Grace Reports Second Quarter Financial Results

COLUMBIA, Md.--(Business Wire)--
W. R. Grace & Co. (NYSE:GRA) today announced its financial results
for the second quarter ended June 30, 2008. Highlights are as follows:

-- Sales for the second quarter were $900.0 million compared with
$812.8 million in the prior year quarter, a 10.7% increase
(4.8% before the effects of currency translation). The sales
increase was attributable to favorable currency translation,
improved pricing, and volume growth in both operating
segments. Sales were up 8.6% in North America, 9.8% in Europe
Africa, 18.0% in Asia Pacific and 7.3% in Latin America.

-- Net income for the second quarter was $25.0 million, or $0.34
per diluted share, compared with net income of $20.5 million,
or $0.29 per diluted share, in the prior year quarter. The
2008 and 2007 results were negatively affected by Chapter 11
expenses, litigation and other matters not related to core
operations. Excluding Chapter 11 expenses, the loss on noncore
activities, and their tax effects, net income would have been
$51.7 million for the second quarter of 2008 compared with
$48.4 million calculated on the same basis for the prior year
quarter, a 6.8% increase.

-- Pre-tax income from core operations was $90.4 million in the
second quarter compared with $93.1 million in the prior year
quarter, a 2.9% decrease. Excluding severance costs related to
a previously disclosed reduction in workforce, pre-tax income
from core operations in the second quarter would have been
$95.6 million, a 2.7% increase over the prior year quarter.
Inflation on raw materials and energy costs totaled
approximately $40 million in the second quarter when compared
with the prior year quarter, negatively affecting margins and
pre-tax income.

-- Sales for the six months ended June 30, 2008 were $1,659.2
million compared with $1,528.4 million for the prior year
period, an 8.6% increase (3.0% before the effects of currency
translation). Net income for the six months ended June 30,
2008 was $38.6 million, or $0.53 per diluted share, compared
with $25.3 million, or $0.35 per diluted share for the prior
year period. Excluding Chapter 11 expenses, the loss on
noncore activities, and their tax effects, net income would
have been $84.0 million for the six months ended June 30, 2008
compared with $76.5 million calculated on the same basis for
2007, a 9.8% increase. Pre-tax income from core operations was
$152.6 million for the six months ended June 30, 2008, down
0.7% from the prior year period.

"We saw solid demand in our Grace Davison businesses and strength
in certain of our Grace Construction Products businesses," said
Grace's Chairman, President and Chief Executive Officer Fred Festa.
"However, we are experiencing significant and accelerating cost
inflation that is affecting profitability. Pricing actions already
taken increased revenue by approximately $28 million in the quarter,
and we are taking further actions to improve prices and margins."
Today Grace is announcing additional price increases of up to 20% on
its Grace Davison products.

CORE OPERATIONS

Grace Davison

Second quarter sales for the Grace Davison operating segment,
which includes specialty catalysts and materials used in a wide range
of industrial applications, were $584.8 million, up 11.6% from the
prior year quarter. Sales of this operating segment are reported by
product group as follows:

-- Refining Technologies - sales of catalysts and chemical
additives used by petroleum refineries were $285.8 million in
the second quarter of 2008, up 11.6% from the prior year
quarter.

-- Materials Technologies - sales of engineered materials,
coatings and sealants used in numerous industrial, consumer
and packaging applications were $194.6 million in the second
quarter of 2008, up 14.4% from the prior year quarter.

-- Specialty Technologies - sales of highly specialized catalysts
and materials used in unique or proprietary applications and
markets were $104.4 million in the second quarter, up 6.6%
from the prior year quarter and up 14.5% after excluding prior
year sales of a product line sold in 2007.

Sales in all product groups were favorably affected by foreign
currency translation (which most significantly affected the Materials
Technologies product group), volume increases, and price increases in
response to higher raw material and energy costs.

Pre-tax operating income of Grace Davison for the second quarter
was $68.5 million compared with $73.1 million in the prior year
quarter, a 6.3% decrease. The decrease in operating income was
principally due to raw material and energy cost inflation, which
outpaced price improvements and productivity gains. Operating margin
was 11.7%, compared with 13.9% in the prior year quarter.

