Grace Reports Third Quarter Financial Results

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

-- Sales for the third quarter were $889.4 million compared with
$783.1 million in the prior year quarter, a 13.6% increase
(9.0% before the effects of currency translation). The sales
increase was attributable primarily to higher selling prices
in response to rising raw materials costs in both operating
segments and favorable currency translation. Price increases
yielded approximately $50 million in the third quarter,
increasing sales by 6.4% over the prior year quarter. Sales
were up 13.4% in North America, 4.4% in Europe Africa, 36.1%
in Asia Pacific and 18.8% in Latin America.

-- Net income for the third quarter was $28.3 million, or $0.39
per diluted share, compared with net income of $19.1 million,
or $0.27 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
$46.9 million for the third quarter of 2008 compared with
$40.5 million calculated on the same basis for the prior year
quarter, a 15.8% increase.

-- Pre-tax income from core operations was $82.4 million in the
third quarter compared with $78.0 million in the prior year
quarter, a 5.6% increase. Inflation on raw materials and
energy costs totaled approximately $50 million in the third
quarter, increasing costs approximately 18% when compared with
the prior year quarter.

-- Sales for the nine months ended September 30, 2008 were
$2,548.6 million compared with $2,311.5 million for the
comparable prior year period, a 10.3% increase (5.1% before
the effects of currency translation). Net income for the nine
months ended September 30, 2008 was $78.1 million, or $1.07
per diluted share, compared with $51.6 million, or $0.72 per
diluted share for the comparable prior year period. Excluding
Chapter 11 expenses, the loss on noncore activities, and their
tax effects, net income would have been $142.4 million for the
nine months ended September 30, 2008 compared with $123.8
million calculated on the same basis for the comparable prior
year period, a 15.0% increase. Pre-tax income from core
operations was $252.3 million for the nine months ended
September 30, 2008, up 4.1% from the comparable prior year
period. Price increases totaled approximately $100 million in
the nine months ended September 30, 2008, increasing sales
approximately 4.3% when compared with the comparable prior
year period. Inflation on raw materials and energy costs
totaled approximately $110 million in the nine months ended
September 30, 2008, increasing costs approximately 13% when
compared with the comparable prior year period.

-- During the third quarter of 2008, Grace changed its accounting
policy for inventories in the U.S. from LIFO to FIFO in order
to provide a consistent, global inventory accounting standard.
Grace has applied the change retrospectively and restated all
periods presented in this press release.

"We delivered good results in a tough economic environment," said
Fred Festa, Grace's Chairman, President and Chief Executive Officer.
"We have made significant progress improving prices in response to
unprecedented increases in raw material costs. We are focused on
executing our strategic plans and expect our diverse business and
geographic position, and our integrated operating company approach, to
enable us to continue delivering value to our customers in a period of
increased volatility."

CORE OPERATIONS

Grace Davison

Third quarter sales for the Grace Davison operating segment, which
includes specialty catalysts and materials used in a wide range of
industrial applications, were $579.7 million, up 17.9% 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 $305.3 million in
the third quarter, up 33.4% from the prior year quarter. Third
quarter sales in the product group were favorably affected by
strong order patterns for hydroprocessing catalysts, price
increases in fluid cracking and hydroprocessing catalysts, and
by favorable foreign currency translation.

-- Materials Technologies - sales of engineered materials,
coatings and sealants used in numerous industrial, consumer
and packaging applications were $183.4 million in the third
quarter, up 8.1% from the prior year quarter. Third quarter
sales in the product group were favorably affected by foreign
currency translation and pricing actions taken to offset
inflation. Volumes in this product group were down from the
prior year quarter due to lower customer demand, primarily in
Europe.

-- Specialty Technologies - sales of highly specialized catalysts
and materials used in unique or proprietary applications and
markets were $91.0 million in the third quarter, down 2.2%
from the prior year quarter and up 1.2% after excluding prior
year sales of a product line divested in 2007. Sales in the
product group were unfavorably affected by Hurricane Ike, and
by lower demand in Europe, the Middle East, and Asia.

