WR Grace Earnings 2021-03-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

gra-20210331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number 1-13953

W. R. GRACE & CO.

(Exact name of registrant as specified in its charter)


Delaware			65-0773649
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

7500 Grace Drive, Columbia, Maryland 21044-4098

(Address of principal executive offices) (Zip Code)

(410) 531-4000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

GRA

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						Outstanding at April 30, 2021
Common Stock, $0.01 par value per share						66,251,602 shares

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TABLE OF CONTENTS


Part I.	Financial Information
	Item 1.	Financial Statements (unaudited)		4
		Consolidated Statements of Operations		4
		Consolidated Statements of Comprehensive Income (Loss)		5
		Consolidated Statements of Cash Flows		6
		Consolidated Balance Sheets		7
		Consolidated Statements of Equity		8
		Notes to Consolidated Financial Statements
		1.	Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies	9
		2.	Inventories	10
		3.	Debt	10
		4.	Fair Value Measurements and Risk	10
		5.	Income Taxes	16
		6.	Pension Plans and Other Retirement Plans	16
		7.	Other Balance Sheet Accounts	17
		8.	Commitments and Contingent Liabilities	18
		9.	Restructuring Expenses and Repositioning Expenses	21
		10.	Other (Income) Expense, net	22
		11.	Other Comprehensive Income (Loss)	23
		12.	Earnings Per Share	24
		13.	Revenues	25
		14.	Segment Information	26
		15.	Related Party Transactions	28
		16.	Acquisitions	30
		17.	Subsequent Events	30
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		31
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		47
	Item 4.	Controls and Procedures		47
Part II.	Other Information
	Item 1.	Legal Proceedings		48
	Item 1A.	Risk Factors		48
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		49
	Item 4.	Mine Safety Disclosures		50
	Item 6.	Exhibits		50
		Signatures		52

Notes on references that we use in our disclosure. Unless the context indicates otherwise, the terms “Grace,” the “Company,” “we,” “us,” or “our” mean (i) W. R. Grace & Co. itself, or (ii) W. R. Grace & Co. and/or one or more of its consolidated subsidiaries and affiliates and, in certain cases, their respective predecessors. Unless otherwise indicated, the contents of websites that we mention are not incorporated by reference or otherwise made a part of this Report.

We refer to the U.S. Securities and Exchange Commission as the “SEC.” We refer to the Financial Accounting Standards Board as the “FASB.” The FASB issues, among other things, the Accounting Standards Codification (which we refer to as “ASC”) and Accounting Standards Updates (which we refer to as “ASU”). We refer to the U.S. Internal Revenue Service as the “IRS.”

Trademarks and other intellectual property that we discuss in this Report. GRACE®, the GRACE® logo (and any other use of the term “Grace” as a trade name) as well as the other trademarks, service marks, or trade names used in this Report are trademarks, service marks, or trade names of Grace or its operating units, except as otherwise indicated. ART® and ADVANCED REFINING TECHNOLOGIES® are trademarks, registered in the United States and/or other countries, of Advanced Refining Technologies LLC, a Delaware limited liability company, 50% owned by Grace and 50% owned by Chevron U.S.A. Inc.

