W R GRACE & CO | 2013 | FY | 3


Chapter 11 and Joint Plan of Reorganization
On April 2, 2001, Grace and 61 of its United States subsidiaries and affiliates filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code. The cases were consolidated under case number 01-01139 (the "Chapter 11 Cases"). Grace's non-U.S. subsidiaries and certain of its U.S. subsidiaries were not included in the filing.
In September 2008, Grace and other parties filed the Joint Plan with the Bankruptcy Court to address all pending and future asbestos-related claims and all other pre-petition claims as outlined therein. On January 31, 2011, the Bankruptcy Court issued an order (the "Confirmation Order") confirming the Joint Plan. On January 31, 2012, the United States District Court for the District of Delaware (the "District Court") issued an order affirming the Confirmation Order and confirming the Joint Plan in its entirety. On February 3, 2014 (the "Effective Date"), the U.S. Court of Appeals for the Third Circuit (the "Third Circuit") dismissed the sole remaining appeal challenging the Confirmation Order and the Joint Plan became effective.
Under the Joint Plan, two asbestos trusts have been established and funded under Section 524(g) of the Bankruptcy Code. The Confirmation Order contains a channeling injunction which provides that all pending and future asbestos-related personal injury claims and demands ("PI Claims") are to be channeled for resolution to an asbestos personal injury trust (the "PI Trust") and all pending and future asbestos-related property damage claims and demands ("PD Claims"), including PD Claims related to Graces former attic insulation product ("ZAI PD Claims"), are to be channeled to a separate asbestos property damage trust (the "PD Trust"). Canadian ZAI PD Claims are channeled to a separate Canadian claims fund. The trusts are the sole recourse for holders of asbestos-related claims; the channeling injunctions prohibit holders of asbestos-related claims from asserting such claims directly against Grace.
Under the terms of the Joint Plan, claims under the Chapter 11 Cases are satisfied as follows:
Asbestos-Related Personal Injury Claims Asbestos personal injury claimants allege adverse health effects from exposure to asbestos-containing products formerly manufactured by Grace. Historically, Grace's cost to resolve such claims was influenced by numerous variables, including the nature of the disease alleged, product identification, proof of exposure to a Grace product, negotiation factors, the solvency of other former producers of asbestos-containing products, cross-claims by co-defendants, the rate at which new claims were filed, the jurisdiction in which the claims were filed, and the defense and disposition costs associated with these claims.
As of the Filing Date, 129,191 PI Claims were pending against Grace. Grace believes that a substantial number of additional PI Claims would have been received between the Filing Date and December 31, 2013, had such PI Claims not been stayed by the Bankruptcy Court.
Under the Joint Plan, all PI Claims are channeled to the PI Trust for resolution. The PI Trust will use specified trust distribution procedures to satisfy allowed PI Claims.
On the Effective Date, the PI Trust was funded with:
$557.7 million in cash from Grace (includes $464.1 million of cash from Grace and $93.6 million of cash from insurance proceeds that were held in escrow);
A warrant to acquire 10 million shares of Company common stock at an exercise price of $17.00 per share, expiring one year after the Effective Date (the "PI Warrant") (this obligation is expected to be settled in cash with the PI Trust as discussed below);
Rights to all proceeds under all of Graces insurance policies that are available for payment of PI Claims;
$42.1 million in cash from a subsidiary of Fresenius AG, pursuant to the terms of a settlement agreement resolving asbestos-related, successor liability and fraudulent transfer claims against Fresenius; and
$856.8 million in cash and 18 million shares of Sealed Air Corporation common stock paid by Cryovac, Inc., a wholly owned subsidiary of Sealed Air, pursuant to the terms of a settlement agreement resolving asbestos-related, successor liability and fraudulent transfer claims against Cryovac and Sealed Air.
Grace is obligated to make deferred payments to the PI Trust of $110 million per year for 5 years beginning in 2019, and $100 million per year for 10 years beginning in 2024, which obligation is secured by the Company's obligation to issue 77,372,257 shares of Company common stock to the asbestos trusts in the event of default.
The amounts that Grace will be obligated to pay to the PI Trust under the Joint Plan are fixed amounts. Grace is not obligated to make additional payments to the PI Trust beyond the payments described above.
Asbestos-Related Property Damage Claims The plaintiffs in asbestos property damage lawsuits generally seek to have the defendants pay for the cost of removing, containing or repairing the asbestos-containing materials in commercial and public buildings. Various factors can affect the merit and value of PD Claims, including legal defenses, product identification, the amount and type of product involved, the age, type, size and use of the building, the legal status of the claimant, the jurisdictional history of prior cases, the court in which the case is pending, and the difficulty of asbestos abatement, if necessary.
