First Quarter 2021 Highlights
- Net sales of
$456.7 million were up 8.4%, or up 5.8% on constant currency; all segments returned to year over year growth in the quarter - Weather-related impact on sales was approximately 3% or
$13 million in the first quarter; in addition, expect weather-related costs of approximately$15 million , with$8.5 million or$0.09 per share recorded in the first quarter and approximately$6.5 million expected in the second quarter - Diluted EPS of
$1.03 , up$0.40 from$0.63 a year ago, primarily due to pension curtailment-related gains recorded in 1Q21, and Adjusted EPS of$0.73 , up$0.02 from$0.71 a year ago
(See Analysis of Operations and Notes for information on Non-GAAP financial measures; all results based on year-over-year comparison unless otherwise noted.)
“We are experiencing strong demand in all of our businesses,” said
First Quarter Consolidated Performance
Summary Financial Results - Total Grace | |||||||
(In $ millions, except per share amounts) | 1Q21 | 1Q20 | Change | ||||
Net sales | $ | 456.7 | $ | 421.5 | 8.4 % | ||
Net sales, constant currency1 | 5.8 % | ||||||
Net income | 68.4 | 42.0 | 62.9 % | ||||
Net income margin | 15.0 % | 10.0 % | 5.0 pts | ||||
Adjusted EBIT1 | 85.2 | 82.3 | 3.5 % | ||||
Adjusted EBIT margin1 | 18.7 % | 19.5 % | (0.8) pts | ||||
Diluted EPS | $ | 1.03 | $ | 0.63 | 63.5 % | ||
Adjusted EPS1 | $ | 0.73 | $ | 0.71 | 2.8 % | ||
Dividends per share | $ | 0.33 | $ | 0.30 | 10.0 % | ||
YTD 2021 | YTD 2020 | Change | |||||
Net cash provided by operating activities | 69.0 | 54.6 | 26.4 % | ||||
Adjusted Free Cash Flow1 | 24.2 | 9.3 | 160.2 % | ||||
TTM 1Q21 | TTM 1Q20 | Change | |||||
Return on Equity | 8.0 % | 37.4 % | (29.4) pts | ||||
Adjusted EBIT ROIC1 | 13.7 % | 18.6 % | (4.9) pts | ||||
1 See Analysis of Operations and Notes for information on Non-GAAP financial measures. |
- First quarter sales of
$456.7 million were up 8.4%, or up 5.8% on constant currency, despite the weather-related impact of approximately 3% or$13 million . Sales in all segments returned to year over year growth as we continue to recover from the pandemic, with Materials Technologies up 12.0%, Specialty Catalysts up 8.9%, and Refining Technologies up 5.5%. - Net income of
$68.4 million was up 62.9%, and Diluted EPS of$1.03 was up 63.5%, primarily due to pension curtailment-related gains recorded in the quarter as a result of the recently announced salaried pension plan freeze in theU.S. - Adjusted EBIT of
$85.2 million increased 3.5% and Adjusted EPS of$0.73 increased 2.8%, despite weather-related costs of$8.5 million , or$0.09 per share. The prior-year period also included$8 .0 million, or$0.09 per share, in business interruption insurance recoveries. Together, the weather-related costs and business interruption insurance recoveries reduced Adjusted EBIT growth by 22.6%. - Net cash provided by operating activities of
$69 .0 million increased$14 .4 million, and Adjusted Free Cash Flow of$24 .2 million increased$14 .9 million.
Delivering on Our Strategic Initiatives
“The past few months have been strategically important for Grace,” continued La Force. “We concluded our strategic review with an agreement to be acquired by
“In addition, we announced an agreement to acquire a fine chemicals business to strengthen and expand our existing fast-growing pharma business. This acquisition is strategically and financially compelling and aligns perfectly with our strategy of building a higher-growth, high-margin portfolio. This transaction is expected to close in the second quarter of 2021. Our integration plan is on track and we have secured financing for the cash portion of the purchase price. Given our track record of successful integrations, I am very confident in our ability to quickly combine this business with our existing pharma business."
Grace's strategic framework for profitable growth includes four elements:
- Invest to accelerate growth and extend our competitive advantages
- Invest in great people to strengthen our high-performance culture
- Execute the Grace Value Model to drive operating excellence
- Acquire to build our technology and manufacturing capabilities for our customers
First Quarter Segment Performance
Catalysts Technologies
Catalysts Technologies produces and sells catalysts and related products and technologies used in petrochemical, refining, and other chemical manufacturing applications.
