COLUMBIA, Md., April 25, 2019 (GLOBE NEWSWIRE) -- W. R. Grace & Co. (NYSE: GRA) today announced financial results for the first quarter of 2019, summarized in the table below, and reaffirmed its full-year 2019 outlook.
Summary Financial Results - Total Grace | |||||||||
(In $ millions, except per share amounts) | 1Q19 | 1Q18 | Change | ||||||
Net sales | 469.5 | 431.5 | 8.8% | ||||||
Net sales, constant currency | 11.3% | ||||||||
Net income | 24.7 | 43.6 | (43.3)% | ||||||
Adjusted EBIT | 104.4 | 95.8 | 9.0% | ||||||
Adjusted EBIT margin | 22.2 | % | 22.2 | % | 0.0 pts | ||||
Diluted EPS | $0.37 | $0.64 | (42.2)% | ||||||
Adjusted EPS | $0.93 | $0.82 | 13.4% | ||||||
Dividends per share | $0.27 | $0.24 | 12.5% | ||||||
YTD 2019 | YTD 2018 | Change | |||||||
Net cash provided by operating activities | 71.0 | 89.0 | (20.2)% | ||||||
Adjusted Free Cash Flow | 42.8 | 55.1 | (22.3)% | ||||||
TTM 1Q19 | TTM 1Q18 | Change | |||||||
Adjusted EBIT ROIC | 20.7 | % | 24.7 | % | (4.0) pts | ||||
Note: See Analysis of Operations and Notes for information on Non-GAAP financial measures |
Delivering on Our Strategic Initiatives
“Our team delivered another strong quarter of sales and earnings growth," said Hudson La Force, Grace’s President and Chief Executive Officer. "We continue to see good demand and I am confident in our full-year outlook, including Adjusted EPS growth of 10-12%. Our commercial excellence and operating excellence initiatives are adding to growth and profitability now, and our strategic growth investments are positioning us well for the future."
Grace's strategic framework for profitable growth includes four elements:
First Quarter Segment Performance
Catalysts Technologies
Catalysts Technologies includes catalysts and additives for plastics, refinery, and other chemical process applications, as well as polypropylene process technology licensing.
Summary Financial Results - Catalysts Technologies | ||||||||
(In $ millions) | 1Q19 | 1Q18 | Change | |||||
Net sales | 349.7 | 315.8 | 10.7% | |||||
Net sales, constant currency | 12.3% | |||||||
Gross margin | 42.4% | 41.5% | 0.9 pts | |||||
Operating income | 101.4 | 92.1 | 10.1% | |||||
Operating margin | 29.0% | 29.2% | (0.2) pts |
Materials Technologies
Materials Technologies includes specialty materials, including silica-based and silica-alumina-based materials, for consumer/pharma, chemical process and coatings applications.
Summary Financial Results - Materials Technologies | ||||||||||||||||
(In $ millions) | 1Q19 | 1Q18 | Change | |||||||||||||
Net sales | 119.8 | 115.7 | 3.5% | |||||||||||||
Net sales, constant currency | 8.4% | |||||||||||||||
Gross margin | 36.4% | 36.3% | 0.1 pts | |||||||||||||
Operating income | 24.0 | 24.1 | (0.4)% | |||||||||||||
Operating margin | 20.0% | 20.8% | (0.8) pts |
Capital Allocation
2Q19 and Full-Year 2019 Outlook
We are reaffirming our full-year 2019 outlook, which is presented in the table below.
Full-Year 2019 Outlook | ||||||||
2019 Outlook | ||||||||
(In $ millions, except per share amounts) | 2019 Outlook (as of 4/25/19) | YoY | ||||||
Sales growth (total) | 6% - 7% | |||||||
Adjusted EBIT | $490 - $500M | 7% - 9% | ||||||
Adjusted EPS | $4.53 - $4.62 | 10% - 12% | ||||||
Adjusted Free Cash Flow | $235 - $250M | |||||||
Note: We are unable to estimate the annual mark-to-market pension adjustment or future net income or diluted EPS. |
Investor Call
We will discuss these results during an investor conference call and webcast today starting at 9:00 a.m. ET. To access the call and webcast, interested participants should go to the Investors portion of our website, www.grace.com, and click on the webcast link.