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FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements, that is, information related to future, not past, events. Such statements generally include the words “believes,” “plans,” “intends,” “targets,” “will,” “expects,” “suggests,” “anticipates,” “outlook,” “continues,” or similar expressions. Forward-looking statements include, without limitation, statements regarding: financial positions; results of operations; cash flows; financing plans; business strategy; operating plans; capital and other expenditures; impact of COVID-19 on Grace’s business; competitive positions; growth opportunities for existing products; benefits from new technology; benefits from cost reduction initiatives; succession planning; markets for securities; the anticipated timing of closing of the proposed transaction between Grace and affiliates of Standard Industries Holdings Inc. and the potential benefits of the proposed transaction. For these statements, Grace claims the protections of the safe harbor for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Grace is subject to risks and uncertainties that could cause actual results or events to differ materially from its projections or that could cause forward-looking statements to prove incorrect. Factors that could cause actual results or events to differ materially from those contained in the forward-looking statements include, without limitation: risks related to foreign operations, especially in areas of active conflicts and in emerging regions; the costs and availability of raw materials, energy, and transportation; the effectiveness of Grace’s research and development and growth investments; acquisitions and divestitures of assets and businesses; developments affecting Grace’s outstanding indebtedness; developments affecting Grace’s pension obligations; legacy matters (including product, environmental, and other legacy liabilities) relating to past activities of Grace; its legal and environmental proceedings; environmental compliance costs (including existing and potential laws and regulations pertaining to climate change); the inability to establish or maintain certain business relationships; the inability to hire or retain key personnel; natural disasters such as storms and floods; fires and force majeure events; the economics of our customers’ industries, including the petroleum refining, petrochemicals, and plastics industries, and shifting consumer preferences; public health and safety concerns, including pandemics and quarantines; changes in tax laws and regulations; international trade disputes, tariffs, and sanctions; the potential effects of cyberattacks; the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement between Grace and Standard Industries Holdings Inc.’s affiliates; the failure to obtain Grace stockholder approval of the transaction or the failure to satisfy any of the other conditions to the completion of the transaction; risks relating to the financing required to complete the transaction; the effect of the announcement of the transaction on the ability of Grace to retain and hire key personnel and maintain relationships with its customers, vendors and others with whom it does business, or on its operating results and businesses generally; risks associated with the disruption of management’s attention from ongoing business operations due to the transaction; the ability to meet expectations regarding the timing and completion of the transaction; significant transaction costs, fees, expenses and charges; the risk of litigation and/or regulatory actions related to the transaction; the effects of the transaction on the previously announced fine chemicals business acquisition, which is pending as of the date of this filing, and the integration thereof; other business effects, including the effects of industry, market, economic, political, regulatory or world health conditions (including new or ongoing effects of the COVID-19 pandemic), and other factors detailed in Grace’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2020, and Grace’s other filings with the SEC, which are available at http://www.sec.gov and on Grace’s website at www.grace.com. Our reported results should not be considered as an indication of our future performance. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Grace undertakes no obligation to release publicly any revisions to its forward-looking statements, or to update them to reflect events or circumstances occurring after the dates those statements are made.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

W. R. Grace & Co. and Subsidiaries

Consolidated Statements of Operations (unaudited)


	Three Months Ended March 31,
(In millions, except per share amounts)		2021		2020
Net sales		$	456.7	$	421.5
Cost of goods sold		286.7		261.9
Gross profit		170.0		159.6
Selling, general and administrative expenses		74.6		71.1
Research and development expenses		17.4		17.0
Costs related to legacy matters		4.6		2.7
Equity in earnings of unconsolidated affiliate		(3.2)		(1.2)
Restructuring and repositioning expenses		12.8		2.7

Interest expense and related financing costs		19.0		18.3
Other (income) expense, net		(42.1)		(8.8)
Total costs and expenses		83.1		101.8
Income (loss) before income taxes		86.9		57.8
(Provision for) benefit from income taxes		(18.3)		(15.7)


Net income (loss)		68.6		42.1
Less: Net (income) loss attributable to noncontrolling interests		(0.2)		(0.1)
Net income (loss) attributable to W. R. Grace & Co. shareholders		$	68.4	$	42.0




Earnings Per Share Attributable to W. R. Grace & Co. Shareholders
Basic earnings per share:


Net income (loss)		$	1.03	$	0.63
Weighted average number of basic shares		66.2		66.5
Diluted earnings per share:


Net income (loss)		$	1.03	$	0.63
Weighted average number of diluted shares		66.3		66.5
Dividends per common share		$	0.33	$	0.30

The Notes to Consolidated Financial Statements are an integral part of these statements.

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W. R. Grace & Co. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss) (unaudited)


	Three Months Ended March 31,
(In millions)		2021		2020
Net income (loss)		$	68.6	$	42.1
Other comprehensive income (loss), net of income taxes:
Defined benefit pension and other postretirement plans		(0.1)		(0.1)
Currency translation adjustments		25.1		2.5
Gain (loss) from hedging activities		2.0		(1.0)

Total other comprehensive income (loss)		27.0		1.4
Comprehensive income (loss)		95.6		43.5
Less: comprehensive (income) loss attributable to noncontrolling interests		(0.2)		(0.1)
Comprehensive income (loss) attributable to W. R. Grace & Co. shareholders		$	95.4	$	43.4

The Notes to Consolidated Financial Statements are an integral part of these statements.