Summary Financial Results - Catalysts Technologies | |||||||
(In $ millions) | 1Q21 | 1Q20 | Change | ||||
Net sales | $ | 329.6 | $ | 308.0 | 7.0 % | ||
Net sales, constant currency1 | 5.0 % | ||||||
Gross margin | 40.2 % | 40.7 % | (0.5) pts | ||||
Operating income | 75.8 | 82.0 | (7.6) % | ||||
Operating margin | 23.0 % | 26.6 % | (3.6) pts | ||||
1 See Analysis of Operations and Notes for information on Non-GAAP financial measures. |
- First quarter sales of
$329.6 million were up 7.0%, or up 5.0% on constant currency, despite the weather-related impact of approximately 4% or$13 million . Sales growth was driven primarily by higher sales volumes.
- Specialty Catalysts sales increased 8.9% primarily due to higher sales volumes and increased licensing revenue.
- Refining Technologies sales increased 5.5% mainly due to higher sales volumes and favorable currency. Global demand for transportation fuels and refinery operating rates continued to show steady improvement.
- Gross margin of 40.2% decreased 50 bps primarily due to unfavorable product mix, higher manufacturing costs including inflation on raw materials and energy costs, partially offset by increased production volumes and strong operating performance.
- Operating income of
$75.8 million was down$6 .2 million, or 7.6%, driven by weather-related costs of$8.5 million , partially offset by higher gross profit and income from our ART joint venture. The prior-year period also included$8 .0 million in business interruption insurance recoveries. Together, the weather-related costs and business interruption insurance recoveries reduced operating income growth by 21.5%.
Materials Technologies
Materials Technologies produces and sells specialty materials, which are either silica based or complex organic molecules, that can be used in pharma & consumer, coatings, and chemical process applications.
Summary Financial Results - Materials Technologies | |||||||
(In $ millions) | 1Q21 | 1Q20 | Change | ||||
Net sales | $ | 127.1 | $ | 113.5 | 12.0 % | ||
Net sales, constant currency1 | 7.8 % | ||||||
Gross margin | 36.8 % | 33.0 % | 3.8 pts | ||||
Operating income | 26.8 | 19.0 | 41.1 % | ||||
Operating margin | 21.1 % | 16.7 % | 4.4 pts | ||||
1 See Analysis of Operations and Notes for information on Non-GAAP financial measures. |
- First quarter sales of
$127.1 million were up 12.0%, or up 7.8% on constant currency. Sales growth was driven by higher sales volumes, mostly in pharma & consumer and coatings. - Gross margin of 36.8% increased 380 bps primarily due to increased production volumes, strong operating performance, and favorable mix, partially offset by higher depreciation, inflation on raw materials and energy costs, and increased logistics costs. The higher depreciation is a result of recent growth investments and capacity additions that came online in the second half of last year.
- Operating income of
$26.8 million was up$7 .8 million, or 41.1%, driven by higher gross profit. Operating margin of 21.1% was up 440 bps.
Other Developments
Gulf Coast Freeze Update
In mid-February, Winter Storm Uri caused widespread manufacturing disruptions across the
- The weather-related impact on sales in the first quarter was approximately 3% or
$13 million , which impacted Refining Technologies and Specialty Catalysts. - In addition, the total estimated weather-related costs are expected to be approximately
$15 million . Weather-related costs recorded in the first quarter were$8.5 million , or$0.09 per share, with approximately$6.5 million expected in the second quarter. The costs are included in cost of goods sold and other expense and impact both net income and Adjusted EBIT. They are primarily due to lower fixed cost absorption during the downtime, increased costs to supply customers from other Grace manufacturing facilities, and costs to repair plants impacted by the weather.
Pensions Update
In the first quarter of 2021, Grace announced to employees that the
About Grace
Built on talent, technology, and trust, Grace is a leading global specialty chemical company. 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 4,000 employees, Grace operates and/or sells to customers in over 60 countries. More information about Grace is available at grace.com.
Forward-Looking Statements
Certain statements contained in this communication may contain 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
W. R. Grace & Co. and Subsidiaries
Consolidated Statements of Operations (unaudited)
Three Months Ended | |||||||
(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 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 | |||||||
(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 | (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 |
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) | 2021 | 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 | 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 | 1,193.1 | 1,208.8 | |||||
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 | |||||
Equity | |||||||
Common stock issued, par value | 0.7 | 0.7 | |||||
Paid-in capital | 467.7 | 473.2 | |||||
Retained earnings | 695.4 | 648.8 | |||||
(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 the Financial Information are included as part of the Earnings Release.