Several class action lawsuits also were filed on behalf of homeowners alleging damage from ZAI. Based on Grace's investigation of the claims described in these lawsuits, and testing and analysis of this product by Grace and others, Grace believes that ZAI was and continues to be safe for its intended purpose and poses little or no threat to human health. The plaintiffs in the ZAI lawsuits dispute Grace's position on the safety of ZAI. In December 2006 the Bankruptcy Court issued an opinion and order holding that, although ZAI is contaminated with asbestos and can release asbestos fibers when disturbed, there is no unreasonable risk of harm from ZAI.
At Grace's request, in July 2008, the Bankruptcy Court established a claims bar date for U.S. ZAI PD Claims and approved a related notice program that required any person with a U.S. ZAI PD Claim to submit an individual proof of claim no later than October 31, 2008. Approximately 17,960 U.S. ZAI PD Claims were filed prior to the October 31, 2008, claims bar date and, as of December 31, 2013, an additional 1,310 U.S. ZAI PD Claims were filed.
In 2008 and 2009, Grace entered into settlement agreements with representatives of the U.S. ZAI PD claimants and Canadian ZAI PD claimants, respectively. The terms of these settlements have been incorporated into the terms of the Joint Plan and related documents.
All PD Claims have been channeled to the PD Trust for resolution. The PD Trust contains two accounts, the PD Account and the ZAI PD Account. U.S. ZAI PD Claims are to be paid from the ZAI PD Account and non-ZAI PD Claims are to be paid from the PD Account. Canadian ZAI PD Claims are to be paid by a separate fund established in Canada. Each account has a separate trustee and the assets of the accounts may not be commingled.
PD Account
On the Effective Date, the PD Account of the PD Trust was funded with $39.9 million in cash from Grace and $111.4 million in cash from Cryovac and Fresenius to pay allowed non-ZAI PD Claims settled as of the Effective Date, and CDN$8.6 million in cash from Grace to fund the Canadian ZAI PD Claims fund.
Following the Effective Date, unresolved non-ZAI PD Claims are to be litigated in the Bankruptcy Court and any future non-ZAI PD Claims are to be litigated in a federal district court, in each case pursuant to procedures to be approved by the Bankruptcy Court. To the extent any such PD Claims are determined to be allowed claims, they are to be paid in cash by the PD Trust. Grace is obligated to make a payment to the PD Trust every six months in the amount of any non-ZAI PD Claims allowed during the preceding six months plus interest (if applicable) and, except for the first six months, the amount of PD Trust expenses for the preceding six months (the "PD Obligation"). The aggregate amount to be paid under the PD Obligation is not capped and Grace may be obligated to make additional payments to the PD Account of the PD Trust in respect of the PD Obligation. Grace has accrued for those unresolved non-ZAI PD Claims that it believes are probable and estimable. Grace has not accrued for other unresolved or unasserted non-ZAI PD Claims as it does not believe that payment on any such claims is probable.
On the Effective Date, the PD Trust contributed CDN$8.6 million to a separate Canadian ZAI PD Claims fund through which Canadian ZAI PD Claims are to be resolved. Grace has no continuing or contingent obligations to make additional payments into this fund.
ZAI PD Account
On the Effective Date, the ZAI PD Account of the PD Trust was funded with approximately $34.4 million in cash from Cryovac and Fresenius.
Grace is obligated to make a payment of $30 million in cash to the ZAI PD Account on the third anniversary of the Effective Date, and Grace is obligated to make up to 10 contingent deferred payments of $8 million per year to the ZAI PD Account during the 20-year period beginning on the fifth anniversary of the Effective Date, with each such payment due only if the assets of the ZAI PD Account fall below $10 million during the preceding year. The amounts that Grace will be obligated to pay to the ZAI PD Account under the Joint Plan are capped amounts. Grace is not obligated to make additional payments to the PD Trust in respect of the ZAI PD Account beyond the payments described above. Grace has accrued for the $30 million payment due on the third anniversary of the Effective Date, but has not accrued for the 10 additional payments since Grace does not currently believe they are probable.
The PD Trust is to resolve U.S. ZAI PD Claims that qualify for payment under specified trust distribution procedures by paying 55% of the claimed amount, but in no event is the PD Trust to pay more per claim than 55% of $7,500 (as adjusted for inflation each year after the fifth anniversary of the Effective Date).
All payments to the PD Trust required after the Effective Date are secured by the Company's obligation to issue 77,372,257 shares of Company common stock to the asbestos trusts in the event of default. Grace has the right to conduct annual audits of the books, records and claim processing procedures of the PD Trust.
Asbestos-Related Liability    The recorded asbestos-related liability as of December 31, 2013 and 2012, was $2,092.4 million and $2,065.0 million respectively, and is included in "liabilities subject to compromise" in the accompanying Consolidated Balance Sheets. Grace increased its asbestos-related liability by $27.4 million in the fourth quarter of 2013 to reflect the updated estimated value of the consideration payable to the PI Trust and the PD Trust (the "Trusts") under the Joint Plan, considering the effective date of February 3, 2014. The asbestos-related liability was settled at the recorded amount on the Effective Date, including payment of cash due at the Effective Date, issuance of the warrant and deferred payment obligations, and transfer of all cash and rights with respect to Grace's insurance policies that provide coverage for asbestos-related claims.