Pre-tax operating income of Grace Davison for the third quarter
was $62.2 million compared with $60.9 million in the prior year
quarter, a 2.1% increase. Pricing actions initiated early in the
quarter across all product groups began yielding significant benefits
by the end of the quarter. However, pre-tax operating income for the
third quarter was negatively affected by continued high raw material
cost inflation, lost sales and higher production costs due to
Hurricanes Gustav and Ike, and isolated product-specific operational
issues which were resolved in the quarter. Operating margin was 10.7%
compared with 12.4% in the prior year quarter.

Sales of the Grace Davison operating segment for the nine months
ended September 30, 2008 were $1,661.6 million, up 12.0% over the
comparable prior year period. Pre-tax operating income for the nine
months ended September 30, 2008 was $209.8 million, a 5.4% increase
over the comparable prior year period, with operating margins at
12.6%, for the nine months ended September 30, 2008 compared with
13.4% for the comparable prior year period. Year-to-date operating
results reflect continuing inflationary pressures.

Grace Construction Products

Third quarter sales for the Grace Construction Products operating
segment, which includes specialty chemicals and building materials
used in commercial, infrastructure and residential construction, were
$309.7 million, up 6.2% from the prior year quarter. Sales in the
third quarter were favorably affected by higher selling prices in all
major geographic regions and product lines and by foreign currency
translation. 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 $164.4 million in the third quarter, up
6.1% from the prior year quarter. Third quarter sales of Grace
Construction Products in the U.S. were up 1.6% over the prior
year period. Lower sales of concrete and cement additives were
more than offset by sales of waterproofing products and the
impact of pricing actions across all product lines in the U.S.
The U.S. commercial construction market slowed during the
third quarter.

-- Europe - sales of products to customers in Eastern and Western
Europe, the Middle East, Africa and India were $106.1 million
in the third quarter, up 7.0% from the prior year quarter.
Growth in the Middle East and Eastern Europe was offset by
weakness in Western Europe, where housing market corrections
as well as softness in commercial construction unfavorably
affected third quarter sales.

-- Asia - sales of products to customers in Asia (excluding
India), Pacific Rim countries, Australia and New Zealand were
$39.2 million in the third quarter, up 4.5% from the prior
year quarter.

Pre-tax operating income of Grace Construction Products for the
third quarter was $44.9 million compared with $44.3 million for the
prior year quarter, a 1.4% increase. Price increases and productivity
gains offset the impact of higher raw material costs and decreased
volumes. Operating margin in third quarter was 14.5%, compared with
15.2% in the prior year quarter.

Sales of the Grace Construction Products operating segment for the
nine months ended September 30, 2008 were $887.0 million, up 7.1% over
the comparable prior year period. Pre-tax operating income for the
nine months ended September 30, 2008 was $114.9 million compared with
$117.8 million for the comparable prior year period, a 2.5% decrease,
reflecting continued weakness in the U.S. construction market, raw
material cost inflation, and second quarter severance costs. Operating
margin of 13.0% for the nine months ended September 30, 2008 was down
1.2 percentage points compared with the comparable prior year period.

Corporate Operating Costs

Corporate costs related to core operations were $24.7 million in
the third quarter of 2008 compared with $27.2 million in the prior
year quarter, a decrease of 9.2%, primarily due to lower expenses for
pensions and other employment-related costs. Year-to-date corporate
costs related to core operations were $72.4 million compared with
$74.5 million in the first nine months of 2007, a decrease of 2.8%.

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 $33.9 million in the third
quarter of 2008 compared with a loss of $13.3 million in the prior
year quarter, and $47.2 million year-to-date 2008 compared with $39.5
million in the first nine months of 2007. The higher year-to-date loss
is principally due to changes in foreign currency translation on
intercompany loans net of hedge contract gains as well as higher legal
costs related to the noncore matters.