Sales of the Grace Davison operating segment for the first six
months of 2008 were $1,081.9 million, up 9.1% over the same period in
2007. Year-to-date pre-tax operating income was $130.8 million, a 2.6%
increase over the first six months of 2007, with operating margins at
12.1%, compared with 12.9% last year. Year-to-date operating results
reflect continuing inflationary pressures.

Grace Construction Products

Second quarter sales for the Grace Construction Products operating
segment, which includes specialty chemicals and building materials
used in commercial, infrastructure and residential construction, were
$315.2 million, up 9.2% from the prior year quarter. Sales of this
operating segment are reported by geographic region as follows:

-- Americas - sales of products to customers in North, Central
and South America were $163.4 million, up 7.4% from the prior
year quarter.

-- Europe - sales of products to customers in Eastern and Western
Europe, the Middle East, Africa and India were $113.4 million,
up 11.9% from the prior year quarter.

-- Asia - sales of products to customers in Asia (excluding
India), Pacific Rim countries, Australia and New Zealand were
$38.4 million, up 9.4% from the prior year quarter.

Sales were favorably affected by foreign currency translation and
higher selling prices in all major geographic regions and product
lines. Second quarter sales of Grace Construction Products in the U.S.
were up 5.9% over the prior year period, driven by improving sales of
waterproofing and fire protection products.

Pre-tax operating income of Grace Construction Products for the
second quarter was $44.8 million compared with $46.1 million for the
prior year quarter, a 2.8% decrease. Excluding severance costs related
to a previously disclosed reduction in workforce, pre-tax operating
income in the second quarter was $49.5 million, a 7.4% increase over
the prior year quarter. The increase in 2008 operating income
(excluding severance costs) was primarily a result of price increases
and productivity gains, partially offset by higher raw material costs.
Operating margin was 14.2%, compared with 16.0% in the second quarter
of 2007. Operating margin excluding severance costs was 15.7% in the
second quarter of 2008.

Sales of the Grace Construction Products operating segment for the
six months ended June 30, 2008 were $577.3 million, up 7.6% over the
same period in 2007. Year-to-date pre-tax operating income was $69.5
million compared with $72.9 million for the first six months of the
prior year, a 4.7% decrease, reflecting continued weakness in the U.S.
construction market, raw material cost inflation, and the second
quarter severance costs. Operating margin of 12.0% was down 1.6
percentage points compared with the same period last year.

Corporate Operating Costs

Corporate costs related to core operations were $22.9 million in
the second quarter of 2008 compared with $26.1 million in the prior
year quarter, a decrease of 12.3%, primarily due to lower expenses for
pensions and other employment-related costs. Year-to-date corporate
costs related to core operations were $47.7 million compared with
$46.7 million in the first half of 2007, an increase of 2.1%.

PRE-TAX INCOME (LOSS) FROM NONCORE ACTIVITIES

Noncore activities (as reflected in the attached Segment Basis
Analysis) includes events and transactions not directly related to the
generation of operating revenue or the support of core operations. The
pre-tax loss from noncore activities was $12.7 million in the second
quarter of 2008 compared with a loss of $21.0 million in the prior
year quarter, and $13.3 million year-to-date 2008 compared with $26.8
million in the first half of 2007. The lower year-to-date loss is
principally due to foreign currency translation gains on certain
intercompany loans, net of hedge contract costs, and lower
environmental remediation charges.

INTEREST AND INCOME TAXES

Interest expense was $14.5 million for the quarter ended June 30,
2008, compared with $20.3 million for the comparable period in 2007,
and $29.6 million year-to-date in 2008 compared with $39.7 million in
the first half of last year. The change in interest expense is
attributable to reductions in the prime rate and reduced interest
accruals for certain pre-petition obligations, partially offset by the
effects of compounding interest on certain liabilities subject to
compromise over the course of Grace's Chapter 11 proceeding. The
annualized weighted average interest rate on pre-petition obligations
for the quarter was 4.88%.

Income taxes are recorded at a global effective rate of
approximately 33% before considering the effects of certain
non-deductible Chapter 11 expenses, changes in uncertain tax positions
and other discrete adjustments. Income taxes related to foreign
jurisdictions are generally paid in cash, while Grace expects taxable
income in the United States will be offset by available tax
deductions.

