as a toothpaste abrasive and thickener; and for the processing and stabilization of edible oils and beverages.
|
•
|
Industrial applications, such as tires and rubber, precision investment casting, refractory, insulating glass windows, adsorbents for use in petrochemical and natural gas processes and biofuels, various functions such as reinforcement, high temperature binding and moisture scavenging.
|
•
|
Pharmaceutical, life science and related applications including silica-based separation media, excipients and pharmaceutical intermediates; complementary purification products, chromatography consumables, and instruments; and CO
2
absorbents used in anesthesiology and mine safety applications.
|
•
|
Packaging products, including can and closure sealants used to seal and enhance the shelf life of can and bottle contents; coatings for cans and closures that prevent metal corrosion, protect package contents from the influence of metal and ensure proper adhesion of sealing compounds; and scavenging technologies designed to reduce off-taste and extend the shelf-life of packaged products.
|
•
|
Specialty construction chemicals (SCC) used to improve the performance of portland cement and materials based on portland cement including:
|
•
|
Concrete admixtures that are sold to ready-mix, precast, and sprayed concrete producers to improve the rheology, workability, quality, durability and other engineering properties of concrete, reduce production costs and provide differentiated product offerings. Certain of our concrete admixtures include polyolefin fibers which are used to improve the strength of concrete and enables the replacement of steel reinforcement, in certain cases.
|
•
|
Cement additives that are sold to manufacturers of portland cement to improve energy efficiency in cement milling operations and to enhance the characteristics of finished cement. Our additives are also used by cement manufacturers to meet national standards for cement quality at lower production cost and with a reduced environmental footprint, including lower CO
2
emissions.
|
•
|
Specialty building materials (SBM) used in both new construction and renovation/repair projects including:
|
•
|
Sheet and liquid membrane systems that protect commercial buildings, residential buildings and infrastructure from above- and below-grade water penetration and above-grade vapor and air penetration and underlayments used to protect sloped roofs from wind and water penetration.
|
Analysis of Operations
(In millions, except per share amounts)
|
Three Months Ended March 31,
|
|||||||||
2015
|
|
2014
|
|
% Change
|
||||||
Net sales:
|
|
|
|
|
|
|||||
Catalysts Technologies
|
$
|
281.0
|
|
|
$
|
284.5
|
|
|
(1.2
|
)%
|
Materials Technologies
|
200.3
|
|
|
219.8
|
|
|
(8.9
|
)%
|
||
Construction Products
|
239.3
|
|
|
240.2
|
|
|
(0.4
|
)%
|
||
Total Grace net sales
|
$
|
720.6
|
|
|
$
|
744.5
|
|
|
(3.2
|
)%
|
Net sales by region:
|
|
|
|
|
|
|||||
North America
|
$
|
232.4
|
|
|
$
|
222.6
|
|
|
4.4
|
%
|
Europe Middle East Africa
|
235.2
|
|
|
274.9
|
|
|
(14.4
|
)%
|
||
Asia Pacific
|
176.6
|
|
|
164.9
|
|
|
7.1
|
%
|
||
Latin America
|
76.4
|
|
|
82.1
|
|
|
(6.9
|
)%
|
||
Total net sales by region