W. R. Grace & Co. and Subsidiaries
Analysis of Operations (unaudited)
Three Months Ended | ||||||||||
(In millions, except per share amounts) | 2021 | 2020 | % Change | |||||||
Net sales: | ||||||||||
Catalysts Technologies | $ | 329.6 | $ | 308.0 | 7.0 | % | ||||
Materials Technologies | 127.1 | 113.5 | 12.0 | % | ||||||
Total Grace net sales | $ | 456.7 | $ | 421.5 | 8.4 | % | ||||
Net sales by region: | ||||||||||
$ | 126.4 | $ | 120.2 | 5.2 | % | |||||
Europe Middle East Africa | 183.4 | 181.6 | 1.0 | % | ||||||
123.2 | 100.3 | 22.8 | % | |||||||
23.7 | 19.4 | 22.2 | % | |||||||
Total net sales by region | $ | 456.7 | $ | 421.5 | 8.4 | % | ||||
Performance measures: | ||||||||||
Adjusted EBIT(A)(B): | ||||||||||
Catalysts Technologies segment operating income | $ | 75.8 | $ | 82.0 | (7.6 | )% | ||||
Materials Technologies segment operating income | 26.8 | 19.0 | 41.1 | % | ||||||
Corporate costs | (15.4 | ) | (15.6 | ) | 1.3 | % | ||||
Certain pension costs(C) | (2.0 | ) | (3.1 | ) | 35.5 | % | ||||
Adjusted EBIT | 85.2 | 82.3 | 3.5 | % | ||||||
Gain on curtailment of | 25.6 | — | ||||||||
Pension MTM adjustment and other related costs, net | 13.7 | — | ||||||||
Restructuring and repositioning expenses | (12.8 | ) | (2.7 | ) | ||||||
Costs related to legacy matters | (4.6 | ) | (2.7 | ) | ||||||
Third-party acquisition-related costs | (1.3 | ) | (1.5 | ) | ||||||
Taxes and interest included in equity in earnings of unconsolidated affiliate | (0.2 | ) | — | |||||||
Interest expense, net | (18.9 | ) | (17.7 | ) | (6.8 | )% | ||||
(Provision for) benefit from income taxes | (18.3 | ) | (15.7 | ) | (16.6 | )% | ||||
Net income (loss) attributable to | $ | 68.4 | $ | 42.0 | 62.9 | % | ||||
Diluted EPS | $ | 1.03 | $ | 0.63 | 63.5 | % | ||||
Adjusted EPS(A) | $ | 0.73 | $ | 0.71 | 2.8 | % |
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 | ||||||||||
(In millions) | 2021 | 2020 | % Change | |||||||
Adjusted profitability performance measures(A)(B)(C): | ||||||||||
Gross Margin: | ||||||||||
Catalysts Technologies | 40.2 | % | 40.7 | % | (50) bps | |||||
Materials Technologies | 36.8 | % | 33.0 | % | 380 bps | |||||
Adjusted Gross Margin | 39.3 | % | 38.7 | % | 60 bps | |||||
Weather-related impacts in cost of goods sold | (1.2 | )% | — | % | (120) bps | |||||
Pension costs in cost of goods sold | (0.9 | )% | (0.8 | )% | (10) bps | |||||
Total Grace | 37.2 | % | 37.9 | % | (70) bps | |||||
Adjusted EBIT: | ||||||||||
Catalysts Technologies | $ | 75.8 | $ | 82.0 | (7.6 | )% | ||||
Materials Technologies | 26.8 | 19.0 | 41.1 | % | ||||||
Corporate, pension, and other | (17.4 | ) | (18.7 | ) | 7.0 | % | ||||
Total Grace | $ | 85.2 | $ | 82.3 | 3.5 | % | ||||
Adjusted Depreciation And Amortization: | ||||||||||
Catalysts Technologies depreciation and amortization | $ | 22.2 | $ | 20.7 | 7.2 | % | ||||
Depreciation and amortization included in equity in earnings of unconsolidated affiliate | 1.1 | 0.4 | 175.0 | % | ||||||
Catalysts Technologies | 23.3 | 21.1 | 10.4 | % | ||||||
Materials Technologies | 5.1 | 3.6 | 41.7 | % | ||||||
Corporate | 0.8 | 1.2 | (33.3 | )% | ||||||
Adjusted Depreciation And Amortization | 29.2 | 25.9 | 12.7 | % | ||||||
Depreciation and amortization included in equity in earnings of unconsolidated affiliate | (1.1 | ) | (0.4 | ) | (175.0 | )% | ||||
Depreciation and amortization | $ | 28.1 | $ | 25.5 | 10.2 | % | ||||
Adjusted EBITDA: | ||||||||||
Catalysts Technologies | $ | 99.1 | $ | 103.1 | (3.9 | )% | ||||
Materials Technologies | 31.9 | 22.6 | 41.2 | % | ||||||
Corporate, pension, and other | (16.6 | ) | (17.5 | ) | 5.1 | % | ||||
Total Grace | $ | 114.4 | $ | 108.2 | 5.7 | % | ||||
Adjusted EBIT margin: | ||||||||||
Catalysts Technologies | 23.0 | % | 26.6 | % | (360) bps | |||||
Materials Technologies | 21.1 | % | 16.7 | % | 440 bps | |||||
Total Grace | 18.7 | % | 19.5 | % | (80) bps | |||||