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W. R. Grace & Co. and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)


	Three Months Ended March 31,
(In millions)	2021		2020
OPERATING ACTIVITIES
Net income (loss)	$	68.6	$	42.1


Reconciliation to net cash provided by (used for) operating activities:
Depreciation and amortization	28.1		25.5
Equity in earnings of unconsolidated affiliate	(3.2)		(1.2)

Costs related to legacy matters	4.6		2.7
Cash paid for legacy matters	(3.5)		(7.6)
Provision for (benefit from) income taxes	18.3		15.7
Cash paid for income taxes	(11.7)		(14.4)
Income tax refunds received	0.1		0.8
Defined benefit pension (income) expense	(11.7)		3.1
Gain on curtailment of U.S. salaried pension plan	(25.6)		—
Cash paid under defined benefit pension arrangements	(4.2)		(4.4)



Changes in assets and liabilities, excluding effect of currency translation and acquisitions:
Trade accounts receivable	(14.9)		47.3
Inventories	(21.6)		(31.7)
Accounts payable	36.3		(3.8)
All other items, net	9.4		(19.5)
Net cash provided by (used for) operating activities	69.0		54.6
INVESTING ACTIVITIES
Cash paid for capital expenditures	(55.0)		(57.1)



Other investing activities, net	2.6		(16.6)
Net cash provided by (used for) investing activities	(52.4)		(73.7)
FINANCING ACTIVITIES
Borrowings under credit arrangements	2.7		4.2
Repayments under credit arrangements	(4.7)		(6.1)




Cash paid for repurchases of common stock	—		(40.4)

Dividends paid to shareholders	(22.0)		(20.5)
Other financing activities, net	(2.2)		(4.2)
Net cash provided by (used for) financing activities	(26.2)		(67.0)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	(4.1)		(3.1)







Net increase (decrease) in cash, cash equivalents, and restricted cash	(13.7)		(89.2)

Cash, cash equivalents, and restricted cash, beginning of period	306.2		282.9
Cash, cash equivalents, and restricted cash, end of period	$	292.5	$	193.7

Supplemental disclosure of cash flow information
Cash paid for interest, net of amounts capitalized	$	4.3	$	4.0
Capital expenditures in accounts payable	16.6		29.7
Expenditures for other investing activities included in accounts payable	—		10.4

The Notes to Consolidated Financial Statements are an integral part of these statements.

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W. R. Grace & Co. and Subsidiaries

Consolidated Balance Sheets (unaudited)


(In millions, except par value and shares)	March 31, 2021		December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents	$	290.8	$	304.5
Restricted cash and cash equivalents	1.7		1.7
Trade accounts receivable, less allowance of $2.2 (2020—$2.2)	267.1		264.1
Inventories	273.6		253.8
Other current assets	53.2		51.2

Total Current Assets	886.4		875.3
Properties and equipment, net of accumulated depreciation and amortization of $1,554.6 (2020—$1,550.1)	1,193.1		1,208.8
Goodwill	560.3		562.7
Technology and other intangible assets, net	315.3		320.8
Deferred income taxes	557.6		567.1

Investment in unconsolidated affiliate	177.4		175.5
Other assets	68.3		55.3

Total Assets	$	3,758.4	$	3,765.5
LIABILITIES AND EQUITY
Current Liabilities
Debt payable within one year	$	14.4	$	15.3
Accounts payable	262.0		262.1
Other current liabilities	282.7		281.9

Total Current Liabilities	559.1		559.3
Debt payable after one year	1,974.8		1,975.1
Unfunded defined benefit pension plans	501.6		520.7
Underfunded defined benefit pension plans	91.2		128.3
Other liabilities	323.4		347.6

Total Liabilities	3,450.1		3,531.0
Commitments and Contingencies—Note 8
Equity
Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 66,248,119 (2020—66,190,410)	0.7		0.7
Paid-in capital	467.7		473.2
Retained earnings	695.4		648.8
Treasury stock, at cost: shares: 11,208,514 (2020—11,266,223)	(915.1)		(920.6)
Accumulated other comprehensive income (loss)	56.3		29.3
Total W. R. Grace & Co. Shareholders’ Equity	305.0		231.4
Noncontrolling interests	3.3		3.1
Total Equity	308.3		234.5
Total Liabilities and Equity	$	3,758.4	$	3,765.5

The Notes to Consolidated Financial Statements are an integral part of these statements.