Those without access to the internet can participate by dialing +1 844.515.9173 (U.S.) or +1 574.990.9421 (International). The participant passcode is 3277809. Investors are advised to dial into the call at least 10 minutes early in order to register.
An audio replay will be available after 1:00 p.m. ET on April 25. For one week, the replay will be accessible by dialing +1 855.859.2056 (U.S.) or +1 404.537.3406 (International) and entering the participant passcode 3277809. The webcast replay or transcript will be available for one year on the company's website.
About Grace
Built on talent, technology, and trust, Grace is a leading global supplier of catalysts and engineered materials. The company’s two industry-leading business segments—Catalysts Technologies and Materials Technologies—provide innovative products, technologies, and services that enhance the products and processes of our customers around the world. With approximately 3,900 employees, Grace operates and/or sells to customers in over 70 countries. More information about Grace is available at grace.com.
Forward-Looking Statements
This announcement 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, expected financial positions; results of operations; cash flows; financing plans; business strategy; operating plans; capital and other expenditures; competitive positions; growth opportunities for existing products; benefits from new technology and cost reduction initiatives, plans and objectives; and markets for securities. For these statements, Grace claims the protections of the safe harbor for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. Like other businesses, Grace is subject to risks and uncertainties that could cause its actual results to differ materially from its projections or that could cause other forward-looking statements to prove incorrect. Factors that could cause actual results to differ materially from those contained in the forward-looking statements include, without limitation: risks related to foreign operations, especially in emerging regions; the costs and availability of raw materials, energy and transportation; the effectiveness of its 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; the inability to establish or maintain certain business relationships; the inability to hire or retain key personnel; natural disasters such as storms and floods, and force majeure events; changes in tax laws and regulations; international trade disputes, tariffs, and sanctions; the potential effects of cyberattacks; and those additional factors set forth in Grace's most recent Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, which have been filed with the Securities and Exchange Commission and are readily available on the internet at www.sec.gov. Reported results should not be considered as an indication of future performance. Readers are cautioned not to place undue reliance on Grace's projections and forward-looking statements, which speak only as of the dates those projections and statements are made. Grace undertakes no obligation to release publicly any revision to the projections and forward-looking statements contained in this announcement, or to update them to reflect events or circumstances occurring after the date of this announcement.
W. R. Grace & Co. and Subsidiaries
Consolidated Statements of Operations (unaudited)
Three Months Ended March 31, | |||||||
(In millions, except per share amounts) | 2019 | 2018 | |||||
Net sales | $ | 469.5 | $ | 431.5 | |||
Cost of goods sold | 280.9 | 262.0 | |||||
Gross profit | 188.6 | 169.5 | |||||
Selling, general and administrative expenses | 73.2 | 68.4 | |||||
Research and development expenses | 17.0 | 14.7 | |||||
Costs related to legacy matters | 46.9 | 2.0 | |||||
Equity in earnings of unconsolidated affiliate | (4.1 | ) | (5.4 | ) | |||
Restructuring and repositioning expenses | 2.3 | 5.6 | |||||
Interest expense and related financing costs | 20.0 | 19.3 | |||||
Other (income) expense, net | (2.2 | ) | (3.3 | ) | |||
Total costs and expenses | 153.1 | 101.3 | |||||
Income (loss) before income taxes | 35.5 | 68.2 | |||||
(Provision for) benefit from income taxes | (10.9 | ) | (24.8 | ) | |||
Net income (loss) | 24.6 | 43.4 | |||||
Less: Net (income) loss attributable to noncontrolling interests | 0.1 | 0.2 | |||||
Net income (loss) attributable to W. R. Grace & Co. shareholders | $ | 24.7 | $ | 43.6 | |||
Earnings Per Share Attributable to W. R. Grace & Co. Shareholders | |||||||
Basic earnings per share: | |||||||
Net income (loss) | $ | 0.37 | $ | 0.64 | |||
Weighted average number of basic shares | 66.8 | 67.6 | |||||
Diluted earnings per share: | |||||||
Net income (loss) | $ | 0.37 | $ | 0.64 | |||
Weighted average number of diluted shares | 66.9 | 67.7 | |||||
Dividends per common share | $ | 0.27 | $ | 0.24 |
The Notes to the Financial Information are included as part of the Earnings Release.