INTEREST AND INCOME TAXES

Interest expense was $13.1 million for the quarter ended September
30, 2008, compared with $17.3 million for the comparable period in
2007, and $42.8 million year-to-date in 2008 compared with $57.1
million in the first nine months of last year. The change in interest
expense is attributable to reductions in the prime rate and reduced
interest accruals for certain pre-petition environmental obligations.
The annualized weighted average interest rate on pre-petition
obligations for the quarter was 4.7%.

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 "Bankruptcy Court")
in order to resolve Grace's asbestos-related liabilities.

On September 19, 2008, Grace filed a Joint Plan of Reorganization
(the "Plan") as well as several associated documents, including a
disclosure statement, with the Bankruptcy Court. The Official
Committee of Asbestos Personal Injury Claimants (the "PI Committee"),
the Representative for Future Asbestos Personal Injury Claimants (the
"PI FCR"), and the Official Committee of Equity Security Holders are
co-proponents of the Plan. The Plan supersedes the plans of
reorganization previously filed by Grace and the PI Committee and the
PI FCR. The committee representing general unsecured creditors and the
Official Committee of Asbestos Property Damage Claimants are not
co-proponents of the Plan. The Plan is consistent with the terms of
the previously announced asbestos personal injury settlement and
requires the establishment of two asbestos trusts under Section 524(g)
of the United States Bankruptcy Code to which all present and future
asbestos-related claims would be channeled. Bankruptcy Court approval
of the disclosure statement is required before votes on the Plan can
be solicited. A hearing on the disclosure statement is scheduled to
begin on October 27, 2008 and a confirmation hearing is currently
scheduled to begin on March 9, 2009. The Plan is subject to the
satisfaction of a number of conditions, including the availability of
exit financing and the approval of both the Bankruptcy Court and
United States District Court for the District of Delaware.

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.
Grace has not revised its accounting to reflect the PI Settlement or
the filing of the Plan. The resolution of Grace's asbestos-related
liabilities and other unresolved claims under the Plan would result in
allowable claims that differ from amounts recorded as part of
liabilities subject to compromise as of September 30, 2008. Grace
expects to adjust its recorded asbestos-related liability as material
conditions to the Plan are satisfied. 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 $12.0 million in the third quarter
compared with $21.3 million in the prior year quarter.

CASH FLOW AND LIQUIDITY

Grace's net cash used for operating activities for the nine months
ended September 30, 2008 was $182.0 million compared with net cash
provided by operating activities of $65.8 million for the prior year
period. The change in net cash flow from operating activities was
primarily attributable to a payment of $250 million related to the
previously announced settlement of environmental claims relating to
Grace's former operations in Libby, Montana. Net cash used for
investing activities was $23.9 million for the nine months ended
September 30, 2008.

At September 30, 2008, Grace had available liquidity of
approximately $562.8 million, consisting of $325.2 million in cash and
cash equivalents, $35.1 million in short-term investment securities,
$30.8 million in net cash value of life insurance policies,
approximately $73.3 million of available credit under various non-U.S.
credit facilities and approximately $98.4 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 the Plan.

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 6,400 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.
Consolidated Statements of Operations
======================================================================
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------------
In millions, except per
share amounts 2008 2007 2008 2007
----------------------------------------------------------------------

Net sales $ 889.4 $ 783.1 $ 2,548.6 $ 2,311.5
-------------------------------------------

Cost of goods sold 633.4 532.6 1,777.2 1,564.7
Selling, general and
administrative expenses 150.8 150.6 447.2 431.8
Research and development
expenses 20.5 20.4 63.4 57.8
Defined benefit pension
expense 14.1 13.1 42.4 38.9
Interest expense and
related financing costs 13.1 17.3 42.8 57.1
Provision for
environmental remediation 2.9 - 8.8 12.0
Provision for asbestos-
related litigation, net
of insurance - - - -
Chapter 11 expenses, net
of interest income 12.0 21.3 48.4 62.7
Other (income) expense,
net 14.5 (4.9) (10.0) (20.6)
-------------------------------------------
861.3 750.4 2,420.2 2,204.4
-------------------------------------------
Income before income taxes
and minority interest 28.1 32.7 128.4 107.1
Provision for income taxes 4.2 (8.6) (38.9) (36.7)
Minority interest in
consolidated entities (4.0) (5.0) (11.4) (18.8)
-------------------------------------------
Net income $ 28.3 $ 19.1 $ 78.1 $ 51.6
======================================================================