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W. R. Grace & Co. and Subsidiaries

Consolidated Statements of Equity (unaudited)


(In millions)	Common Stock and Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total Equity
Balance, December 31, 2020	$	473.9	$	648.8	$	(920.6)	$	29.3	$	3.1	$	234.5
Net income (loss)	—		68.4		—		—		0.2		68.6

Payments in consideration of employee tax obligations related to stock-based compensation	(2.2)		—		—		—		—		(2.2)
Stock-based compensation	2.1		—		—		—		—		2.1
Exercise of stock options	(0.1)		—		0.1		—		—		—
Shares issued	(5.3)		—		5.4		—		—		0.1
Dividends declared	—		(21.8)		—		—		—		(21.8)
Other comprehensive (loss) income	—		—		—		27.0		—		27.0



Balance, March 31, 2021	$	468.4	$	695.4	$	(915.1)	$	56.3	$	3.3	$	308.3


(In millions)	Common Stock and Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total Equity
Balance, December 31, 2019	$	478.6	$	730.5	$	(892.2)	$	78.8	$	6.5	$	402.2
Net income (loss)	—		42.0		—		—		0.1		42.1
Repurchase of common stock	—		—		(40.4)		—		—		(40.4)
Payments in consideration of employee tax obligations related to stock-based compensation	(4.1)		—		—		—		—		(4.1)
Stock-based compensation	2.9		—		—		—		—		2.9

Shares issued	(10.3)		—		10.3		—		—		—
Dividends declared	—		(20.2)		—		—		—		(20.2)
Other comprehensive (loss) income	—		—		—		1.4		—		1.4



Balance, March 31, 2020	$	467.1	$	752.3	$	(922.3)	$	80.2	$	6.6	$	383.9

The Notes to Consolidated Financial Statements are an integral part of these statements.

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W. R. Grace & Co. and Subsidiaries

Notes to Consolidated Financial Statements

1. Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies

W. R. Grace & Co., through its subsidiaries, is engaged in the production and sale of specialty chemicals and specialty materials on a global basis through two reportable segments: Grace Catalysts Technologies, which includes catalysts and related products and technologies used in petrochemical, refining, and other chemical manufacturing applications; and Grace Materials Technologies, which includes specialty materials, including silica-based and complex organic molecules, used in pharma & consumer, coatings, and chemical process applications.

W. R. Grace & Co. conducts all of its business through a single wholly owned subsidiary, W. R. Grace & Co.–Conn. (“Grace–Conn.”). Grace–Conn. owns all of the assets, properties and rights of W. R. Grace & Co. on a consolidated basis, either directly or through subsidiaries.

Basis of Presentation The interim Consolidated Financial Statements presented herein are unaudited and should be read in conjunction with the Consolidated Financial Statements presented in the Company’s 2020 Annual Report on Form 10-K. Such interim Consolidated Financial Statements reflect all adjustments that, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented; all such adjustments are of a normal recurring nature except for the impacts of adopting new accounting standards as discussed below. All significant intercompany accounts and transactions have been eliminated.

The results of operations for the three-month interim period ended March 31, 2021, are not necessarily indicative of the results of operations to be attained for the year ending December 31, 2021.

Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, and the reported amounts of revenues and expenses for the periods presented. Actual amounts could differ from those estimates, and the differences could be material. Changes in estimates are recorded in the period identified. Grace’s accounting measurements that are most affected by management’s estimates of future events are:

•The effective tax rate and realization values of net deferred tax assets, which depend on projections of future taxable income;

•Pension and postretirement liabilities, which depend on assumptions regarding participant life spans, future inflation, discount rates and total returns on invested funds (see Note 6);

•Carrying values of goodwill and other intangible assets, which depend on assumptions of future earnings and cash flows; and

•Contingent liabilities, which depend on an assessment of the probability of loss and an estimate of ultimate obligation, such as litigation and arbitration; and product, environmental, and other legacy liabilities (see Note 8).

Reclassifications Certain amounts in the prior year’s Consolidated Financial Statements have been reclassified to conform to the current year presentation. Such reclassifications have not materially affected previously reported amounts in the Consolidated Financial Statements.