CHAPTER 11 PROCEEDINGS

On April 2, 2001, Grace and 61 of its United States subsidiaries
and affiliates, including its primary U.S. operating subsidiary W. R.
Grace & Co.-Conn., filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware (the "Filing") in order
to resolve Grace's asbestos-related liabilities.

On April 7, 2008, Grace announced an agreement in principle that
provides for a settlement of all present and future asbestos-related
personal injury claims. The agreement, reached with the Official
Committee of Asbestos Personal Injury Claimants, the Future Claimants
Representative and the Official Committee of Equity Security Holders,
requires the establishment of a trust under Section 524(g) of the
United States Bankruptcy Code to which all present and future
asbestos-related claims would be channeled. This agreement
contemplates the filing of a plan of reorganization and related
documents with the Bankruptcy Court, and would be subject to obtaining
exit financing and Bankruptcy Court and District Court approvals.

Most of Grace's noncore liabilities and contingencies (including
asbestos-related litigation, environmental claims and other
obligations) are subject to compromise under the Chapter 11 process.
The agreement to resolve Grace's asbestos-related liabilities and the
settlement of other unresolved claims in the Chapter 11 case would
result in allowable claims that differ from amounts recorded as part
of liabilities subject to compromise as of June 30, 2008. Grace
expects to incorporate the terms of the agreement in principle into a
joint plan of reorganization and related documentation. Grace expects
to adjust its recorded asbestos-related liability as necessary: to
reflect rulings made by the Bankruptcy Court; when a new joint plan of
reorganization is filed; and when significant uncertainties have been
resolved. Such adjustments may be material to Grace's consolidated
financial position and results of operations.

Expenses related to Grace's Chapter 11 proceedings, net of filing
entity interest income, were $18.0 million in the second quarter
compared with $23.6 million in the prior year quarter.

CASH FLOW AND LIQUIDITY

Grace's net cash used for operating activities for the six months
ended June 30, 2008 was $99.2 million compared with net cash provided
by operating activities of $5.2 million for the prior year period. The
change in net cash flow from operating activities was primarily
attributable to a payment of $100 million related to the previously
announced $250 million settlement of environmental claims in Libby,
Montana. The remaining $150 million was paid on July 2, 2008. Net cash
used for investing activities was $4.2 million for the six months
ended June 30, 2008.

At June 30, 2008, Grace had available liquidity of approximately
$692.7 million, consisting of $395.4 million in cash and cash
equivalents, $50.5 million in short-term investment securities, $70.7
million in net cash value of life insurance policies, approximately
$83.8 million of available credit under various non-U.S. credit
facilities and approximately $92.3 million of available credit under
its $165.0 million debtor-in-possession ("DIP") facility. Grace
believes that these sources and amounts of liquidity are sufficient to
support its business operations, strategic initiatives and Chapter 11
proceedings until a plan of reorganization is confirmed and Grace
emerges from bankruptcy. Grace is exploring sources of new financing
of up to $1.5 billion to fund a plan of reorganization.

Grace is a leading global supplier of catalysts and other products
to petroleum refiners; catalysts for the manufacture of plastics;
silica-based engineered and specialty materials for a wide-range of
industrial applications; sealants and coatings for food and beverage
packaging, and specialty chemicals, additives and building materials
for commercial and residential construction. With annual sales of more
than $3.1 billion, Grace has about 6,500 employees and operations in
over 40 countries. For more information, visit Grace's web site at
www.grace.com.

This announcement contains forward-looking statements, that is,
information related to future, not past, events. Such information
generally includes the words "believes," "plans," "intends,"
"targets," "will," "expects," "anticipates," "continues" or similar
expressions. For these statements, Grace claims the protection of the
safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. Grace is subject to risks
and uncertainties that could cause actual results to differ materially
from those projected in the forward-looking statements or that could
cause other forward-looking information to prove incorrect. Factors
that could cause actual results to materially differ from those
contained in the forward-looking statements include: Grace's
bankruptcy and proposed plan of reorganization, Grace's recent
settlement with certain creditors, Grace's legal proceedings
(especially the Montana criminal proceeding and environmental
proceedings), the cost and availability of raw materials and energy,
Grace's unfunded pension liabilities, costs of environmental
compliance, risks related to foreign operations, especially, security,
regulation and currency risks and those factors set forth in Grace's
most recent Annual Report on Form 10-K, quarterly report 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 forward-looking statements, which speak only
as of the date thereof. Grace undertakes no obligation to publicly
release any revisions to the forward-looking statements contained in
this announcement, or to update them to reflect events or
circumstances occurring after the date of this announcement.