The PI Trust deferred payment obligation of $110 million per year for 5 years beginning January 2, 2019, and of $100 million per year for 10 years beginning January 2, 2024, was recorded at fair value of $567 million on December 31, 2013, to reflect the estimated value on the Effective Date. The value of the deferred payment obligation has been estimated based on (i) interest rates; (ii) the Company's credit standing and the payment period of the deferred payments; (iii) restrictive covenants and terms of the Company's other credit facilities; (iv) assessment of the risk of a default, which if default were to occur would require Grace to issue shares of Company common stock; and (v) the subordination provisions of the deferred payment agreement.
Grace also recorded a deferred payment obligation of $27.5 million representing the present value of the $30 million payment due to the ZAI PD Account on February 3, 2017.
The warrant to acquire 10 million shares of the Company's common stock for $17.00 per share is recorded at estimated value of $490 million on the Effective Date based on the current trading range of Company common stock and other valuation factors.
Insurance Rights    The insurance rights transferred by Grace to the PI Trust under the Joint Plan relate to insurance policies that provide coverage for 1962 to 1985 with respect to asbestos-related lawsuits and claims. For the most part, coverage for years 1962 through 1972 has been exhausted, leaving coverage for years 1973 through 1985 available for pending and future asbestos claims. Since 1985, insurance coverage for asbestos-related liabilities has not been commercially available to Grace. As discussed above, pursuant to the Joint Plan, proceeds with respect to all of Grace's insurance policies that provide coverage for asbestos-related claims were transferred to the PI Trust at emergence.
Grace has entered into settlement agreements, which were, for the most part, dependent upon the effectiveness of the Joint Plan, with underwriters of a portion of Grace's insurance coverage. Under most of these agreements, the insurers have agreed, subject to certain conditions, to pay to the PI Trust (directly or through an escrow arrangement) an aggregate of $396.1 million in respect of coverage under the affected policies. Under the remaining agreements, the insurers have agreed to reimburse the PI Trust for a portion of the claims actually paid by the PI Trust.
The amount of insurance recovered on claims by the PI Trust will depend on the aggregate amount of claims received by the PI Trust, proceeds from unsettled policies, and a number of factors that will be determined at the time claims are paid including: the nature of the claim, the relevant exposure years, the timing of payment, the solvency of insurers and the legal status of policy rights. Grace estimates that the recorded amount of $500.0 million is within the reasonable range of possible valuations of these policies at emergence.
PI Warrant Settlement    In October 2012, Grace entered into an agreement with interested parties to settle the PI Warrant in cash during the one-year period after the Effective Date. Under the terms of the settlement agreement, Grace will repurchase the PI Warrant for a price equal to the average of the daily closing prices of Company common stock during the period commencing one day after the Effective Date and ending on the day prior to the date the PI Trust elects to sell the PI Warrant back to Grace, multiplied by 10 million (the number of shares issuable under the PI Warrant), less $170 million (the aggregate exercise price of the PI Warrant), provided that if the average of the daily closing prices is less than $54.50 per share, then the repurchase price would be $375 million, and if the average of the daily closing prices exceeds $66.00 per share, then the repurchase price would be $490 million. The settlement agreement is terminable by the PI Trust in the event a tender offer, or other proposed transaction that would result in a change in control of the Company, is announced during the one-year period after the Effective Date. In such event, the PI Warrant would be settled in shares of Company common stock.
Other Claims    The Joint Plan also provides that all other allowed pre-petition claims will be paid in full on or within 10 days after the Effective Date, or when they otherwise become due. All allowed administrative claims are to be paid in cash and all allowed priority claims are to be paid in cash with interest as provided in the Joint Plan. Secured claims are to be paid in cash with interest or by reinstatement. Allowed general unsecured claims are to be paid in cash, including post-petition interest in accordance with the Joint Plan. The Joint Plan further provides that Grace will, subject to certain non-bankruptcy limitations, satisfy all pension, retirement medical, and similar employee-related obligations and pay workers’ compensation claims. Grace paid on or within 10 days after the Effective Date $1,361.6 million in respect of other allowed pre-petition or other claims, including $1,103.5 million in respect of Grace's pre-petition credit facilities.