|
$
|
720.6
|
|
|
$
|
744.5
|
|
|
(3.2
|
)%
|
Profitability performance measures:
|
|
|
|
|
|
|||||
Adjusted EBIT(A):
|
|
|
|
|
|
|||||
Catalysts Technologies segment operating income
|
$
|
73.7
|
|
|
$
|
71.2
|
|
|
3.5
|
%
|
Materials Technologies segment operating income
|
41.0
|
|
|
45.5
|
|
|
(9.9
|
)%
|
||
Construction Products segment operating income
|
29.4
|
|
|
25.4
|
|
|
15.7
|
%
|
||
Corporate costs
|
(20.6
|
)
|
|
(22.5
|
)
|
|
8.4
|
%
|
||
Certain pension costs(B)
|
(6.5
|
)
|
|
(8.3
|
)
|
|
21.7
|
%
|
||
Adjusted EBIT
|
117.0
|
|
|
111.3
|
|
|
5.1
|
%
|
||
Benefit (costs) related to Chapter 11 and asbestos, net
|
9.7
|
|
|
(15.5
|
)
|
|
|
|||
Pension MTM adjustment and other related costs, net
|
(4.7
|
)
|
|
4.8
|
|
|
|
|||
Restructuring expenses
|
(9.5
|
)
|
|
(0.7
|
)
|
|
|
|||
Repositioning expenses
|
(6.9
|
)
|
|
—
|
|
|
|
|||
Income and expense items related to divested businesses
|
0.7
|
|
|
(1.1
|
)
|
|
|
|||
Interest expense, net
|
(24.9
|
)
|
|
(18.9
|
)
|
|
(31.7
|
)%
|
||
Provision for income taxes
|
(28.7
|
)
|
|
(29.8
|
)
|
|
3.7
|
%
|
||
Net income attributable to W. R. Grace & Co. shareholders
|
$
|
52.7
|
|
|
$
|
50.1
|
|
|
5.2
|
%
|
Diluted EPS (GAAP)
|
$
|
0.72
|
|
|
$
|
0.64
|
|
|
12.5
|
%
|
Adjusted EPS (non-GAAP)
|
$
|
0.82
|
|
|
$
|
0.77
|
|
|
6.5
|
%
|
Analysis of Operations
(In millions)
|
Three Months Ended March 31,
|
|||||||||
2015
|
|
2014
|
|
% Change
|
||||||
Profitability performance measures:
|
|
|
|
|
|
|
|
|
||
Gross margin:
|
|
|
|
|
|
|
|
|
||
Catalysts Technologies
|
38.8
|
%
|
|
39.0
|
%
|
|
(0.2) pts
|
|
||
Materials Technologies
|
35.2
|
%
|
|
34.9
|
%
|
|
0.3 pts
|
|
||
Construction Products
|
35.8
|
%
|
|
34.4
|
%
|
|
1.4 pts
|
|
||
Segment Gross Margin
|
36.8
|
%
|
|
36.3
|
%
|
|
0.5 pts
|
|
||
Pension costs in cost of goods sold
|
(1.0
|
)%
|
|
(0.1
|
)%
|
|
(0.9) pts
|
|
||
Total Grace
|
35.8
|
%
|
|
36.2
|
%
|
|
(0.4) pts
|
|
||
Adjusted profitability performance measures:
|
|
|
|
|
|
|
|
|
||
Adjusted EBIT:
|
|
|
|
|
|
|
|
|
||
Catalysts Technologies
|
$
|
73.7
|
|
|
$
|
71.2
|
|
|
3.5
|
%
|
Materials Technologies
|
41.0
|
|
|
45.5
|
|
|
(9.9
|
)%
|
||
Construction Products
|
29.4
|
|
|
25.4
|
|
|
15.7
|
%
|
||
Corporate
|
(27.1
|
)
|
|
(30.8
|
)
|
|
12.0
|
%
|
||
Total Grace
|
117.0
|
|
|
111.3
|
|
|
5.1
|
%
|
||
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
||
Catalysts Technologies
|
$
|
17.1
|
|
|
$
|
16.6
|
|
|
3.0
|
%
|
Materials Technologies
|
7.5
|
|
|
8.0
|
|
|
(6.3
|
)%
|
||
Construction Products
|
7.4
|
|
|
7.6
|
|
|
(2.6
|
)%
|
||
Corporate
|
1.5
|
|
|
1.8
|
|
|
(16.7
|
)%
|
||
Total Grace
|
33.5
|
|
|
34.0
|
|
|
(1.5
|
)%
|
||
Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
||
Catalysts Technologies
|
$
|
90.8
|
|
|
$
|
87.8
|
|
|
3.4
|
%
|
Materials Technologies
|
48.5
|
|
|
53.5
|
|
|
(9.3
|
)%
|
||
Construction Products
|
36.8
|
|
|
33.0
|
|
|
11.5
|
%
|
||
Corporate
|
(25.6
|
)
|
|
(29.0
|
)
|
|
11.7
|
%
|
||
Total Grace
|
150.5
|
|
|
145.3
|
|
|
3.6
|
%
|
||
Adjusted EBIT margin:
|
|
|
|
|
|
|
|
|
||
Catalysts Technologies
|
26.2
|
%
|
|
25.0
|
%
|
|
1.2 pts
|
|
||
Materials Technologies
|
20.5
|
%
|
|
20.7
|
%
|
|
(0.2) pts
|
|
||
Construction Products
|
12.3
|
%
