W.R. Grace & Co., the specialty chemical maker that filed for bankruptcy protection citing a surge in asbestos-related litigation, increased its profit in the second quarter in part because it reached settlements with two insurance groups.

The Columbia firm's earnings jumped to $32.7 million (49 cents a share) from $21.3 million (32 cents) in the same period a year ago. About $11 million of the quarter's profit came from a group of insolvent insurance firms that paid asbestos-related claims filed by Grace many years ago. An additional $9 million came from an insurance carrier that paid claims tied to environmental cleanup in the 1980s.

Grace generated $676.5 million in sales, up from $572.4 million.

"We're beginning to solve the issues that are part of our Chapter 11 proceeding," Robert M. Tarola, the company's chief financial officer, said in an interview. "The more of those we can resolve as we work on the asbestos measurements, the better off we'll be at the time when we emerge" from bankruptcy protection.

Grace filed for protection in April 2001. Since then, it has been hit with criminal charges accusing it of exposing mine workers in a Montana town to asbestos and covering up the danger. It also faces a civil lawsuit filed by the state of New Jersey, which accuses Grace and two executives of lying about its cleanup of a now-defunct plant that processed vermiculite, a mineral that contains asbestos before it is processed. The legal costs tied to the Montana and New Jersey cases in the quarter totaled $3.2 million and $9.2 million, respectively.

Grace also paid $90 million to resolve IRS tax audit issues for its 1993 through 1996 filings. It paid an additional $21 million for cleanup efforts at a New Jersey site in exchange for being absolved of future cleanup risks at the site.