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W. R. Grace & Co. and
Subsidiaries
Consolidated Statements of
Operations Three Months Ended Six Months Ended
(Unaudited) June 30, June 30,
======================================================================
In millions, except per share
amounts 2008 2007 2008 2007
----------------------------------------------------------------------
Net sales $ 900.0 $812.8 $1,659.2 $1,528.4
--------------------------------------

Cost of goods sold 635.3 552.9 1,162.5 1,050.6
Selling, general and
administrative expenses 153.6 146.0 296.4 281.2
Research and development
expenses 21.2 18.7 42.9 37.4
Defined benefit pension expense 14.0 13.1 28.3 25.8
Interest expense and related
financing costs 14.5 20.3 29.6 39.7
Provision for environmental
remediation - 12.0 5.9 12.0
Chapter 11 expenses, net of
interest income 18.0 23.6 36.4 41.4
Other (income) expense, net (7.2) (7.7) (24.5) (15.7)
--------------------------------------
849.4 778.9 1,577.5 1,472.4
--------------------------------------
Income before income taxes and
minority interest 50.6 33.9 81.7 56.0
Provision for income taxes (21.5) (9.3) (37.1) (24.2)
Minority interest in
consolidated entities (4.1) (4.1) (6.0) (6.5)
--------------------------------------
Net income $ 25.0 $ 20.5 $ 38.6 $ 25.3
======================================================================

Basic earnings per common
share:
Net income $ 0.35 $ 0.29 $ 0.54 $ 0.36
Weighted average number of
basic shares 72.1 70.1 71.9 69.8

Diluted earnings per common
share:
Net income $ 0.34 $ 0.29 $ 0.53 $ 0.35
Weighted average number of
diluted shares 72.9 71.8 72.6 71.4
======================================================================

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Note: The amounts in these financial statements are unaudited and
are subject to change prior to the filing of Grace's Quarterly Report
on Form 10-Q. Any changes will be reflected in the Form 10-Q and
promptly disclosed publicly, if material.

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Reconciliation of Net Income to Net
Income Excluding Noncore Activities and Three Months Six Months
Chapter 11 Expenses, net Ended Ended
(Unaudited) June 30, June 30,
-----------------------------
In millions 2008 2007 2008 2007
----------------------------------------------------------------------

Net income $25.0 $ 20.5 $38.6 $ 25.3
Adjustments:
Pre-tax loss from noncore activities 12.7 21.0 13.3 26.8
Chapter 11 expenses, net of interest
income 18.0 23.6 36.4 41.4
Tax effects of noncore and Chapter 11
items (4.0) (16.7) (4.3) (17.0)
----------------------------------------------------------------------
Net income excluding noncore activities
and Chapter 11 expenses, net $51.7 $ 48.4 $84.0 $ 76.5
======================================================================

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Note: Net income excluding noncore activities and Chapter 11
expenses, net does not purport to represent an income or cash flow
measure as defined under United States generally accepted accounting
principles, and should not be considered an alternative to net income
as an indicator of Grace's performance. This measure is presented to
distinguish the net results of Grace's current business base from the
net results of Grace's past businesses, discontinued products, and
corporate legacies, including the effect of Grace's Chapter 11
proceedings.

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W. R. Grace & Co. and Subsidiaries
Segment Basis Analysis Three Months Ended
(Unaudited) June 30,
========================================------------------------------
In millions 2008 2007 % Change
----------------------------------------------------------------------
Net Sales:
Grace Davison $ 584.8 $ 524.2 11.6 %
Refining Technologies 285.8 256.2 11.6 %
Materials Technologies 194.6 170.1 14.4 %
Specialty Technologies 104.4 97.9 6.6 %