W. R. Grace & Co. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
Three Months Ended March 31, | |||||||
(In millions) | 2019 | 2018 | |||||
OPERATING ACTIVITIES | |||||||
Net income (loss) | $ | 24.6 | $ | 43.4 | |||
Reconciliation to net cash provided by (used for) operating activities: | |||||||
Depreciation and amortization | 24.9 | 25.0 | |||||
Equity in earnings of unconsolidated affiliate | (4.1 | ) | (5.4 | ) | |||
Costs related to legacy matters | 46.9 | 2.0 | |||||
Cash paid for legacy matters | (3.2 | ) | (6.3 | ) | |||
Provision for income taxes | 10.9 | 24.8 | |||||
Cash paid for income taxes | (10.9 | ) | (8.9 | ) | |||
Income tax refunds received | 0.8 | — | |||||
Interest expense and related financing costs | 20.0 | 19.3 | |||||
Cash paid for interest | (6.5 | ) | (5.3 | ) | |||
Defined benefit pension expense | 4.8 | 3.8 | |||||
Cash paid under defined benefit pension arrangements | (4.0 | ) | (3.7 | ) | |||
Changes in assets and liabilities, excluding effect of currency translation and acquisitions: | |||||||
Trade accounts receivable | 26.6 | 20.1 | |||||
Inventories | (35.5 | ) | (23.0 | ) | |||
Accounts payable | 3.5 | 10.5 | |||||
All other items, net | (27.8 | ) | (7.3 | ) | |||
Net cash provided by (used for) operating activities | 71.0 | 89.0 | |||||
INVESTING ACTIVITIES | |||||||
Cash paid for capital expenditures | (38.2 | ) | (50.1 | ) | |||
Other investing activities, net | (7.9 | ) | 1.6 | ||||
Net cash provided by (used for) investing activities | (46.1 | ) | (48.5 | ) | |||
FINANCING ACTIVITIES | |||||||
Borrowings under credit arrangements | 2.2 | 8.6 | |||||
Repayments under credit arrangements | (5.7 | ) | (11.7 | ) | |||
Cash paid for repurchases of common stock | (4.8 | ) | (35.0 | ) | |||
Proceeds from exercise of stock options | 9.2 | 0.8 | |||||
Dividends paid to shareholders | (18.4 | ) | (16.2 | ) | |||
Other financing activities, net | (4.3 | ) | (1.6 | ) | |||
Net cash provided by (used for) financing activities | (21.8 | ) | (55.1 | ) | |||
Effect of currency exchange rate changes on cash and cash equivalents | (0.3 | ) | 2.4 | ||||
Net increase (decrease) in cash and cash equivalents | 2.8 | (12.2 | ) | ||||
Cash, cash equivalents, and restricted cash beginning of period | 201.0 | 163.5 | |||||
Cash, cash equivalents, and restricted cash, end of period | $ | 203.8 | $ | 151.3 |
The Notes to the Financial Information are included as part of the Earnings Release.
