WR Grace Earnings 2020-09-30

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

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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 September 30, 2020

☐ 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 October 31, 2020
Common Stock, $0.01 par value per share	66,190,280	shares

Table of Contents

TABLE OF CONTENTS



Part I.	Financial Information
	Item 1.	Financial Statements (unaudited)		3
		Consolidated Statements of Operations		3
		Consolidated Statements of Comprehensive Income (Loss)		4
		Consolidated Statements of Cash Flows		5
		Consolidated Balance Sheets		6
		Consolidated Statements of Equity		7
		Notes to Consolidated Financial Statements
		1.	Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies	9
		2.	Inventories	10
		3.	Debt	11
		4.	Fair Value Measurements and Risk	12
		5.	Income Taxes	19
		6.	Pension Plans and Other Retirement Plans	20
		7.	Other Balance Sheet Accounts	21
		8.	Commitments and Contingent Liabilities	22
		9.	Restructuring Expenses and Repositioning Expenses	25
		10.	Other (Income) Expense, net	27
		11.	Other Comprehensive Income (Loss)	27
		12.	Earnings Per Share	29
		13.	Revenues	30
		14.	Segment Information	32
		15.	Related Party Transactions	34
		16.	Acquisitions	36
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		37
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		57
	Item 4.	Controls and Procedures		57
Part II.	Other Information
	Item 1.	Legal Proceedings		58
	Item 1A.	Risk Factors		58
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		59
	Item 4.	Mine Safety Disclosures		60
	Item 6.	Exhibits		60
		Signatures		62

_______________________________________________________________________________

Notes on references that we use in this Report. 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.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

W. R. Grace & Co. and Subsidiaries

Consolidated Statements of Operations (unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions, except per share amounts)	2020			2019			2020			2019
Net sales	$	419.4		$	470.5		$	1,259.6		$	1,453.6
Cost of goods sold	263.0			279.5			824.3			864.6
Gross profit	156.4			191.0			435.3			589.0
Selling, general and administrative expenses	68.1			74.2			211.1			223.7
Research and development expenses	15.6			14.9			49.3			48.2
Costs related to legacy matters	30.6			3.7			36.1			52.1
Equity in earnings of unconsolidated affiliate	(1.3		)	(3.8		)	(5.9		)	(13.9		)
Restructuring and repositioning expenses	2.4			3.4			29.0			12.1
Loss on early extinguishment of debt	39.4			—			39.4			—
Interest expense and related financing costs	19.8			18.6			57.3			58.2
Other (income) expense, net	5.3			(1.1		)	(12.1		)	(3.2		)
Total costs and expenses	179.9			109.9			404.2			377.2
Income (loss) before income taxes	(23.5		)	81.1			31.1			211.8
(Provision for) benefit from income taxes	30.2			(27.3		)	8.1			(57.0		)
Net income (loss)	6.7			53.8			39.2			154.8
Less: Net (income) loss attributable to noncontrolling interests	0.3			(0.1		)	2.5			(0.2		)
Net income (loss) attributable to W. R. Grace & Co. shareholders	$	7.0		$	53.7		$	41.7		$	154.6
Earnings Per Share Attributable to W. R. Grace & Co. Shareholders
Basic earnings per share:
Net income (loss)	$	0.11		$	0.81		$	0.63		$	2.31
Weighted average number of basic shares	66.2			66.7			66.3			66.8
Diluted earnings per share:
Net income (loss)	$	0.11		$	0.80		$	0.63		$	2.31
Weighted average number of diluted shares	66.2			66.8			66.3			66.9
Dividends per common share	$	0.30		$	0.27		$	0.90		$	0.81

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

Table of Contents

W. R. Grace & Co. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss) (unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2020			2019			2020			2019
Net income (loss)	$	6.7		$	53.8		$	39.2		$	154.8
Other comprehensive income (loss), net of income taxes:
Defined benefit pension and other postretirement plans	—			(0.1		)	(0.2		)	(0.3		)
Currency translation adjustments	(20.9		)	22.4			(25.9		)	27.3
Gain (loss) from hedging activities	3.0			(0.5		)	1.2			(9.6		)
Total other comprehensive income (loss)	(17.9		)	21.8			(24.9		)	17.4
Comprehensive income (loss)	(11.2		)	75.6			14.3			172.2
Less: comprehensive (income) loss attributable to noncontrolling interests	0.3			(0.1		)	2.5			(0.2		)
Comprehensive income (loss) attributable to W. R. Grace & Co. shareholders	$	(10.9	)	$	75.5		$	16.8		$	172.0