Basic earnings per share:
Net income $ 0.39 $ 0.27 $ 1.08 $ 0.74
Weighted average number
of basic shares 72.2 70.2 72.0 69.9

Diluted earnings per
share:
Net income $ 0.39 $ 0.27 $ 1.07 $ 0.72
Weighted average number
of diluted shares 72.8 71.5 72.7 71.5
======================================================================

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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 (Loss) to Net
Income (Loss) Excluding
Noncore Activities and
Chapter 11 Expenses, net Three Months Ended Nine Months Ended
(Unaudited) September 30, 2008 September 30, 2008
-------------------------------------------
In millions 2008 2007 2008 2007
----------------------------------------------------------------------

Net income $ 28.3 $ 19.1 $ 78.1 $ 51.6
Adjustments:
Pre-tax loss from
noncore activities 33.9 13.3 47.2 39.5
Chapter 11 expenses,
net 12.0 21.3 48.4 62.7
Tax effects of noncore
and Chapter 11 items (27.3) (13.2) (31.3) (30.0)
-------------------------------------------
Net income (loss)
excluding noncore
activities and Chapter 11
expenses, net $ 46.9 $ 40.5 $ 142.4 $ 123.8
======================================================================

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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.
Consolidated Analysis of Continuing Operations
======================================================================
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------------------------
In millions 2008 2007 % Change 2008 2007 % Change
----------------------------------------------------------------------
Net Sales:
Grace Davison $579.7 $491.5 17.9% $1,661.6 $1,483.3 12.0%
Refining
Technologies 305.3 228.9 33.4% 828.0 705.0 17.4%
Materials
Technologies 183.4 169.6 8.1% 548.3 499.3 9.8%
Specialty
Technologies 91.0 93.0 (2.2%) 285.3 279.0 2.3%

Grace
Construction
Products 309.7 291.6 6.2% 887.0 828.2 7.1%
Americas 164.4 154.9 6.1% 460.3 442.4 4.0%
Europe 106.1 99.2 7.0% 317.1 283.6 11.8%
Asia 39.2 37.5 4.5% 109.6 102.2 7.2%
----------------------------------------------------------------------
Total Grace net
sales $889.4 $783.1 13.6% $2,548.6 $2,311.5 10.3%
======================================================================
Pre-tax
operating
income:
Grace Davison $ 62.2 $ 60.9 2.1% $ 209.8 $ 199.0 5.4%
Grace
Construction
Products 44.9 44.3 1.4% 114.9 117.8 (2.5%)
Corporate
costs (24.7) (27.2) 9.2% (72.4) (74.5) 2.8%
----------------------------------------------------------------------
Pre-tax income
from core
operations (a) 82.4 78.0 5.6% 252.3 242.3 4.1%
Pre-tax loss
from noncore
activities (a) (33.9) (13.3) (154.9%) (47.2) (39.5) (19.5%)
Interest
expense (13.1) (17.3) 24.3% (42.8) (57.1) 25.0%
Interest income 0.7 1.6 (56.3%) 3.1 5.3 (41.5%)
----------------------------------------------------------------------
Income before
Chapter 11
expenses and
income taxes 36.1 49.0 (26.3%) 165.4 151.0 9.5%
Chapter 11
expenses, net
of interest
income (12.0) (21.3) 43.7% (48.4) (62.7) 22.8%
Provision for
income taxes 4.2 (8.6) 148.8% (38.9) (36.7) (6.0%)
----------------------------------------------------------------------