Recently Adopted Accounting Standards In December 2019, the FASB issued ASU 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This update clarifies and amends existing guidance, including removing certain exceptions to the general principles in Topic 740, and improves consistent application of and simplifies U.S. GAAP for other areas of Topic 740. Grace adopted this update on January 1, 2021, and it did not have a material impact on the Consolidated Financial Statements.

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Notes to Consolidated Financial Statements (Continued)

2. Inventories

Inventories are stated at the lower of cost or net realizable value, and cost is determined using FIFO. Inventories consisted of the following at March 31, 2021, and December 31, 2020:


(In millions)	March 31, 2021		December 31, 2020
Raw materials	$	57.7	$	57.0
In process	42.9		38.2
Finished products	141.6		126.6
Other	31.4		32.0
Total inventory	$	273.6	$	253.8

3. Debt

Components of Debt


(In millions)	March 31, 2021			December 31, 2020
2018 U.S. dollar term loan, net of unamortized debt issuance costs of $5.8 (2020—$6.0)	$	920.5		$	922.6
Senior notes due 2027, net of unamortized debt issuance costs of $9.7 (2020—$10.1)	740.3			739.9
Senior notes due 2024, net of unamortized debt issuance costs of $1.8 (2020—$1.9)	298.2			298.1
Debt payable to unconsolidated affiliate	27.4			25.6

Other borrowings	2.8			4.2
Total debt	1,989.2			1,990.4
Less debt payable within one year	14.4			15.3
Debt payable after one year	$	1,974.8		$	1,975.1
Weighted average interest rates on total debt	3.5		%	3.5		%

See Note 4 for a discussion of the fair value of Grace’s debt.

Grace also maintains a $400 million revolving credit facility. As of March 31, 2021, the available credit under this facility was reduced to $391.8 million by outstanding letters of credit.

4. Fair Value Measurements and Risk

Certain of Grace’s assets and liabilities are reported at fair value on a gross basis. ASC 820 “Fair Value Measurement” defines fair value as the value that would be received at the measurement date in the principal or “most advantageous” market. Grace uses principal market data, whenever available, to value assets and liabilities that are required to be reported at fair value.

Grace has identified the following financial assets and liabilities that are subject to the fair value analysis required by ASC 820:

Fair Value of Debt and Other Financial Instruments Debt payable is recorded at carrying value. Fair value is determined based on Level 2 inputs, including expected future cash flows (discounted at market interest rates), estimated current market prices and quotes from financial institutions.

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Notes to Consolidated Financial Statements (Continued)

4. Fair Value Measurements and Risk (Continued)

At March 31, 2021, and December 31, 2020, the carrying amounts, net of unamortized debt issuance costs and discounts (see Note 3), and fair values of Grace’s debt were as follows:


	March 31, 2021				December 31, 2020
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
2018 U.S. dollar term loan	$	920.5	$	915.9	$	922.6	$	904.1
Senior notes due 2027	740.3		768.4		739.9		784.7
Senior notes due 2024	298.2		329.7		298.1		322.4
Other borrowings	30.2		30.2		29.8		29.8
Total debt	$	1,989.2	$	2,044.2	$	1,990.4	$	2,041.0

At March 31, 2021, the recorded values of other financial instruments such as cash equivalents and trade receivables and payables approximated their fair values, based on the short-term maturities and floating rate characteristics of these instruments.

Currency Derivatives Because Grace operates and/or sells to customers in over 60 countries and in over 30 currencies, its results are exposed to fluctuations in currency exchange rates. Grace seeks to minimize exposure to these fluctuations by matching sales with expenditures in the same currencies, but it is not always possible to do so. From time to time, Grace uses financial instruments such as currency forward contracts, options, swaps, or combinations thereof to reduce the risk of certain specific transactions. However, Grace does not have a policy of hedging all exposures, because management does not believe that such a level of hedging would be cost-effective. Forward contracts with maturities of not more than 36 months are used and designated as cash flow hedges of forecasted repayments of intercompany loans. The effective portion of gains and losses on these currency hedges is recorded in “accumulated other comprehensive income (loss)” and reclassified into “other (income) expense, net” to offset the remeasurement of the underlying hedged loans. Forward points are excluded from the assessment of effectiveness and amortized to income on a systematic basis.