Unresolved Claims    The Bankruptcy Court established a claims bar date of March 31, 2003, for claims of general unsecured creditors, PD Claims (other than ZAI PD Claims) and medical monitoring claims related to asbestos. The bar date did not apply to PI Claims or claims related to ZAI PD Claims.
Unresolved claims are to be addressed through the claims objection process and the dispute resolution procedures approved by the Bankruptcy Court. As of the Effective Date, 62 employee claims and 70 non-employee claims (other than asbestos-related claims) remain unresolved.
Grace believes that its recorded liabilities for unresolved claims represent a reasonable estimate of the ultimate allowable amount for such claims. If it is ultimately determined that any amounts are owed on these claims, they are to be paid in full, with interest as required. While the ultimate outcome of these claims cannot be predicted with certainty, Grace believes that the resolution of these matters will not have a material adverse effect on its consolidated financial position, results of operations, or cash flows.
After the Effective Date, all persons and entities generally are forever barred from asserting against Grace any claims or demands that are based upon any act or omission, transaction, or other activity, event or occurrence that occurred prior to the Effective Date, except as expressly provided in the Joint Plan.
Committees and Representatives    As a result of confirmation and effectiveness of the Joint Plan, the four official committees appointed in the Chapter 11 Cases have been disbanded. The legal representative for future asbestos personal injury claimants will continue to act in the same capacity with respect to the PI Trust and the legal representative for future asbestos property damage claimants will continue to act in the same capacity with respect to the PD Trust.
Effect on Company Common Stock    Under the Joint Plan holders of Company common stock as of the Effective Date retained their shares, but the interests of shareholders are subject to dilution in the event of default with respect to the deferred payment obligations to the PI Trust or the PD Trust under the Company's security obligation.
Debt Capital    As of December 31, 2013, all of the Debtors' pre-petition debt was in default due to the Filing. The accompanying Consolidated Balance Sheets reflect the classification of the Debtors' pre-petition debt within "liabilities subject to compromise."
As of December 31, 2013, Grace maintained a $100 million cash-collateralized letter of credit facility with a commercial bank to support existing and new financial assurances. At emergence, the cash-collateralized letter of credit facility was replaced with a $400 million revolving credit facility with a $150 million sublimit for letters of credit. See Note 8 for a discussion of Grace's exit financing.
Accounting Impact    The accompanying Consolidated Financial Statements have been prepared in accordance with ASC 852 "Reorganizations". ASC 852 requires that financial statements of debtors-in-possession be prepared on a going concern basis, which contemplates continuity of operations and realization of assets and liquidation of liabilities in the ordinary course of business.
Pursuant to ASC 852, Grace's pre-petition and post-petition liabilities that are subject to compromise are required to be reported separately on the balance sheet at an estimate of the amount that will ultimately be allowed by the Bankruptcy Court. As of December 31, 2013, such pre-petition liabilities include fixed obligations (such as debt and contractual commitments), as well as estimates of costs related to contingent liabilities (such as asbestos-related litigation, environmental remediation and other claims). Obligations of Grace subsidiaries not covered by the Filing continue to be classified on the Consolidated Balance Sheets based upon maturity dates or the expected dates of payment. ASC 852 also requires separate reporting of certain expenses, realized gains and losses, and provisions for losses related to the Filing as reorganization items. Grace presents reorganization items as "Chapter 11 expenses, net of interest income," a separate caption in its Consolidated Statements of Operations.
Grace has not recorded the benefit of the assets available to fund asbestos-related and other liabilities under the Fresenius settlement and the Sealed Air settlement as provided by the Joint Plan, as these assets were transferred directly to the PI Trust and the PD Trust on the Effective Date. The estimated fair value available under the Fresenius settlement and the Sealed Air settlement as measured at December 31, 2013, was $1,653 million composed of $115 million in cash from Fresenius and $1,538 million in cash and stock from Cryovac.
Grace's Consolidated Balance Sheets separately identify the liabilities that are "subject to compromise" as a result of the Chapter 11 proceedings. In Grace's case, "liabilities subject to compromise" represent both pre-petition and post-petition liabilities as determined under U.S. GAAP. Changes to pre-petition liabilities subsequent to the Filing Date reflect: (1) cash payments under approved court orders; (2) the terms of the Joint Plan, as discussed above, including the accrual of interest on pre-petition debt and other fixed obligations; (3) accruals for employee-related programs; and (4) changes in estimates related to other pre-petition contingent liabilities.
Components of liabilities subject to compromise are as follows:
(In millions)
December 31, 2013
 
