Grace's pretax income rose 17% in first quarter

Bankrupt parent aided by strength at Davison, Performance Chemicals

April 24, 2002|By Kristine Henry | Kristine Henry,SUN STAFF

Although it is saddled with asbestos lawsuits and has declared bankruptcy, W.R. Grace & Co. said yesterday that its operating performance improved in the first quarter.

The Columbia-based chemical maker earned $12.4 million, or 19 cents a share, during the three months that ended March 31. That figure was down 15 percent from the $14.6 million reported in the year-earlier quarter, but included a pension-cost increase of $3.5 million, a $3.8 million charge for environmental remediation and legal fees and $4.4 million in bankruptcy-related expenses.

Grace, which employs about 1,100 in the Baltimore area, filed for Chapter 11 protection in April 2001 after it was overcome by asbestos-related lawsuits. Before 1973, Grace added asbestos to some of its fire protection products. Grace also operated a vermiculite mine in Montana for nearly three decades. Vermiculite, which is used in insulation, fertilizer and potting soil, contains a naturally occurring form of asbestos.

The company's pretax income from core operations rose 17 percent in the first quarter to $34 million, and sales were up 4 percent to $413.5 million. Excluding the effects of currency translations, sales were up nearly 8 percent.

"Our businesses delivered strong results in the first quarter with both Davison and Performance Chemicals contributing double-digit improvements in operating earnings," said Paul J. Norris, chairman, president and chief executive.

"Although the economic outlook remains uncertain, our productivity and growth initiatives are continuing to deliver performance in a difficult operating environment."

The Davison Chemicals division, also based in Columbia, saw its sales rise nearly 9 percent to $215.4 million.

Its operating income grew nearly 11 percent to $26.9 million and its operating margin of 12.5 percent was an improvement of 0.3 percentage points.

The Davison division produces silicas and catalysts used to accelerate the chemical reactions in oil refining.

Grace's Performance Chemicals of Cambridge, Mass., which makes construction chemicals and building materials, had a slight sales rise -- 0.4 percent -- to $198.1 million, and its operating income rose 10 percent to $19.6 million. The division's operating margin was 9.9 percent, about 0.9 percentage points higher than in the year-earlier quarter.

Robert M. Tarola, senior vice president and chief financial officer, said Grace's operations improved in part because of small acquisitions the company has made in the past year, and because energy costs are down.

"Energy costs were at their peak this time last year," he said.

The company also said yesterday that the bankruptcy court has set March 31, 2003, as the last day that claims of general unsecured creditors, asbestos property damage claims and medical monitoring claims related to asbestos can be filed.

A trial date of Sept. 30 has been set for a lawsuit that charges Grace fraudulently spun off its Cryovac and Sealed Air subsidiaries.

"This all helps us move forward to resolution of the process," Tarola said. "So it's all relatively good news."

Shares of Grace were up 3 cents yesterday to close at $3.58.

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