washingtonpost.com  > Metro > Maryland > Howard

W.R. Grace Losses Pile Up

Pretax Charge for Asbestos Cases Key to Reorganization

By Dina ElBoghdady
Washington Post Staff Writer
Wednesday, January 26, 2005; Page E03

W.R. Grace & Co., the 150-year-old company that filed for bankruptcy protection after a surge in asbestos-related lawsuits, yesterday reported widening losses tied to its pending plan for reorganization.

The Columbia-based chemical maker lost $487.4 million ($7.36 a share) in the fourth quarter, compared with a loss of $49.5 million (75 cents) in the fourth quarter of 2003. Grace has 6,000 employees worldwide, with about 1,200 in Maryland.

_____Earnings Watch_____
Kraft Net Drops 28 Percent on Higher Costs (Associated Press, Jan 26, 2005)
Mercantile to Buy Community Bank of Northern Virginia (The Washington Post, Jan 26, 2005)
Investors Show Drugmakers Strong Support (The Washington Post, Jan 26, 2005)
Decline in Contracts Depresses CACI Shares (The Washington Post, Jan 26, 2005)
Rowe Reports Loss For Fourth Quarter (The Washington Post, Jan 26, 2005)
More Earnings News
_____The Markets_____
Dow Over 12 Months
Nasdaq Over 12 Months
S&P 500 Over 12 Months

Much of last quarter's loss results from a $570.7 million pretax charge -- mostly for asbestos liabilities -- under a revised reorganization plan it submitted for approval to U.S. Bankruptcy Court in Delaware earlier this month.

For all of 2004, the company said it lost $402.3 million ($6.11), compared with a loss of $55.2 million (84 cents) the previous year. Yesterday, Grace said it had $510.4 million cash on hand.

But even as Grace took a hit on its bottom line, its sales reached $2.3 million last year, a 14 percent increase from the previous year. Its pretax income from core operations totaled $179.3 million in 2004, up nearly 21 percent from the previous year.

"The operating story of this company and the litigation story are very different stories," Robert M. Tarola, the company's chief financial officer since 1999, said in an interview. "Our bankruptcy issues relate to a mass tort asbestos litigation which is attempting to be resolved without any impact on our business performance."

But Tarola declined to comment on the company's chances of emerging from bankruptcy protection or overcoming other legal challenges. In November, Grace disclosed that federal prosecutors are likely to indict the company in the first quarter this year on charges related to environmental problems at a former mine in Montana unless the matter is settled.

Grace and 61 of its domestic subsidiaries filed for bankruptcy protection on April 2, 2001, citing an 81 percent increase in asbestos claims from 1999 to 2000 and an even higher increase in the first quarter of 2001. At the time, it said many of those claims lacked merit.

Yesterday, Tarola said Grace's liabilities fall into three primary categories: about 130,000 personal injury claims filed by people allegedly suffering from exposure to products containing asbestos; 4,300 property damage claims, mostly related to the installation of a fireproofing material sprayed on steel beams of buildings; and eight class-action lawsuits related to Zonolite Attic Insulation used mostly in homes.

In 1973, Grace stopped using asbestos in its fire-protection products.

Tarola said that Grace's reorganization plan asks the court to define a valid claim and approve a process that would determine how much those claims would cost the company.

Under the plan, Grace caps its asbestos liabilities at $1.61 billion. While unsecured creditors and shareholders support the cap, the committees representing asbestos claimants say the amount is too low.

The company has not publicly disclosed how it calculated the cap. But it has said it is willing to settle the claims if the costs do not exceed the $1.61 billion limit.

Kenneth R. Bradley, editor of Asbestos Litigation Reporter, said that if the court approves the current plan, anyone who makes further asbestos injury or property damage claims against the company must deal with a trust and stay out of court.

"That helps the company's bottom line because it won't have to pay for lawyers and trials," Bradley said. "If this plan is approved, Grace's future is looking a lot brighter."

© 2005 The Washington Post Company