December 31, 2012
 
Filing Date
(Unaudited)
Asbestos-related contingencies
$
2,092.4

 
$
2,065.0

 
$
1,002.8

Pre-petition bank debt plus accrued interest
1,100.0

 
937.2

 
511.5

Environmental contingencies
134.5

 
140.5

 
164.8

Unfunded special pension arrangements
129.4

 
137.1

 
70.8

Income tax contingencies
76.6

 
87.6

 
242.1

Postretirement benefits other than pension
57.2

 
63.9

 
185.4

Drawn letters of credit plus accrued interest
37.8

 
36.1

 

Accounts payable
34.3

 
31.3

 
43.0

Retained obligations of divested businesses
29.9

 
29.0

 
43.5

Other accrued liabilities
94.3

 
102.3

 
102.1

Reclassification to current liabilities(1)
(10.3
)
 
(10.1
)
 

Total Liabilities Subject to Compromise
$
3,776.1

 
$
3,619.9

 
$
2,366.0

_______________________________________________________________________________
(1)
As of December 31, 2013 and 2012, approximately $10.3 million and $10.1 million, respectively, of certain pension and postretirement benefit obligations subject to compromise have been presented in "other current liabilities" in the Consolidated Balance Sheets in accordance with ASC 715 "Compensation—Retirement Benefits".
Note that the unfunded special pension arrangements reflected above exclude non-U.S. pension plans and qualified U.S. pension plans that became underfunded subsequent to the Filing.
Change in Liabilities Subject to Compromise
The following table is a reconciliation of the changes in pre-filing date liability balances for the period from the Filing Date through December 31, 2013.
(In millions) (Unaudited)
Cumulative
Since Filing
Balance, Filing Date April 2, 2001
$
2,366.0

Cash disbursements and/or reclassifications under Bankruptcy Court orders:
 
Payment of environmental settlement liability
(252.0
)
Freight and distribution order
(5.7
)
Trade accounts payable order
(9.1
)
Resolution of contingencies subject to Chapter 11
(130.0
)
Other court orders for payments of certain operating expenses
(374.9
)
Expense (income) items:
 
Interest on pre-petition liabilities
682.5

Employee-related accruals
127.6

Provision for asbestos-related contingencies
1,137.2

Provision for environmental contingencies
362.0

Release of income tax contingencies
(91.5
)
Balance sheet reclassifications
(36.0
)
Balance, end of period
$
3,776.1