|
|
10.6
|
%
|
|
1.7 pts
|
|
||
Total Grace
|
16.2
|
%
|
|
14.9
|
%
|
|
1.3 pts
|
|
||
Adjusted EBITDA margin:
|
|
|
|
|
|
|
|
|
||
Catalysts Technologies
|
32.3
|
%
|
|
30.9
|
%
|
|
1.4 pts
|
|
||
Materials Technologies
|
24.2
|
%
|
|
24.3
|
%
|
|
(0.1) pts
|
|
||
Construction Products
|
15.4
|
%
|
|
13.7
|
%
|
|
1.7 pts
|
|
||
Total Grace
|
20.9
|
%
|
|
19.5
|
%
|
|
1.4 pts
|
|
Analysis of Operations
(In millions)
|
Four Quarters Ended
|
||||||
March 31,
2015 |
|
March 31, 2014
|
|||||
Calculation of Adjusted EBIT Return On Invested Capital (trailing four quarters):
|
|||||||
Adjusted EBIT
|
$
|
631.9
|
|
|
$
|
545.3
|
|
Invested Capital:
|
|
|
|
||||
Trade accounts receivable
|
447.9
|
|
|
504.7
|
|
||
Inventories
|
325.1
|
|
|
324.8
|
|
||
Accounts payable
|
(258.2
|
)
|
|
(305.4
|
)
|
||
|
514.8
|
|
|
524.1
|
|
||
Other current assets (excluding income taxes)
|
87.4
|
|
|
89.3
|
|
||
Properties and equipment, net
|
813.1
|
|
|
832.7
|
|
||
Goodwill
|
443.2
|
|
|
455.7
|
|
||
Technology and other intangible assets, net
|
278.3
|
|
|
310.1
|
|
||
Investment in unconsolidated affiliate
|
106.6
|
|
|
99.7
|
|
||
Other assets (excluding capitalized financing fees)
|
25.8
|
|
|
43.3
|
|
||
Other current liabilities (excluding income taxes, environmental remediation related to asbestos and divested businesses, Chapter 11, restructuring, and accrued interest)
|
(228.5
|
)
|
|
(257.8
|
)
|
||
Other liabilities (excluding environmental remediation related to asbestos and divested businesses)
|
(80.2
|
)
|
|
(93.6
|
)
|
||
Total invested capital
|
$
|
1,960.5
|
|
|
$
|
2,003.5
|
|
Adjusted EBIT Return On Invested Capital
|
32.2
|
%
|
|
27.2
|
%
|
(A)
|
Grace's segment operating income includes only Grace's share of income of consolidated and unconsolidated joint ventures.
|
(B)
|
Certain pension costs include only ongoing costs recognized quarterly, which include service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits. Catalysts Technologies, Materials Technologies, and Construction Products segment operating income and corporate costs do not include any amounts for pension expense. Other pension related costs including annual mark-to-market adjustments and actuarial gains and losses are excluded from Adjusted EBIT. These amounts are not used by management to evaluate the performance of Grace's businesses and significantly affect the peer-to-peer and period-to-period comparability of our financial results. Mark-to-market adjustments and actuarial gains and losses relate primarily to changes in financial market values and actuarial assumptions and are not directly related to the operation of Grace's businesses.
|
|
Three Months Ended March 31, 2015
as a Percentage Increase (Decrease) from
Three Months Ended March 31, 2014
|
||||||||||
Net Sales Variance Analysis
|
Volume
|
|
Price
|
|
Currency Translation
|
|
Total
|
||||
Catalysts Technologies
|
3.7
|
%
|
|
0.2
|
%
|
|
(5.1
|
)%
|
|
(1.2
|
)%
|
Materials Technologies
|
(1.6
|
)%
|
|
0.9
|
%
|
|
(8.2
|
)%
|
|
(8.9
|
)%
|
Construction Products
|
3.7
|
%
|
|
0.8
|
%
|
|
(4.9
|
)%
|
|
(0.4
|
)%
|
Net sales
|
2.1
|
%
|
|
0.6
|
%
|
|
(5.9
|
)%
|
|
(3.2
|
)%
|
By Region:
|
|
|
|
|
|
|
|
||||
North America
|