Grace also enters into foreign currency forward contracts and swaps to hedge a portion of its net outstanding monetary assets and liabilities. These forward contracts and swaps are not designated as hedging instruments under applicable accounting guidance, and therefore all changes in their fair value are recorded in “other (income) expense, net,” in the Consolidated Statements of Operations. These forward contracts and swaps are intended to offset the foreign currency gains or losses associated with the underlying monetary assets and liabilities.

The valuation of Grace’s currency exchange rate forward contracts and swaps is determined using an income approach. Inputs used to value currency exchange rate forward contracts and swaps consist of: (1) spot rates, which are quoted by various financial institutions; (2) forward points, which are primarily affected by changes in interest rates; and (3) discount rates used to present value future cash flows, which are based on the London Interbank Offered Rate (LIBOR) curve or overnight indexed swap rates. Total notional amounts for forward contracts and swaps outstanding as of March 31, 2021, were $444.9 million.

Cross-Currency Swap Agreements Grace uses cross-currency swaps designated as cash flow hedges to manage fluctuations in currency exchange rates and interest rates on variable rate debt. Gains and losses on these cash flow hedges are recorded in “accumulated other comprehensive income (loss)” and reclassified into “other (income) expense, net” and “interest expense and related financing costs” during the hedged period.

In connection with the 2018 U.S. dollar term loan, Grace entered into cross-currency swaps beginning on November 5, 2018, and maturing on March 31, 2023, to synthetically convert $600.0 million of U.S. dollar-denominated floating rate debt into €525.9 million of euro-denominated debt fixed at 1.785%. The valuation of these cross-currency swaps is determined using an income approach, using LIBOR and EURIBOR (Euro Interbank Offered Rate) swap curves, currency basis spreads, and euro/U.S. dollar exchange rates.

Debt and Interest Rate Swap Agreements Grace uses interest rate swaps designated as cash flow hedges to manage fluctuations in interest rates on variable rate debt. The effective portion of gains and losses on

Table of Contents

Notes to Consolidated Financial Statements (Continued)

4. Fair Value Measurements and Risk (Continued)

these interest rate cash flow hedges is recorded in “accumulated other comprehensive income (loss)” and reclassified into “interest expense and related financing costs” during the hedged interest period.

In connection with the 2018 U.S. dollar term loan, Grace entered into interest rate swaps beginning on April 3, 2018, and maturing on March 31, 2023, fixing the LIBOR component of the interest on $100.0 million of term debt at 2.775%. The valuation of these interest rate swaps is determined using an income approach, using prevailing market interest rates and discount rates to present value future cash flows based on the forward LIBOR yield curves. Credit risk is also incorporated into derivative valuations.

The following tables present the fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2021, and December 31, 2020:


	Fair Value Measurements at March 31, 2021, 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	$	4.8	—		$	4.8	—


Total Assets	$	4.8	$	—	$	4.8	$	—
Liabilities
Variable-to-fixed cross-currency derivatives	$	27.8	$	—	$	27.8	$	—
Currency derivatives	11.0		—		11.0		—
Interest rate derivatives	4.9		—		4.9		—

Total Liabilities	$	43.7	$	—	$	43.7	$	—


	Fair Value Measurements at December 31, 2020, 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	$	1.6	$	—	$	1.6	$	—

Total Assets	$	1.6	$	—	$	1.6	$	—
Liabilities
Variable-to-fixed cross-currency derivatives	$	51.0	$	—	$	51.0	$	—
Currency derivatives	17.8		—		17.8		—
Interest rate derivatives	5.5		—		5.5		—
Total Liabilities	$	74.3	$	—	$	74.3	$	—

Table of Contents

Notes to Consolidated Financial Statements (Continued)

4. Fair Value Measurements and Risk (Continued)

The following tables present the location and fair values of derivative instruments included in the Consolidated Balance Sheets as of March 31, 2021, and December 31, 2020:

March 31, 2021
(In millions)

Asset Derivatives

Liability Derivatives

Balance Sheet
Location

Fair Value

Balance Sheet
Location

Fair Value

Derivatives designated as hedging instruments under ASC 815:

Currency contracts

Other current assets

4.6

Other current liabilities

9.5

Currency contracts

Other assets

0.2

Other liabilities

—

Interest rate contracts

Other current assets

—

Other current liabilities

2.6

Interest rate contracts

Other assets

—

Other liabilities

2.3

Variable-to-fixed cross-currency derivatives

Other current assets

—

Other current assets

(0.5)

