COLUMBIA, Md., – W. R. Grace & Co. (NYSE:GRA) announced fourth quarter net income of $20.3 million, or $0.29 per diluted share. Net income for the prior-year quarter was $15.5 million, or $0.21 per diluted share. Adjusted EBIT increased 2% to $171.3 million, and fourth quarter Adjusted EPS increased 2% to $1.40 per diluted share.

Net income for the year ended December 31, 2015, was $144.2 million, or $1.99 per diluted share, compared with $276.3 million, or $3.63 per diluted share for the prior year. Adjusted EBIT decreased 1% to $618.5 million, and full-year Adjusted EPS increased 8% to $4.78 per diluted share.

“We are excited and energized by the opportunities ahead,” said Fred Festa, Grace’s Chairman and Chief Executive Officer. “With the completion of our separation into two industry-leading public companies, we enter 2016 as a lean, focused and strategically nimble company. We are focused on our unique growth opportunities, maintaining our ROIC discipline and improving productivity.”

Fourth Quarter Results

Fourth quarter net sales of $758.7 million decreased 5.6% compared with the prior-year quarter due to unfavorable currency translation (-6.3%), the effect of the 2015 third quarter devaluation of our Venezuelan operations (-1.5%), and lower pricing (-0.4%), partially offset by higher sales volumes (+2.6%).

Adjusted EBIT of $171.3 million increased 2.0% from the prior-year quarter, and increased approximately 10% at constant currency. Adjusted EBIT margin of 22.6% increased 170 basis points compared with the prior-year quarter.

Adjusted EBIT Return On Invested Capital was 32.3% on a trailing four-quarter basis, compared with 31.2% as of December 31, 2014.

Twelve Month Results

For the year ended December 31, 2015, net sales of $3,051.5 million decreased 5.9% compared with the prior-year period due to unfavorable currency translation (-6.9%) and the effect of Venezuela (-0.4%), partially offset by higher sales volumes (+0.8%) and improved pricing (+0.6%).

Adjusted EBIT of $618.5 million decreased 1.2% from the prior-year period, and increased approximately 8% at constant currency. Adjusted EBIT margin of 20.3% increased 100 basis points compared with the prior-year period.

Grace Catalysts Technologies

Fourth quarter sales for our Catalysts Technologies operating segment, which includes specialty catalysts and additives for refinery, plastics and other chemical process applications, and polypropylene process technology, were $306.5 million, a decrease of 4.2% compared with the prior-year quarter due to unfavorable currency translation (-3.3%) and lower pricing including the effect of lower metals (-1.1%), partially offset by higher sales volumes (+0.2%).

Sales volumes increased slightly compared with strong prior-year quarter volumes.

Adjusted Gross Margin was 43.1% compared with 45.7% in the prior-year quarter. The decrease in gross margin primarily was due to less favorable product mix, including lower licensing revenue.

Segment operating income of $100.6 million decreased 7.5%, or approximately 3% at constant currency. Segment operating margin was 32.8%, a decrease of 120 basis points compared with the prior-year quarter. The decreases were primarily due to lower gross profit. The ART joint venture contributed $8.3 million to segment operating income compared with $6.5 million in the prior-year quarter.

Grace Materials Technologies

Fourth quarter sales for our Materials Technologies operating segment, which includes engineered materials for consumer, industrial, coatings and pharmaceutical applications, and Darex Packaging Technologies, were $191.6 million, a decrease of 6.8% compared with the prior-year quarter due to unfavorable currency translation (-9.0%), lower pricing (-0.3%), and the effect of Venezuela (-2.1%), partially offset by higher sales volumes (+4.6%).

Sales volumes increased in North America, Europe, the Middle East and Latin America, and decreased in China and the rest of Asia.

Adjusted Gross Margin was 37.5%, an increase of 120 basis points compared with the prior-year quarter. The increase in gross margin was primarily due to improved sales volumes and favorable product mix.

Segment operating income of $44.4 million increased 7.5%, and increased approximately 23% at constant currency. The increase in segment operating income is primarily due to the benefit of improved gross margin and lower operating expenses, partially offset by unfavorable currency translation. Segment operating margin was 23.2%, an increase of 310 basis points from the prior-year quarter.

As part of the separation, Darex Packaging Technologies became part of GCP Applied Technologies Inc. For the fourth quarter, sales for Darex were $71.9 million and gross margin was 33.8%.

Grace Construction Products

Fourth quarter sales for our Construction Products operating segment, which includes Specialty Construction Chemicals (SCC) products and Specialty Building Materials (SBM) products used in commercial, infrastructure, and residential construction, were $260.6 million, a decrease of 6.5% compared with the prior-year quarter. Increased sales volumes (+3.4%) and improved pricing (+0.3%) were more than offset by unfavorable currency translation (-7.6%) and the effect of Venezuela (-2.6%).

Segment sales volumes increased in SCC and SBM, including 8% growth in North America and double digit growth in the emerging regions.

Adjusted Gross Margin of 38.4% increased 110 basis points compared with the prior-year quarter. The increase was primarily due to higher sales volumes, improved pricing, and favorable product mix.

Segment operating income of $46.0 million increased 8.5%, and approximately 19% at constant currency, primarily due to higher gross profit and lower operating expenses. Segment operating margin was 17.7%, an increase of 250 basis points from the prior-year quarter.