Net income margin | 15.0 | % | 10.0 | % | 500 bps | |||||
Adjusted EBITDA margin: | ||||||||||
Catalysts Technologies | 30.1 | % | 33.5 | % | (340) bps | |||||
Materials Technologies | 25.1 | % | 19.9 | % | 520 bps | |||||
Total Grace | 25.0 | % | 25.7 | % | (70) bps |
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 | |||||||
(In millions) | 2021 | 2020 | |||||
Cash flow measure(A): | |||||||
Net cash provided by (used for) operating activities | $ | 69.0 | $ | 54.6 | |||
Cash paid for capital expenditures | (55.0 | ) | (57.1 | ) | |||
Free Cash Flow | 14.0 | (2.5 | ) | ||||
Cash paid for repositioning | 4.3 | 1.9 | |||||
Cash paid for legacy matters | 3.5 | 7.6 | |||||
Cash paid for third-party acquisition-related costs | 1.5 | 1.3 | |||||
Other Items | 0.8 | — | |||||
Cash paid for restructuring | 0.1 | 1.0 | |||||
Adjusted Free Cash Flow | $ | 24.2 | $ | 9.3 |
Four Quarters Ended | |||||||
(In millions) | 2021 | 2020 | |||||
Calculation of Adjusted EBIT Return on | |||||||
Net income (loss) attributable to W. R. Grace & Co. shareholders | $ | 24.6 | $ | 143.6 | |||
Adjusted EBIT | 315.1 | 451.1 | |||||
Reconciliation to | |||||||
Total equity | $ | 308.3 | $ | 383.9 | |||
Total debt | 1,989.2 | 1,978.3 | |||||
Underfunded and unfunded defined benefit pension plans | 592.8 | 514.8 | |||||
Liabilities related to legacy matters | 220.3 | 203.1 | |||||
Cash, cash equivalents, and restricted cash | (292.5 | ) | (193.7 | ) | |||
Net income tax assets | (543.2 | ) | (498.6 | ) | |||
Other items | 27.3 | 32.0 | |||||
$ | 2,302.2 | $ | 2,419.8 | ||||
GAAP Return on Equity | 8.0 | % | 37.4 | % | |||
Adjusted EBIT ROIC | 13.7 | % | 18.6 | % |
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 | |||||||||||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||||||||||
(In millions, except per share amounts) | Pre-Tax | Tax Effect | After-Tax | Per Share | Pre-Tax | Tax Effect | After-Tax | Per Share | |||||||||||||||||||||||
Diluted EPS | $ | 1.03 | $ | 0.63 | |||||||||||||||||||||||||||
Gain on curtailment of | $ | (25.6 | ) | $ | (8.1 | ) | $ | (17.5 | ) | (0.26 | ) | $ | — | $ | — | $ | — | — | |||||||||||||
Pension MTM adjustment and other related costs, net | (13.7 | ) | (4.2 | ) | (9.5 | ) | (0.14 | ) | — | — | — | — | |||||||||||||||||||
Restructuring and repositioning expenses | 12.8 | 4.0 | 8.8 | 0.13 | 2.7 | 0.6 | 2.1 | 0.03 | |||||||||||||||||||||||
Costs related to legacy matters | 4.6 | 1.4 | 3.2 | 0.05 | 2.7 | 0.6 | 2.1 | 0.03 | |||||||||||||||||||||||
Third-party acquisition-related costs | 1.3 | 0.4 | 0.9 | 0.01 | 1.5 | 0.3 | 1.2 | 0.02 | |||||||||||||||||||||||
Discrete tax items | 5.9 | (5.9 | ) | (0.09 | ) | 0.1 | (0.1 | ) | — | ||||||||||||||||||||||
Adjusted EPS | $ | 0.73 | $ | 0.71 |
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
(A) In the above, Grace presents financial information in accordance with
- Adjusted EBIT means net income attributable to
W. R. Grace & Co. shareholders adjusted for interest income and expense; income taxes; costs related to legacy matters; restructuring and repositioning expenses and asset impairments; pension costs other than service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits; gains and losses on sales and exits of businesses, product lines, and certain other investments; third-party acquisition-related costs and the amortization of acquired inventory fair value adjustment; gains and losses on modification or extinguishment of debt; the effects of these items on equity in earnings of unconsolidated affiliate; and certain other items that are not representative of underlying trends. - Adjusted EBITDA means Adjusted EBIT adjusted for depreciation and amortization and depreciation and amortization included in equity in earnings of unconsolidated affiliate (collectively, Adjusted Depreciation and Amortization).