W. R. Grace & Co. and Subsidiaries
Consolidated Balance Sheets (unaudited)
(In millions, except par value and shares) | March 31, 2019 | December 31, 2018 | |||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 203.4 | $ | 200.5 | |||
Restricted cash and cash equivalents | 0.4 | 0.5 | |||||
Trade accounts receivable, less allowance of $11.7 (2018—$11.6) | 257.8 | 288.5 | |||||
Inventories | 316.2 | 281.1 | |||||
Other current assets | 202.8 | 86.7 | |||||
Total Current Assets | 980.6 | 857.3 | |||||
Properties and equipment, net of accumulated depreciation and amortization of $1,495.1 (2018—$1,482.8) | 1,043.7 | 1,011.7 | |||||
Goodwill | 540.3 | 540.4 | |||||
Technology and other intangible assets, net | 351.1 | 356.5 | |||||
Deferred income taxes | 525.6 | 529.4 | |||||
Investment in unconsolidated affiliate | 159.5 | 156.1 | |||||
Other assets | 45.6 | 113.9 | |||||
Total Assets | $ | 3,646.4 | $ | 3,565.3 | |||
LIABILITIES AND EQUITY | |||||||
Current Liabilities | |||||||
Debt payable within one year | $ | 22.5 | $ | 22.3 | |||
Accounts payable | 257.5 | 248.6 | |||||
Other current liabilities | 356.0 | 243.5 | |||||
Total Current Liabilities | 636.0 | 514.4 | |||||
Debt payable after one year | 1,961.6 | 1,961.0 | |||||
Unfunded defined benefit pension plans | 362.9 | 366.0 | |||||
Underfunded defined benefit pension plans | 67.6 | 67.1 | |||||
Other liabilities | 264.5 | 319.8 | |||||
Total Liabilities | 3,292.6 | 3,228.3 | |||||
Equity | |||||||
Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 66,915,399 (2018—66,792,968) | 0.7 | 0.7 | |||||
Paid-in capital | 469.1 | 481.1 | |||||
Retained earnings | 683.3 | 676.7 | |||||
Treasury stock, at cost: shares: 10,541,234 (2018—10,663,659) | (881.8 | ) | (895.5 | ) | |||
Accumulated other comprehensive income (loss) | 76.5 | 67.9 | |||||
Total W. R. Grace & Co. Shareholders’ Equity | 347.8 | 330.9 | |||||
Noncontrolling interests | 6.0 | 6.1 | |||||
Total Equity | 353.8 | 337.0 | |||||
Total Liabilities and Equity | $ | 3,646.4 | $ | 3,565.3 |
The Notes to the Financial Information are included as part of the Earnings Release.
W. R. Grace & Co. and Subsidiaries
Analysis of Operations (unaudited)
Three Months Ended March 31, | ||||||||||
(In millions, except per share amounts) | 2019 | 2018 | % Change | |||||||
Net sales: | ||||||||||
Catalysts Technologies | $ | 349.7 | $ | 315.8 | 10.7 | % | ||||
Materials Technologies | 119.8 | 115.7 | 3.5 | % | ||||||
Total Grace net sales | $ | 469.5 | $ | 431.5 | 8.8 | % | ||||
Net sales by region: | ||||||||||
North America | $ | 144.5 | $ | 126.0 | 14.7 | % | ||||
Europe Middle East Africa | 194.6 | 178.7 | 8.9 | % | ||||||
Asia Pacific | 109.2 | 100.2 | 9.0 | % | ||||||
Latin America | 21.2 | 26.6 | (20.3 | )% | ||||||
Total net sales by region | $ | 469.5 | $ | 431.5 | 8.8 | % | ||||
Performance measures: | ||||||||||
Adjusted EBIT(A)(B): | ||||||||||
Catalysts Technologies segment operating income | $ | 101.4 | $ | 92.1 | 10.1 | % | ||||
Materials Technologies segment operating income | 24.0 | 24.1 | (0.4 | )% | ||||||
Corporate costs | (16.2 | ) | (16.6 | ) | 2.4 | % | ||||
Certain pension costs(C) | (4.8 | ) | (3.8 | ) | (26.3 | )% | ||||
Adjusted EBIT | 104.4 | 95.8 | 9.0 | % | ||||||
Costs related to legacy matters | (46.9 | ) | (2.0 | ) | ||||||
Restructuring and repositioning expenses | (2.3 | ) | (5.6 | ) | ||||||
Third-party acquisition-related costs | (0.3 | ) | (0.9 | ) | ||||||
Interest expense, net | (19.3 | ) | (18.9 | ) | (2.1 | )% | ||||
(Provision for) benefit from income taxes | (10.9 | ) | (24.8 | ) | 56.0 | % | ||||
Income (loss) attributable to W. R. Grace & Co. shareholders | $ | 24.7 | $ | 43.6 | (43.3 | )% | ||||
Diluted EPS | $ | 0.37 | $ | 0.64 | (42.2 | )% | ||||
Adjusted EPS(A) | $ | 0.93 | $ | 0.82 | 13.4 | % |
The Notes to the Financial Information are included as part of the Earnings Release.