For the holders of pre-petition bank credit facilities, beginning January 1, 2006, Grace agreed to pay interest on pre-petition bank debt at the prime rate, adjusted for periodic changes, and compounded quarterly. The effective rate for the years ended December 31, 2013 and 2012, was 3.25%. From the Filing Date through December 31, 2005, Grace accrued interest on pre-petition bank debt at a negotiated fixed annual rate of 6.09%, compounded quarterly. The pre-petition bank debt holders argued that they were entitled to post-petition interest at the default rate specified under the terms of the underlying credit agreements, which they asserted was more than an additional $210 million in interest. The Bankruptcy Court and the District Court overruled this assertion and the pre-petition bank debt holders appealed these rulings to the Third Circuit Court of Appeals. On December 23, 2013, Grace and the pre-petition bank debt holders settled this appeal. Under the terms of the settlement, Grace agreed to pay an additional $129.0 million of interest above the amount provided for under the Joint Plan as of December 31, 2013, with interest to continue to accrue at 3.25% through January 31, 2014, and at 5.00% thereafter. The principal and all accrued interest on the pre-petition bank debt was paid in full on the Effective Date.
For the holders of claims who, but for the Filing, would be entitled under a contract or otherwise to accrue or be paid interest on such claim in a non-default (or non-overdue payment) situation under applicable non-bankruptcy law, Grace accrued interest at the rate provided in the contract between the Grace entity and the claimant or such rate as may otherwise apply under applicable non-bankruptcy law.
For all other holders of allowed general unsecured claims, Grace accrued interest at a rate of 4.19% per annum, compounded annually, unless otherwise negotiated during the claim settlement process.
Chapter 11 Expenses
 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Legal and financial advisory fees
$
17.1

 
$
17.4

 
$
20.6

Interest (income) expense
(1.8
)
 
(0.8
)
 
(0.6
)
Chapter 11 expenses, net of interest income
$
15.3

 
$
16.6

 
$
20.0


Pursuant to ASC 852, interest income earned on the Debtors' cash balances must be offset against Chapter 11 expenses.
Condensed Financial Information of the Debtors
W. R. Grace & Co.—Chapter 11 Filing Entities
Debtor-in-Possession Statements of Operations
 
Year Ended December 31,
(In millions) (Unaudited)
2013
 
2012
 
2011
Net sales, including intercompany
$
1,425.4

 
$
1,512.6

 
$
1,479.4

Cost of goods sold, including intercompany, exclusive of depreciation and amortization shown separately below
882.2

 
951.3

 
919.1

Selling, general and administrative expenses
178.1

 
274.9

 
334.5

Depreciation and amortization
69.1

 
67.3

 
68.3

Chapter 11 expenses, net of interest income
15.3

 
16.6

 
20.0

Default interest settlement
129.0

 

 

Asbestos and bankruptcy-related charges, net
21.9

 
384.6

 

Research and development expenses
37.8

 
35.9

 
39.7

Interest expense and related financing costs
37.7

 
41.5

 
40.0

Other income, net
(75.7
)
 
(93.2
)
 
(75.3
)
 
1,295.4

 
1,678.9

 
1,346.3

Income (loss) before income taxes and equity in net income of non-filing entities
130.0

 
(166.3
)
 
133.1

Benefit from (provision for) income taxes
(53.2
)
 
48.4

 
(50.8
)
Income (loss) before equity in net income of non-filing entities
76.8

 
(117.9
)
 
82.3

Equity in net income of non-filing entities
179.3

 
157.9

 
137.4

Net income attributable to W. R. Grace & Co. shareholders
$
256.1

 
$
40.0

 
$
219.7


In the above table, for 2013, Asbestos and bankruptcy-related charges, net, primarily includes adjustments made to reflect the emergence-date value of the deferred payment obligations and adjustments to record the final allowed claims listing, partially offset by adjustments for interest per the terms of the Joint Plan. For 2012, Asbestos and bankruptcy-related charges, net, includes adjustments made to our asbestos-related liability and to accrue for the Libby Medical Program settlement.
W. R. Grace & Co.—Chapter 11 Filing Entities
Debtor-in-Possession Statements of Cash Flows
 
Year Ended December 31,
(In millions) (Unaudited)
2013
 
2012
 
2011
Operating Activities
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
$
256.1

 
$
40.0

 
$
219.7

Reconciliation to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization
69.1

 
67.3

 
68.3

Asbestos and bankruptcy-related charges, net
21.9

 
384.6

 

Default interest settlement
129.0

 

 

Equity in net income of non-filing entities
(179.3
)
 
(157.9
)
 
(137.4
)
Provision for (benefit from) income taxes
53.2

 
(48.4
)
 
50.8

Income taxes (paid), net of refunds
13.5

 
(33.9
)
 
(13.2
)
Tax benefits from stock-based compensation
35.4

 
(36.8
)
 

Defined benefit pension (income) expense
(51.8
)
 
82.0

 
111.6

Payments under defined benefit pension arrangements
(55.6
)
 
(114.9
)
 
(251.4
)
Repatriation of cash from foreign entities
29.7

 
21.6

 
30.3

Changes in assets and liabilities, excluding the effect of foreign currency translation and business acquired:
 
 
 
 
 