Net income $ 28.3 $ 19.1 48.2% $ 78.1 $ 51.6 51.4%
======================================================================

======================================================================
Key Financial
Measures:
Pre-tax income
from core
operations as
a percentage
of sales:
Grace Davison 10.7% 12.4% (1.7)pts 12.6% 13.4% (0.8)pts
Grace
Construction
Products 14.5% 15.2% (0.7)pts 13.0% 14.2% (1.2)pts
Total Core
Operations 9.3% 10.0% (0.7)pts 9.9% 10.5% (0.6)pts
Total Core
Operations
adjusted for
profit
sharing of
joint
ventures (b) 9.7% 10.6% (0.9)pts 10.3% 11.3% (1.0)pts

Pre-tax income
from core
operations
before
depreciation
and
amortization
(a) $ 112.3 $ 106.3 5.6% $ 343.1 $ 325.8 5.3%
As a
percentage
of sales 12.6% 13.6% (1.0)pts 13.5% 14.1% (0.6)pts
Depreciation
and
amortization $ 29.9 $ 28.3 (5.7%) $ 90.8 $ 83.5 (8.7%)

Gross profit
percentage
(sales less
cost of goods
sold as a
percent of
sales) (c):
Grace Davison 25.5% 29.0% (3.5)pts 28.0% 29.9% (1.9)pts
Grace
Construction
Products 35.1% 37.7% (2.6)pts 35.1% 37.1% (2.0)pts
Total Grace 28.8% 32.0% (3.2)pts 30.3% 32.3% (2.0)pts
======================================================================
Net Sales by
Region:
North America$ 321.5 $ 283.6 13.4% $ 895.8 $ 827.1 8.3%
Europe Africa 338.1 324.0 4.4% 1,029.2 953.4 8.0%
Asia Pacific 167.8 123.3 36.1% 455.1 382.3 19.0%
Latin America 62.0 52.2 18.8% 168.5 148.7 13.3%
----------------------------------------------------------------------
$ 889.4 $ 783.1 13.6% $ 2,548.6 $ 2,311.5 10.3%
======================================================================

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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.

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W. R. Grace & Co.
Consolidated Statements of Cash Flows

Nine Months Ended
September 30,
-----------------
In millions 2008 2007
----------------------------------------------------------------------
Operating Activities
-----------------------------------------------------

Net income $ 78.1 $ 51.6
Reconciliation to net cash provided by (used for)
operating activities:
Depreciation and amortization 90.8 83.5
Chapter 11 expenses, net of interest income 48.4 62.7
Provision for income taxes 38.9 36.7
Income taxes paid, net of refunds (39.1) (35.8)
Minority interest in consolidated entities 11.4 18.8
Dividends paid to minority interests in
consolidated entities (13.3) (12.0)
Interest accrued on pre-petition liabilities
subject to compromise 38.8 56.2
Net (gain) loss on sales of investments and
disposals of assets 0.3 (2.8)
Defined benefit pension expense 42.4 38.9
Payments under defined benefit pension arrangements (57.4) (85.5)
Net payments under postretirement benefit plans (4.7) (4.6)
Net income from life insurance policies (2.0) (3.0)
Provision for uncollectible receivables 0.8 (0.4)
Provision for environmental remediation 8.8 12.0
Expenditures for environmental remediation (3.7) (7.1)
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) (75.8) (69.1)
Other accruals and non-cash items (40.1) (7.3)
----------------------------------------------------------------------
Net cash provided by operating activities before
Chapter 11 expenses and settlements 122.5 132.0
Cash paid to resolve contingencies subject to Chapter
11 (251.6) (10.3)
Chapter 11 expenses paid (52.9) (55.9)
----------------------------------------------------------------------
Net cash provided by (used for) operating
activities (182.0) 65.8
----------------------------------------------------------------------
Investing Activities
-----------------------------------------------------
Capital expenditures (93.1) (89.8)
Investments in short-term debt securities - (25.0)
Proceeds from sales of investment securities 61.5 -
Cash proceeds from sale of business - 21.8
Purchase of equity investment (3.0) (6.3)
Businesses acquired, net of cash acquired - (5.5)
Proceeds from termination of life insurance policies 8.1 -
Net investment in life insurance policies (0.2) (1.2)
Proceeds from disposals of assets 2.8 5.5
----------------------------------------------------------------------
Net cash (used for) investing activities (23.9) (100.5)
----------------------------------------------------------------------
Financing Activities
-----------------------------------------------------
Proceeds from life insurance policy loans 40.0 (0.1)
Net (repayments) borrowings under credit arrangements 1.5 0.7
Fees paid under debtor-in-possession credit facility (1.6) (2.0)
Proceeds from exercise of stock options 9.6 20.2
----------------------------------------------------------------------
Net cash provided by (used for) financing
activities 49.5 18.8
----------------------------------------------------------------------
Effect of currency exchange rate changes on cash and
cash equivalents 1.1 14.6
----------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (155.3) (1.3)
Cash and cash equivalents, beginning of period 480.5 536.3
----------------------------------------------------------------------
Cash and cash equivalents, end of period $ 325.2 $ 535.0
======================================================================