W. R. Grace & Co. and Subsidiaries
Analysis of Operations (unaudited) (continued)
Three Months Ended March 31, | ||||||||||
(In millions) | 2019 | 2018 | % Change | |||||||
Adjusted profitability performance measures(A)(B)(C): | ||||||||||
Gross Margin: | ||||||||||
Catalysts Technologies | 42.4 | % | 41.5 | % | 0.9 pts | |||||
Materials Technologies | 36.4 | % | 36.3 | % | 0.1 pts | |||||
Adjusted Gross Margin | 40.9 | % | 40.1 | % | 0.8 pts | |||||
Pension costs in cost of goods sold | (0.7 | )% | (0.8 | )% | 0.1 pts | |||||
Total Grace | 40.2 | % | 39.3 | % | 0.9 pts | |||||
Adjusted EBIT: | ||||||||||
Catalysts Technologies | $ | 101.4 | $ | 92.1 | 10.1 | % | ||||
Materials Technologies | 24.0 | 24.1 | (0.4 | )% | ||||||
Corporate, pension, and other | (21.0 | ) | (20.4 | ) | (2.9 | )% | ||||
Total Grace | 104.4 | 95.8 | 9.0 | % | ||||||
Depreciation and amortization: | ||||||||||
Catalysts Technologies | $ | 20.5 | $ | 19.4 | 5.7 | % | ||||
Materials Technologies | 3.5 | 4.7 | (25.5 | )% | ||||||
Corporate | 0.9 | 0.9 | — | % | ||||||
Total Grace | 24.9 | 25.0 | (0.4 | )% | ||||||
Adjusted EBITDA: | ||||||||||
Catalysts Technologies | $ | 121.9 | $ | 111.5 | 9.3 | % | ||||
Materials Technologies | 27.5 | 28.8 | (4.5 | )% | ||||||
Corporate, pension, and other | (20.1 | ) | (19.5 | ) | (3.1 | )% | ||||
Total Grace | 129.3 | 120.8 | 7.0 | % | ||||||
Adjusted EBIT margin: | ||||||||||
Catalysts Technologies | 29.0 | % | 29.2 | % | (0.2) pts | |||||
Materials Technologies | 20.0 | % | 20.8 | % | (0.8) pts | |||||
Total Grace | 22.2 | % | 22.2 | % | 0.0 pts | |||||
Adjusted EBITDA margin: | ||||||||||
Catalysts Technologies | 34.9 | % | 35.3 | % | (0.4) pts | |||||
Materials Technologies | 23.0 | % | 24.9 | % | (1.9) pts | |||||
Total Grace | 27.5 | % | 28.0 | % | (0.5) pts |
The Notes to the Financial Information are included as part of the Earnings Release.