Grace Construction Products 315.2 288.6 9.2 %
Americas 163.4 152.2 7.4 %
Europe 113.4 101.3 11.9 %
Asia 38.4 35.1 9.4 %
----------------------------------------------------------------------
Total Grace net sales $ 900.0 $ 812.8 10.7 %
======================================================================
Pre-tax operating income:
Grace Davison $ 68.5 $ 73.1 (6.3 %)
Grace Construction Products 44.8 46.1 (2.8 %)
Corporate costs (22.9) (26.1) 12.3 %
----------------------------------------------------------------------
Pre-tax income from core operations (a) 90.4 93.1 (2.9 %)
Pre-tax loss from noncore activities
(a) (12.7) (21.0) 39.5 %
Interest expense (14.5) (20.3) 28.6 %
Interest income 1.3 1.6 (18.8 %)
----------------------------------------------------------------------
Income before Chapter 11 expenses
and income taxes 64.5 53.4 20.8 %
Chapter 11 expenses, net of interest
income (18.0) (23.6) 23.7 %
Provision for income taxes (21.5) (9.3) (131.2 %)
----------------------------------------------------------------------

Net income $ 25.0 $ 20.5 22.0 %
======================================================================

======================================================================
Key Financial Measures:
Pre-tax income from core operations
as a percentage of sales:
Grace Davison 11.7 % 13.9 % (2.2) pts
Grace Construction Products 14.2 % 16.0 % (1.8) pts
Total Core Operations 10.0 % 11.5 % (1.5) pts
Total Core Operations adjusted for
profit sharing of joint ventures
(b) 10.5 % 12.0 % (1.5) pts

Pre-tax income from core operations
before depreciation and amortization
(a) $ 121.1 $ 120.7 0.3 %
As a percentage of sales 13.5 % 14.8 % (1.3) pts
Depreciation and amortization $ 30.7 $ 27.6 (11.2 %)

Gross profit percentage (sales less
cost of goods sold as a percent of
sales) (c):
Grace Davison 26.3 % 29.0 % (2.7) pts
Grace Construction Products 36.2 % 37.8 % (1.6) pts
Total Grace 29.4 % 32.0 % (2.6) pts
======================================================================
Net Sales by Region:
North America $ 300.7 $ 276.8 8.6 %
Europe Africa 367.1 334.4 9.8 %
Asia Pacific 175.1 148.4 18.0 %
Latin America 57.1 53.2 7.3 %
----------------------------------------------------------------------
Total $ 900.0 $ 812.8 10.7 %
======================================================================

W. R. Grace & Co. and Subsidiaries
Segment Basis Analysis Six Months Ended
(Unaudited) June 30,
========================================------------------------------
In millions 2008 2007 % Change
----------------------------------------------------------------------
Net Sales:
Grace Davison $1,081.9 $ 991.8 9.1 %
Refining Technologies 522.7 476.1 9.8 %
Materials Technologies 364.9 329.7 10.7 %
Specialty Technologies 194.3 186.0 4.5 %

Grace Construction Products 577.3 536.6 7.6 %
Americas 295.9 287.5 2.9 %
Europe 211.0 184.4 14.4 %
Asia 70.4 64.7 8.8 %
----------------------------------------------------------------------
Total Grace net sales $1,659.2 $1,528.4 8.6 %
======================================================================
Pre-tax operating income:
Grace Davison $ 130.8 $ 127.5 2.6 %
Grace Construction Products 69.5 72.9 (4.7 %)
Corporate costs (47.7) (46.7) (2.1 %)
----------------------------------------------------------------------
Pre-tax income from core operations (a) 152.6 153.7 (0.7 %)
Pre-tax loss from noncore activities
(a) (13.3) (26.8) 50.4 %
Interest expense (29.6) (39.7) 25.4 %
Interest income 2.4 3.7 (35.1 %)
----------------------------------------------------------------------
Income before Chapter 11 expenses
and income taxes 112.1 90.9 23.3 %
Chapter 11 expenses, net of interest
income (36.4) (41.4) 12.1 %
Provision for income taxes (37.1) (24.2) (53.3 %)
----------------------------------------------------------------------

Net income $ 38.6 $ 25.3 52.6 %
======================================================================

======================================================================
Key Financial Measures:
Pre-tax income from core operations
as a percentage of sales:
Grace Davison 12.1 % 12.9 % (0.8) pts
Grace Construction Products 12.0 % 13.6 % (1.6) pts
Total Core Operations 9.2 % 10.1 % (0.9) pts
Total Core Operations adjusted for
profit sharing of joint ventures
(b) 9.6 % 10.5 % (0.9) pts