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W. R. Grace & Co.
Consolidated Balance Sheets
======================================================================
September 30, December 31,
In millions 2008 2007
----------------------------------------------------------------------

ASSETS
Current Assets
Cash and cash equivalents $ 325.2 $ 480.5
Investment securities 35.1 98.3
Cash value of life insurance policies, net
of policy loans 30.8 77.1
Trade accounts receivable, less allowance
of $4.6 (2007- $5.2) 531.1 500.6
Inventories 431.4 362.9
Deferred income taxes 48.7 37.7
Other current assets 84.9 80.8
---------------------------
Total Current Assets 1,487.2 1,637.9

Properties and equipment, net 710.1 706.1
Goodwill 122.0 122.3
Cash value of life insurance policies, net
of policy loans 4.3 3.9
Deferred income taxes 723.6 747.5
Asbestos-related insurance 500.0 500.0
Overfunded defined benefit pension plans 64.8 54.1
Other assets 142.2 136.6
----------------------------------------------------------------------
Total Assets $ 3,754.2 $ 3,908.4
======================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Liabilities Not Subject to Compromise
Current Liabilities
Debt payable within one year $ 6.1 $ 4.7
Accounts payable 219.4 191.3
Other current liabilities 292.1 325.1
---------------------------
Total Current Liabilities 517.6 521.1

Debt payable after one year 0.3 0.3
Deferred income taxes 33.3 32.7
Minority interest in consolidated entities 69.7 73.2
Underfunded defined benefit pension plans 173.1 169.1
Unfunded defined benefit pension plans 121.8 137.9
Other liabilities 37.0 46.2
---------------------------
Total Liabilities Not Subject to
Compromise 952.8 980.5

Liabilities Subject to Compromise
Pre-petition bank debt plus accrued
interest 815.2 783.0
Drawn letters of credit plus accrued
interest 30.0 26.9
Income tax contingencies 88.7 89.3
Asbestos-related contingencies 1,700.0 1,700.0
Environmental contingencies 148.1 368.6
Postretirement benefits 151.3 172.7
Other liabilities and accrued interest 116.7 137.0
---------------------------
Total Liabilities Subject to Compromise 3,050.0 3,277.5
---------------------------
Total Liabilities 4,002.8 4,258.0
---------------------------

Shareholders' Equity (Deficit)
Common stock 0.8 0.8
Paid-in capital 434.9 431.5
Accumulated deficit (290.0) (368.1)
Treasury stock, at cost (57.4) (63.7)
Accumulated other comprehensive income
(loss) (336.9) (350.1)
---------------------------
Total Shareholders' Equity (Deficit) (248.6) (349.6)
----------------------------------------------------------------------
Total Liabilities and Shareholders'
Equity (Deficit) $ 3,754.2 $ 3,908.4
======================================================================
*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