Variable-to-fixed cross-currency derivatives

Other assets

—

Other liabilities

Price	66.99	EPS	3
Shares	67	P/E	20
MCap	4,482	P/FCF	17
Net Debt	1,740	EBIT	325
TEV	6,222	TEV/EBIT	19
TTM 2019-09-30, in MM, except price, ratios

10-Q	2021-03-31	Filed 2021-05-07
10-K	2020-12-31	Filed 2021-02-26
10-Q	2020-09-30	Filed 2020-11-04
10-Q	2020-06-30	Filed 2020-08-05
10-Q	2020-03-31	Filed 2020-05-08
10-K	2019-12-31	Filed 2020-02-27
10-Q	2019-09-30	Filed 2019-11-07
10-Q	2019-06-30	Filed 2019-08-07
10-Q	2019-03-31	Filed 2019-05-08
10-K	2018-12-31	Filed 2019-02-28
10-Q	2018-09-30	Filed 2018-11-08
10-Q	2018-06-30	Filed 2018-08-08
10-Q	2018-03-31	Filed 2018-05-09
10-K	2017-12-31	Filed 2018-02-22
10-Q	2017-09-30	Filed 2017-11-02
10-Q	2017-06-30	Filed 2017-07-28
10-Q	2017-03-31	Filed 2017-05-09
10-K	2016-12-31	Filed 2017-02-23
10-Q	2016-09-30	Filed 2016-11-03
10-Q	2016-06-30	Filed 2016-08-04
10-Q	2016-03-31	Filed 2016-05-05
10-K	2015-12-31	Filed 2016-02-25
10-Q	2015-09-30	Filed 2015-11-05
10-Q	2015-06-30	Filed 2015-08-05
10-Q	2015-03-31	Filed 2015-05-07
10-K	2014-12-31	Filed 2015-02-25
10-Q	2014-09-30	Filed 2014-11-06
10-Q	2014-06-30	Filed 2014-08-07
10-Q	2014-03-31	Filed 2014-05-08
10-K	2013-12-31	Filed 2014-02-27
10-Q	2013-09-30	Filed 2013-11-08
10-Q	2013-06-30	Filed 2013-08-02
10-Q	2013-03-31	Filed 2013-05-03
10-K	2012-12-31	Filed 2013-02-27
10-Q	2012-09-30	Filed 2012-11-08
10-Q	2012-06-30	Filed 2012-08-06
10-Q	2012-03-31	Filed 2012-05-04
10-Q	2011-09-30	Filed 2011-11-04
10-Q	2011-06-30	Filed 2011-08-05
10-Q	2011-03-31	Filed 2011-05-06
10-K	2010-12-31	Filed 2011-02-25
10-Q	2010-09-30	Filed 2010-11-05
10-Q	2010-06-30	Filed 2010-08-05
10-Q	2010-03-31	Filed 2010-05-06
10-K	2009-12-31	Filed 2010-02-25

8-K	2021-02-09
8-K	2021-02-01
8-K	2021-01-15
8-K	2020-11-09
8-K	2020-10-28
8-K	2020-10-13
8-K	2020-09-17
8-K	2020-08-26
8-K	2020-07-30
8-K	2020-06-26
8-K	2020-06-25
8-K	2020-06-12
8-K	2020-06-12
8-K	2020-05-12
8-K	2020-04-30
8-K	2020-04-03
8-K	2020-02-27
8-K	2020-02-27
8-K	2020-02-10
8-K	2020-02-04
8-K	2019-11-07
8-K	2019-10-24
8-K	2019-10-01
8-K	2019-09-10
8-K	2019-07-25
8-K	2019-06-06
8-K	2019-05-08
8-K	2019-04-25
8-K	2019-02-20
8-K	2019-02-07
8-K	2018-11-08
8-K	2018-10-24
8-K	2018-07-26
8-K	2018-05-15
8-K	2018-05-09
8-K	2018-04-25
8-K	2018-04-03
8-K	2018-03-02
8-K	2018-02-22
8-K	2018-02-08

EX-31.(I).1	a1q21exhibit31i1.htm
EX-31.(I).2	a1q21exhibit31i2.htm
EX-32	a1q21exhibit32.htm
EX-95	a1q21exhibit95.htm

GRA 10Q Quarterly Report

WR Grace Earnings 2021-03-31