4.2
|
%
|
|
0.4
|
%
|
|
(0.2
|
)%
|
|
4.4
|
%
|
Europe Middle East Africa
|
(2.4
|
)%
|
|
0.6
|
%
|
|
(12.6
|
)%
|
|
(14.4
|
)%
|
Asia Pacific
|
9.2
|
%
|
|
0.3
|
%
|
|
(2.4
|
)%
|
|
7.1
|
%
|
Latin America
|
(2.5
|
)%
|
|
1.7
|
%
|
|
(6.1
|
)%
|
|
(6.9
|
)%
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||||||||||
|
2015
|
|
2014
|
||||||||||||||||||||||||||||
(In millions, except per share amounts)
|
Pre-
Tax
|
|
Tax Effect
|
|
After-
Tax
|
|
Per
Share
|
|
Pre-
Tax
|
|
Tax Effect
|
|
After-
Tax
|
|
Per
Share
|
||||||||||||||||
Diluted Earnings Per Share (GAAP)
|
|
|
|
|
|
|
|
|
|
$
|
0.72
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.64
|
|
||||||
(Benefit) costs related to Chapter 11 and asbestos, net
|
$
|
(9.7
|
)
|
|
$
|
(3.6
|
)
|
|
$
|
(6.1
|
)
|
|
(0.08
|
)
|
|
$
|
15.5
|
|
|
$
|
5.8
|
|
|
$
|
9.7
|
|
|
0.12
|
|
||
Pension MTM adjustment and other related costs, net
|
4.7
|
|
|
1.7
|
|
|
3.0
|
|
|
0.04
|
|
|
(4.8
|
)
|
|
(1.8
|
)
|
|
(3.0
|
)
|
|
(0.04
|
)
|
||||||||
Restructuring expenses
|
9.5
|
|
|
3.3
|
|
|
6.2
|
|
|
0.08
|
|
|
0.7
|
|
|
0.2
|
|
|
0.5
|
|
|
0.01
|
|
||||||||
Repositioning expenses
|
6.9
|
|
|
1.6
|
|
|
5.3
|
|
|
0.07
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Income and expense items related to divested businesses
|
(0.7
|
)
|
|
(0.3
|
)
|
|
(0.4
|
)
|
|
(0.01
|
)
|
|
1.1
|
|
|
0.4
|
|
|
0.7
|
|
|
0.01
|
|
||||||||
Discrete tax items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Discrete tax items, including adjustments to uncertain tax positions
|
|
|
|
(0.3
|
)
|
|
0.3
|
|
|
—
|
|
|
|
|
|
(2.0
|
)
|
|
2.0
|
|
|
0.03
|
|
||||||||
Adjusted EPS (non-GAAP)
|
|
|
|
|
|
|
|
|
|
$
|
0.82
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.77
|
|
(In millions)
|
Three Months Ended March 31, 2015
|
||
Professional fees
|
$
|
6.4
|
|
Employee-related costs
|
0.5
|
|
|
Total
|
$
|
6.9
|
|
(In millions)
|
Maximum Borrowing Amount
|
|
Available Liquidity
|
|
Expiration Date
|
||||
Germany
|
$
|
54.3
|
|
|
$
|
7.1
|
|
|
12/31/2015
|
Other countries
|
131.4
|
|
|
70.4
|
|
|
Various through 2016
|
||
Total
|
$
|
185.7
|
|
|
$
|
77.5
|
|
|
|
|
Three Months Ended March 31,
|
||||||
(In millions)
|
2015
|
|
2014
|
||||
Net cash used for operating activities
|
$
|
(373.6
|
)
|
|
$
|
(1,253.3
|
)
|
Net cash (used for) provided by investing activities
|
(40.6
|
)
|
|
352.7
|
|
||
Net cash provided by financing activities
|
198.8
|
|
|
360.8
|
|
||
Effect of currency exchange rate changes on cash and cash equivalents
|
(15.3
|
)
|
|
(2.1
|
)
|
||
Decrease in cash and cash equivalents
|
(230.7
|
)
|
|
(541.9
|
)
|
||
Cash and cash equivalents, beginning of period
|
557.5
|
|
|
964.8
|
|
||
Cash and cash equivalents, end of period
|
$
|
326.8
|
|
|
$
|
422.9
|
|
|
Three Months Ended March 31,
|
||||||
(In millions)
|
2015
|
|
2014
|
||||
U.S. pay-as-you-go plans(1)
|
$
|
1.7
|
|
|
$
|
1.7
|
|
Non-U.S. advance-funded plans
|
1.1
|
|
|
4.8
|
|
||
Non-U.S. pay-as-you-go plans
|
1.8
|
|
|
2.3
|
|
||
Total Cash Contributions
|
$
|
4.6
|
|
|
$
|
8.8
|
|
(1)
|
Excludes benefit payments of approximately $27 million which were paid in 2014 from a U.S. nonqualified pension plan in connection with our emergence from bankruptcy.