As part of the separation, Construction Products became part of GCP Applied Technologies Inc.

Other Expenses in Adjusted EBIT

Total corporate costs were $13.4 million for the fourth quarter, a decrease of $8.1 million primarily due to the benefit of a sale of an operating asset.

Certain pension costs of $6.3 million decreased $1.4 million compared with the prior-year quarter primarily due to lower interest costs.

Restructuring and Repositioning Expenses

Restructuring expenses were $4.2 million for the fourth quarter, primarily related to work force reductions.

Repositioning expenses were $30.0 million for the fourth quarter, including $26.4 million of third party costs and $3.6 million of employee-related costs, primarily in connection with the company’s separation into two independent companies.

Interest Expense

Net interest expense was $25.2 million for the fourth quarter compared with $24.6 million for the prior-year quarter. The weighted average cash interest rate for the fourth quarter was 4.2%.

Income Taxes

Income taxes on adjusted pre-tax income were recorded at a global effective tax rate of 33.0%. We generally have not had to pay U.S. federal income taxes in recent years due to available tax deductions and credits that fully offset our U.S. tax liability.

Income taxes paid in cash, net of refunds, were $57.6 million during the year, or approximately 19% of income before income taxes. Income taxes paid in cash were approximately 11% based on our Adjusted EBIT performance measure (less interest expense, net). For the year ended December 31, 2015, our low cash tax rate, compared to our effective tax rate, resulted in a favorable impact to cash flow of $118.3 million, equivalent to $1.63 per share.

Cash Flow

Net cash provided by operating activities for the year ended December 31, 2015, was $13.4 million compared with a use of cash of $1.47 billion in the prior year. In the prior-year period, we paid $1.38 billion in connection with our emergence from Chapter 11 and $632 million to settle a deferred payment obligation issued at emergence. In the 2015 first quarter, we paid $490 million to repurchase the warrant issued at emergence.

Adjusted Free Cash Flow was $437.4 million for the year ended December 31, 2015, a decrease of 4.9% compared with the prior-year period.

Share Repurchase Program

In the fourth quarter, we spent $81.4 million to repurchase approximately 860 thousand shares of our outstanding common stock at an average price of $94.63. Through December 31, we spent $301.5 million to repurchase approximately 3.1 million shares under our second $500 million share repurchase authorization.

2016 Outlook for New Grace

As of February 11, 2016, we expect 2016 Adjusted EBIT to be in the range of $400 million to $420 million. We expect 2016 Adjusted EBITDA to be in the range of $500 million to $520 million. We expect Adjusted EPS to be in the range of $3.02 to $3.21 per share. Our outlook assumes an average 1.10 USD/EUR exchange rate for the year.

We expect 2016 Adjusted Free Cash Flow to be approximately $250 million, including a favorable impact to 2016 cash flow of approximately $60 to $65 million, equivalent to $0.85 to $0.92 per share, due to our low cash tax rate compared with our effective tax rate.

We are unable to make an estimate of the amount of the annual mark-to-market pension adjustment or 2016 net income.

Separation into Two Companies

On February 5, 2015, Grace announced that its Board of Directors had approved a plan to separate Grace into two independent, publicly traded companies. On January 27, 2016, Grace entered into a separation agreement with GCP Applied Technologies Inc. (GCP), then a wholly-owned subsidiary of Grace, pursuant to which Grace agreed to transfer its Grace Construction Products operating segment and the packaging technologies business, operated under the “Darex” name, of its Grace Materials Technologies operating segment to GCP. The separation occurred on February 3, 2016, by means of a pro rata distribution to Grace stockholders of all of the outstanding shares of GCP common stock. Under the distribution, one share of GCP common stock was distributed for each share of Grace common stock held as of the close of business on January 27, 2016. No fractional shares were distributed. As a result of the distribution, GCP is now an independent public company and its common stock is listed under the symbol “GCP” on the New York Stock Exchange.

Venezuela

Effective September 30, 2015, we began to account for the results of our Venezuelan subsidiary at the SIMADI rate. At December 31, 2015, this rate was 199 VEB/USD. The assets, liabilities, sales, earnings and cash flows of our Venezuelan subsidiary are immaterial after September 30, 2015.

Investor Call

We will discuss these results during an investor conference call and webcast today starting at 11:00 a.m. ET. To access the call and webcast, interested participants should go to the Investors portion of our website, www.grace.com, and click on the webcast link.

Those without access to the Internet can participate by dialing +1 855.830.2314 (U.S.) or +1 330.863.3314 (International). The participant passcode is 24024541. Investors are advised to dial into the call at least ten minutes early in order to register.

An audio replay will be available after 3:00 p.m. ET on February 11. For one week, the replay will be accessible by dialing +1 855.859.2056 (U.S.) or +1 404.537.3406 (International) and entering the participant passcode 24024541. The webcast replay or transcript will be available for one year on the company’s website.

About Grace

Built on talent, technology, and trust, Grace is a leading global supplier of catalysts and engineered materials. The company’s two industry-leading business segments-Grace Catalysts Technologies and Grace Materials Technologies-provide innovative products, technologies, and services that enhance the products and processes of our customer partners around the world. Grace employs approximately 3,700 people in over 30 countries. More information about Grace is available at grace.com.