Trade accounts receivable
(6.2
)
 
(7.1
)
 
(26.2
)
Inventories
(23.0
)
 
66.7

 
(66.4
)
Accounts payable
21.9

 
(15.1
)
 
37.5

All other items, net
31.1

 
75.9

 
13.4

Net cash provided by operating activities
345.0

 
324.0

 
37.0

Investing Activities
 
 
 
 
 
Capital expenditures
(94.1
)
 
(82.6
)
 
(77.7
)
Business acquired, net of cash acquired
(510.4
)
 

 

Transfer to restricted cash and cash equivalents
(222.2
)
 
(35.4
)
 
(8.4
)
Other

 

 
10.0

Net cash used for investing activities
(826.7
)
 
(118.0
)
 
(76.1
)
Borrowings under credit arrangements
0.3

 

 

Repayments under credit arrangements
(0.8
)
 
(0.6
)
 

Proceeds from exercise of stock options
34.4

 
32.2

 
12.1

Excess tax benefits from stock-based compensation
(35.4
)
 
36.8

 

Other financing activities
4.1

 
1.2

 
28.4

Net cash provided by financing activities
2.6

 
69.6

 
40.5

Net (decrease) increase in cash and cash equivalents
(479.1
)
 
275.6

 
1.4

Cash and cash equivalents, beginning of period
1,064.2

 
788.6

 
787.2

Cash and cash equivalents, end of period
$
585.1

 
$
1,064.2

 
$
788.6



W. R. Grace & Co.—Chapter 11 Filing Entities
Debtor-in-Possession Balance Sheets
 
December 31,
 (In millions) (Unaudited)
2013
 
2012
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
585.1

 
$
1,064.2

Restricted cash and cash equivalents
340.5

 
118.3

Trade accounts receivable, net
138.8

 
132.6

Accounts receivable—unconsolidated affiliate
10.9

 
14.1

Receivables from non-filing entities, net
173.0

 
160.5

Inventories
138.9

 
115.9

Other current assets
69.3

 
58.5

Total Current Assets
1,456.5

 
1,664.1

Properties and equipment, net
484.5

 
433.5

Goodwill
279.9

 
26.8

Technology and other intangible assets, net
249.1

 
9.6

Deferred income taxes
817.3

 
933.3

Asbestos-related insurance
500.0

 
500.0

Loans receivable from non-filing entities, net
283.8

 
282.1

Investment in non-filing entities
531.3

 
442.3

Investment in unconsolidated affiliate
96.2

 
85.5

Other assets
16.5

 
10.8

Total Assets
$
4,715.1

 
$
4,388.0

LIABILITIES AND EQUITY
 
 
 
Liabilities Not Subject to Compromise
 
 
 
Current liabilities (including $17.5 due to unconsolidated affiliate) (2012—$6.0)
$
247.4

 
$
244.7

Underfunded defined benefit pension plans
52.2

 
156.9

Other liabilities (including $24.3 due to unconsolidated affiliate) (2012—$22.4)
78.7

 
56.5

Total Liabilities Not Subject to Compromise
378.3

 
458.1

Liabilities Subject to Compromise
3,776.1

 
3,619.9

Total Liabilities
4,154.4

 
4,078.0

Total W. R. Grace & Co. Shareholders' Equity
560.6

 
309.9

Noncontrolling interests in Chapter 11 filing entities
0.1

 
0.1

Total Equity
560.7

 
310.0

Total Liabilities and Equity
$
4,715.1

 
$
4,388.0


In addition to Grace's financial reporting obligations as prescribed by the SEC, during the Chapter 11 proceeding, Grace was required, under the rules and regulations of the Bankruptcy Code, to periodically file certain statements and schedules with the Bankruptcy Court. This information is available to the public through the Bankruptcy Court. This information was prepared in a format that may not be comparable to information in Grace's quarterly and annual financial statements as filed with the SEC. These statements and schedules are not audited and do not purport to represent the financial position or results of operations of Grace on a consolidated basis.
This summary of the terms of various agreements does not purport to be complete and is qualified in its entirety by reference to the Joint Plan, the Confirmation Order, the Asbestos Trust Agreements, the Asbestos Insurance Transfer Agreement, the Deferred Payment Agreements, the Guarantee Agreements, the Share Issuance Agreement, the Warrant Agreement, the Warrant Implementation Letter, and the Warrant Registration Rights Agreement, which have been filed with the SEC.

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