|
Exchange Mechanism
(in millions, except exchange rate amounts)
|
USD Exchange Rate
March 31, 2015
|
|
Net Monetary Assets
USD Equivalent
March 31, 2015
|
|
Foreign Exchange
(Gain)/Loss(1)
Three Months Ended
March 31, 2015
|
|
Sales
USD Equivalent Three Months Ended March 31, 2015 |
|
Foreign Exchange Translation Impact on Sales(1)
Three Months Ended March 31, 2015 |
|||||||||
CENCOEX
|
6.3
|
|
|
$
|
28.8
|
|
|
$
|
—
|
|
|
$
|
11.5
|
|
|
$
|
—
|
|
SICAD
|
12.0
|
|
|
15.1
|
|
|
13.7
|
|
|
6.0
|
|
|
5.5
|
|
||||
SIMADI
|
193.0
|
|
|
0.9
|
|
|
27.9
|
|
|
0.4
|
|
|
11.1
|
|
(1)
|
Represents the potential impact to the Consolidated Financial Statements if we had used the respective alternative exchange mechanism to remeasure our net monetary asset position as of
March 31, 2015
.
|
|
|
Total number of shares purchased
(#)
|
|
Average price paid per share
($/share)
|
|
Total number of shares purchased as part of publicly announced plans or programs
(#)
|
|
Approximate dollar value of shares that may yet be purchased under the plans or programs
($ in millions)
|
||||
1/1/2015 - 1/31/2015
|
|
258,120
|
|
|
92.31
|
|
|
258,120
|
|
|
—
|
|
2/1/2015 - 2/28/2015
|
|
105,186
|
|
|
100.09
|
|
|
105,186
|
|
|
490.3
|
|
3/1/2015 - 3/31/2015
|
|
163,398
|
|
|
97.53
|
|
|
163,398
|
|
|
474.4
|
|
Total
|
|
526,704
|
|
|
95.48
|
|
|
526,704
|
|
|
|
|
•
|
Are not statements of fact, but rather are used to allocate risk to one of the parties if the statements prove to be inaccurate;
|
•
|
May have been qualified by disclosures that were made to the other parties in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
|
•
|
May apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
|
•
|
Were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and do not reflect more recent developments.
|
Exhibit No.
|
|
Description of Exhibit
|
|
Location
|
10.1
|
|
Letter Agreement dated December 3, 2014, between Fred Festa, on behalf of Grace, and Elizabeth Brown
|
|
Filed herewith
|
15
|
|
Accountants' Awareness Letter
|
|
Filed herewith
|
31(i).1
|
|
Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
31(i).2
|
|
Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
32
|
|
Certification of Periodic Report by Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
95
|
|
Mine Safety Disclosure Exhibit
|
|
Filed herewith
|
101.INS
|
|
XBRL Instance Document
|
|
Filed herewith
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
Filed herewith
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
Filed herewith
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
Filed herewith
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
Filed herewith
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
Filed herewith
|
|
W. R. GRACE & CO.
(Registrant)
|
|
|
|
|
Date: 5/7/2015
|
By:
|
/s/ A. E. FESTA
|
|
|
A. E. Festa
(Chairman and
Chief Executive Officer)
|
|
|
|
Date: 5/7/2015
|
By:
|
/s/ HUDSON LA FORCE III
|
|
|
Hudson La Force III
(Senior Vice President and
Chief Financial Officer)
|
|
|
|
Date: 5/7/2015
|
By:
|
/s/ WILLIAM C. DOCKMAN
|
|
|
William C. Dockman
(Vice President and Controller)
|
Exhibit No.
|
|
Description of Exhibit
|
|
Location
|
10.1
|
|
Letter Agreement dated December 3, 2014, between Fred Festa, on behalf of Grace, and Elizabeth Brown
|
|
Filed herewith
|
15
|
|
Accountants' Awareness Letter
|
|
Filed herewith
|
31(i).1
|
|
Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
31(i).2
|
|
Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
32
|
|
Certification of Periodic Report by Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
95
|
|
Mine Safety Disclosure Exhibit
|
|
Filed herewith
|
101.INS
|
|
XBRL Instance Document
|
|
Filed herewith
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
Filed herewith
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
Filed herewith
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
Filed herewith
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
Filed herewith
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
Filed herewith
|
|
Fred Festa
Chairman and Chief Executive Officer
W. R. Grace & Co.-Conn.
7500 Grace Drive
Columbia, MD 21044
|
1.