Pre-tax income from core operations
before depreciation and amortization
(a) $ 213.5 $ 208.9 2.2 %
As a percentage of sales 12.9 % 13.7 % (0.8) pts
Depreciation and amortization $ 60.9 $ 55.2 (10.3 %)

Gross profit percentage (sales less
cost of goods sold as a percent of
sales) (c):
Grace Davison 27.6 % 28.6 % (1.0) pts
Grace Construction Products 35.1 % 36.6 % (1.5) pts
Total Grace 29.9 % 31.3 % (1.4) pts
======================================================================
Net Sales by Region:
North America $ 574.3 $ 543.5 5.7 %
Europe Africa 691.1 629.4 9.8 %
Asia Pacific 287.3 259.0 10.9 %
Latin America 106.5 96.5 10.4 %
----------------------------------------------------------------------
Total $1,659.2 $1,528.4 8.6 %
======================================================================
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Note (a): In the above chart, as well as the financial discussion in
other parts of this earnings release, Grace presents its financial
results of operations by operating segment and between "core
operations" and "noncore activities". Core operations comprise the
financial results of Grace Davison, Grace Construction Products and
the cost of corporate activities that directly or indirectly support
business operations. In contrast, noncore activities comprise all
other events and transactions not directly related to the generation
of operating revenue or the support of core operations and generally
relate to Grace's former operations and products. Grace uses pre-tax
income from core operations as the performance factor in determining
certain incentive compensation and as the profitability factor in all
significant business decisions. Pre-tax income from core operations,
pre-tax loss from noncore activities, pre-tax income from core
operations as a percentage of sales, and pre-tax income from core
operations before depreciation and amortization do not purport to
represent income or cash flow measures as defined under United States
generally accepted accounting principles, and should not be
considered as an alternative to such measures as an indicator of
Grace's performance. These measures are provided to distinguish
operating results of Grace's current business base from the income
and expenses of past businesses, discontinued products, and corporate
legacies, including the effect of Grace's Chapter 11 proceedings.
Note (b): Reflects the add-back of minority interest expense.
Note (c): Includes depreciation and amortization related to
manufacturing of products.
NM - Not Meaningful

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W. R. Grace & Co. and Subsidiaries
Consolidated Statements of Cash Flows Six Months Ended
(Unaudited) June 30,
======================================================================
In millions 2008 2007
----------------------------------------------------------------------
Operating Activities
-----------------------------------------------------

Net income $ 38.6 $ 25.3
Reconciliation to net cash provided by (used for)
operating activities:
Depreciation and amortization 60.9 55.2
Chapter 11 expenses, net of interest income 36.4 41.4
Provision for income taxes 37.1 24.2
Income taxes paid, net of refunds (32.4) (18.5)
Minority interest in consolidated entities 6.0 6.5
Dividends paid to minority interests in
consolidated entities (13.3) (11.8)
Interest accrued on pre-petition liabilities
subject to compromise 26.8 38.8
Net gain on sales of investments and disposals of
assets (0.6) (3.6)
Defined benefit pension expense 28.3 25.8
Payments under defined benefit pension arrangements (42.5) (57.0)
Net payments under postretirement benefit plans (3.3) (3.1)
Net income from life insurance policies (1.8) (2.5)
Provision for uncollectible receivables 0.3 1.4
Provision for environmental remediation 5.9 12.0
Expenditures for environmental remediation (1.2) (4.8)
Expenditures for retained obligations of divested
businesses (0.1) (0.8)
Changes in assets and liabilities, excluding effect
of foreign currency translation:
Working capital items (trade accounts receivable,
inventories, and accounts payable) (40.4) (34.2)
Other accruals and non-cash items (65.6) (43.3)
----------------------------------------------------------------------
Net cash provided by operating activities before
Chapter 11 expenses and settlements 39.1 51.0
Cash paid to resolve contingencies subject to Chapter
11 (101.6) (10.3)
Chapter 11 expenses paid (36.7) (35.5)
----------------------------------------------------------------------
Net cash provided by (used for) operating
activities (99.2) 5.2
----------------------------------------------------------------------
Investing Activities
-----------------------------------------------------
Capital expenditures (58.7) (52.3)
Investments in short-term debt securities - (25.0)
Proceeds from sales of investment securities 46.7 -
Purchase of equity investment (3.0) (6.3)
Proceeds from termination of life insurance policies 8.1 -
Net investment in life insurance policies 0.1 0.2
Proceeds from disposals of assets 2.6 3.0
----------------------------------------------------------------------
Net cash used for investing activities (4.2) (80.4)
----------------------------------------------------------------------
Financing Activities
-----------------------------------------------------
Net (repayments) borrowings under credit arrangements (0.9) 9.6
Fees paid under debtor-in-possession credit facility (1.3) (1.3)
Proceeds from exercise of stock options 9.6 19.4
----------------------------------------------------------------------
Net cash provided by financing activities 7.4 27.7
----------------------------------------------------------------------
Effect of currency exchange rate changes on cash and
cash equivalents 10.9 5.5
----------------------------------------------------------------------
Decrease in cash and cash equivalents (85.1) (42.0)
Cash and cash equivalents, beginning of period 480.5 536.3
----------------------------------------------------------------------
Cash and cash equivalents, end of period $ 395.4 $494.3
======================================================================
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W. R. Grace & Co. and Subsidiaries
Consolidated Balance Sheets
(Unaudited) June 30, December 31,
======================================================================
In millions 2008 2007
----------------------------------------------------------------------

