W.R. Grace posts $56.6 million second-quarter pre-tax income

By Caroline Salls

Pittsburgh, July 19 - W. R. Grace & Co. reported a $56.6 million pre-tax income from core operations for the second quarter of 2005 on $676.5 million in sales, according to a company news release.

The sales figures were an 18.2% increase over the $572.4 million in the prior-year quarter.

The increase in sales was attributed to higher unit volumes in all key geographic regions, improved product mix, selling price increases to partially offset cost inflation, acquisitions and favorable currency translation, the release said.

Pre-tax income from core operations was a 14.8% increase over the same period in 2004.

The pre-tax results from core operations reflect added profit from higher sales and from productivity improvements, which together more than offset increases in raw materials, energy and certain operating expenses, according to the release.

Grace reported second-quarter net income of $32.7 million, or $0.49 per diluted share, compared with net income of $21.3 million, or $0.32 per diluted share, in the second quarter of 2004.

Net income for the second quarter of 2005 includes income from two bankruptcy court approved insurance settlements, offset by higher interest expense to conform to rates in Grace's proposed Chapter 11 plan of reorganization and higher legal costs related to Chapter 11 and other litigation proceedings.

"Higher sales more than offset double-digit increases in the cost of raw materials and energy," president and chief executive officer Fred Festa said in the release.

For the first six months of 2005, Grace reported sales of $1.28 billion, a 17.3% increase over 2004.

The year-to-date increase was largely attributable to the same favorable factors that affected second-quarter sales, the release said.

Net income through June was $35.8 million, or $0.53 per diluted share, compared with net income of $37.1 million, or $0.56 per diluted share, for the six months ended June 2004.

Core operating income was $96.3 million for the first six months of 2005 compared with $87.8 million in the prior year period, a 9.7% increase.

According to the release, the increase was mostly attributed to strong sales volume growth, higher selling prices to partially offset the impact of cost inflation, and favorable foreign currency translation.

The second-quarter financial results include about $20 million of income and cash proceeds from the settlement of two disputes with insurance carrier groups with respect to coverage for past environmental remediation and asbestos-related costs.

Grace's net cash flow from operating activities was a negative $78.8 million for the first six months of 2005, compared with a positive cash flow of $85.8 million for the comparable period of 2004.

W.R. Grace, a Columbia, Md.-based specialty chemicals company, filed for bankruptcy on April 2, 2001 with the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 01-01139.

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