Grace reports loss of $107.6 million for quarter

W. R.

Weak euro, litigation noted

bankruptcy protection considered

January 30, 2001|By Paul Adams | Paul Adams,SUN STAFF

Stung by mounting asbestos-related litigation costs, rising natural gas prices and a weak euro, W. R. Grace and Co. reported a fourth-quarter loss of $107.6 million yesterday and said it was not ruling out filing for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

The Columbia-based chemical maker, which operates a chemical plant in southern Baltimore, said it faces more than 124,000 asbestos-related bodily injury claims and is considering the bankruptcy measure and other options.

Several other companies being sued for similar asbestos-related injuries have filed for bankruptcy protection, including Owens Corning and Armstrong World Industries Inc. Some plaintiffs have responded to the bankruptcy filings by rushing to file new claims.

"We believe we can handle our asbestos problem in a stabilized environment, but the higher claims level and uncertainty of our current environment has basically obligated us to examine all of our options," said Robert M. Tarola, senior vice president and chief financial officer.

The loss amounts to $1.65 a share, compared with income of $48.2 million, or 66 cents a share, in the fourth quarter of 1999. The results included a $135.2 million charge, or $2.07 a share, for higher-than-expected fourth-quarter asbestos-related litigation costs. The earnings report was released after the markets closed yesterday. Last year's results included after-tax gains of $14.9 million.

Excluding one-time charges, earnings per share for the three months that ended Dec. 31 were 42 cents, down from 46 cents in 1999. Analysts polled by First Call/Thomson Financial expected earnings of 40 cents. Analysts lowered their estimates after the company issued two warnings - one in December and one this month - that profits would fall 3 percent to 5 percent below previous forecasts. Sales for the quarter totaled $384.4 million, a 2.7 percent increase over the $395.2 million reported in fourth-quarter 1999.

For the year, the company reported a net loss of $14.7 million including one-time charges, compared with net income of $135.9 million in 1999. Excluding special items in years, net income was $120.5 million, or $1.78 a share, last year, up from $112.2 million, or $1.52 a share, in 1999, the company said. Net sales totaled $1.6 billion, 2.9 percent more than in 1999.

"It's been a difficult end to an otherwise good year," Paul J. Norris, Grace's chairman, president and chief executive, said in a statement released yesterday. "Asbestos litigation continues to be our company's biggest challenge. During 2000, we have seen the litigation environment worsen and become more uncertain."

Bodily-injury claims increased more than expected in the fourth quarter. For all of last year, 48,786 were received, 81 percent more than in 1999, and the cost of settling the claims increased. Seven property damage lawsuits and nine attic insulation class action lawsuits also are pending.

Norris also blamed weather-related construction and rising natural gas and crude oil prices for diminished profits. A weak euro hurt its European operations, which account for about 29 percent of sales.

Tarola said Grace has $300 million on hand to fund operations. But the company warned that its 364-day bank credit facility might not be renewed when it comes due in May as a result of a tightening credit market and uncertainties over the outstanding asbestos claims. Tarola said the company has several options and does not expect a credit problem this year. Shares closed down 14 cents yesterday at $2.80.

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