- Adjusted EBIT Return on
Invested Capital means Adjusted EBIT (on a trailing four quarters basis) divided by equity adjusted for debt; underfunded and unfunded defined benefit pension plans; liabilities related to legacy matters; cash, cash equivalents, and restricted cash; net income tax assets; and certain other assets and liabilities. - Adjusted Gross Margin means gross margin adjusted for pension-related costs included in cost of goods sold, the amortization of acquired inventory fair value adjustment, and write-offs of inventory related to exits of businesses and product lines and significant manufacturing process changes, and certain other items that are not representative of underlying trends.
- Adjusted EPS means diluted EPS adjusted for costs related to legacy matters; restructuring and repositioning expenses and asset impairments; pension costs other than service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits; gains and losses on sales and exits of businesses, product lines, and certain other investments; third-party acquisition-related costs and the amortization of acquired inventory fair value adjustment; gains and losses on modification or extinguishment of debt; certain other items that are not representative of underlying trends; and certain discrete tax items and income tax expense related to historical tax attributes.
- Adjusted Free Cash Flow means net cash provided by or used for operating activities minus capital expenditures plus cash flows related to legacy matters; cash paid for restructuring and repositioning; capital expenditures related to repositioning; cash paid for third-party acquisition-related costs; cash flows related to debt modification; and accelerated payments under defined benefit pension arrangements.
- The change in net sales on a constant currency basis, which we sometimes refer to as "
Net Sales , constant currency," means the period-over-period change in net sales calculated using the foreign currency exchange rates that were in effect during the previous comparable period. - Organic sales growth means the period-over-period change in net sales excluding the sales growth attributable to acquisitions.
“Legacy matters” include legacy (i) product, (ii) environmental, and (iii) other liabilities, relating to past activities of Grace.
Adjusted EBIT, Adjusted EBITDA,
Grace uses Adjusted EBIT as a performance measure in significant business decisions and in determining certain incentive compensation. Grace uses Adjusted EBIT as a performance measure because it provides improved period-to-period comparability for decision making and compensation purposes, and because it better measures the ongoing earnings results of its strategic and operating decisions by excluding the earnings effects of legacy matters; restructuring and repositioning activities; certain acquisition-related items; and certain other items that are not representative of underlying trends.
Grace uses Adjusted EBITDA,
Grace uses Adjusted Free Cash Flow as a liquidity measure to evaluate its ability to generate cash to support its ongoing business operations, to invest in its businesses, and to provide a return of capital to shareholders. Grace also uses Adjusted Free Cash Flow as a performance measure in determining certain incentive compensation.
Adjusted EBIT, Adjusted EBITDA,
Adjusted EBIT has material limitations as an operating performance measure because it excludes costs related to legacy matters, and may exclude income and expenses from restructuring and repositioning activities, which historically have been material components of Grace’s net income. Adjusted EBITDA also has material limitations as an operating performance measure because it excludes the impact of depreciation and amortization expense. Grace’s business is substantially dependent on the successful deployment of capital, and depreciation and amortization expense is a necessary element of our costs. Grace compensates for the limitations of these measurements by using these indicators together with net income as measured under
(B) Grace's segment operating income includes only Grace's share of income from consolidated and unconsolidated joint ventures.
(C) 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 and Materials Technologies 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.
(D) Restructuring and repositioning expenses attributable to
NM - Not Meaningful
Media Relations +1 410.531.8870 caitlin.leopold@grace.com | Investor Relations +1 410.531.8835 jason.hershiser@grace.com |
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