W. R. Grace & Co. and Subsidiaries
Analysis of Operations (unaudited) (continued)
Three Months Ended March 31, | |||||||
(In millions) | 2019 | 2018 | |||||
Cash flow measure(A): | |||||||
Net cash provided by (used for) operating activities | $ | 71.0 | $ | 89.0 | |||
Cash paid for capital expenditures | (38.2 | ) | (50.1 | ) | |||
Free Cash Flow | 32.8 | 38.9 | |||||
Cash paid for legacy matters | 3.2 | 6.3 | |||||
Cash paid for repositioning | 3.5 | 4.6 | |||||
Cash paid for third-party acquisition-related costs | 0.3 | 2.1 | |||||
Cash paid for restructuring | 3.0 | 3.2 | |||||
Adjusted Free Cash Flow | $ | 42.8 | $ | 55.1 |
The Notes to the Financial Information are included as part of the Earnings Release.
Four Quarters Ended March 31, | |||||||
(In millions) | 2019 | 2018 | |||||
Calculation of Adjusted EBIT Return On Invested Capital (trailing four quarters)(A): | |||||||
Adjusted EBIT | $ | 465.3 | $ | 423.0 | |||
Invested Capital: | |||||||
Trade accounts receivable | 257.8 | 269.1 | |||||
Inventories | 316.2 | 256.2 | |||||
Accounts payable | (257.5 | ) | (217.3 | ) | |||
316.5 | 308.0 | ||||||
Other current assets (excluding income taxes) | 183.3 | 43.9 | |||||
Properties and equipment, net | 1,043.7 | 829.4 | |||||
Goodwill | 540.3 | 405.2 | |||||
Technology and other intangible assets, net | 351.1 | 251.6 | |||||
Investment in unconsolidated affiliate | 159.5 | 132.2 | |||||
Other assets (excluding capitalized financing fees) | 42.9 | 44.3 | |||||
Other current liabilities (excluding income taxes, legacy matters, accrued interest, and restructuring) | (278.2 | ) | (157.8 | ) | |||
Other liabilities (excluding income taxes and legacy matters) | (109.8 | ) | (142.7 | ) | |||
Total invested capital | $ | 2,249.3 | $ | 1,714.1 | |||
Adjusted EBIT Return On Invested Capital | 20.7 | % | 24.7 | % |
The Notes to the Financial Information are included as part of the Earnings Release.
W. R. Grace & Co. and Subsidiaries
Analysis of Operations (unaudited)
Three Months Ended March 31, | |||||||||||||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||||||||||
(In millions, except per share amounts) | Pre- Tax | Tax Effect | After- Tax | Per Share | Pre- Tax | Tax Effect | After- Tax | Per Share | |||||||||||||||||||||||
Adjusted EPS: | |||||||||||||||||||||||||||||||
Diluted earnings per share | $ | 0.37 | $ | 0.64 | |||||||||||||||||||||||||||
Costs related to legacy matters | $ | 46.9 | $ | 10.9 | $ | 36.0 | 0.54 | $ | 2.0 | $ | 0.3 | $ | 1.7 | 0.03 | |||||||||||||||||
Restructuring and repositioning expenses | 2.3 | 0.6 | 1.7 | 0.03 | 5.6 | 1.1 | 4.5 | 0.07 | |||||||||||||||||||||||
Third-party acquisition-related costs | 0.3 | 0.1 | 0.2 | — | 0.9 | 0.3 | 0.6 | 0.01 | |||||||||||||||||||||||
Income tax expense related to historical tax attributes(D) | — | — | — | (4.7 | ) | 4.7 | 0.07 | ||||||||||||||||||||||||
Discrete tax items | 1.0 | (1.0 | ) | (0.01 | ) | — | — | — | |||||||||||||||||||||||
Adjusted EPS(A) | $ | 0.93 | $ | 0.82 |
The Notes to the Financial Information are included as part of the Earnings Release.
W. R. Grace & Co. and Subsidiaries
Notes to the Financial Information
Media Relations Rich Badmington +1 410.531.4370 rich.badmington@grace.com | Investor Relations Jeremy Rohen +1 410.531.8234 jeremy.rohen@grace.com |