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

Table of Contents

W. R. Grace & Co. and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)



	Nine Months Ended September 30,
(In millions)	2020			2019
OPERATING ACTIVITIES
Net income (loss)	$	39.2		$	154.8
Reconciliation to net cash provided by (used for) operating activities:
Depreciation and amortization	77.1			75.3
Equity in earnings of unconsolidated affiliate	(5.9		)	(13.9		)
Dividends received from unconsolidated affiliate	10.0			—
Costs related to legacy matters	36.1			52.1
Cash paid for legacy matters	(17.1		)	(13.8		)
Provision for (benefit from) income taxes	(8.1		)	57.0
Cash paid for income taxes	(35.6		)	(39.6		)
Income tax refunds received	7.6			7.1
Defined benefit pension expense	10.2			13.9
Cash paid under defined benefit pension arrangements	(13.0		)	(12.3		)
Loss on early extinguishment of debt	39.4			—
Loss on disposal of assets	21.8			2.2
Changes in assets and liabilities, excluding effect of currency translation and acquisitions:
Trade accounts receivable	74.6			11.6
Inventories	56.3			(58.0		)
Accounts payable	(34.3		)	13.6
All other items, net	0.8			18.4
Net cash provided by (used for) operating activities	259.1			268.4
INVESTING ACTIVITIES
Cash paid for capital expenditures	(123.8		)	(142.6		)
Business acquired, net of cash acquired	(2.0		)	(22.8		)
Other investing activities, net	(27.9		)	(4.4		)
Net cash provided by (used for) investing activities	(153.7		)	(169.8		)
FINANCING ACTIVITIES
Borrowings under credit arrangements	12.2			10.3
Repayments under credit arrangements	(31.3		)	(17.5		)
Proceeds from issuance of notes	750.0			—
Repayment of notes	(700.0		)	—
Cash paid related to early extinguishment of debt	(37.9		)	—
Cash paid for debt financing costs	(7.9		)	—
Cash paid for repurchases of common stock	(40.4		)	(29.8		)
Proceeds from exercise of stock options	—			19.1
Dividends paid to shareholders	(60.2		)	(54.6		)
Other financing activities, net	(4.2		)	(4.9		)
Net cash provided by (used for) financing activities	(119.7		)	(77.4		)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	0.3			(3.3		)
Net increase (decrease) in cash, cash equivalents, and restricted cash	(14.0		)	17.9
Cash, cash equivalents, and restricted cash, beginning of period	282.9			201.0
Cash, cash equivalents, and restricted cash, end of period	$	268.9		$	218.9

Supplemental disclosure of cash flow information
Cash paid for interest, net of amounts capitalized	$	46.1		$	39.1
Capital expenditures in accounts payable	23.2			39.4
Expenditures for other investing activities included in accounts payable	0.8			16.2

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

Table of Contents

W. R. Grace & Co. and Subsidiaries

Consolidated Balance Sheets (unaudited)



(In millions, except par value and shares)	September 30, 2020			December 31, 2019
ASSETS
Current Assets
Cash and cash equivalents	$	268.7		$	282.5
Restricted cash and cash equivalents	0.2			0.4
Trade accounts receivable, less allowance of $3.1 (2019—$13.3)	239.8			307.0
Inventories	255.7			309.9
Other current assets	69.2			235.1
Total Current Assets	833.6			1,134.9
Properties and equipment, net of accumulated depreciation and amortization of $1,509.9 (2019—$1,497.0)	1,156.5			1,143.8
Goodwill	559.0			556.9
Technology and other intangible assets, net	326.3			342.8
Deferred income taxes	555.8			517.6
Investment in unconsolidated affiliate	167.4			181.9
Other assets	51.8			54.7
Total Assets	$	3,650.4		$	3,932.6
LIABILITIES AND EQUITY
Current Liabilities
Debt payable within one year	$	18.8		$	23.1
Accounts payable	210.2			302.3
Other current liabilities	266.2			419.7
Total Current Liabilities	495.2			745.1
Debt payable after one year	1,985.6			1,957.3
Unfunded defined benefit pension plans	449.4			434.6
Underfunded defined benefit pension plans	83.1			85.2
Other liabilities	316.6			308.2
Total Liabilities	3,329.9			3,530.4
Commitments and Contingencies—Note 8
Equity
Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 66,190,280 (2019—66,735,913)	0.7			0.7
Paid-in capital	470.4			477.9
Retained earnings	712.1			730.5
Treasury stock, at cost: shares: 11,266,353 (2019—10,720,720)	(920.6		)	(892.2		)
Accumulated other comprehensive income (loss)	53.9			78.8
Total W. R. Grace & Co. Shareholders’ Equity	316.5			395.7
Noncontrolling interests	4.0			6.5
Total Equity	320.5			402.2
Total Liabilities and Equity	$	3,650.4		$	3,932.6

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

Table of Contents

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, 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
Net income (loss)	—			(7.3		)	—			—			(2.3		)	(9.6		)
Stock-based compensation	2.9			—			—			—			—			2.9
Shares issued	(0.7		)	—			1.5			—			—			0.8
Dividends declared	—			(20.0		)	—			—			—			(20.0		)
Other comprehensive (loss) income	—			—			—			(8.4		)	—			(8.4		)
Balance, June 30, 2020	$	469.3		$	725.0		$	(920.8	)	$	71.8		$	4.3		$	349.6
Net income (loss)	—			7.0			—			—			(0.3		)	6.7
Stock-based compensation	2.0			—			—			—			—			2.0
Shares issued	(0.2		)	—			0.2			—			—			—
Dividends declared	—			(19.9		)	—			—			—			(19.9		)
Other comprehensive (loss) income	—			—			—			(17.9		)	&

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	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	2020-11-09	Other Events, Exhibits
8-K	2020-10-28	Earnings, Exhibits
8-K	2020-10-13	Officers, Exhibits
8-K	2020-09-17	Regulation FD, Exhibits
8-K	2020-08-26	Regulation FD, Exhibits
8-K	2020-07-30	Earnings, Exhibits
8-K	2020-06-26	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2020-06-25	Officers, Exhibits
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	a3q20exhibit31i1.htm
EX-31.(I).2	a3q20exhibit31i2.htm
EX-32	a3q20exhibit32.htm
EX-95	a3q20exhibit95.htm

GRA 10Q Quarterly Report

WR Grace Earnings 2020-09-30