|
Your initial annual base salary as Corporate Vice President & Chief Human Resources Officer will be $375,000. Thereafter, your base salary will be subject to periodic reviews on the same basis and at the same intervals as are applicable to other officers of the Company.
|
2.
|
Your salary will cease to accrue immediately upon your termination of employment with the Company, regardless of the reason for such termination. (Note, however, the provisions below under "Severance Pay Arrangement").
|
3.
|
You will be eligible for a targeted award under the Company's Long-Term Incentive Plan (the "LTIP") for the 2014-2016 performance period. Under that LTIP, 50 percent of the total targeted award will be in the form of "performance based units" ("PBUs"), which will be settled in cash (or stock, if appropriate), in early 2017, based on the performance of the Company's common stock and "EBIT" during the 3-year 2014-2016 performance period ending December 31, 2016; and 50 percent will be in the form of a stock option grant.
|
4.
|
Consistent with your election as an officer of the Company, the Board has authorized the Company to enter into a written Executive Severance Agreement, or a so-called "golden parachute", with you. In general, the terms of that agreement will provide for a severance payment of 3.0 times the sum of your annual base salary plus your targeted annual incentive compensation award (adjusted in accordance with the terms of that agreement), and certain other benefits, in the event your employment terminates under certain conditions following a change-in-control of the Company. The form and provisions of your Executive Severance Agreement will be the same as applicable to other elected officers of the Company. Please refer to the Executive Severance Agreement itself for definition of "change in control", "employment termination" and other particulars of this arrangement.
|
•
|
The W. R. Grace & Co. Retirement Plan for Salaried Employees ("Grace Salaried Retirement Plan")
|
•
|
The W. R. Grace & Co. Supplemental Executive Retirement Plan
|
•
|
The W. R. Grace & Co. Salaried Employee Savings & Investment Plan
|
•
|
The W. R. Grace & Co. Savings & Investment Plan Replacement Payment Program
|
•
|
The W. R. Grace & Co. Long-Term Disability income Plan ("LTD Plan")
|
•
|
Executive Salary Protection Plan ("ESP Plan")
|
•
|
The W. R. Grace & Co. Voluntary Group Accident Insurance Plan
|
•
|
The W. R. Grace & Co. Business Travel Accident Insurance Plan
|
•
|
The W. R. Grace & Co. Group Term Life Insurance Program
|
•
|
Personal Excess Liability Insurance (with a current limit of $6 million)
|
•
|
The W. R. Grace & Co. Group Medical Plan
|
•
|
The W. R. Grace & Co. Dental Plan
|
1.
|
I have reviewed this quarterly report on Form 10-Q of W. R. Grace & Co.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
|
/s/ A. E. FESTA
|
|
|
A. E. Festa
Chairman and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of W. R. Grace & Co.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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/s/ HUDSON LA FORCE III
|
|
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Hudson La Force III
Senior Vice President and Chief Financial Officer
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/s/ A. E. FESTA
|
|
|
Chairman and Chief Executive Officer
|
|
|
|
|
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/s/ HUDSON LA FORCE III
|
|
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Senior Vice President and Chief Financial Officer
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Mine
|
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§104 S&S
*
Citations
(#)
|
|
§104(b) Orders
(#)
|
|
§104(d) Citations and Orders
(#)
|
|
§110(b)(2) Violations
(#)
|
|
§107(a) Orders
(#)
|
|
Total Dollar Value of MSHA Assessments Proposed
($)
|
|
Total Number of Mining-Related Fatalities
(#)
|
|
Received Written Notice of Pattern of S&S* Violations under §104(e)
(yes/no)
|
|
Received Notice of Potential to have Pattern of S&S* Violations under §104(e)
(yes/no)
|
Clay Mine
Aiken, SC
|
|
1
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
No
|
|
No
|
*
|
S&S refers to violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a coal or other mine safety or health hazard under §104 of the Mine Act.
|
Mine
|
|
Pending as of the end of most recent fiscal quarter
(#) |
|
Instituted during most recent fiscal quarter
(#) |
|
Resolved during most recent fiscal quarter
(#) |
Clay Mine
Aiken, SC
|
|
—
|
|
—
|
|
—
|
*
|
29 CFR part 2700.
|