ASSETS
Current Assets
Cash and cash equivalents $ 395.4 $ 480.5
Investment securities 50.5 98.3
Cash value of life insurance policies, net of
policy loans 70.7 77.1
Trade accounts receivable, net 534.9 500.6
Inventories 368.7 303.5
Deferred income taxes 97.0 37.7
Other current assets 85.9 80.8
------------------------
Total Current Assets 1,603.1 1,578.5

Properties and equipment, net 724.4 706.1
Goodwill 126.7 122.3
Cash value of life insurance policies, net of
policy loans 3.9 3.9
Deferred income taxes 707.2 767.5
Asbestos-related insurance 500.0 500.0
Overfunded defined benefit pension plans 58.0 54.1
Other assets 135.5 136.6
----------------------------------------------------------------------
Total Assets $ 3,858.8 $ 3,869.0
======================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Liabilities Not Subject to Compromise
Current Liabilities
Debt payable within one year $ 3.8 $ 4.7
Accounts payable 228.9 191.3
Other current liabilities 436.9 325.1
------------------------
Total Current Liabilities 669.6 521.1

Debt payable after one year 0.3 0.3
Deferred income taxes 35.0 32.7
Minority interest in consolidated entities 62.7 70.8
Underfunded defined benefit pension plans 173.8 169.1
Unfunded pay-as-you-go defined benefit pension
plans 138.4 137.9
Other liabilities 51.6 46.2
------------------------
Total Liabilities Not Subject to Compromise 1,131.4 978.1

Liabilities Subject to Compromise
Pre-petition bank debt plus accrued interest 805.1 783.0
Drawn letters of credit plus accrued interest 29.5 26.9
Income tax contingencies 100.8 89.3
Asbestos-related contingencies 1,700.0 1,700.0
Environmental contingencies 147.7 368.6
Postretirement benefits 165.3 172.7
Other liabilities and accrued interest 115.1 137.0
------------------------
Total Liabilities Subject to Compromise 3,063.5 3,277.5
------------------------
Total Liabilities 4,194.9 4,255.6
------------------------

Shareholders' Equity (Deficit)
Common stock 0.8 0.8
Paid-in capital 434.9 431.5
Accumulated deficit (366.5) (405.1)
Treasury stock, at cost (57.5) (63.7)
Accumulated other comprehensive income (loss) (347.8) (350.1)
------------------------
Total Shareholders' Equity (Deficit) (336.1) (386.6)
----------------------------------------------------------------------
Total Liabilities and Shareholders' Equity
(Deficit) $ 3,858.8 $ 3,869.0
======================================================================

*T

W. R. Grace & Co.
Media Relations:
Andrea Greenan, + 1 410-531-4391
andrea.greenan@grace.com
or
Investor Relations:
Susette Smith, + 1 410-531-4590
susette.smith@grace.com

Copyright Business Wire 2008